Forward-Looking Statements
This quarterly report contains "forward-looking statements". 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,
statements regarding: the plans, strategies and objections of management for
future operations; the future plans or business of our company; future economic
conditions or performance; 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. Except as required by applicable law, we do not
intend, and undertake no obligation, to update any forward-looking statement.
Although we believe the expectations reflected in the forward-looking statements
in this report are reasonable, actual results could differ materially from those
projected or assumed in any forward-looking statements. All 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:
• our current lack of working capital;
• a possible inability to raise additional financing;
• 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 our management to make estimates about matters that
are inherently uncertain;
• deterioration in general or regional economic conditions;
• adverse state or federal legislation or regulations that increase the
costs of compliance;
• inability to efficiently manage our operations; and
• the unavailability of funds for capital expenditures.
All financial information contained herein is shown in United States dollars
unless otherwise stated. Our financial statements are prepared in accordance
with United States generally accepted accounting principles.
In this quarterly report, unless otherwise specified, all references to "shares"
refer to shares of common stock in the capital of our company.
As used in this quarterly report on Form 10-Q, the terms "we", "us" "our" and
"Can-Cal" refer to Can-Cal Resources Ltd., a Nevada corporation, unless
otherwise specified.
Corporate 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 March 31, 2019, we had cash on hand of approximately $4,934 available to
sustain operations. At December 31, 2018, cash on hand was $54. 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.
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On April 9, 2013, the Company entered into the Original MSA with Candeo and the
Amended MSA on March 3, 2014. Pursuant to the Amended MSA, Candeo is entitled to
purchase Material from the Pisgah Property at a price equal to the greater of
$15 per ton and the net sales margin per ton removed from the Pisgah Property
realized as follows: (i) 35% of the net sales margins during the first year of
mining; and (ii) 50% of the net sales margins for the subsequent years during
the term of the Amended MSA. Under the Amended MSA, Candeo has the right to
remove an Initial Amount of up to 1,000,000 tons of Material from the Pisgah
Property and Additional Amounts of 1,000,000 tons each, upon the successful
removal of the Initial Amount from the Pisgah Property. Candeo's right to remove
the Additional Amounts from the Pisgah Property is on the basis that once Candeo
has removed the first Additional Amount of the Material from the Pisgah
Property, it shall have the right to remove subsequent Additional Amounts of
Material from the Property, so long as it removes its then current Additional
Amount. As such, Candeo's right to extend the term of the Amended MSA is
entirely based on Candeo's successful performance of its Material removal
commitments under the terms of the Amended MSA.
Under the Amended MSA, Candeo is required to purchase a minimum of ten thousand
(10,000) tons of Material during each of the first three years of the term of
the agreement, all at a purchase price of $15.00 per ton, for a total payment of
$150,000 per year in each of the first three years of the Term, with credit
being given by the Company to Candeo for all pre-paid tons of Material that have
already been purchased and paid for under the Original MSA. The Pre-Purchased
Material will remain on the Pisgah Property until Candeo commences its
production operations or engages the Company to mine and remove Material on
Candeo's behalf. In the event that Candeo engages the Company to mine and remove
any of the Material, Candeo shall pay all of the Company's reasonable costs and
expenses in conducting such mining and removal operations plus a fee of 15%. All
mining and removal operations on the Pisgah Property will be subject to all
necessary regulatory and other third-party approvals being obtained. The
Pre-Purchased Payments will not be refundable to Candeo but shall be credited
against the first Production Payments.
The term of the Amended MSA has been extended from an initial term of ten (10)
years to twenty (20) years (the "Primary Term") and Candeo has the option to
extend the term for an additional thirty (30) years exercisable at any time with
no less than three (3) months written notice prior to the expiration of the
Primary Term, provided that Candeo is not in default under any of the provisions
of the Second Amended and Restated MSA and that the whole of the Initial Amount
has been removed from the Property.
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. July 8, 2018, the
courts approved the Stipulation and Agreement of Settlement.
Terms of the Agreement include:
· A new Board was constituted as of May 13, 2019, with Mr. Casey Douglass,
appointee of Defendants and Mr. Hugo Bondi, appointee of Plaintiffs, whom
then unanimously voted in Mr. Gary Oosterhoff as third Director.
· Advance Royalty payments on minimum tonnage of lava material to Candeo
Lava Products within certain time frames.
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· Proceeds from lava material income 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 and/or advance royalty paid,
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.
Results of Operations
Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31,
2018
Results of Operations for the Three Months Ended March 31, 2019 and 2018:
Three Months ended March 31,
2019 2018
Revenues 29,992 -
Operating expenses:
General and administrative $ 29,822 $ 76,160
Director fees 18,750 18,750
Total operating expenses 48,572 94,910
Net operating loss (18,580 ) (94,910 )
Other income (expense):
Interest expense (2,070 ) 18,022
Foreign exchange gain (loss) (405 ) 39
Total other income (expense) (2,475 ) 18,061
Loss before provision for income taxes (21,055 ) (76,849 )
Provision for income taxes - -
Net loss $ (21,055 ) $ (76,849 )
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Revenue
There was revenues of $29,992 for the quarter ended March 31, 2019 related to
the sale of materials. Revenues for March 31, 2018 were $nil.
General and Administrative:
General and administrative expenses were $29,822 for the three months ended
March 31, 2019 and $76,160 for 2018. This decrease in general and administrative
expense in 2019 was primarily due to management fees, legal fees, and filing
fees.
Director Fees:
Director fees were $18,750 for the three months ended March 31, 2019, and
$18,750 for the three months ended March 31, 2018.
Net Operating Gain or Loss:
Net operating loss for the three months ended March 31, 2019 was $21,055 or
$0.00 per share, there was a net operating loss of $76,849 or $0.00 per share
for the three months ended March 31, 2018. This operating loss increase is
primarily due to higher General and Administrative expense and Director fees as
explained above.
Interest Expense:
Interest expense for the three months ended March 31, 2019 was $2,070 and a
recovery of $18,022 expense for 2018. The reason for the recovery of $18,022 in
the first quarter of 2018 was due to a recalculation of the related party loan
outstanding with G. Michael Hogan pursuant to the revision to the agreement. It
was determined that previously omitted expenses would be included and that legal
expenses would remain bearing an interest rate of 10%, but all other expenses
would bear an interest rate of 5%.
Net Loss:
See the explanation of Net Operating Loss above.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes total assets, accumulated deficit, stockholders'
equity (deficit) and working capital at March 31, 2019 and December 31, 2018.
March 31, December 31,
2019 2018
Total Assets $ 27,881 $ 54
Accumulated (Deficit) (11,834,262 ) (11,813,208 )
Stockholders' Equity (Deficit) (1,194,898 ) (1,173,844 )
Working Capital (Deficit) $ (1,194,898 ) $ (1,173,844 )
At March 31, 2019, we had total assets of $27,881, consisting of prepaid
expenses and cash, compared to assets of $54 at December 31, 2018. We have
implemented financial controls in the business to ensure each expense is
warranted and needed. Our cash on hand at March 31, 2019 was $4,934.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements of any kind.
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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 days notice. No new contract has been signed and the automatic renewal
has been continuing.
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