Company Quick10K Filing
Can Cal Resources
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 44 $-0
10-K 2020-01-07 Annual: 2018-12-31
10-Q 2018-11-14 Quarter: 2018-09-30
10-Q 2018-08-15 Quarter: 2018-06-30
10-Q 2018-05-15 Quarter: 2018-03-31
10-K 2018-04-11 Annual: 2017-12-31
10-K 2018-03-12 Annual: 2016-12-31
10-Q 2016-01-07 Quarter: 2015-09-30
10-Q 2016-01-07 Quarter: 2015-06-30
10-Q 2016-01-07 Quarter: 2015-03-31
10-K 2016-01-07 Annual: 2014-12-31
10-Q 2015-01-22 Quarter: 2014-09-30
10-Q 2014-12-24 Quarter: 2014-06-30
10-Q 2014-12-24 Quarter: 2014-03-31
10-K 2014-05-23 Annual: 2013-12-31
10-Q 2013-11-25 Quarter: 2013-09-30
10-Q 2013-08-19 Quarter: 2013-06-30
10-Q 2013-05-17 Quarter: 2013-03-31
10-K 2013-04-16 Annual: 2012-12-31
10-Q 2012-11-16 Quarter: 2012-09-30
10-Q 2012-08-14 Quarter: 2012-06-30
10-Q 2012-05-07 Quarter: 2012-03-31
10-K 2012-03-30 Annual: 2011-12-31
10-Q 2011-11-07 Quarter: 2011-09-30
10-Q 2011-08-15 Quarter: 2011-06-30
10-Q 2011-05-19 Quarter: 2011-03-31
10-K 2011-04-15 Annual: 2010-12-31
10-Q 2010-11-15 Quarter: 2010-09-30
10-Q 2010-08-16 Quarter: 2010-06-30
10-Q 2010-05-17 Quarter: 2010-03-31
10-K 2010-04-15 Annual: 2009-12-31
8-K 2019-10-18
8-K 2019-10-09 Other Events, Exhibits
8-K 2019-02-06 Officers, Other Events
8-K 2019-02-06 Sale of Shares, Officers, Other Events
8-K 2018-11-12 Other Events
8-K 2018-04-13 Other Events
8-K 2018-04-02 Other Events, Exhibits
CCRE 2018-12-31
Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information.
Part III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accountant Fees and Services.
Part IV
Item 15. Exhibits, Financial Statement Schedules.
Note 1 - Nature of Business and Summary of Significant Accounting Policies
Note 2 - Going Concern
Note 3 - Related Party Transactions
Note 4 - Prepaid Expenses
Note 5 - Notes Payable, Related Parties
Note 6 - Unearned Revenues
Note 7 - Other Income
Note 8 - Commitments and Contingencies
Note 9 - Shareholders' Equity
Note 10 - Stock-Based Compensation
Note 11 - Income Taxes
Note 12 - Comparative Figures
Note 13 - Subsequent Events
EX-31.1 cancal_ex3101.htm
EX-32.1 cancal_ex3201.htm

Can Cal Resources Earnings 2018-12-31

CCRE 10K Annual Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
CNHC 12,949 11,626 877 0 149 771 5,714 0% 7.4 1%
RMES 1 1 0 0 -0 -0 -0 0.5 -13%
TCT 210 12 13 0 11 11 -200 0% -18.3 5%
VDI 1,766 1,288 779 0 465 632 222 0% 0.4 26%
POYE 0 0 0 0 -0 -0 -0 0.0 -1,973%
SCTF 0 0 0 0 -0 -0 -0 3.0 -33%
SEK 302,033 283,794 0 0 0 0 -0 0%
DAVEY 570 398 1,095 98 32 97 161 9% 1.7 6%
SLDV 25 6 2 0 13 19 -1 0% -0.0 53%
MBCC 216 243 112 0 -7 10 215 0% 21.5 -3%

10-K 1 cancal_10k.htm FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

 

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

 

For the fiscal year ended December 31, 2018

or

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

 

Commission file number 000-26669

CAN-CAL RESOURCES LTD.

(Exact name of registrant as specified in its charter)

 

Nevada   86-0865852
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

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

 

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

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Title of each class Name of each exchange on which registered
None None

 

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

Preferred Stock, $0.001 par value, 5% cumulative

 

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

  Yes     No

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

  Yes     No

Indicate by check mark 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.

  Yes     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

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

 

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

Large accelerated filer   Accelerated filer  
Non-accelerated filer   Smaller reporting company  
Emerging Growth Company    

 

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

 

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

  Yes      No

 

The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $957,340 as of computed by reference to the sale price of a share of the registrant’s Common Stock on June 30, 2017 reported by OTC Bulletin Board (Ref: Bloomberg). The voting stock held by non-affiliates on that date consisted of 42,904,060 shares of common stock.

 

The number of shares outstanding of each of the registrant’s classes of common stock, as of November 15, 2019, was 43,667,060 shares of common stock, $0.001 par value held by approximately 601 shareholders.

Documents Incorporated by Reference

None.

   

 

 

CAN-CAL RESOURCES LTD.

COMPREHENSIVE FORM 10-K

 

TABLE OF CONTENTS

 

  Page
   
PART I 1
  ITEM 1. BUSINESS 1
  ITEM 1A. RISK FACTORS 9
  ITEM 1B. UNRESOLVED STAFF COMMENTS 9
  ITEM 2. PROPERTIES 8
  ITEM 3. LEGAL PROCEEDINGS 18
  ITEM 4. MINE SAFETY DISCLOSURES 19
PART II 20
  ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 20
  ITEM 6. SELECTED FINANCIAL DATA 23
  ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 24
  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 28
  ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 28
  ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 29
  ITEM 9A CONTROLS AND PROCEDURES 29
  ITEM 9B. OTHER INFORMATION 30
PART III 31
  ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 31
  ITEM 11. EXECUTIVE COMPENSATION 33
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 34
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 35
  ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 35
PART IV 37
  ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 37

 

 

 

 

 

 

 

 i 

 

 

FORWARD-LOOKING STATEMENTS

 

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

 

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

 

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

 

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

 

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

 

AVAILABLE INFORMATION

 

Can-Cal files annual, quarterly, and current reports and other information with the Securities and Exchange Commission (SEC). You can read these SEC filings and reports over the Internet at the SEC’s website at www.sec.gov. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at Can-Cal Resources Ltd., 42 Springfield Avenue, Red Deer, Alberta, Canada T4N 0C7.

 

 

 ii 

 

 

PART I

 

ITEM 1. BUSINESS.

 

Business Development

 

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

 

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

 

Business of Company

 

The Company is an exploration company. Since 1996, we have examined various mineral properties prospective for precious metals and minerals and acquired those deemed promising. We own one mineral property, Pisgah Crater, in California.. The Company formerly had an interest in a property in Owl Canyon, California, as well as Wikieup, and Cerbat, Arizona but these were abandoned.

 

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

 

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

 

The Company’s current focus has changed from Mexico to the United States with present emphasis on the Pisgah Mountain property located in Pisgah, California (“Pisgah Property”).

 

 

 

 1 

 

 

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

 

Can-Cal is currently an exploration stage company. An entity remains in the exploration stage until such time as proven or probable reserves have been established for its deposits. Upon the location of commercially mineable reserves, in the event that we are successful in locating commercially mineable reserves, the Company plans to prepare for mineral extraction and enter the development stage. To date, the exploration stage of the Company’s operations consists of contracting with geologists who sample and assess the mining viability of the Company’s claims.

 

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

 

Our executive offices are located at 42 Springfield Avenue, Red Deer, Alberta, Canada T4N 0C7 (tel. (403) 342 6221).

 

ITEM 1A. RISK FACTORS.

 

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

 

Risk Factors Related to Our Business

 

Losses to Date and General Risks Faced by the Company.

 

We are an exploration stage company engaged in the acquisition and exploration of precious metals mineral properties. To date, we have no producing properties. As a result, we have had minimal sources of operating revenue and we have historically operated and continue to operate at a loss. For the year ended December 31, 2018, the Company recorded a net loss of $200,179 and had an accumulated deficit of $11,813,208 at that date. Our ultimate success will depend on our ability to generate profits from our properties.

 

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

 

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

 

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

 

 

 

 2 

 

 

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

 

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

 

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

 

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

 

All of the mineral properties in which we have an interest or right are in the exploration stages only and are without mineral reserves. Current or proposed exploration or development programs on properties in which we have an interest may not result in the discovery of any minerals or mineral reserves and may not result in a profitable commercial mining operation.

 

The audit report on the financial statements at December 31, 2018 has a “going concern” qualification, which means we may not be able to continue operations unless we obtain additional funding and are successful with our strategic plan.

 

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

 

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

 

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

 

Our current operating funds are less than necessary to complete all intended objectives and therefore we will need to obtain additional financing or commencement of income generation in order to continue in business. We currently do not have any operations. Our only source of income at present is from two third parties.

 

On May 1, 1998, the Company entered into a Mining Lease Agreement for the Pisgah Property with Twin Mountain Rock Venture, a California general partnership (“Twin Mountain,”). The agreement provides that Twin Mountain will pay minimum annual rental payments of $22,500 for the initial term and $27,500 per year for the additional term. Twin Mountain is also obligated to pay a monthly production royalty for all material removed from the premises.

 

 

 3 

 

 

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

 

We do not currently have any additional arrangements for financing and may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of our business model and general market conditions. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.

 

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

 

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

 

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

 

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

 

The British Columbia Securities Commission (“BCSC”) previously required the Company to obtain a report by an independent consultant qualified under the standards of the BCSC. Under British Columbia securities laws, all disclosure of scientific or technical information, including disclosure of a mineral resource or mineral reserve must be based on information prepared by or under the supervision of an independent third party who is “qualified” under the terms of that law. The Company was therefore required under order to supply such verification by a “qualified” third party consultant, and its stock was prohibited from trading in British Columbia until the BCSC accepted such verification. The Company subsequently retained a “qualified” third party consultant who prepared and filed the necessary reports with the BCSC to bring the filings up to date. Can-Cal intends to bring all SEC filings up to date and subsequently satisfy requirements of both BCSC & Alberta Securities Commission. Contingent on expected funding, Can-Cal anticipates this to transpire in Q1, 2020.

 

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

 

Policy changes.

 

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

 

Environmental costs.

 

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

 

 

 

 4 

 

 

Future reserve estimates.

 

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

 

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

 

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

 

Risks Related to Our Securities

 

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

 

Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:

 

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

 

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

 

 

 

 5 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

 6 

 

 

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

 

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

 

Recipient Name Stock Options Granted 
Sandra Rogoza   100,000
Red to Black Inc.   250,000
1045899 Alberta Ltd., a company owned by Gary Oosterhoff   100,000
Revrok Farm, a company owned by Cornelus Korver   100,000
For Life Financial Ltd., a company owned by Casey Douglass   100,000
Total   650,000

 

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

 

Recipient Name  Shares Issued 
Thompson MacDonald   250,000 
Ronald Schinnour   250,000 
1045899 Alberta Ltd., a company owned by Gary Oosterhoff   100,000 
Revrok Farm Ltd., a corporation owned by Cornelus Korver   100,000 
For Life Financial Ltd., a corporation owned by Casey Douglass   100,000 
Total   800,000 

 

As at December 31, 2017, and December 31, 2018, we had no options outstanding under our 2003 Non-Qualified Option Plan. Our 2003 Non-Qualified Option Plan permitted us to issue up to 1,500,000 shares of our common stock either upon exercise of stock options granted under such plan or through restricted stock awards under such plan.

 

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

 

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

 

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

 

 

 

 7 

 

 

We may issue additional stock without shareholder consent.

 

Our board of directors has authority, without action or vote of the shareholders, to issue all or part of our authorized but unissued shares. Additional shares may be issued in connection with future financing, acquisitions, employee stock plans, or otherwise. Any such issuance will dilute the percentage ownership of existing shareholders. We are also currently authorized to issue up to 10,000,000 shares of preferred stock and 100,000,000 of common stock. The board of directors can issue preferred stock in one or more series and fix the terms of such stock without shareholder approval. Preferred stock may include the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion and redemption rights and sinking fund provisions. The issuance of preferred stock could adversely affect the rights of the holders of common stock and reduce the value of the common stock. In addition, specific rights granted to holders of preferred stock could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our shareholders. Such issuance could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

 8 

 

 

ITEM 1B. UNRESOLVED STAFF COMMENTS.

 

Not applicable.

 

ITEM 2. PROPERTIES.

 

GENERAL

 

We own one property, Pisgah Crater, in the United States, located in:

 

  · Pisgah, San Bernadino County, California

 

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

 

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

 

In the United States, one property is owned (patented mining claims on a volcanic cinders property) at Pisgah, California.

 

The evaluation and acquisition of precious metals, mining properties and mineral properties is competitive; as there are numerous companies involved in the mining and minerals business. The Company has processed and tested mineralized materials and produced very small amounts of precious metals on a testing basis. These have come primarily from testing material from the Pisgah Mountain.

 

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

 

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

 

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

 

 9 

 

 

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

 

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

 

Federal, state and local provisions regulating the discharge of material into the environment, or otherwise relating to the protection of the environment, such as the Clean Air Act, Clean Water Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response Liability Act (“Superfund”) affect mineral operations. For exploration and mining operations, applicable environmental regulation includes a permitting process for mining operations, an abandoned mine reclamation program and a permitting program for industrial development. Other nonenvironmental regulations can impact exploration and mining operations and indirectly affect compliance with environmental regulations. For example, a state highway department may have to approve a new access road to make a project accessible at lower costs, but the new road itself may raise environmental issues. Compliance with these laws, and any regulations adopted there under, can make the development of mining claims prohibitively expensive, thereby frustrating the sale or lease of properties, or curtailing profits or royalties which might have been received there from.

 

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

 

PISGAH, CALIFORNIA PROPERTY

 

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

 

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

 

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

 

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

 

 

 

 10 

 

 

Pisgah Property - Mining Lease

 

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

 

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

 

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

 

Mining and reclamation permits, and an air quality permit have been issued by the California regulatory agencies in the names of both Twin Mountain and the Company. We posted a cash bond in the amount of $1,379 (1% of the total bond amount) and Twin Mountain has posted the remainder of the $137,886 bond. If Twin Mountain defaults, we would be responsible for reclamation of the property, but reclamation costs incurred in that event would be paid in whole or part by the bond posted by us and Twin Mountain. Reclamation costs are not presently determinable.

 

In addition to our historic exploration activities, we are currently undertaking alternative revenue producing opportunities at our Pisgah Property. On January 23, 2012 we entered into a mineral lease agreement with a partner who will purchase up to 100,000 tons of resources derived from the property to produce commercial products for resale. The agreement is for an initial period of ten (10) years, with an additional five (5) year extension at the option of the lessee. We will receive fees for the removal of minerals at diminishing prices in $0.50 increments between $12 per ton and $10 per ton for each 20,000 tons of material removed.

 

Pisgah Property – Material Supply Agreements

 

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

 

On April 9, 2013, the Company entered into a Material Supply Agreement (the “Original MSA”) with Candeo Lava Products, Inc. (“Candeo”), an Alberta, Canada company controlled by a former director of the Company and brother of our then CEO. This Agreement was amended on December 7, 2018 (the “Amended MSA”) wherein the mining permit has been extended to December 31, 2048 and the Reclamation Plan expiring on December 31, 2050. Pursuant to the Amended MSA, Candeo is entitled to purchase volcanic lava or cinders from Pisgah Property that is not currently stockpiled on the Pisgah Property (the “Material”) at a price equal to the greater of $15 per ton and the net sales margin per ton removed from the Pisgah Property realized as follows: (i) 35% of the net sales margins during the first year of mining; and (ii) 50% of the net sales margins for the subsequent years during the term of the Amended MSA (the “Production Payment”). Under the Amended MSA, Candeo has the right to remove an initial amount of up to 1,000,000 tons (the “Initial Amount”) of Material from the Property and additional incremental amounts (the “Additional Amounts”) of 1,000,000 tons each, upon the successful removal of the Initial Amount from the Property. Candeo’s right to remove the Additional Amounts from the Property is on the basis that once Candeo has removed the first Additional Amount of the Material from the Property, it shall have the right to remove subsequent Additional Amounts of Material from the Property, so long as it removes its then current Additional Amount. As such, Candeo’s right to extend the term of the Amended MSA is entirely based on Candeo’s successful performance of its Material removal commitments under the terms of the Amended MSA.

 

 

 

 11 

 

 

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

 

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

 

Location and Access

 

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

 

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

 

 

 

 

 

 

 

 

 

 

 

 12 

 

 

Pisgah Project

 

General Location Map

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 13 

 

 

Pisgah Project

 

Regional Location Map

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 14 

 

 

Pisgah Project

 

Township Location Map

 

 

 

 

  

 

 

 

 

 

 15 

 

 

Pisgah Project

 

Topography Map

 

 

 

 

 

 

 

 

 

 

 

 16 

 

 

OWL CANYON - S & S JOINT VENTURE

 

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

 

CERBAT PROPERTY

 

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

 

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

 

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

 

Location and Access

 

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

 

WIKIEUP PROPERTY

 

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

 

 

 

 17 

 

 

ITEM 3. LEGAL PROCEEDINGS.

 

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

 

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

 

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

 

Terms of the Agreement include:

 

·A new Board of 4 comprised of 3 Directors of which 1 was nominated by Plaintiffs and 2 from Defendants. The members are Casey Douglas, Gary Oosterhoff, and Hugo Bondi. There was also an advisory board member, Cosimo La Porta named as of May 13, 2019.
·Sale of minimum tonnage of lava material to Candeo Lava Products within certain time frames.
·Proceeds from lava material sales are budgeted towards Plaintiff’s legal costs, acute Accounts Payables and Management Fees. An annual minimum was established to cover base costs of keeping Can-Cal from insolvency.
·As Candeo develops its marketing, it expects to substantially increase volumes of lava material sales and thus future purchases from Can-Cal. After the first 60-75,000 tons are purchased, then Can-Cal will begin to receive 20% of gross revenues, or ORI (Overriding Royalty Interest) from Candeo’s sales of lava material.

Can-Cal Resources will be able to focus on developing any other resource potential.

 

 

The lawsuit brought forward by its shareholders has reached a tentative settlement. Terms of the settlement agreement include:

 

  - A new Board of Directors to consist of five individuals. Two nominated by the Plaintiffs, two nominated by the Defendants, and a fifth agreed upon by these four;

 

  - Sale of minimum tonnage of lava material to Candeo within set timeframes;

 

  - Proceeds from lava material sales to be applied to pay Plaintiff’s legal costs, acute accounts payable, and management fees. Annual minimum purchases of lava material by Candeo have also been established to cover the basic costs of keeping the Company in operation and solvent;

 

  - As Candeo develops its marketing operations, it is expected to substantially increase the volumes of its annual lava material purchases from the Company. After the first 90,000-110,000 tons are purchased, then the Company will begin to receive a 20% overriding royalty interest from Candeo’s sales of lava material;

 

  - The Company will be able to focus on developing any other resource potential

 

 

 

 18 

 

 

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

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

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

 

 

 

 

 

 

 

 

 

 19 

 

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

(a) Market Information

 

Our Common Stock trades sporadically on the OTC Pink market under the symbol CCRE. Our common stock has traded infrequently on the OTC Pink market, which limits our ability to locate accurate high and low bid prices for each quarter within the last two fiscal years. Therefore, the following table lists the quotations for the high and low bid prices as reported by a Quarterly Trade and Quote Summary Report of the OTC Pink market for the calendar years 2014 through 2018. The quotations from the OTC Pink market reflect inter-dealer prices without retail mark-up, markdown, or commissions and may not represent actual transactions.

 

    2017   2018 
    High   Low   High   Low 
 1st Quarter   $0.07   $0.03   $0.03   $0.03 
 2nd Quarter   $0.07   $0.05   $0.03   $0.03 
 3rd Quarter   $0.07   $0.05   $0.03   $0.03 
 4th Quarter   $0.05   $0.03   $0.03   $0.03 

 

(b) Holders of Common Stock

 

As of December 31, 2018, there were approximately 43,667,060 shares outstanding held by approximately 601 shareholders.

 

As at Number of shareholders Number of shares outstanding 
December 31, 2016  180  42,867,060 
March 31, 2017  180  42,867,060 
June 30, 2017  180  42,867,060 
September 30, 2017  180  42,867,060 
December 31, 2017  601(1)  43,667,060 
March 31, 2018  601  43,667,060 
June 30, 2018  601  43,667,060 
September 30, 2018  601  43,667,060 
December 31, 2018  601  43,667,060 

___________

  (1) Official records show historical number as 598. 3 more were added in stock issuance this period. Management apologizes for confusion due to numbers reported earlier.

 

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

 

 

 

 20 

 

 

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

 

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

 

On December 31, 2017, aside from the 600,000 shares issued to G. Michael Hogan and 240,000 shares issued to Bill Hogan, an additional 800,000 shares were issued to former and current directors of the Company for their work on seeing the Company continue.

 

(c) Dividends

 

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

 

(d) Securities Authorized for Issuance under Equity Compensation Plans

 

STOCK OPTIONS

 

On December 31, 2017, 650,000 stock options were granted to members of the Board of Directors and consultants of the Company in lieu of cash compensation. No stock options were issued during the year ended December 31, 2018.

 

WARRANTS

 

Can-Cal has no warrants outstanding as of the fiscal year ended December 31, 2017, or 2018.

 

 

 

 21 

 

 

Recent Sales of Unregistered Securities

 

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

 

Recipient Name Stock Options Granted
Sandra Rogoza   100,000
Red To Black Inc.   250,000
1045899 Alberta Ltd., a company owned by Gary Oosterhoff   100,000
Revrok Farm, a company owned by Cornelus Korver   100,000
For Life Financial Ltd., a company owned by Casey Douglass   100,000
Total   650,000

 

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

 

Recipient Name   Shares Issued  
Thompson MacDonald     250,000  
Ronald Schinnour     250,000  
1045899 Alberta Ltd., a company owned by Gary Oosterhoff     100,000  
Revrok Farm Ltd., a corporation owned by Cornelus Korver     100,000  
For Life Financial Ltd., a corporation owned by Casey Douglass     100,000  
Total     800,000  

 

There were no sales of equity securities by the Company during the fiscal year ended December 31, 2018.

 

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

 

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

 

 

 

 22 

 

 

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

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the year ended December 31, 2017, or 2018.

 

ITEM 6. SELECTED FINANCIAL DATA.

 

Not applicable.

 

 

 

 

 

 

 23 

 

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion of the business, financial condition and results of operation of the Company should be read in conjunction with the financial statements of the Company for the years ended December 31, 2018 and 2017 and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the section titled “Risk Factors.”

 

Overview

 

Can-Cal Resources Ltd. is a publicly traded exploration stage company engaged in seeking the acquisition and exploration of metals mineral properties. As part of its growth strategy, the Company will focus its future activities in the USA, with an emphasis on the Pisgah Mountain, California property.

 

At December 31, 2018, we had cash on hand of approximately $54 available to sustain operations. At December 31, 2017, cash on hand was $769. Accordingly, we are uncertain as to whether the Company may continue as a going concern. While we may seek additional investment capital, or possible funding or joint venture arrangements with other mining companies, we have no assurance that such investment capital or additional funding and joint venture arrangements will be available to the Company.

 

We expect in the near term to continue to rely on outside financing activities to finance our operations. We used investment proceeds realized during 2012 for (i) completion of work-up of two potential extraction processes to determine which process we will employ to potentially prove up any precious metals, platinum groups elements and/or other base metals on the Pisgah, California property. if any; (ii) strategic working capital reserve and (iii) to finance our operations.

 

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

 

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

 

 

 

 24 

 

 

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

 

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

 

Results of Operations for the Years Ended December 31, 2018 and 2017:

 

For the year ended December 31,  2018   2017 
Rental Income  $ -   $ - 
         
Operating expenses:          
Exploration costs   21,753    8,738 
General and administrative   193,421    228,747 
Depreciation        
Director fees   75,000    75,000 
Stock-based compensation       30,500 
Total operating expenses   290,174    342,983 
           
Net operating loss   (290,174)   (342,983)
           
Other income (expense):          
Interest adjustment (expense)   7,970    (12,451)
Gain on sale of asset       9,000 
Foreign exchange gain (loss)   792    (3,503)
Gain on settlement of accounts payable   81,233     
Non-recurring income       700 
Total other income (expense)   89,995    (6,254)
           
Loss before provision for income taxes   (200,179)   (349,237)
Provision for income taxes        
Net loss  $(200,179)  $(349,237)

 

 

 

 25 

 

 

Revenues:

 

Rental revenue was $Nil for the year ended December 31, 2018 and December 31, 2017.

 

Exploration Costs:

 

For the year ended December 31, 2018, exploration costs were $21,753 and $8,738 in 2017. The decrease in exploration costs is due to lower property taxes paid on our locations in 2018.

 

General and Administrative:

 

General and administrative expenses were $193,421 for the year ended December 31, 2018 and $228,747 for 2017. The higher general and administrative expense in 2017 was primarily due to legal expenses incurred as a result of the lawsuit brought forward by our shareholders.

 

Director Fees:

 

Director fees were $75,000 for the year ended December 31, 2018, and $75,000 for 2017. During the settlement of the lawsuit from the shareholders, it was deemed prudent that the three directors of the Company would each be compensated $25,000 per year starting January 1, 2017.

 

Net Operating Gain or Loss:

 

Net operating loss for the year ended December 31, 2018 was $290,174 or $0.01 per share, there was a net operating loss of $342,983 or $0.01 per share for 2017. The decrease in operating loss increase is primarily due to lower General and Administrative expense as explained above.

 

Other Income:

 

In the year ended December 31, 2018, there was a gain on the settlement of accounts payable of $81,233. This was due to negotiations with our vendors and coming to agreements for partial payments. Gain on the settlement of accounts payable for the year ended December 31, 2017 was $nil.

 

There was other non-recurring revenue for the year ended December 31, 2018 of $nil and $700 in 2017. The other income in 2017 was due to a photoshoot on our property while other income in 2016 was due to the write-off of charges incurred.

 

Interest Expense:

 

Interest expense for the year ended December 31, 2018 was a positive $7,970, this is due to an amendment in the interest calculation. For the year ended December 31, 2017, interest expense was $12,451.

 

Net Loss:

 

Net loss for the year ended December 31, 2018 was $200,179 compared to $349,237 in 2017. The decrease in the net loss is due to the lower general and administrative costs and gain on settlement of accounts payable.

 

 

 

 26 

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

The following table summarizes total assets, accumulated deficit, stockholders’ equity (deficit) and working capital at December 31, 2018 and 2017.

 

As at December 31,  2018   2017 
Total Assets  $54   $6,559 
Accumulated (Deficit)   (11,813,208)   (11,613,030)
Stockholders’ Equity (Deficit)   (1,173,844)   (973,665)
Working Capital (Deficit)  $(1,173,844)  $(973,665)

 

At December 31, 2018, we had total assets of $54, consisting of prepaid expenses and cash, compared to assets of $6,559 in 2017. We have implemented financial controls in the business to ensure each expense is warranted and needed. Our cash on hand at December 31, 2018 was $54.

 

Off Balance Sheet Arrangements

 

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

 

Contractual Obligations

 

An agreement was signed effective June 10, 2016 with For Life Financial for the office administration of the Company and can be terminated by either party with one month’s written notice. An agreement was signed effective September 10, 2016 to manage the Company. The contract is effective until December 31, 2018 and will continue until the earlier of the completion of the services or the termination of the agreement. Termination of the agreement may be for any or no reason upon four months written notice. The Company may, in its sole discretion, request For Life Financial to cease performing services during the four-month period. For Life Financial may terminate this agreement for any or no reason upon two months written notice.

 

On September 1, 2017, an agreement was signed with Red to Black Inc. to perform the accounting for the Company. The contract is effective until December 31, 2017 and will automatically renew and can be terminated by either party with thirty-day notice.

 

Critical Accounting Policies and Estimates

 

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

 

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably may have been used, or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements. We refer readers to Note 1 to our audited financial statements for the years ended December 31, 2018 and 2017 filed with this Annual Report.

 

Recent Accounting Pronouncements

 

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

 

 

 

 27 

 

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

Index to Financial Statements

 

 

 

 

 

 

 

 

 

 28 

 

 

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

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES.

 

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

 

Changes in Internal Control

 

We have also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls as of December 31, 2018.

 

Limitations on the Effectiveness of Controls 

 

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

 

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

 

CEO Certification

 

Appearing immediately following the Signatures section of this report there are Certifications of the CEO. The Company currently has no CFO. The Certification are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

 

 

 

 

 29 

 

 

Management’s Annual Report on Internal Control over Financial Reporting

 

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

 

 The management of the Company assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on this assessment, management determined that, during the year ended December 31, 2016, our internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules, as more fully described below. This was due to deficiencies in the design or operation of the Company’s internal control that adversely affected the Company’s internal controls and that may be considered to be material weaknesses.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ITEM 9B. OTHER INFORMATION.

 

None.

 

 

 

 30 

 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

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

 

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

 

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

 

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

 

Name  Age  Position and Tenure
Casey Douglass   59  Director and Chairman of the Board.
Gary Oosterhoff   61  Director.
Hugo Bondi   54  Director. Elected May 13, 2019
Cosimo La Porta   57  Advisory Board Member. Elected May 13, 2019

 

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

 

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

 

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

 

 

 

 31 

 

 

(a) Director Compensation

 

With the settlement of the lawsuit brought forward by the Company’s shareholders, the Company has begun compensating its directors starting January 1, 2017 with director fees of $25,000 per annum each. Directors are also reimbursed for travel costs to attend Board meetings. The directors were also given a one-time issuance of 100,000 shares each on December 31, 2017.

 

(b) Identification of Certain Significant Employees and Consultants

 

None.

 

(c) Family Relationships.

 

Not applicable.

 

(d) Involvement in Certain Legal Proceedings.

 

None of our executive officers or directors has been involved in any of the following events during the past ten years:

 

  (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

  (2) any conviction in a criminal proceeding or being a named subject to a pending criminal proceeding (excluding traffic violations and minor offenses);

 

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

 

  (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law;

 

  (5) being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (i) any Federal or State securities or commodities law or regulation; (ii) any law or regulation respecting financial institutions or insurance companies, including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

  (6) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section (1)(a)(40) of the Commodity Exchange Act), or any equivalent exchange, association, entity, or organization that has disciplinary authority over its members or persons associated with a member.

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Based upon a review of Forms 3 and 4 furnished to the company pursuant to Rule 16a-3(a) and written representations referred to in Item 405(b) (2)(i) of Regulation S-K, no directors, officers, beneficial owners of more than 10% of the company’s common stock, or any other person subject to Section 16 of the Exchange Act failed for the period from January 1, 2015 through December 31, 2016 to file on a timely basis the reports required by Section 16(a) of the Exchange Act.

 

 

 32 

 

 

CODE OF ETHICS

 

The Company has adopted a Code of Ethics. A copy of the Code of Ethics will be provided to any person, without charge, upon written request sent by email to Casey Douglass, President (casey@forlifefinancial.com).

 

ITEM 11. EXECUTIVE COMPENSATION.

 

The following table sets forth summary compensation information for the years ended December 31, 2018 and 2017 for our chief executive officers and directors.

 

Summary Compensation Table
Name and Principal Position   

Fiscal

Year

    Salary    Bonus    Option Awards    All Other Compensation    Total 
Casey Douglass   2018   $25,000   $-0-   $-0-   $-0-   $25,000 
Director   2017   $25,000   $-0-   $1,100   $3,000   $29,100 
                               
Gary Oosterhoff   2018   $25,000   $-0-   $-0-   $-0-   $25,000 
Director   2017   $25,000   $-0-   $1,100   $3,000   $29,100 
                               
Cornelus (Case) Korver   2018   $25,000   $-0-   $-0-   $-0-   $25,000 
Director   2017   $25,000   $-0-   $1,100   $3,000   $29,100 
                               
Officers as a Group   2018   $75,000   $-0-   $-0-   $-0-   $25,000 
    2017   $75,000   $-0-   $3,300   $9,000   $87,300 

 

Grants of Plan-Based Awards

 

No stock options were issued to the directors in the year ended December 31, 2018. Outside of the Plan, each of the directors was issued 100,000 stock options on December 31, 2017.

 

Outstanding Equity Awards

 

There were 300,000 exercisable stock options held by our directors on December 31, 2018 and December 31, 2017.

 

Option Exercises

 

There were no options issued or exercised by our executive officers during the year ended December 31, 2018, or December 31, 2017.

 

Equity Compensation Plan Information

 

There are no outstanding Warrants as of the year ended December 31, 2018, or 2017.

 

 

 

 33 

 

 

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

 

The following tables presents information, to the best of Can-Cal’s knowledge, about the ownership of Can-Cal’s common stock on December 31, 2018 and 2017, relating to those persons known to beneficially own more than 5% of Can-Cal’s capital stock and by Can-Cal’s directors and executive officers. The percentage of beneficial ownership for the following tables are based on 43,667,060 shares of common stock outstanding as of December 31, 2018 and 43,667,060 outstanding as of December 31, 2017 (including the share issuances to Michael Hogan and William J. Hogan for the settlements of their debts). The percentage of beneficial ownership for the following table is based on 43,667,060 and 43,667,060 shares of common stock outstanding as of December 31, 2018 and 2017, respectively.

 

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the shareholder has sole or shared voting or investment power. It also includes shares of common stock that the shareholder has a right to acquire within 60 days after December 31, 2017 pursuant to options, warrants, conversion privileges or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of Can-Cal’s common stock.

 

   2018 
Name and Address of Beneficial Owner, Officer or Director Notes (1) & (3)  Number of Shares     Percentage of Outstanding Common Stock Note (2) 
Beneficial Owners, Officers and Directors:            
G Michael Hogan, Former CEO, President and Director   3,760,419      8.6% 
Casey Douglass, Director   463,000  (4)   1.1% 
Gary Oosterhoff, Director   300,000  (4)   0.7% 
Cornelus (Case) Korver, Director   300,000  (4)   0.7% 
All Current Directors and Executives as a Group   1,063,000  (4)   2.5% 

___________

  (1) As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security).
  (2) Figures are rounded to the nearest tenth of a percent.
  (3) The address of each person is care of Can-Cal: 42 Springfield Avenue, Red Deer, Alberta, Canada T4N 0C7.
  (4) These amounts include the 100,000 of stock options that each of the directors have that are vested and exercisable within 60 days after December 31, 2018.

 

 

 

 34 

 

 

   2017 
Name and Address of Beneficial Owner, Officer or Director Notes (1) & (3)  Number of Shares     Percentage of Outstanding Common Stock Note (2) 
Beneficial Owners, Officers and Directors:            
G Michael Hogan, Former CEO, President and Director   3,760,419      8.6% 
Casey Douglass, Director   463,000  (4)   1.1% 
Gary Oosterhoff, Director   300,000  (4)   0.7% 
Cornelus (Case) Korver, Director   300,000  (4)   0.7% 
All Current Directors and Executives as a Group   1,063,000  (4)   2.5% 

___________

  (1) As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security).
  (2) Figures are rounded to the nearest tenth of a percent.
  (3) The address of each person is care of Can-Cal: 42 Springfield Avenue, Red Deer, Alberta, Canada T4N 0C7.
  (4)

These amounts include the 100,000 of stock options that each of the directors have that are vested and exercisable within 60 days after December 31, 2017.

 

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

 

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

 

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

 

Since August 2012, G. Michael Hogan, the former CEO and former Chairman of the Board, has been providing funds to the Company to pay for ongoing operations. The amount received is a note payable, is unsecured, and is due on demand. Amounts received for legal expenses bear interest at 10% and amounts received for other expenses bear interest at 5%. At December 31, 2018, the amount outstanding, including interest, is $185,875.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

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

 

 

 

 35 

 

 

Until his resignation, the Board of Directors delegated management of the Company to Mr. G. Michael Hogan and the Board of Directors. The responsibility was then passed on to the Chairman of the Board to manage the terms of engagement, before we engage independent auditor for audit and non-audit services, except as to engagements for services outside the scope of the original terms, in which instances the services have been provided pursuant to preapproval policies and procedures, established by management. These pre-approval policies and procedures are detailed as to the category of service and the Board of Directors is kept informed of each service provided.

 

(7) Thayer O’Neal Company, LLC, was retained as our auditing firm by the Board of Directors for the fiscal years ended December 31, 2018 and 2017. Thayer O’Neal Company, LLC billed us as follows for the years ended December 31, 2018 and 2017, respectively:

 

For the year ended December 31,  2018   2017 
Audit Fees (1)  $4,500   $28,582 
Audit-Related Fees (2)        
Tax Fees (3)        
All Other Fees (4)        
Total fees paid or accrued  $4,500   $28,582 

___________

(1)Includes fees for audit of the annual financial statements and review of quarterly financial information filed with the Securities and Exchange Commission.
(2)For assurance and related services that were reasonably related to the performance of the audit or review of the financial statements, which are not included in the Audit Fees category. The Company had no Audit-Related Fees for the periods ended December 31, 2018 and 2017.
(3)For tax compliance, tax advice, and tax planning services, relating to any and all federal and state tax returns as necessary for the periods ended December 31, 2018 and 2017, respectively.
 
(4)For services in respect of any and all other reports as required by the SEC and other governing agencies.

 

 

 

 

 

 

 

 

 

 

 

 36 

 

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

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

 

(a) 1. Financial Statements

 

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

 

(b) 2. Financial Statement Schedules

 

None.

 

 

 

 

 

 37 

 

 

(c) 3. Exhibit Index

 

      Incorporated by reference
Exhibit Exhibit Description Filed herewith Form Period ending Exhibit Filing date
3.1 Articles of Incorporation   Form 10-SB N/A 3.0 7/9/1999
3.2 Amendment to the Articles of Incorporation   Form 10-SB N/A 3.1 7/9/1999
3.3 By-Laws   Form 10-SB N/A 3.2 7/9/1999
10.1 Form of Mineral Lease Agreement   10-K 12/31/2014 10.1 1/7/2016
10.2 Form of Promissory Note with FutureWorth Capital   10-K 12/31/2014 10.2 1/7/2016
10.3 Form of Subscription Agreement for Promissory Note with FutureWorth Capital   10-K 12/31/2014 10.3 1/7/2016
10.4 Form of Warrant Certificate with FutureWorth Capital   10-K 12/31/2014 10.4 1/7/2016
31.1 Certification of Principal Executive Officer/Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act X        
32.1 Certification of Principal Executive Officer/Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act X        
99.1 Summary Regarding Pisgah, Wikieup, Cerbat and the Owl Canyon Properties   10-KSB/A 12/31/07 99.1 03/11/09
101.INS XBRL Instance Document X        
101.SCH XBRL Schema Document X        
101.CAL XBRL Calculation Linkbase Document X        
101.DEF XBRL Definition Linkbase Document X        
101.LAB XBRL Labels Linkbase Document X        
101.PRE XBRL Presentation Linkbase Document X        

 

 

 

 

 

 38 

 

 

SIGNATURES

 

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

 

CAN-CAL RESOURCES LTD.

 

By: /s/ Casey Douglass                                      

 

Casey Douglass, Chairman of the Board of Directors

 

Date: January 7, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 39 

 

 

POWER OF ATTORNEY

 

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

 

 

/s/ Gary Oosterhoff, Director                

January 7, 2020

Gary Oosterhoff

 

 

/s/ Hugo Bondi, Director                

January 7, 2020

Hugo Bondi

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 40 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors of

Can-Cal Resources Ltd.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Can Cal Resources, Ltd. (“the Company”), as of December 31, 2018 and 2017, and the related statements of operations, changes in stockholder’s deficit and cash flows for the years then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with U.S generally accepted accounting principles.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

  

Emphasis of a Matter

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note #2 to the financial statements, the Company has limited operations and has yet to attain profitability. This raises substantial doubt about its ability to continue as a going concern. Management’s plan in this regard is also described in Note #2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/S/ Thayer O’Neal Company, LLC

 

Thayer O’Neal Company, LLC

We have served as the Company's auditor since 2015

Sugar Land, Texas

January 7, 2020

 

 

  

 F-1 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

BALANCE SHEETS

 

   As of December 31, 
   2018   2017 
ASSETS        
Current assets:          
Cash  $54   $769 
Other current assets       5,790 
           
Total current assets   54    6,559 
           
Total assets  $54   $6,559 
           
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)          
Current liabilities:          
Accounts payable  $258,029   $239,225 
Accounts payable, related parties   62,673    62,673 
Accrued expenses   19,930    18,104 
Accrued expenses, related parties   101,122    62,132 
Unearned revenues, related party   583,066    402,438 
 Notes payable, related parties   149,078    195,652 
           
Total current liabilities   1,173,898    980,224 
           
Total liabilities   1,173,898    980,224 
           
Commitments and contingencies (See Note 8)          
           
Stockholders’ deficit:          
Preferred stock(1)        
Common stock(2)   43,667    43,667 
Additional paid-in capital   10,595,697    10,595,697 
Accumulated deficit   (11,813,208)   (11,613,029)
           
Total stockholders’ deficit   (1,173,844)   (973,665)
           
Total liabilities and stockholders’ deficit  $54   $6,559 

___________

  (1) Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding.
  (2) Common stock, $0.001 par value, 100,000,000 shares authorized, 43,667,060 issued and outstanding as of December 31, 2018 and December 31, 2017.

 

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

 

 

 F-2 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF OPERATIONS

 

   For the years ended December 31, 
   2018   2017 
Rental Income  $   $ 
           
Operating expenses:          
Exploration costs   21,753    8,738 
General and administrative   193,421    228,747 
Officer salary and director fees   75,000    75,000 
Stock-based compensation       30,500 
           
Total operating expenses   290,174    342,983 
           
Net operating loss   (290,174)   (342,983)
           
Total other income (expense)   89,995    (6,254)
           
Loss before provision for income taxes   (200,179)   (349,237)
Provision for income taxes        
           
Net loss  $(200,179)  $(349,237)
           
Weighted average number of common shares outstanding – basic and fully diluted   43,667,060    42,869,252 
           
Net loss per share – basic and fully diluted  $(0.00)  $(0.01)

 

 

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

 

 

 

 

 

 

 

 F-3 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

 

   Common Stock   Additional       Total 
   Number of       Paid-in   Accumulated   Stockholders’ 
   Shares   Amount  

Capital

   Deficit   Deficit 
Balance, December 31, 2016   42,867,060   $42,867   $10,565,997   $(11,263,792)  $(654,928)
                          
Stock-based compensation   800,000    800    29,700        30,500 
Net loss               (349,237)   (349,237)
Balance, December 31, 2017   43,667,060   $43,667   $10,595,697   $(11,613,029)  $(973,665)
                          
Net loss               (200,179)   (200,179)
Balance, December 31, 2018   43,667,060   $43,667   $10,595,697   $(11,813,208)  $(1,173,844)

 

 

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

 

 

 

 

 

 

 

 

 F-4 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF CASH FLOWS

For the years ended December 31, 2018 and 2017

 

 

 For the years ended December 31, 
  2018   2017 
CASH FLOWS FROM OPERATING ACTIVITIES       
        
Net loss $(200,179)  $(349,237)
Adjustments to reconcile net loss to net cash used in operating activities:         
Stock-based compensation      30,500 
Decrease (increase) in assets:         
Other current assets  5,790    (4,500)
Increase (decrease) in liabilities:        
Accounts payable  18,803    153,451 
Accrued expenses       1,799 
Accrued expenses, related parties  1,826    12,451 
Unearned revenues, related party  180,628    148,673 
          
Net cash provided by (used in) operating activities  6,868    (6,863)
          
CASH FLOWS FROM FINANCING ACTIVITIES         
(Payments to) proceeds from notes payable, related parties  (7,583)   7,632 
          
Net cash used in financing activities  (7,583)   7,632 
          
Net (decrease) increase in cash  (715)   769 
Cash, beginning of year  769     
Cash, end of year $54   $769 
          
CASH PAID FOR         
Interest expense       
Income taxes       

 

 

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

 

 

 

 

 F-5 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

 

Can-Cal Resources Ltd. (“Can-Cal” or the “Company”) is a Nevada corporation incorporated on March 22, 1995. The Company’s head office is located in Red Deer, Alberta.

 

The Company is an exploration company engaged in the exploration for precious metals, specifically focused on mineral exploration projects. We have examined various prospective mineral properties for precious metals and acquired those deemed promising. We currently own, lease or have mining interest in one mineral property in the southwestern United States (Pisgah Crater in California). The Company previously had mineral rights in Owl Canyon, California, as well as, Cerbat and Wikieup, Arizona, which have been impaired and abandoned in 1999.

 

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

 

Summary of Significant Accounting Policies

 

Basis of Presentation

 

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

 

The Company’s functional and reporting currency is the United States dollar (USD). Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 830, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in the Canadian dollar (CDN). The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

 

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

 

Exploration Stage Company

 

The Company is currently an exploration stage company. The Company has incurred an accumulated deficit of $11,813,208 for the period from inception (March 22, 1995) through December 31, 2018. 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.

 

 

 

 

 

 F-6 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

Use of Estimates

 

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

 

Cash

 

Cash consists of deposits in banks.

 

Long-Lived Assets

 

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

 

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

 

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

 

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

 

Fair Value of Financial Instruments

 

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

 

Basic and Diluted Loss per Share

 

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For 2018 and 2017 potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

 

 

 

 F-7 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

Stock-Based Compensation

 

Employees - The Company accounts for share-based compensation under the fair value method which requires all such compensation to employees, including the grant of employee stock options, to be calculated based on its fair value at the measurement date (generally the grant date), and recognized in the condensed consolidated statement of operations over the requisite service period.

 

Nonemployees - During June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”) to simplify the accounting for share- based payments to nonemployees by aligning it with the accounting for share-based payments to employees. The Company elected to early adopt ASU 2018-07. Under the requirements of ASU 2018-07, the Company accounts for share-based compensation to non-employees under the fair value method which requires all such compensation to be calculated based on the fair value at the measurement date (generally the grant date), and recognized in the statement of operations over the requisite service period.

 

Income Taxes

 

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

 

Uncertain Tax Positions

 

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

 

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

 

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

 

Mineral Claim Payments and Exploration Expenditures

 

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

 

 

 

 F-8 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

Capitalized Mineral Costs

 

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

 

Recent Accounting Pronouncements

 

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

 

Leases (Topic 842). In February 2016, ASU 2016-02, Leases, was issued. This standard will require all lessees to recognize a right of use asset and a lease liability on the balance sheet, except for leases with durations that are less than twelve months. Effective for Public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). The adoption of new guidance will not have a material impact on our financial statements and related disclosures.

 

NOTE 2 – GOING CONCERN

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company had a net loss of $200,179 for the year ended December 31, 2018, and a working capital deficit of $1,173,844 at December 31, 2018. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities. Management has plans to seek additional capital through private placements and public offerings of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

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

 

 

 

 

 F-9 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

Material Supply Agreement

 

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

 

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

 

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

 

Unearned revenues as reflected on the Balance Sheet are a reflection of amounts received from Candeo based on the Amended MSA. 

 

Compensation

 

On June 30, 2010, the Company entered into a consulting agreement, with a Board of Director’s consulting firm, FutureWorth Capital Corp. The terms of the agreement include annual compensation of $60,000, payable monthly. The Company may elect to satisfy payment in shares of common stock in lieu of cash at a market value equal to $0.10 above the average closing trading price of the common stock for the preceding five (5) days from the date of such election. No payments have been made in cash or stock to date. As of December 31, 2018, the Company owed FutureWorth Capital Corp. $506 (2017 - $506) as included in accounts payable, related parties, for service prior to, and during the service period under the consulting agreement. The consulting agreement was terminated on February 27, 2013 with Mr. William Hogan’s resignation from the Board of Directors.

 

 

 

 F-10 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

On June 10, 2016, the Company entered into a consulting agreement, with a consulting firm, For Life Financial. The terms of the agreement include monthly compensation of $2,100 CAD (approx. $1,560 USD) for managing the Company. On September 10, 2016, the Company amended the agreement to include additional annual compensation $50,000 USD, payable monthly as the scope of work increased.

 

Stock-Based Compensation

 

No new warrants have been issued as of December 31, 2018.

 

On December 31, 2017, 650,000 Stock Options and 800,000 shares were issued as compensation for work done by consultants and directors of the Company. (Note 9)

 

NOTE 4 – PREPAID EXPENSES

 

Prepaid expenses consisted of the following as of December 31, 2018 and 2017, respectively:

 

   As at December 31, 
   2018   2017 
County taxes  $   $1,290 
Audit fees       4,500 
Total prepaid expenses  $   $5,790 

 

NOTE 5 – NOTES PAYABLE, RELATED PARTIES

 

Notes payable, related parties consisted of the following as of December 31, 2018 and 2017, respectively:

 

   As at December 31, 
   2018   2017 
Note payable (1)  $149,078   $179,409 
Promissory note payable (2)       14,050 
Note payable (3)       2,193 
Total related party notes payable  $149,078   $195,652 

___________

  (1) Note payable to the former CEO, unsecured, bearing interest at 10% and due on demand.
  (2) Promissory note payable originated on November 30, 2012 with FutureWorth Capital Corp., a consulting firm owned by our former Chairman of the Board of Directors, unsecured, bearing interest at 10%, matured on November 29, 2013. In connection with the promissory note, the Company granted warrants to purchase 20,000 shares of the Company’s common stock at an exercise price of $0.10. The warrants expired on November 29, 2014.
  (3) Note payable to the former manager of the Company for funds advanced to the Company, unsecured non-interest bearing, and due on demand.

 

 

 

 

 

 F-11 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

NOTE 6 – UNEARNED REVENUES

 

On April 9, 2013, the Company entered into the Original MSA with Candeo and the Amended MSA on March 3, 2014. Pursuant to the Amended MSA, Candeo is entitled to purchase Material from the Pisgah Property at a price equal to the greater of $15 per ton and the net sales margin per ton removed from the Pisgah Property realized as follows: (i) 35% of the net sales margins during the first year of mining; and (ii) 50% of the net sales margins for the subsequent years during the term of the Amended MSA. As of December 31, 2018 and 2017, we had unearned revenue from this agreement totaling $583,066 and $402,438, respectively.

 

NOTE 7 – Other Income

 

Other income consists of the following items:

 

Other income (expense):  For the years ended December 31, 
   2018   2017 
Interest expense, related parties   7,970    (12,451)
Gain on sale of assets       9,000 
Foreign exchange gain (loss)   792    (3,503)
Clearing unobligated liabilities   81,233     
Non-recurring income       700 
Total other income (expense)  $89,995   $(6,254)

 

Interest expense in 2018 and prior periods are from related parties.

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

A) Mining claims

 

The Company had a lease and purchase option agreement that began in March 1998 which has since expired, covering six patented claims in the Cerbat Mountains, Hualapai Mining District and Mohave County Arizona. The Company pays $1,500 per quarter as minimum advance royalties. The Company has the option to purchase the property for $250,000 plus interest at a rate of 8% compounded annually from and after the date of its exercise of the option to purchase the property. If the Lessee exercises its option to purchase, all funds paid to Lessors shall be credited toward the purchase price as of the date the payments were made.

 

B) Mining reclamation costs

 

Mining and reclamation permits, and an air quality permit have been issued by the California regulatory agencies in the names of both Twin Mountain, our joint venture partner, and the Company on August 25, 2016 for a 5 year permit. The Company posted a cash bond in the amount of $1,379 (1% of the total bond amount) and Twin Mountain has posted the remainder of the $137,886 bond. If Twin Mountain defaults, we would be responsible for reclamation of the property, but reclamation costs incurred in that event would be paid in whole or part by the bond posted by us and Twin Mountain. Reclamation costs are not presently determinable. Can-Cal & Candeo Growth Solutions are now joint owners of this Permit which has been extended to December 31, 2048.

 

 

 

 

 F-12 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

C) Litigation

 

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

 

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

 

Can-Cal Resources Ltd., as one of several Defendants in Derivative Lawsuit reached “Settlement Agreement in Principle” mid-November 2017. As of December 4, 2019, all Parties are progressing toward a more detailed Definitive Agreement.

 

Terms of the Agreement include:

 

  · A new Board of 4 comprised of 3 Directors were selected as of May 13, 2019.
  · Sale of minimum tonnage of lava material to Candeo Lava Products within certain time frames.
  · Proceeds from lava material sales are budgeted towards Plaintiff’s legal costs, acute Accounts Payables and Management Fees. An annual minimum was established to cover base costs of keeping Can-Cal from insolvency.
  · As Candeo develops its marketing, it expects to substantially increase volumes of lava material sales and thus future purchases from Can-Cal. After the first 60-75,000 tons are purchased, then Can-Cal will begin to receive 20% of gross revenues, or ORI (Overriding Royalty Interest) from Candeo’s sales of lava material.
  · Can-Cal Resources will be able to focus on developing any other resource potential.

 

In or about June 2017, the Securities and Exchange Commission initiated an administrative proceeding before an administrative law judge seeking to revoke Can-Cal’s registration as a publicly traded security. In November 2017, the SEC’s Division of Enforcement sought summary adjudication on the issue of permanent revocation of Cal-Cal’s securities registration. Can-Cal opposed the motion and the matter has been fully briefed; however, as of April 5, 2019, the SEC has moved to dismiss this proceeding.

 

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

 

 

 

 F-13 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

NOTE 9 – SHAREHOLDERS’ EQUITY

 

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

 

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

 

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

 

An additional 800,000 shares were issued on December 31, 2017 to the Directors and former Directors of the Company. (Note 9)

 

NOTE 10 – STOCK-BASED COMPENSATION

 

Option Plan

 

Options granted for employee and consulting services - The 2003 Non-Qualified Option Plan was established by the Board of Directors in June 2003 and approved by shareholders in October 2003. A total of 1,500,000 shares of common stock are reserved for issuance under this plan. There were no options issued during the year ended December 31, 2018.

 

Outside of the plan, by Board resolutions, the following Stock Options were issued on December 31, 2017 with an exercise price of $0.06 per share, for director and/or consultant services rendered to Can-Cal Resources:

 

   Available for Grant   Options Outstanding   Weighted-Average Exercise Price 
Balance as of January 1, 2018       650,000   $0.06 
Authorization of awards            
Grants of stock options            
Cancelled stock options            
Balance as of December 31, 2018       650,000   $0.06 

 

 

   Number of Options   Weighted-Average Remaining Contractual Life (In Years)   Weighted-Average Exercise Price 
Outstanding   650,000    4   $0.06 
Exercisable   650,000         
Expected to vest       4   $0.06 

 

 

 

 F-14 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

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

 

Recipient Name  Shares Issued 
Thompson MacDonald   250,000 
Ronald Schinnour   250,000 
1045899 Alberta Ltd., a company owned by Gary Oosterhoff   100,000 
Revrok Farm Ltd., a corporation owned by Cornelus Korver   100,000 
For Life Financial Ltd., a corporation owned by Casey Douglass   100,000 
Total   800,000 

 

NOTE 11 – INCOME TAXES

 

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

 

As of December 31, 2018, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. The Company had approximately $9,857,955 and $9,657,641 of federal net operating losses at December 31, 2018 and 2017, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2029.

  

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

 

   As at December 31, 
   2018   2017 
 Net operating loss carry forwards  $2,070,171   $2,028,105 
Tax Rate   21%    21% 
Total deferred tax assets:   434,736    425,902 
Less: Valuation allowance   (434,736)   (425,902)
Net deferred tax assets  $   $ 

 

Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2018 and 2017.

 

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

 

NOTE 12 – COMPARATIVE FIGURES

 

Certain comparative figures have been reclassified to conform to the current period’s presentation. The Company has presented expenses which were classified as accounts payable and accrued liabilities in the prior year to accrued liabilities and notes payable, related party to conform to the current year’s presentation and simplify the presentation of the statements of operations and balance sheet. The reclassifications have no impact on the Company’s financial statements.

 

NOTE 13 – SUBSEQUENT EVENTS

 

The Company has evaluated all transactions from December 31, 2018 through the financial statement issuance date for subsequent event disclosure consideration and noted no significant subsequent event that needs to be disclosed.

 

 

 

 F-15