Document/Exhibit Description Pages Size
1: 10KSB Can Cal Resources Ltd. Form 10-Ksb 44± 185K
2: EX-1 Exhibit 31 2± 10K
3: EX-2 Exhibit 32 1 6K
4: EX-3 Exhibit 99 3± 12K
5: EX-4 Wikieup Claim Information Cover Page 1 3K
6: EX-4 Wikieup Claim Information -- ex_wikieupclaiminfo PDF 70K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-KSB
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 2007.
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ to ______.
Commission file number 000-26669
Can-Cal Resources Ltd.
_____________________________________________________________
(Name of Small Business Issuer in its charter)
Nevada 86-0865852
____________________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2500 Vista Mar Drive, Las Vegas, NV 89128
____________________________________ ____________________________________
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number, (702) 243 - 1849
__________________
Securities registered pursuant to Section 12(b) of the Act:None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.001
_____________________________________________________________
Preferred stock, par value $.001, non-voting, 5% cumulative
_____________________________________________________________
(Title of class)
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 filed such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers, pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or in or any
amendment to this Form 10-KSB.
Registrant's revenues in fiscal year 2007 were $0.
Aggregate market value of the voting stock held by non-affiliates as of
March 31, 2008: $3,246,513
Number of common shares outstanding as of March 31, 2008: 24,587,753
Number of preferred shares outstanding as of March 31, 2008: -0-
Documents incorporated by reference: None. However, exhibitsare
incorporated. See Item 13.
Transitional Small Business Disclosure Format: YES NO X
FORWARD LOOKING STATEMENTS
Except for historical and current information, all the information in this
prospectus is considered to be "forward looking" statements. Specifically, all
statements (other than statements of historical and current information)
regarding financial and business strategy and the performance objectives of
management for future operations are forward-looking statements. These
forward-looking statements are based on the beliefs of management, as well as
assumptions made by and information currently available to them. These
statements involve known risks such as lack of capital to put our properties
into production, disappointing recoveries of precious metals from our
properties once we put them into production, higher than expected production
costs, declining market prices for precious metals, and delays or increased
costs to obtain production or mining permits.
When we use the words "anticipate," "believe," "estimate," "expect," "may,"
"will," "should," "continue," "intend" and similar words or phrases, we are
identifying forward-looking statements (also known as "cautionary statements"
because you should be cautious in evaluating such statements in the context of
all the information in this prospectus). These statements reflect our current
views with respect to future events. However, the merit or validity of current
views is subject to the realization in fact of assumptions we have made. What
we now think will happen may turn out much different, and therefore our
assumptions may prove to have been inaccurate or incomplete.
PART I
RISK FACTORS
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, 2007, the company recorded a net loss of $604,913 and had an
accumulated stockholders' deficit of $222,547 at that date. Our ultimate
success will depend on our ability to generate profits from our properties.
We lack 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 or curtail our operations.
Further, 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, most of which are beyond our control and are not predictable.
Exploration for gold is speculative in nature, involves many risks and is
frequently unsuccessful. Any gold 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 gold,
- 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 gold 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 reserves of gold or other minerals.
We cannot assure that current or proposed exploration or development programs
on properties in which we have an interest will result in the discovery of gold
or other mineral reserves or will result in a profitable commercial mining
operation.
THE AUDIT REPORT ON THE FINANCIAL STATEMENTS AT DECEMBER 31, 2007 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.
The Company has 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 Wikieup 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 in the company. We have no
definitive arrangements in place to raise the necessary capital to continue
operations; however, positive analytical reports by independent third parties
would possibly assist in raising capital to sustain operations
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. Most exploration programs do not result in the
discovery of mineralization, which is economic to mine, and most exploration
programs never recover the funds invested in them. Without extensive technical
and economic feasibility studies, no one can know if any property can be mined
at a profit. Even with promising reserve reports and feasibility studies,
profits are not assured.
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") has required the Company to
obtain a report by an independent consultant qualified under the standards of
the BCSC. Under British Columbia securities laws, all disclosure of
scientific or technical information, including disclosure of a mineral resource
or mineral reserve must be based on information prepared by or under the
supervision of an independent third party who is "qualified" under the terms of
that law. The Company is under order to supply such verification by a
"qualified" third party consultant, and its stock may not trade in British
Columbia until such verification is accepted by the BCSC. The BCSC has also
requested documentation regarding all subscribers to the Company stock who are
residents in British Columbia. The Company has retained such a "qualified"
third party consultant who is in the process of preparing and filing the
necessary reports with the BCSC. There can be no assurance that the reports
will satisfy the BCSC or that the Company's stock will regain trading status in
British Columbia. Further investigatory proceedings by the BCSC will require
the Company to expend funds on legal fees, and there is no assurance that the
Company would be able to continue as a going concern if it cannot afford to pay
such legal fees.
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. A limited amount of the sample
test work was conducted by independent parties; most of that kind of work, and
the drilling and other exploration work, was conducted by consultants or
persons employed by us. Can-Cal is currently conducting "In House" evaluations
of the material in addition to testing by an independent third party
consultant.
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.
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 gold or other minerals. 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.
Item 1.Description of Business (and information for Item 2 on Properties)
(a) Business Development
(a)(1)Form and Year of Organization
Can-Cal Resources Ltd. 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 specifically for that business.
(a)(2)Any Bankruptcy, Receivership or Similar Proceeding
None.
(a)(3)Any Material Reclassification, Merger, Consolidation, or Purchase or Sale
of a Significant Amount of Assets Not in the Ordinary Course of Business
None.
(b) Business of Issuer
(b)(1)
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, lease or have mining interest in
four mineral properties in the southwestern United States (California and
Arizona, as follows: Wikieup, Arizona; Cerbat, Arizona; Owl Canyon, California;
and Pigsah, California.
Prior to 2003, we performed more than 1,000 "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 with whom we contracted, who are experienced in performing assays, but
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.
All the United States properties are "grass roots" because they are not
known to contain reserves of precious metals or other minerals (a reserve is
that part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve determination). None of these
properties is in production. In 2005, we sold $11,500 of volcanic cinder
materials from the Pisgah, California property to industrial users. As of June
1, 2005, we have discontinued sales of volcanic cinder materials.
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 "Arco Project" and
"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 material and Wikieup material.
The Company has presently engaged an independent consultant who is "qualified"
under the British Columbia Securities law to perform mineral resource testing
on Pisgah and Wikieup. A report is expected by the second quarter of 2008.
To the extent that financing is available, we will explore, develop, and,
if warranted, bring into production precious metals properties for 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
the lack of available financing, or the number of properties which merit
development at any point in time, or the scope of the exploration and/or
development work of a particular property being beyond the Company's financial
and administrative capabilities, the Company may farm out one or more of its
properties to other mining companies.
Executive offices are located at 2500 Vista Mar Drive, Las Vegas, Nevada
89128 (tel. 702.243.1849; fax 702.243.1869).
ITEM 2. DESCRIPTION OF PROPERTIES
GENERAL.
We own or have interests in four United States properties. They are:
Wikieup, Arizona
Cerbat, Arizona
Owl Canyon, California
Pisgah, San Bernadino County, California
A summary of important features about each of these properties is set forth
in Exhibit 99 hereto, as requested by the SEC in its Comment Letter of
February 11,2008, and investors should take care to review this summary.
On September 26, 2006, the Company signed a letter of intent with E.R.S.
Ltd., an Israeli owned Cyprus corporation with offices located in Tel Aviv. The
letter of intent was to expand testing by E.R.S. on material from Can-Cal's
Pisgah property. The Company and E.R.S. did not enter into a definitive
agreement in 2007. As of January 8, 2008, E.R.S. advised the Company that it
wished to continue negotiations for a definitive agreement.
In May and June 2006, Can-Cal acquired an additional 66 20-acre lode claims
for the filing cost of $1,200. This increased the Company's property holding
to 1,900 acres or 2,969 square miles of 95 lode claims.
In April, June, July and September 2006, the Company conducted further
surface sampling and rock wall sampling on its Wikieup, Arizona property. These
samples were shipped to ALS Chemex, an internationally recognized assayer for
fire assays (process of testing the original head ore material at high
temperatures to determine the recoverability of precious metals) and I.C.P.
tests. The preliminary assay results were encouraging and the Company will
continue with further surface sampling from various areas of the approximate
six square miles of claimed land.
On August 28, 2006, Can-Cal acquired an additional 1,800 acres from the
Rose Trust in exchange for 1,000,000 restricted shares of its common stock.
This increased the Company's property holding on its Wikieup, Arizona property
to 3700 acres or approximately six square miles of 185 lode claims. The area
is accessed by gravel road just off highway 93 approximately eight miles from
the town of Wikieup, Arizona.
Adits (A type of entrance 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.
The geology of the Wikieup area claims is comprised of Precambrian
ganoids and gneiss. Outcrop is extensive on the property and rock units
include diorite, gabbro and granitic dikes. The Company is continuing the
surface sampling program and plans to hire an independent geologist for
continued exploration.
In the United States, one property is owned (patented mining claims on a
volcanic cinders property at Pisgah, California), one is leased with an option
to purchase (the Cerbat property in Mohave County, Arizona), and two properties
are groups of unpatented mining claims located on federal public land and
managed by the United States Bureau of Land Management (the "BLM"): the Owl
Canyon property (23 miles northeast of Baker, California); and the Wikieup
property (in Mohave County, Arizona).
In the United States, unpatented claims are "located" or "staked" by
individuals or companies on federal public land. Each placer claim covers 160
acres and each lode claim covers 20 acres. The Company is obligated to pay a
maintenance fee of $125 per claim per year to the BLM and file an Affidavit of
Assessment Work with the County showing labor and improvements of at least $100
for each claim yearly.
If the statutes and regulations for the location and maintenance of a
mining claim in the United States are complied with, the locator obtains a
valid possessory right, or claim, to the contained minerals. Failure to pay
such fees or make the required filings may render the mining claim void or
voidable. We believe we have valid claims, but, because mining claims are
self-initiated and self-maintained, it is impossible to ascertain their
validity solely from public real estate records. If the government challenges
the validity of an unpatented mining claim, we would have the burden of
proving the present economic feasibility of mining minerals located on the
claims.
PISGAH, CALIFORNIA PROPERTY.
GENERAL TESTING. In 1997 we acquired fee title to 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 privately owned and 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 Company owns equipment which was acquired with the property, and is
located on the property: a ball mill used for crushing cinders, truck loading
pads, two buildings, large storage tanks, conveyors to load trucks, material
silos and screening equipment.
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.
Electrical power was previously available onsite and could be reinitiated
by running a new power line. The Company has reinstated testing over the past
nine months and is currently conducting additional tests.
From 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.
PISGAH PROPERTY MINING LEASE. To generate working capital, as of May 1,
1998, we signed a Mining Lease Agreement for the Pisgah property with Twin
Mountain Rock Venture, a California general partnership ("Twin Mountain," a
subsidiary of Rinker Materials, Fort Calhoun, Nebraska). 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 $.80 per ton for material
used for block material; plus 10% of gross sales f.o.b. Pisgah for all other
material. Against these payments, Twin Mountain Twin Mountain will be credited
for minimum royalty payments previously made.
Twin Mountain is current in payments, which are pledged to service company
debt. 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.
PISGAH PROPERTY - DEBT TRANSACTIONS.
At December 31, 2007, we owed a second private lender (First Colony
Merchant) a total of $652,500 including accrued interest, on three notes
payable secured by a deed of trust and assignment of rents (payments under the
Twin Mountain lease) on the Pisgah property. For additional consideration for
part of the amounts loaned, the Company granted the lender a five-year option
to purchase 300,000 restricted shares of common stock, at the lower of $0.65
per share or 50% of the lowest trading price during the month before exercise,
payable in cash. The option was exercised in 2000 at $0.52 per share. Also, in
fiscal year 2000, as further consideration, we issued 45,000 restricted shares
of common stock to a corporate affiliate of the lender as a loan placement fee.
As of the filing date of this Annual Report, the Company is in default of
principal and interest payments totaling $652,500 and has initiated forbearance
on collection with the lender.
OWL CANYON - S & S JOINT VENTURE
In 1996, the Company entered into a Joint Venture Agreement with the
Schwarz family covering approximately 425 acres of unpatented placer and lode
mining claims in the Silurian Hills of California, known as Owl Canyon (" the
S&S Joint Venture.") The S & S Joint Venture has since reduced its holdings to
160 acres of lode claims and a five-acre mill site claim. These claims are
prospective for precious metals and some base metals. The property is located
approximately 23 miles northeast of Baker, California, accessible by 23 miles
of paved and dirt road. The Company and the Schwarz family each have a 50%
interest in the venture which is operated by a management committee, comprised
of Ronald Sloan, a director of the company, and Ms. Robin Schwarz.
Holding costs are approximately $ 160 per year for county and BLM filing
fees in accordance with filings under provisions of the "Small Miner Waiver".
Work must be performed on the property each year to keep title to the claims.
Pursuant to the Joint Venture Agreement, we are funding the venture's
operations. Any income from the venture will first be paid to the Company to
repay funds advanced to the venture or spent on its account, with any
additional income divided 50% to the Company and 50% to the Schwarz family.
As the acquisition price of its 50% interest in the S & S Joint Venture, in
1996 the Company issued 500,000 restricted shares of common stock to the
Schwarz family.
The venture owns miscellaneous drilling, milling, assay, and facilities,
all of it stored at the property. The equipment is used but operational.
Prior to 2003, the Company conducted extensive preliminary testing and
assaying on the Owl Canyon property. Results indicate precious metals are
present in material located on the Owl Canyon property, and further exploration
is warranted. Upon conclusion of the trenching program conducted by
Geochemist, Bruce Ballantyne, the assay results confirmed that the "Papa Hill"
section of Owl Canyon should be a designated drill target in the future.
GEOLOGY OF OWL CANYON
Mineralization on the property migrates along north/south oriented faulting
and at the contact point between metamorphic and dolomite rocks. Metalliferous
deposits, or deposits filled with fine metal particles, along these fractures
are prevalent near the central area of Owl Canyon. Along the southern side of
the property, fault contact areas exhibit localized zone alteration from
migrating hydrothermal fluids, or areas altered from hot lava and hydro
thermalfluids due to volcanic activity, producing a mineralized vein ranging
in width from approximately 18 to 36 inches.
We have performed external and in-house fire assays on material from the
Owl Canyon property, sending both trench and rock samples to independent
laboratories. Approximately 15 tons of material was removed to a depth of 3 to
4 feet to expose a continuation of one of the veins. An independent laboratory
analyzed samples from this material.
A detailed structural and geologic mapping survey has been completed on the
property, indicating some zones in certain areas are suitable exploration
targets. Currently, work on this property has been suspended. This property is
without known reserves and future work would be exploratory in nature. There
was no significant activity on this property in 2007.
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. 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 market
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.
The buildings on the property are practically valueless, owing to being in
disuse for so many years.
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. There was no significant activity on Cerbat in 2007.
WIKIEUP PROPERTY
The Wikieup property consists of 3700 acres or approximately 6 square miles
of 185 lode claims. The lode claims are accessed via gravel road approximately
eight miles just off Highway 93 at the town of Wikieup, Arizona.
Holding costs are approximately $155 per year for county and BLM filing
fees, and work must be performed on the property each year to keep title to the
claims.
The geology of the area is comprised of Precambrian ganoids and gneiss.
Outcrop is extensive on the property and rock units include diorite, gabbro and
granitic dikes. The Company has kept the claims in good standing by submission
of the required rental fees. During the past nine months, the Company has
conducted surface sampling of the rock units on the property for "In House" and
independent third party companies' analytical evaluation and assay tests. We
are currently holding the property for further exploration. At the present
time the property is without known reserves.
(b)(2)Distribution methods of products or services. Not applicable.
(b)(3)The Company has not publicly announced any new product(s) or service(s).
(b)(4)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.
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.
(b)(5)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, Wikieup, Cerbat and
the Owl Canyon properties.
(b)(6)The Company is not dependent upon one or a few major customers.
(b)(7)The Company holds no patents, trademarks, licenses, franchises,
concessions, and has no labor contracts.
(b)(8)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). See (b)(11) below. 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.
(b)(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.
Generally, the effect of governmental regulations on the Company cannot be
determined until a specific project is undertaken by the Company.
(b)(10)The Company has 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.
(b)(11)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 non-
environmental 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. In 1997, the S & S Joint
Venture spent approximately $32,000 to clean up areas of the Owl Canyon
properties as requested by the BLM. The Company cannot anticipate what the
further costs and/or effects of compliance with any environmental laws
might be. The BLM approved the S&S Joint Venture trenching program at Owl
Canyon without a requirement for bonding. The BLM approved the reclamation of
this trenching program in 2000. BLM demanded further clean up of the mill site
and surrounding area, and the Joint Venture complied with their request in
2000.
(b)(12)The Company presently has two full-time employees and relies on outside
subcontractors, consultants and agents, to perform various administrative,
legal and technical functions, as required.
OTHER FINANCING TRANSACTIONS
During the twelve months ended December 31, 2007, we sold 1,238,167
restricted common shares to 72 Canadian residents and 4 US residents for a
total of $375,533 and issued warrants to purchase 492,795 restricted common
shares, exercisable between $0.35 to $0.65 per share. These securities were
issued in private transactions, with respect to the Canadian residents, in
reliance on the exemption from registration with the SEC provided by Regulation
S, and with respect to the U.S. citizen, in reliance on the exemption available
under Section 4(2) of the 1933 Act.
The common stock was rendered to a U.S. citizen, in reliance on the
exemption available under Section 4(2) of the 1933 Act. The shares were valued
at a total of $22,000. In addition to monthly cash payments of $3,500 per month
for twelve months, the Company has recorded debt forgiveness of $147,419 in
accordance with the terms of the settlement agreement. Due to the related party
nature of the transaction the gain has been recorded to additional paid in
capital, therefore, there was no impact on the Company's net loss.
ITEM 3.LEGAL PROCEEDINGS
The Company is not currently a party to litigation. The British Columbia
Securities Commission has recently required the Company to obtain a report by
an independent consultant qualified under the standards of the BCSC. Under
British Columbia securities laws, all disclosure of scientific or technical
information, including disclosure of a mineral resource or mineral reserve must
be based on information prepared by or under the supervision of an independent
third party who is "qualified" under the terms of that law. The Company is
under order to supply such verification by a "qualified" third party
consultant, and its stock may not trade in British Columbia until such
verification is accepted by the BCSC. The BCSC has also requested documentation
regarding all subscribers to the Company stock who are resident in British
Columbia. The Company has retained such a "qualified" third party consultant
who is in the process of preparing and filing the necessary reports with the
BCSC.
Item 4.Submission of Matters to a Vote of Security Holders
No matters were submitted to the Company's security holders during the
final quarter of the most recently completed fiscal year.
PART II
Item 5.Market for Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities
(a)The stock is traded on the Nasdaq Over-the-Counter Bulletin Board
("CCRE").
The following shows the high and low bid quotation for the shares for the
last two years. Quotations reflect inter-dealer prices, without retail mark-
up, markdown, or commissions, and do not necessarily represent actual
transactions.
2006 High Low
First Quarter $0.40 $0.15
Second Quarter $0.27 $0.16
Third Quarter $0.45 $0.21
Fourth Quarter $0.71 $0.29
2007
First Quarter $0.71 $0.30
Second Quarter $0.70 $0.38
Third Quarter $0.56 $0.30
Fourth Quarter $0.40 $0.18
Holders
The Company has approximately 534 shareholders of record as of March 31, 2008.
Dividends
The Company has never paid any dividends. There are no legal restrictions
which limit the Company's ability to pay dividends but, based on its present
financial situation; it is extremely unlikely to do so in the near future.
Sales of Unregistered Securities in 2007:
(1) For Cash: During the twelve months ended December 31, 2007, we sold
1,238,167 restricted common shares to 72 Canadian residents and 4 US residents
for a total of $375,533 and issued warrants to purchase 492,795 restricted
common shares, exercisable between $0.35 to $.65 per share. These securities
were issued in private transactions, with respect to the Canadian residents, in
reliance on the exemption from registration with the SEC provided by Regulation
S, and with respect to the U.S. citizen, in reliance on the exemption available
under Section 4(2) of the 1933 Act.
(2) For Services: On April 30, 2007, the Company also issued 50,000 shares of
restricted common stock as part of a settlement agreement with a former officer
of the Company for compensation of accrued salaries. The common stock was
rendered to a U.S. citizen, in reliance on the exemption available under
Section 4(2) of the 1933 Act. The shares were valued at a total of $22,000. In
addition to monthly cash payments of $3,500 per month for twelve months, the
Company has recorded debt forgiveness of $147,419 in accordance with the terms
of the settlement agreement. Due to the related party nature of the transaction
the gain has been recorded to additional paid in capital, therefore, there was
no impact on the Company's net loss.
No commissions were paid in connection with these transactions
(b) Report of use of proceeds from registered offerings. Not applicable.
(a) Issuer repurchase of securities. Not applicable.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
(A) PLAN OF OPERATION.
Can-Cal Resources Ltd. is a public company engaged in seeking the
acquisition and exploration of metals mineral properties. As part of its
growth strategy, the Company will focus its future activities in the USA, with
an emphasis on the Pisgah Mountain, California property and the Wikieup,
Arizona property.
The Company has discontinued all industrial sales for the volcanic
materials located on the Pisgah property in California subject to the
finalization of the current analytical program.
At April 14, 2008 , we had approximately $45,997 cash available to sustain
operations. Accordingly we are uncertain as to whether the Company may continue
as a going concern. While we may seek additional investment capital, or
possible funding or joint venture arrangements with other mining companies, we
have no assurance that that such investment capital or additional funding and
joint venture arrangements will be available to the Company.
(B) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following should be read together with the financial statements
included in this report.
LIQUIDITY AND CAPITAL RESOURCES AT DECEMBER 31, 2007 COMPARED WITH DECEMBER 31,
2006, AND RESULTS OF OPERATIONS FOR THE TWO YEARS ENDED DECEMBER 31, 2006:
Year ended December 31
-----------------------------
2007 2006
-------- --------
Material sales $ 0 $ 0
Cost of sales
Gross profit
Depreciation 10,225 6,700
Exploration costs 200,427 38,500
General & administrative expenses 254,625 241,200
General & administrative expenses
Related Party 124,176 303,000
Other income (expenses) (15,459) (31,600)
-------- --------
Net loss $604,913 $ 621,000
======== ========
Mineral sales in 2005 were related to limited industrial sales of cinder
material from the Pisgah property.
The following table summarizes working capital, total assets, accumulated
deficit, and shareholders' deficit.
Year ended December 31
--------------------------------
2007 2006
--------- -----------
Working capital $ (736,162) $ (614,200)
Total assets $ 619,602 $ 491,400
Accumulated deficit $ (8,070,513) $ (7,465,600)
Shareholders' deficit $ (222,547) $ (546,100)
The Company raised $375,533 in financing activities from a sale of
1,238,167 shares of common stock.
We recorded a net loss from operations in 2007 of $604,913 compared to a
net loss from operations of $621,000 in 2006.
Unless we can establish the economic viability of the Company's exploration
properties, we will continue writing off the expenses of exploration and
testing. Therefore, losses will continue until such time, if ever, as we
establish the economic viability of the properties. If viability is established
for a property, some of the expenses related to that property would be
capitalized instead of expensed.
We have no material commitments for capital expenditures.
THIS SECTION INTENTIONALLY LEFT BLANK
Item 7. Financial Statements
CAN-CAL RESOURCES LTD.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007
(With Report of Independent Registered Public Accounting Firm Thereon)
CAN-CAL RESOURCES LTD.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE NO.
Report of Independent Registered Public Accounting Firm 1
Financial statements
Balance sheet 2
Statements of operations 3
Statement of stockholders' deficit 4
Statements of cash flows 5
Notes to financial statements 6
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Can-Cal Resources Ltd.
Las Vegas, Nevada
We have audited the accompanying balance sheet of Can-Cal Resources Ltd. as of
December 31, 2007, and the related statements of operations, stockholders'
deficit, and cash flows for the years ended December 31, 2007 and 2006. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the financial statements referred to above
present fairly, in all material respects, the financial position of Can-Cal
Resources Ltd. as of December 31, 2007, and the results of its operations and
cash flows for the years ended December 31, 2007 and 2006, in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses from operations and
current liabilities exceed current assets, all of which raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regards to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ De Joya Griffith & Company, LLC
Henderson, Nevada
March 20, 2008
[Download Table]
CAN-CAL RESOURCES LTD
BALANCE SHEET
(Audited)
ASSETS
December 31,
2007
-----------
Current assets:
Cash $ 105,987
-----------
Total current assets 105,987
Fixed assets, net of accumulated depreciation of $125,894 67,948
Other assets, net 445,667
-----------
Total assets 619,602
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accrued interest $ 311,320
Accrued officers salary 110,652
Accounts payable 28,399
Accrued payroll taxes 21,853
Notes payable-related parties 360,550
Unearned revenues 9,375
-----------
Total current liabilities 842,149
-----------
Total Liabilities 842,149
-----------
Commitments and contingencies -
Stockholders' deficit:
Preferred stock; $0.001 par value; 10,000,000 shares
authorized, no shares issued and outstanding -
Common stock; $0.001 par value; 100,000,000 shares
authorized, 24,555,253 shares issued and outstanding 24,555
Additional paid-in capital 7,823,411
Accumulated deficit (8,070,513)
-----------
Total stockholders' deficit (222,547)
-----------
Total liabilities and stockholders' deficit 619,602
===========
See Accompanying Notes to Financial Statements
2
[Download Table]
CAN-CAL RESOURCES LTD
STATEMENTS OF OPERATIONS
(Audited)
For the years ended December 31,
2007 2006
------------ ------------
Material sales $ - $ -
Cost of sales - -
Gross profit - -
Expenses
Exploration costs 200,427 38,500
Depreciation 10,225 6,700
General and administrative expenses 254,626 241,200
General and administrative expenses-
Related Party 124,176 303,000
------------ ------------
Loss from operations (589,454) (589,400)
------------ ------------
Other income (expense)
Gain on fixed asset disposal 7,001 -
Rental revenue 24,400 55,500
Interest income 10,388 1,600
Interest expense (57,248) (88,700)
------------ ------------
Total other income (expense) (15,459) (31,600)
------------ ------------
Loss before provision for income taxes (604,913) (621,000)
Provision for income taxes - -
------------ ------------
Net loss $ (604,913) $ (621,000)
============ ============
Basic loss per common share $ (0.03) $ (0.03)
============ ============
Basic weighted average
common shares outstanding 24,191,015 20,734,716
============ ============
See Accompanying Notes to Financial Statements
3
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CAN-CAL RESOURCES LTD
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(Audited)
Common Stock Additional Total
Number of Paid-in Accumulated Stockholders'
Shares Amount Capital (Deficit) (Deficit)
---------- ------- ---------- ----------- -----------
Balance December 31, 2005 18,972,071 $19,000 $5,813,500 $(6,844,600) $(1,012,100)
Common shares issued for cash 2,448,213 2,400 642,100 - 644,500
Common warrants
exercised for cash 174,000 200 43,300 - 43,500
Common shares issued
for services 19,500 - 5,000 - 5,000
Common shares issued
in satisfaction of accounts
payable and accrued liabilities 385,714 400 80,600 - 81,000
Common shares issued in
satisfaction of notes
payable-related parties 56,821 100 11,800 - 11,900
Common shares issued in
satisfaction of convertible
debenture, (including accrued
interest of $1,895) 206,767 200 41,700 - 41,900
Common shares issued for
asset acquisition 1,000,000 1,000 399,000 - 400,000
Option granted to officers
and directors - - 123,500 - 123,500
Warrants granted for services - - 2,200 - 2,200
Warrants granted in satisfaction
of accounts payable and accrued
liabilities - - 65,400 - 65,400
Warrants granted in satisfaction
of notes payable-related parties - - 9,600 - 9,600
Warrants granted in satisfaction
of convertible debenture - - 40,000 - 40,000
Net loss (621,000) (621,000)
Balance December 31, 2006 23,263,086 23,264 7,277,736 (7,465,600) (164,600)
---------- ------- ---------- ----------- -----------
Common shares
issued for cash 492,795 492 188,698 - 189,190
Common warrants
exercised for cash 745,372 745 185,598 - 186,343
Common shares
issued for services 4,000 4 2,010 - 2,014
Common shares issued
in satisfaction of accrued
wages, related party 50,000 50 21,950 - 22,000
Debt forgiveness, related party - - 147,419 - 147,419
Net loss (604,913) (604,913)
---------- ------- ---------- ----------- -----------
Balance December 31, 2007 24,555,253 $24,555 $7,823,411 $(8,070,513) $ (222,547)
========== ======= ========== =========== ===========
See Accompanying Notes to Financial Statements
4
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CAN-CAL RESOURCES LTD
STATEMENTS OF CASH FLOWS
(Audited)
For the year ended December 31,
2007 2006
---------- ----------
Cash flows from operating activities:
Net loss $ (604,913) $ (621,000)
Adjustments to reconcile net loss to net
cash used by operating activities:
Beneficial conversion feature on convertible debenture - 25,200
Common stock issued in lieu of accrued wages, related party 22,000 -
Depreciation and amortization 10,225 6,700
Gain on disposal of fixed assets (7,001) -
Stock based compensation 2,014 72,600
Stock options granted officers and consultants - 123,500
Stock issued for financing and interest - 51,500
Changes in operating assets and liabilities:
Accounts receivable 3,600 (3,600)
Accounts payable (5,801) (23,600)
Accrued interest 48,820 23,500
Accrued officer salary payable (67,614) 54,400
Accrued payroll taxes (2,562) (3,700)
Unearned revenues (25) -
---------- ----------
Net cash used by operating activities (601,258) (294,500)
---------- ----------
Cash flows from investing activities:
Proceeds from sale of fixed assets 12,000 -
Purchase of fixed assets (64,172) (5,800)
Purchase of mining claims (15,067) (19,700)
---------- ----------
Net cash used by investing activities (67,239) (25,500)
---------- ----------
Cash flows from financing activities:
Payment due to stockholder - (11,000)
Proceeds from convertible debenture - 40,000
Proceeds from issuance of common stock 375,533 688,000
Proceeds from borrowing on notes payable-related parties - 5,700
Principal payments on notes payable-related parties (20,750) -
---------- ----------
Net cash provided by financing activities 354,783 722,700
---------- ----------
Net increase (decrease) in cash (313,714) 402,700
Cash, beginning of period 419,700 17,000
---------- ----------
Cash, end of period $ 105,987 $ 419,700
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ - -
========== ==========
Cash paid for income taxes $ - -
========== ==========
Accrued interest added to principal on notes
payable - related parties $ 2,400 $ 3,600
========== ==========
Issuance of common stock for satisfaction of accounts payable
and accrued liabilities $ 22,000 $ 81,000
========== ==========
Issuance of common stock for services $ 2,014 $ 5,000
========== ==========
Issuance of common stock for principal payment on
notes payable-related parties $ - $ 11,932
========== ==========
Issuance of common stock for conversion of convertible
debenture, including accrued interest of $1,895 $ - $ 41,895
========== ==========
Issuance of common stock mining claims $ - $ 400,000
========== ==========
See Accompanying Notes to Financial Statements
5
Can-Cal Resources Ltd.
Notes to Financial Statements
December 31, 2007
(Audited)
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
Description of business - Can-Cal Resources Ltd. (hereinafter referred to as
the "Company") was incorporated in the State of Nevada on March 22, 1995.
The Company is engaged in the exploration for precious metals, with gold
exploration projects located in California and Arizona.
Presentation of Financial Statements - The Company rounded the figures on
the 2006 financial statements to the nearest hundred.
Cash and Cash Equivalents - The Company considers all highly liquid
investments purchased with maturities of three months or less to be cash
equivalents.
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 amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue and expense recognition - Precious metals and other materials sales
are recognized when delivery has occurred, title passes and pricing is
either fixed or determinable. Rental revenue is recognized over the term of
the rental agreement. Expenses are recognized when they are incurred. Mine
exploration costs other than the acquisition of mining properties are
expensed as incurred.
Fixed assets - Fixed assets are stated at cost less accumulated
depreciation. Depreciation is provided principally on the straight-line
method over the estimated useful lives of the assets, which are generally 5
to 7 years. The amounts of depreciation provided are sufficient to charge
the cost of the related assets to operations over their estimated useful
lives. The cost of repairs and maintenance is charged to expense as
incurred. Expenditures for property betterments and renewals are
capitalized. Upon sale or other disposition of a depreciable property, cost
and accumulated depreciation are removed from the accounts and any gain or
loss is reflected in other income.
The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of fixed
assets or whether the remaining balance of fixed assets should be evaluated
for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the fixed assets in
measuring their recoverability.
Advertising costs - The Company recognizes advertising expenses in
accordance with Statement of Position 93-7 "Reporting on Advertising Costs."
Accordingly, the Company expenses the costs of producing advertisements at
the time production occurs, and expenses the costs of communicating
advertisements in the period in which the advertising space or airtime is
used. Advertising costs for the years ended December 31, 2007 and 2006 were
$1,088 and $27,560, respectively.
Income taxes - The Company accounts for its income taxes in accordance with
Statement of Financial Accounting Standards No. 109, which requires
recognition of deferred tax assets and liabilities for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and tax credit carry forwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in operations in the period that includes the
enactment date.
Can-Cal Resources Ltd.
Notes to Financial Statements
December 31, 2007
(Audited)
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES-
(CONTINUED)
Credit Risks - Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash deposits.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000. At December 31, 2007 and 2006, the
Company had approximately $ 0 and $279,000 in excess of FDIC insured limits,
respectively.
Stock-based compensation - The Company applies SFAS No. 123 (revised 2004).
Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-
Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting
for Stock Issued to Employees and amends SFAS No. 95, Statement of Cash Flows.
Generally, the approach in SFAS No. 123(R) is similar to the approach described
in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure is no longer
an alternative.
Net loss per common share - The Company computes net loss per share in
accordance with SFAS No. 128, "Earnings per Share" (SFAS 128) and SEC Staff
Accounting Bulletin No. 98 (SAB 98). Under the provisions of SFAS 128 and
SAB 98, basic net loss per share is computed by dividing the net loss
available to common stockholders for the period by the weighted average
number of shares of common stock outstanding during the period. The
calculation of diluted net loss per share gives effect to common stock
equivalents; however, potential common shares are excluded if their effect
is antidilutive. For the years ended December 31, 2007 and 2006, no options
and warrants were excluded from the computation of diluted earnings per
share because their effect would be antidilutive.
Recent accounting pronouncements - In February 2007, the FASB issued SFAS
No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("SFAS No. 159"). SFAS No. 159 allows the company to choose to
measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has
been elected are reported in earnings. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. The adoption of SFAS 159 is not
expected to have a material impact on the Company's financial position,
results of operation or cash flows.
In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests
in Consolidated Financial Statements". This statement amends ARB 51 to
establish accounting and reporting standards for the non-controlling
(minority) interest in a subsidiary and for the de-consolidation of a
subsidiary. It clarifies that a non-controlling interest in a subsidiary is
equity in the consolidated financial statements. SFAS No. 160 is effective
for fiscal years and interim periods beginning after December 15, 2008. The
adoption of SFAS 160 is not expected to have a material impact on the
Company's financial position, results of operation or cash flows.
In December 2007, the FASB issued SFAS No. 141 (Revised), "Business
Combinations". SFAS 141 (Revised) establishes principals and requirements
for how an acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and
any non-controlling interest in the acquiree. This statement also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination. The guidance will become effective for the fiscal year
beginning after December 15, 2008
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement No.
133," (SFAS "161") as amended and interpreted, which requires enhanced
disclosures about an entity's derivative and hedging activities and thereby
improves the transparency of financial reporting. Disclosing the fair values
of derivative instruments and their gains and losses in a tabular format
provides a more complete picture of the location in an entity's financial
statements of both the derivative positions existing at period end and the
effect of using derivatives during the reporting period.
Can-Cal Resources Ltd.
Notes to Financial Statements
December 31, 2007
(Audited)
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES-
(CONTINUED)
Entities are required to provide enhanced disclosures about (a) how and why
an entity uses derivative instruments, (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations and (c) how derivative instruments and related hedged items
affect an entity's financial position, financial performance, and cash
flows. SFAS No. 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. Early adoption
is permitted.
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 has incurred a net loss of $604,913 as of
December 31, 2007. 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.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might arise from this uncertainty.
3. FIXED ASSETS
Fixed assets consist of the following as of December 31, 2007:
Machinery and equipment $ 140,023
Transportation equipment 39,084
Furniture and fixtures 14,736
193,842
Less: accumulated depreciation (125,894)
----------
Fixed assets, net $ 67,948
==========
Depreciation expense for the years ended December 31, 2007 and 2006 was $
10,225 and $ 6,700, respectively.
Can-Cal Resources Ltd.
Notes to Financial Statements
December 31, 2007
(Audited)
4. INCOME TAXES
INCOME TAXES
At December 31, 2007 and 2006, the Company had a federal operating loss carry
forward of $6,672,838 and $6,091,925, respectively.
The provision for income taxes consisted of the following components for the
years ended December 31:
2007 2006
--------- ---------
Current:
Federal -- --
State -- --
Deferred: (2,343,893) (2,132,174)
--------- ---------
(2,343,893) (2,132,174)
Components of net deferred tax assets, including a valuation allowance, are as
follows at December 31:
2007 2006
----------- -----------
Deferred tax assets:
Net operating loss carryforward $ 2,335,493 $ 2,132,174
Stock-based compensation 8,400 --
Total deferred tax assets 2,343,893 2,132,174
----------- -----------
Less: Valuation Allowance
(2,343,893) (2,132,174)
----------- -----------
Net Deferred Tax Assets $ -- $ --
The valuation allowance for deferred tax assets as of December 31, 2007 and
2006 was $2,343,893 and $2,132,174, respectively. In assessing the recovery of
the deferred tax assets, management considers whether it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income in the periods in which those temporary
differences become deductible. Management considers the scheduled reversals of
future deferred tax assets, projected future taxable income, and tax planning
strategies in making this assessment. As a result, management determined it
was more likely than not the deferred tax assets would be realized as of
December 31, 2007 and 2006.
Reconciliation between the statutory rate and the effective tax rate is as
follows at December 31:
2007 2006
---- ----
Federal statutory tax rate (35.0)% (35.0)%
Permanent difference and other 35.0% 35.0%
----- -----
Effective tax rate 0% 0%
5. UNEARNED REVENUE
On May 1, 1998, we entered into an agreement with Twin Mountain Rock Venture
("Twin Mountain") to lease our property located in San Bernardino County,
California for a period of ten years. Further, we will make available to
Twin Mountain a minimum of 600,000 tons of finished material during the term
of the agreement in exchange for a minimum annual royalty payment in the
amount of $22,500. The initial agreement expires on April 30, 2008. Twin
Mountain has the option to renew the agreement for an additional ten year
period with an increased minimum annual royalty of $27,500. As of December
31, 2007, we had unearned revenue from this agreement totaling $9,375.
Can-Cal Resources Ltd.
Notes to Financial Statements
December 31, 2007
(Audited)
6. NOTES PAYABLE AND ACCRUED LIABILITIES-RELATED PARTIES
Notes payable consisted of the following as of December 31, 2007:
Note payable to a stockholder, secured by real property,
bearing interest at 16.0% per annum, interest only payments
payable in semi-annual payments, maturing November 2005
(Note: The Company is in default of interest payments
totaling $292,000 and principal total of $ 300,000 but is
currently negotiating forbearance on collection of the interest) $300,000
Note payable to a stockholder, secured by real property,
bearing interest at 8.0% per annum, maturing July 2008 25,114
Note payable to a stockholder, secured by real property,
bearing interest at 8.0% per annum, maturing June 2008 35,436
--------
Current portion (amounts due within one year) $360,550
========
The Company is in default of its semi-annual interest payment of $24,000 for
2002, 2003, 2004, 2005, 2006 and 2007 (a total of $292,000) and the
principal on a note payable of $300,000. It is currently negotiating
forbearance on collection of the interest and principal.
In 2006, we agreed to pay our CEO an annual salary of $120,000. As of
December 31, 2007, we had accrued salaries due to our CEO in the amount of
$110,652.
7. CHANGES IN SECURITIES
During the twelve months ended December 31, 2007, we sold 1,238,167
restricted common shares to 72 Canadian residents and 4 US residents for a
total of $375,533 and issued warrants to purchase 492,795 restricted common
shares, exercisable between $0.35 to $0.65 per share. These securities were
issued in private transactions, with respect to the Canadian residents, in
reliance on the exemption from registration with the SEC provided by
Regulation S, and with respect to the U.S. citizen, in reliance on the
exemption available under Section 4(2) of the 1933 Act.
On April 30, 2007, the Company also issued 50,000 shares of restricted common
stock as part of a settlement agreement with a former officer of the Company
for compensation of accrued salaries. The common stock was rendered to a U.S.
citizen, in reliance on the exemption available under Section 4(2) of the
1933 Act. The shares were valued at a total of $22,000. In addition to
monthly cash payments of $3,500 per month for twelve months, the Company has
recorded debt forgiveness of $147,419 in accordance with the terms of the
settlement agreement. Due to the related party nature of the transaction the
gain has been recorded to additional paid in capital, therefore, there was no
impact on the Company's net loss.
On June 29, 2007, the Company also issued 4,000 shares of restricted common
stock for services rendered to a U.S. citizen, in reliance on the exemption
available under Section 4(2) of the 1933 Act. The shares were valued at a
total of $2,000.
Can-Cal Resources Ltd.
Notes to Financial Statements
December 31, 2007
(Audited)
8. OPTIONS AND WARRANTS
Options granted for employee and consulting services - The 2003 Non-Qualified
Option Plan was established by the Board of Directors in June 2003 and approved
by shareholders in October 2003. A total of 1,500,000 shares of common stock
are reserved for issuance under this plan.
In June 2006, the Company granted options to buy 750,000 shares of the
Company's common stock at an exercise price of $0.20 with terms ranging from
two to five years from the date of issuance to the Directors of the Company.
Additionally, the Company granted options to purchase 250,000 shares of the
Company's common stock at an exercise price of $0.20 with a term of three years
from the date of issuance to an unrelated consultant.
In accordance with FASB 123R (revised 2004) "Share-based Payment", the Company
recognized the fair value of the options in the statement of operations on the
date of grant. Fair value was determined using the Black-Scholes option
pricing model based on the following assumptions: expected dividends: $-0-;
volatility: 86%; risk free interest rate: 4.92% to 5.16%. The determined fair
value recognized in the current period was $123,475
The following table summarizes the Company's option activity related to
employees and consultants:
Weighted
Average
Options Exercise
Outstanding Price
----------- --------
Balance, January 1, 2006 900,000 $ 0.16
Granted 1,000,000 0.20
Cancelled -- --
Exercised -- --
Expired 900,000 0.16
Balance, December 31, 2006, 1,000,000 0.20
Granted -- --
Cancelled -- --
Exercised -- --
Expired -- --
Balance, December 31, 2007, 1,000,000 $ 0.20
Cancelled
--
--
Exercised -- --
Expired 900,000 0.16
Balance, December 31, 2006, 1,000,000 $ 0.20
Granted -- --
Cancelled -- --
Exercised -- --
Expired -- --
Balance, December 31, 2007, 1,000,000 $ 0.20
#
Can-Cal Resources Ltd.
Notes to Financial Statements
December 31, 2007
(Audited)
8. OPTIONS AND WARRANTS- (CONTINUED)
Warrants related to the sale of common stock - During fiscal years 2007, and
2006, the Company granted 492,795 and 2,348,213 stock warrants, respectively,
with an exercise price ranging from $0.25 to $0.65 per share for its common
stock. These stock warrants were granted in connection with common stock sold
during fiscal years 2007 and 2006. These stock warrants were exercisable upon
issuance and expire at various times throughout 2009 and 2008. The following
table summarizes the Company's warrant activity related to the sale of common
stock:
Weighted
Average
Warrants Exercise
Outstanding Price
----------- --------
Balance, January 1, 2006 2,521,808 $ 0.24
Granted 2,348,213 0.35
Cancelled -- --
Exercised 223,872 0.25
Expired 1,585,436 0.29
Balance, December 31, 2006 3,060,713 0.31
Granted 492,795 0.59
Cancelled -- --
Exercised 745,372 0.25
Expired 50,000 0.25
Balance, December 31, 2007 2,758,136 $ 0.31
The following table summarizes the Company's warrant activity not
related to the sale of common stock:
Weighted
Average
Warrants Exercise
Outstanding Price
----------- --------
Balance, January 1, 2006 1,312,070 $ 0.30
Granted 613,535 0.25
Cancelled -- --
Exercised --
Expired 1,298,495 0.30
Balance, December 31, 2006 627,110 $ 0.25
Granted -- --
Cancelled -- --
Exercised -- --
Expired 173,575 0.25
Balance, December 31, 2007 453,535 $ 0.25
9. COMMITMENTS AND CONTINGENCIES
Mining claims - The Company has a lease and purchase option agreement covering
six patented claims in the Cerbat Mountains, Hualapai Mining District and
Mohave County Arizona. The Company pays $1,500 per quarter as minimum advance
royalties. The Company has the option to purchase the property for $250,000
plus interest at a rate of 8% compounded annually from and after the date of
its exercise of the option to purchase the property. If the Lessee exercises
its option to purchase, all funds paid to Lessors shall be credited toward the
purchase price as of the date the payments were made.
Rental payments - The Company operates a leased facility in Nevada under a
month to month operating lease. The lease calls for a monthly base rent of
approximately $1,500.
Can-Cal Resources Ltd.
Notes to Financial Statements
December 31, 2007
(Audited)
10. SUBSEQUENT EVENTS
From January 1, 2008 through the date of this report, the Company issued
32,500 shares of the Company's common stock and warrants to purchase 32,500
shares of the Company's common stock for cash totaling $8,125. The warrants
are fully vested upon grant, expire in two years and have an exercise price
of $0.35 per share.
From January 1, 2008 through the date of this report, 23,500 common warrants
issued have expired.
ITEM 8A(T). CONTROLS AND PROCEDURES
Internal control over financial reporting refers to the process designed by, or
under the supervision of, our Chief Executive Officer and Chief Financial
Officer, and effected by our 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:
- Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of our assets;
- Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are
being made only in accordance with authorization of our management and
directors; and
- Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisitions, use or disposition of our assets that could have
a material effect on the financial statements.
Internal control over financial reporting cannot provide absolute assurance of
achieving financial reporting objectives because of its inherent limitations.
It is a process that involves human diligence and compliance and is subject to
lapses in judgment and breakdowns resulting from human failures. It also can
be circumvented by collusion or improper management override.
Because of such limitations, there is a risk that material misstatements may
not be prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to design into the
process certain safeguards to reduce, thought not eliminate, this risk.
Management is responsible for establishing and maintaining adequate internal
control over our financial reporting. To avoid segregation of duty due to
management accounting size, management had engaged an outside Consulting
firm to assist in the financial reporting.
Management has used the framework set forth in the report entitled Internal
Control - Integrated Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission, known as COSO, to evaluate the
effectiveness of our internal control over financial reporting. Based upon
this assessment, management has concluded that our internal control over
financial reporting was effective as of and for the year ended December 31,
2007 with the following exceptions:
- As a part of our year end review of our disclosure controls and procedures,
we determined that several of our procedures require additional documentation;
no sufficient testing where conducted and further segregation of duties needs
to be put in place. It is our belief that those control procedures are being
performed, however documentation of their execution is not available. We are
implementing additional documentation procedures in order to address this
weakness.
Management has concluded that other than as described above, our internal
control over financial reporting was effective as of and for the year ended
December 31, 2007.
The Company is not an "accelerated filer" for the 2007 fiscal year because it
is qualified as a "small business issuer". Hence, under current law, the
internal controls certification and attestation requirements of Section 404 of
the Sarbanes-Oxley act will not apply to the Company. This Annual report on
Form 10-KSB does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
Exchange Commission that permit us to provide only management's report in this
Annual Report on Form 10-KSB.
PART III
Item 9. Directors, Executive Officers, Promoters, and Control Persons;
Compliance with Section 16(a) of the Exchange Act
(a)(1)(2)(3) Identification of Directors and Executive Officers.
Officers and directors of the Company are listed below. Directors are
elected to hold offices until the next annual meeting of shareholders and 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
Ronald D. Sloan 67 President and Chief Executive Officer since
May 10, 2005, upon the resignation of Anthony
Ciali. He was also CEO and President from May
1996 to March 2003; Treasurer, and Chief
Financial Officer since May 1996; Chairman of
the Board since January 2001.
John Brian Wolfe 56 Secretary and a Director since May, 1996
James Dacyszyn 76 Director since February, 1999
RONALD D. SLOAN. Mr. Sloan is founder, CEO and President of the Company,
and has recently served as such since May 2005. He is also Chairman of the
Board of Directors and Treasurer (and Chief Financial Officer). During the
past twenty five years , Mr. Sloan has been an entrepreneur as an owner and
operator of several companies including: Atlas Insurance Adjusters Ltd,
partner/president from 1977 to 1978; United Auto Parts, senior manager, parts
sales and distribution, approximate staff of 100 from 1979 to 1984; Save-On
Auto Parts Ltd., shareholder, president, secretary, parts sales and
distribution, approximate staff of 40 from 1985 to 1989; Knight Auto Recyclers
Ltd., owner/president, parts sales and distribution from 1990 to 1995; Scotmar
Industries Ltd., D.B.A. Truck City Inc., senior management, parts sales and
distribution from 1990-1995. Mr. Sloan spends his full time on the Company's
business. Mr. Sloan has no professional or technical credentials in the metals
mining industry. Mr. Sloan also served as President, Treasurer and CEO from May
2, 1996 until March, 2003. Mr. Sloan then again took over the positions of
President and CEO upon the resignation of Mr. Ciali on May 10, 2005.
JOHN BRIAN WOLFE. Since 1984, Mr. Wolfe has owned Wolfe & Associates
Appraisal Services, which appraises damages sustained by vehicles, recreation
vehicles, motorcycles and equipment for insurance companies throughout North
America. From 1980 to 1984 he appraised damages to automobiles for ICBC
(Insurance Corporation of British Colombia). Mr. Wolfe also managed McLaughlin
Motors and Brasso Lincoln, both automotive companies where he was in charge of
their full operation and payroll from 1977 to 1980. Mr. Wolfe has no direct
metal mining experience, or any professional or technical credentials in the
metals mining industry, however, he has experience in management affairs.
JAMES DACYSZYN. Mr. Dacyszyn is a Canadian citizen who is semi-retired.
He owns and operates several concrete transit mix plants and gravel operations
in central Alberta, Canada. He has no precious metal mining experience, or any
professional credentials in the metals mining industry, but he does have
extensive experience in Materials Engineering and holds a bachelor's degree in
Civil Engineering. From 1954 to 1971, he managed a laboratory, which tested
gravels, asphalts, paints and coordinating quality control tests on earthwork.
Mr. Dacyszyn also drilled and evaluated more than 500 gravel deposits in the
Province of Alberta and has vast knowledge in crushing rock. From 1982 to
1995, he managed several concrete mixing plants and gravel operations, also
producing aggregates as owner/operator. His son, a professional engineer, is
now managing the companies and Mr. Dacyszyn is retained in a consulting
capacity.
DIRECTOR COMPENSATION
The directors do not currently have any annuities, pension, retirement
incentive, deferred compensation or any arrangements whereby they have been
paid or may receive compensation.
Our present director, Ron Sloan, who also acts as CEO and President, does
not receive additional compensation for acting as a director or attending
meetings of directors. In the past, the Company has not compensated outside
(non-employee) directors for service but has reimbursed them for travel costs
to attend Board meetings. In the future, the Board of Directors may issue non-
qualified options to non-executive directors. The terms of such options to be
granted have not yet been established.
STOCK OPTION PLANS
THE CAN-CAL 2003 QUALIFIED INCENTIVE STOCK OPTION PLAN: The 2003 Qualified
Incentive Stock 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, which will be used
to compensate senior executives and mid-level employees in the future. An
option on 500,000 shares had been granted to Mr. Ciali under this plan. These
options expired unexercised in 2006. An option on 300,000 shares had been
granted to Anthony F. Ciali when he was appointed an officer of the company in
March 2003. These options expired unexercised in 2006.
An option on 500,000 shares has been granted to Mr. Ronald Sloan with an
exercise price of $0.20 in June 2006 under this plan. This option was
exercisable upon issuance and expires in 2011. An option on 125,000 shares has
been granted to Mr. James Dacyszyn with an exercise price of $0.20 in June 2006
under this plan. This option was exercisable upon issuance and expires in June
2008. An option on 125,000 shares has been granted to Mr. John Brian
Wolfe with an exercise price of $0.20 in June 2006 under this plan. This option
was exercisable upon issuance and expires in June 2008.
THE CAN-CAL 2003 NON-QUALIFIED STOCK OPTION PLAN FOR SENIOR EXECUTIVES,
OUTSIDE DIRECTORS, AND CONSULTANTS: 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. An option on 300,000 shares had been granted to
Anthony F. Ciali, a former officer of the Company, when he was appointed an
officer of the company in March 2003. These options expired unexercised in
2006. An option on 100,000 shares had been granted to Luis Vega when he signed
a consulting agreement with the company in April 2003. Mr. Vega's options
expired unexercised in 2006.
The total number of options issued and outstanding at any time, under both
the Qualified and Non-Qualified Stock Option Plans will not exceed 10% of the
company's issued and outstanding common stock, calculated on a pro forma basis.
(b) Identification of Certain Significant Employees and Consultants
The following individuals are no longer consultants of the Company as a result
of the cessation of the Company's Mexican operations in 2006:
LUIS VEGA. In 2003, Mr. Vega was retained as Senior Consulting Geologist to
the Company. He has over 30 years of international gold exploration experience
with senior mining companies, including Utah International, Duval Corporation,
and (most recently) Battle Mountain Gold, where he was Vice President -
Manager, Latin American Exploration. His exploration experience has
encompassed projects in the Western United States, Mexico, and Central and
South America, including Bolivia (the Korri Kollo gold mine), Chile, Argentina,
and the Dominican Republic, as well as project submittal evaluations for
properties in Peru, Ecuador, Brazil, Uruguay and Venezuela. Mr. Vega holds a
Bachelor of Science in Geology and a Masters of Science in Economic Geology.
Mr. Vega resigned his position as Senior Consulting Geologist with Can-Cal
Resources Ltd. on April 4, 2005. Mr. Vega remained as a Director with Can-
Cal's wholly owned Mexican Subsidiary, Sierra Madre Resources. As Can-Cal has
ceased operations in Mexico as of 2006, Mr. Vega is no longer a consultant or
director to the Company's subsidiary.
TERRY BROWN. In 2004, Mr. Terry Brown was retained as Consulting Geologist
- Mexico. He has over 20 years of international gold mining, exploration and
development experience with international mining companies including Glamis
Gold, Eldorado Gold, Alamos Minerals and Niugini Mining. In addition to his
exploration background in the Western US and Latin America, Mr. Brown has been
involved with the start up of six mines, both in the US and Latin America,
principally in the capacity of Project / Construction Manager. Mr. Brown has
resided in Mexico for over the past twelve years. Mr. Brown holds a Bachelor
of Science in Geology. Mr. Brown served as a consultant until 2006 when the
Company ceased operations in Mexico.
(c) Family Relationships.
Not applicable.
(d) Involvement in Certain Legal Proceedings.
During the past five years, no director, person nominated to become a
director, or executive officer of the Company:
(1) has filed or had filed against him, a petition under the federal bankruptcy
law or any state insolvency law, nor has any court appointed a receiver, fiscal
agent or similar officer by or against any business of which such person was a
general partner, or any corporation or business association of which he was an
executive officer within two years before the time of such filing;
(2) was convicted in a criminal proceeding or is the named subject of a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was the subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring or suspending him from, or
otherwise limiting his involvement in, any type of business, securities or
banking activities, or
(4) was found by a court of competent jurisdiction in a civil action or by the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated any federal or state securities or commodities law, and the
judgment in such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated.
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, 2007 through December 31,
2007 to file on a timely basis the reports required by Section 16(a) of the
Exchange Act.
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 addressed
to Ronald D. Sloan, President/Chairman, 2500 Vista Mar Drive, Las Vegas, Nevada
89128
Item 10. Executive Compensation
The following table shows selected information about the compensation paid
or accrued to or for the account of executive officers in 2007 and 2006 for
services, and bonuses rendered in all capacities in those years. Mr. Ronald
Sloan has been Chief Executive Officer and President since May 2005. Mr.
Anthony Ciali resigned from the Company on May 10, 2005. The company does not
have a long-term compensation plan.
[Enlarge/Download Table]
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Awards Options/ Payouts sation
Position Year Salary Bonus SARs(#)1 ($) ($)(2)
--------- ---- ------ ----- ------ ---------- -------- ------- --------
Ronald D. SloanTreasurer (CEO
until April 25, 2003
President & later CEO
As of May 10, 2005) 2007 $120,000** $ -0- $-0- -0- -0- $-0- $ -0-
2006 $105,000** $ -0- $-0- -0- 500,000 $-0- $ -0-
2005 $60,000** $ -0- $-0- -0- -0- $-0- $ -0-
Anthony F. Ciali 2007 $0 $ -0- $-0- -0- $-0- $ 42,000
2006 $0 $ -0- $-0- -0- $-0- $ -0-
(former CEO 2005 $51,668* $ -0- $-0- -0- $-0- $ -0-
and President)
* On April 30, 2007, the Company issued 50,000 shares of restricted common
stock as part of a settlement agreement with Mr. Ciali for compensation of
accrued salaries. The shares were valued at a total of $22,000. The Company
has also recorded debt forgiveness of $147,419 in accordance with the terms
of the settlement agreement. Mr. Ciali was also paid out $3,500 per month
from January through December 2007.
** Accrued (not paid) at the rate of $5,000 per month until April 2006 From
April 2006 to present accrued at the rate of $10,000 per month. Mr. Sloan
also converted half of his accrued salary in July 2006 in exchange for
385,714 shares of common stock valued at $81,000, the fair value of the
shares issued on the date of grant. Additionally, the Company granted him a
warrant to purchase up to 385,714 shares of the Company's common stock at an
exercise price of $0.25 for a period of 2 years. See "Certain Relationships
and Related Transactions." During 2006, Mr. Sloan was paid $36,640 to lower
his accrued salary.
***Accrued (not paid) at not less than 15% of Mr. Ciali's annualized
compensation on the fiscal year-end monthly fee in effect. The 2003 accrual
was converted to equity in 2004. See "Certain Relationships and Related
Transactions" and "Employment Agreement" below.
Option Grants to Executive Officers in 2007
Percent
Number of of All Options
Shares Under- Granted to
Lying Options Executive Officers
Grant Date Exercise Expiration
Name Granted in 2000 Price Date Pres. Value
Ronald D. Sloan -0- -0- -0- N/A N/A
John Brian Wolfe -0- -0- -0- N/A N/A
James Dacyszyn -0- -0- -0- N/A N/A
Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The following table sets forth certain information about beneficial
ownership of our common stock as of March 28, 2008 by each officer and
director, by any person or group who is known by us to own more than 5% of our
common stock, and by the officers and directors as a group. The ownership
information for officers and directors is based on the Forms 3 and 4 they have
filed with the Securities and Exchange Commission pursuant to section 16(a) of
the Securities Exchange Act of 1934. Based on the Forms 3 and 4, the
beneficial owners have sole voting and dispositive power with respect to their
shares, except as otherwise noted.
The number of shares shown as owned by the individual includes shares
issuable on exercise of any options and warrants he holds. The percentage for
each person has been determined by dividing (x) the shares owned by the
individual plus the shares the person has the right to acquire on exercise of
options and warrants by (y) the shares outstanding at March 31, 2007, plus for
each person with options and warrants, the number of shares the person has the
right to acquire on exercise thereof. The shares shown as owned by officers
and directors as a group includes shares issuable on exercise of the options
and warrants, and the percentage of shares shown as owned by that group has
been determined as if all of those options and warrants had been exercised.
Name and Address Amount and Nature
Title of Class of Beneficial Owner of Beneficial Owner Percent of Class
Common stock Ronald D. Sloan* 2,260,785(1) 9.2%
4312-212 Street
Langley, B.C., Canada
Common Stock John Brian Wolfe* 1,018,211(2) 4.1%
3157 Silver Throne Drive
Coquitlam, B.C., Canada
Common Stock James Dacyszyn* 1,018,050 (3) 4.1%
#64, 9703-41 Avenue
Edmonton, A.B., Canada
Common Stock All Officers and Directors 4,297,046 17.4%
as a group
* Director
(1)Includes 500,000 shares underlying options. Does not include 970,354 shares
underlying warrants which have expired.
(2)Includes 53,890 shares underlying warrants and 125,000 shares underlying
options.
(3)697,550 shares (including 113,775 shares covered by warrants) are owned
directly by Mr. Dacyszyn and 195,500 shares are owned by a family company.
Mr. Dacyszyn exercises investment and dispositive powers over 60,000 shares
(31%) of those owned by the family company. The balance of shares in the
family company is controlled by an adult son, who manages the family company
and has a 25% pecuniary interest in these shares. Also includes 125,000
shares underlying options.
Equity Plan Compensation Information - Information about Compensation Plans
as of December 31, 2007:
[Enlarge/Download Table]
Plan category Number of securities to be issued Weighted average exercise Number of securities remaining available
upon exercise of outstanding options price of outstanding options for future issuance under equity compensation
plans (excluding securities reflected in column (a))
(a) (b) (c)
Equity compensation
plans approved by
security holders 900,000 $0.20 600,000
(shares reserved)
2003 Qualified ISOP 1,500,000
(1,500,000 shares)
Equity compensation
plans not approved
by security holders -------- -------- ---------
None
Total 900,000 $0.20 2,100,000
Total shares underlying unexercised options (both plans) cannot exceed 10%
of the Company's total issued and outstanding shares of common stock,
calculated on a pro forma basis.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONVERSION OF SALARIES OWED TO OFFICERS AND LOANS OWED TO DIRECTORS
On July 3, 2006, Ron Sloan, CEO of the Company, elected to convert half of
his accrued salary in exchange for 385,714 shares of common stock valued at
$81,000, the fair value of the shares issued on the date of grant.
Additionally, the Company granted a warrant to purchase up to 385,714 shares of
the Company's common stock at an exercise price of $0.25 for a period of 2
years. The Company recorded an expense in the amount of $65,418, the fair value
of the warrant on the date of grant. Fair value was determined using the Black
Scholes option pricing model based on the following assumptions: expected
dividends: $-0-; volatility: 187%; risk free interest rate: 5.12%.
The company owed Robin Schwarz, an unaffiliated shareholder, $12,424 at
December 31, 2005 consisting of unsecured loans in various amounts made in 2001
and 2002, at various dates, and interest ranging from 13.24% to 27.99%, due on
demand. On July 3, 2006, the Company issued 56,821 shares of its common stock
for conversion in full of these loans. Additionally, the Company granted Ms.
Schwarz a warrant to purchase 56,821 shares of the Company's common stock at an
exercise price of $0.25 for a period of 2 years. The Company recorded an
expense in the amount of $9,637, the fair value of the warrant on the date of
grant. Fair value was determined using the Black Scholes option pricing model
based on the following assumptions: expected dividends: $-0-; volatility: 187%;
risk free interest rate: 5.12%.
GRANT OF OPTIONS TO DIRECTORS
The Company did not grant options to directors in 2007.
Item 13.Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Title of Exhibit
31 Certification under Rule 13a-14(a) Ronald D. Sloan............*
32 Certification under Rule 13a-14(b) Ronald D. Sloan...........*
99 Summary of Significant Details Regarding Pigsah, Wikeiup, Cerbat
and the Owl Canyon Properties in Response to the SEC's Comment
Letter of February 11, 2008
(b) Reports on Form 8-K.
During the fourth quarter of the fiscal year ended December 31, 2007, the
Company did not file any report on Form 8-K (item 5 event).
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
(5)(i) 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.
The Board of Directors delegates to management of Mr. Sloan and the Board
of Directors, the terms of engagement, before we engage De Joya Griffith &
Company, LLC 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 pre-approval 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) De Joya Griffith & Company, LLC was retained as the new auditing firm by
the Board of Directors as of July 15, 2005, and has provided auditing services
since that time. De Joya Griffith & Company, LLC billed us as follows for the
years ended December 31, 2007 and 2006:
Year Ended December 31, 2007 December 31, 2006
Audit Fees (a) $ 23,000 $ 18,230
Audit Related Fees (b) $ -0- $ -0-
Tax Fees (c) $ 1,000 $ 1,000
All Other Fees (d): $ -0- $ -0-
(a)Includes fees for audit of the annual financial statements and review
of quarterly financial information filed with the Securities and
Exchange Commission.
(b)For assurance and related services that were reasonably related to the
performance of the audit or review of the financial statements, which
fees are not included in the Audit Fees category. The company had no
Audit-Related Fees for the periods ended December 31, 2007, and 2006,
respectively.
(c)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, 2007 and 2006, respectively.
(d)For services in respect of any and all other reports as required by
the SEC and other governing agencies.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, hereunto duly authorized.
CAN-CAL RESOURCES, Ltd.
(Registrant)
Date: April 15, 2008 By: /s/ Ronald D. Sloan
--------------------
Ronald D. Sloan, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 15, 2008 By: /s/ John Brian Wolfe
----------------------
John Brian Wolfe, Director
Date: April 15, 2008 By: /s/ James Dacyszyn
--------------------
James Dacyszyn, Director
Date: April 15, 2008 By /s/ Ronald D. Sloan
--------------------
Ronald D. Sloan, Director
Dates Referenced Herein and Documents Incorporated by Reference
3 Subsequent Filings that Reference this Filing
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