The following discussion of the business, financial condition and results of
operation of the Company should be read in conjunction with the financial
statements of the Company for the years ended December 31, 2018 and 2017 and the
notes to those statements that are included elsewhere in this Annual Report on
Form 10-K. Our discussion includes forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth under
the section titled "Risk Factors."
Overview
Can-Cal Resources Ltd. is a publicly traded exploration stage company engaged in
seeking the acquisition and exploration of metals mineral properties. As part of
its growth strategy, the Company will focus its future activities in the USA,
with an emphasis on the Pisgah Mountain, California property.
At December 31, 2018, we had cash on hand of approximately $54 available to
sustain operations. At December 31, 2017, cash on hand was $769. Accordingly, we
are uncertain as to whether the Company may continue as a going concern. While
we may seek additional investment capital, or possible funding or joint venture
arrangements with other mining companies, we have no assurance that such
investment capital or additional funding and joint venture arrangements will be
available to the Company.
We expect in the near term to continue to rely on outside financing activities
to finance our operations. We used investment proceeds realized during 2012 for
(i) completion of work-up of two potential extraction processes to determine
which process we will employ to potentially prove up any precious metals,
platinum groups elements and/or other base metals on the Pisgah, California
property. if any; (ii) strategic working capital reserve and (iii) to finance
our operations.
In addition to our historic exploration activities, we are currently undertaking
alternative revenue producing opportunities at our Pisgah Property. On January
23, 2012, the Company entered into a mineral lease agreement with a GoodCorp
Inc. to purchase material from the property. This mineral lease agreement is for
an initial period of ten (10) years, with an additional five (5) year extension
at the option of the lessee. Sale prices of minerals are set at diminishing
prices in $0.50 increments between $12 per ton and $10 per ton for each 20,000
tons of material removed. As of the date hereof, no material has been sold under
this agreement and no revenue has been received by the Company.
On April 9, 2013, the Company entered into the Original MSA with Candeo and the
Amended MSA on March 3, 2014. Pursuant to the Amended MSA, Candeo is entitled to
purchase Material from the Pisgah Property at a price equal to the greater of
$15 per ton and the net sales margin per ton removed from the Pisgah Property
realized as follows: (i) 35% of the net sales margins during the first year of
mining; and (ii) 50% of the net sales margins for the subsequent years during
the term of the Amended MSA. Under the Amended MSA, Candeo has the right to
remove an Initial Amount of up to 1,000,000 tons of Material from the Pisgah
Property and Additional Amounts of 1,000,000 tons each, upon the successful
removal of the Initial Amount from the Pisgah Property. Candeo's right to remove
the Additional Amounts from the Pisgah Property is on the basis that once Candeo
has removed the first Additional Amount of the Material from the Pisgah
Property, it shall have the right to remove subsequent Additional Amounts of
Material from the Property, so long as it removes its then current Additional
Amount. As such, Candeo's right to extend the term of the Amended MSA is
entirely based on Candeo's successful performance of its Material removal
commitments under the terms of the Amended MSA.
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Under the Amended MSA, Candeo is required to purchase a minimum of ten thousand
(10,000) tons of Material during each of the first three years of the term of
the agreement, all at a purchase price of $15.00 per ton, for a total payment of
$150,000 per year in each of the first three years of the Term, with credit
being given by the Company to Candeo for all pre-paid tons of Material that have
already been purchased and paid for under the Original MSA. The Pre-Purchased
Material will remain on the Pisgah Property until Candeo commences its
production operations or engages the Company to mine and remove Material on
Candeo's behalf. In the event that Candeo engages the Company to mine and remove
any of the Material, Candeo shall pay all of the Company's reasonable costs and
expenses in conducting such mining and removal operations plus a fee of 15%. All
mining and removal operations on the Pisgah Property will be subject to all
necessary regulatory and other third-party approvals being obtained. The
Pre-Purchased Payments will not be refundable to Candeo but shall be credited
against the first Production Payments.
The term of the Amended MSA has been extended from an initial term of ten (10)
years to twenty (20) years (the "Primary Term") and Candeo has the option to
extend the term for an additional thirty (30) years exercisable at any time with
no less than three (3) months written notice prior to the expiration of the
Primary Term, provided that Candeo is not in default under any of the provisions
of the Amended MSA and that the whole of the Initial Amount has been removed
from the Property.
Results of Operations for the Years Ended December 31, 2018 and 2017:
For the year ended December 31, 2018 2017
Rental Income $ - $ -
Operating expenses:
Exploration costs 21,753 8,738
General and administrative 193,421 228,747
Depreciation - -
Director fees 75,000 75,000
Stock-based compensation - 30,500
Total operating expenses 290,174 342,983
Net operating loss (290,174 ) (342,983 )
Other income (expense):
Interest adjustment (expense) 7,970 (12,451 )
Gain on sale of asset - 9,000
Foreign exchange gain (loss) 792 (3,503 )
Gain on settlement of accounts payable 81,233 -
Non-recurring income - 700
Total other income (expense) 89,995 (6,254 )
Loss before provision for income taxes (200,179 ) (349,237 )
Provision for income taxes - -
Net loss $ (200,179 ) $ (349,237 )
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Revenues:
Rental revenue was $Nil for the year ended December 31, 2018 and December 31,
2017.
Exploration Costs:
For the year ended December 31, 2018, exploration costs were $21,753 and $8,738
in 2017. The decrease in exploration costs is due to lower property taxes paid
on our locations in 2018.
General and Administrative:
General and administrative expenses were $193,421 for the year ended December
31, 2018 and $228,747 for 2017. The higher general and administrative expense in
2017 was primarily due to legal expenses incurred as a result of the lawsuit
brought forward by our shareholders.
Director Fees:
Director fees were $75,000 for the year ended December 31, 2018, and $75,000 for
2017. During the settlement of the lawsuit from the shareholders, it was deemed
prudent that the three directors of the Company would each be compensated
$25,000 per year starting January 1, 2017.
Net Operating Gain or Loss:
Net operating loss for the year ended December 31, 2018 was $290,174 or $0.01
per share, there was a net operating loss of $342,983 or $0.01 per share for
2017. The decrease in operating loss increase is primarily due to lower General
and Administrative expense as explained above.
Other Income:
In the year ended December 31, 2018, there was a gain on the settlement of
accounts payable of $81,233. This was due to negotiations with our vendors and
coming to agreements for partial payments. Gain on the settlement of accounts
payable for the year ended December 31, 2017 was $nil.
There was other non-recurring revenue for the year ended December 31, 2018 of
$nil and $700 in 2017. The other income in 2017 was due to a photoshoot on our
property while other income in 2016 was due to the write-off of charges
incurred.
Interest Expense:
Interest expense for the year ended December 31, 2018 was a positive $7,970,
this is due to an amendment in the interest calculation. For the year ended
December 31, 2017, interest expense was $12,451.
Net Loss:
Net loss for the year ended December 31, 2018 was $200,179 compared to $349,237
in 2017. The decrease in the net loss is due to the lower general and
administrative costs and gain on settlement of accounts payable.
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LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes total assets, accumulated deficit, stockholders'
equity (deficit) and working capital at December 31, 2018 and 2017.
As at December 31, 2018 2017
Total Assets $ 54 $ 6,559
Accumulated (Deficit) (11,813,208 ) (11,613,030 )
Stockholders' Equity (Deficit) (1,173,844 ) (973,665 )
Working Capital (Deficit) $ (1,173,844 ) $ (973,665 )
At December 31, 2018, we had total assets of $54, consisting of prepaid expenses
and cash, compared to assets of $6,559 in 2017. We have implemented financial
controls in the business to ensure each expense is warranted and needed. Our
cash on hand at December 31, 2018 was $54.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements of any kind.
Contractual Obligations
An agreement was signed effective June 10, 2016 with For Life Financial for the
office administration of the Company and can be terminated by either party with
one month's written notice. An agreement was signed effective September 10, 2016
to manage the Company. The contract is effective until December 31, 2018 and
will continue until the earlier of the completion of the services or the
termination of the agreement. Termination of the agreement may be for any or no
reason upon four months written notice. The Company may, in its sole discretion,
request For Life Financial to cease performing services during the four-month
period. For Life Financial may terminate this agreement for any or no reason
upon two months written notice.
On September 1, 2017, an agreement was signed with Red to Black Inc. to perform
the accounting for the Company. The contract is effective until December 31,
2017 and will automatically renew and can be terminated by either party with
thirty-day notice.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make estimates
and judgments that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an on-going basis, we evaluate our estimates and judgments,
including those related to revenue recognition, allowance for sales returns and
doubtful accounts, inventory valuation, business combination purchase price
allocations, our review for impairment of long-lived assets, intangible assets
and goodwill, income taxes and stock-based compensation expense. Actual results
may differ from these judgments and estimates, and they may be adjusted as more
information becomes available. Any adjustment may be significant.
An accounting policy is deemed to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, if different estimates reasonably may have
been used, or if changes in the estimate that are reasonably likely to occur may
materially impact the financial statements. We refer readers to Note 1 to our
audited financial statements for the years ended December 31, 2018 and 2017
filed with this Annual Report.
Recent Accounting Pronouncements
See Note 1 contained in the "Notes to the Financial Statements" for a discussion
of new and recently adopted accounting pronouncements.
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