SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM 10-Q
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31,
2015
Commission File Number
000-32629
PACIFIC GOLD CORP.
(Exact name of registrant as
specified in charter)
Nevada
|
|
98-0408708
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(State or other jurisdiction of
incorporation or organization)
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|
(I.R.S. Employer Identification No.)
|
848 N. Rainbow Blvd. #2987, Las Vegas,
Nevada
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89107
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(Address of principal executive
offices)
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(Zip Code)
|
Registrant’s telephone number, including
area code
(416) 214-1483
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
x
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to
submit and post such files). Yes
x
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definition of “accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated
filer
o
Non-accelerated filer
o
Smaller
reporting company
x
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes
o
No
x
As
of December 15, 2016, the Company had outstanding 4,269,909,409 shares of its
common stock, par value $0.0000000001.
PART I
ITEM 1. CONSOLIDATED FINANCIAL
STATEMENTS
Pacific Gold Corp.
Consolidated Balance Sheets
(Unaudited)
|
|
|
|
March 31
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|
December 31,
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|
|
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|
2015
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|
2014
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ASSETS
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|
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Current Assets:
|
|
|
|
|
|
Cash and Cash Equivalents
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$ 10,262
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|
$ 52,018
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|
|
|
Total Current Assets
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10,262
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|
52,018
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|
Mineral Rights, Plant and Equipment
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|
|
|
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Plant and Equipment, net
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93,869
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128,338
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|
|
Water Rights and Wells
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90,000
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|
90,000
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|
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Land
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13,670
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|
13,670
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|
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|
Total Mineral Rights, Plant and Equipment, net
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197,539
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|
232,008
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|
Other Assets:
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|
|
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Reclamation Bond
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197,938
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197,938
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|
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|
Total Other Assets
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197,938
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|
197,938
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|
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|
TOTAL ASSETS
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$ 405,739
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$ 481,964
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LIABILITIES AND
STOCKHOLDERS' DEFICIT
|
|
|
Current Liabilities:
|
|
|
|
|
|
Accounts Payable
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$ 877,797
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|
$ 890,240
|
|
|
Accrued Expenses
|
267,512
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|
238,252
|
|
|
Deferred Rent
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15,000
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|
-
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|
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Total Current Liabilities
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1,160,309
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1,128,492
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|
Long Term Liabilities:
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|
|
|
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Accrued Interest - Promissory Notes
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20,460
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13,584
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Convertible Promissory Notes, long - term portion
|
265,000
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265,000
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|
|
Accrued Interest - Related Party Notes Payable
|
103,500
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113,263
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Convertible Related Party Notes Payable - long - term portion,
net of discount
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1,360,250
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1,179,500
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|
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Total Liabilities
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2,909,519
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2,699,839
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Stockholders' Deficit:
|
|
|
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Preferred Stock - $0.001 par value; 5,000,000 shares authorized,
|
|
|
|
|
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300,000 shares issued and outstanding at March 31, 2015 and
December 31, 2014
|
300
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|
300
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|
|
Common Stock - $0.0000000001 par value; 10,000,000,000 shares
authorized,
|
|
|
|
|
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4,269,909,409 and 3,644,909,409 shares issued and outstanding
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|
|
|
|
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|
at March 31, 2015 and December 31, 2014, respectively
|
-
|
|
-
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Additional Paid-in Capital
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44,618,725
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44,556,225
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Non - Controlling Interests
|
-
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-
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Accumulated Deficit
|
(47,122,805)
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(46,774,400)
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|
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Total Stockholders' Deficit
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(2,503,780)
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|
(2,217,875)
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|
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|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$ 405,739
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|
$ 481,964
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|
|
|
|
|
|
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See accompanying notes to
the consolidated financial statements
Pacific Gold
Corp.
Consolidated Statements of Operations (Unaudited)
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Three Months Ended
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March 31
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March 31
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2015
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2014
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Revenue:
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Total Revenue
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$
|
-
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$
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-
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Production Costs
|
|
|
|
|
|
Depreciation
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|
25,286
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|
26,616
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|
Gross Margin
|
|
(25,286)
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|
(26,616)
|
Operating Expenses:
|
|
|
|
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General and Administrative
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111,940
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|
245,560
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|
Total Operating Expenses
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111,940
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|
245,560
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|
Loss from Operations
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|
(137,226)
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(272,176)
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Other Income (Expenses)
|
|
|
|
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Gain (Loss) on Extinguishment of Debt
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|
-
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3,179
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|
Change in Fair Value of Derivative Liability
|
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-
|
|
138,189
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|
Sub Lease Rents
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|
5,000
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40,000
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|
Imputed Interest Income
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|
-
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8,201
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|
Foreign Exchange Gain (Loss)
|
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1,118
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|
1,611
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|
Gain (Loss) on Sale of Equipment
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(1,433)
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-
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Interest Expense
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(59,613)
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(126,698)
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Amortization of Debt Discount
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(156,250)
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(88,446)
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Total Other Income (Expenses)
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(211,178)
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(23,964)
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Net Loss Before Non Controlling Interests
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(348,404)
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(296,140)
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Less: Loss Attributable to Non - Controlling Interests
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|
-
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(5,437)
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Net Loss
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$
|
(348,404)
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$
|
(290,703)
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Basic and Diluted Loss per Share
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$
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(0.0001)
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$
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(0.0007)
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Weighted Average Shares Outstanding:
|
|
|
|
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Basic and Diluted
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4,212,687,186
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393,850,509
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See accompanying notes to the
consolidated financial statements
Pacific Gold
Corp.
Consolidated Statements of Cash Flows
(Unaudited)
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Three Months Ended
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March 31, 2015
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March 31, 2014
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net Income (Loss)
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$
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(348,404)
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$
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(290,703)
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|
Adjustments to Reconcile Net Loss to Net Cash Used in Operating
Activities
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|
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|
|
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Depreciation and Depletion
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25,286
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|
26,616
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|
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|
Loss Attributable to Non - Controlling Interests
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-
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(5,437)
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Imputed Interest Income
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-
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(8,201)
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|
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Non-cash Portion of Interest on Convertible Debt
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-
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65,575
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(Gain) Loss on Sales of Assets
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1,433
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-
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(Gain) Loss on Extinguishment of Debt
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-
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(3,179)
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Deferred Rent
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15,000
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|
|
|
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|
Amortization of Debt Discount
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156,250
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88,446
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|
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Change in Fair Value of Derivative Liability
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-
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(138,189)
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Changes in:
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Prepaid Expenses
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|
-
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249
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Accounts Payable
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|
(12,443)
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|
9,218
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|
|
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Accrued Expenses
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29,260
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|
6,397
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|
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Accrued Interest
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59,613
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|
60,948
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|
|
NET CASH USED IN OPERATING ACTIVITIES
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(74,005)
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(188,260)
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchases and Development of Property Plant, Equipment and
Mineral Rights
|
|
-
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(13,000)
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Net Change in Deposits
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|
-
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(50,000)
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Proceeds from Sale of Assets
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7,750
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|
600,000
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NET CASH PROVDIDED BY INVESTING ACTIVITIES
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7,750
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|
537,000
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CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
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Payments on Related Party Notes Payable
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(12,500)
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(139,500)
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Proceeds from Related Party Notes Payable
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37,000
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|
6,000
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Proceeds from Promissory Notes
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|
-
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95,000
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
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|
24,500
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|
(38,500)
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|
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NET CHANGE IN CASH AND CASH EQUIVALENTS
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|
(41,755)
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|
310,240
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|
|
|
|
|
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
52,018
|
|
2,020
|
|
|
|
|
|
|
|
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|
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|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
10,262
|
$
|
312,260
|
|
|
Non-cash financing and investing activities:
|
|
|
|
|
|
|
|
Change in and accelerated amortization of derivative liability
on conversions
|
$
|
-
|
$
|
248,087
|
|
|
|
Conversion of Notes Payable into Common Stock
|
$
|
-
|
$
|
128,605
|
|
|
|
Assignment of Portion of Promissory Note to Convertible Note
|
$
|
-
|
$
|
100,000
|
|
|
|
Conversion of Accrued Interest into Common Stock
|
$
|
62,500
|
$
|
6,969
|
See accompanying notes to the
consolidated financial statements
Pacific Gold
Corp.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)
March 31, 2015
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Pacific
Gold Corp. (“Pacific Gold” or the “Company”) was originally incorporated in
Nevada on December 31, 1996 under the name of Demand Financial International,
Ltd. On October 3, 2002, Demand Financial International, Ltd. changed its
name to Blue Fish Entertainment, Inc. On August 5, 2003, the name was
changed to Pacific Gold Corp. Pacific Gold is engaged in the identification,
acquisition, and development of prospects believed to have gold, vanadium,
uranium, and tungsten mineral deposits. Through its subsidiaries, Pacific Gold
currently owns mining claims, property and leases in Nevada and Colorado.
Basis
of Presentation
These
unaudited condensed consolidated financial statements and related notes are
presented in accordance with accounting principles generally accepted in the
United States ("GAAP"), and are expressed in U.S. dollars. The
Company's fiscal year-end is December 31.
These
unaudited condensed consolidated financial statements should be read in
conjunction with the Company’s audited financial statements and footnotes as of
and for the year ended December 31, 2014, which were filed with the Company’s
annual report Form 10-K on January 28, 2016. The results of operations for the
three months ended March 31, 2015 are not necessarily indicative of results
that may be expected for the year
ending December 31,
2015 or for any other interim period.
Principle
of Consolidation
The
consolidated financial statements include all of the accounts of Pacific Gold
Corp., its wholly-owned subsidiaries, Nevada Rae Gold, Inc., and Fernley Gold,
Inc. All significant inter-company accounts and transactions have been
eliminated.
Reclassification
of Accounts
Certain
accounts in the prior period have been reclassified to conform to the current
year presentation.
Significant
Accounting Principles
Use
of Estimates and Assumptions
The
preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect (i) the
reported amounts of assets and liabilities, (ii) the disclosure of
contingent assets and liabilities known to exist as of the date the
consolidated financial statements are published, and (iii) the reported
amount of net sales, expenses and costs recognized during the periods
presented. Adjustments made with respect to the use of estimates often relate
to improved information not previously available. Uncertainties with respect to
such estimates and assumptions are inherent in the preparation of consolidated
financial statements; accordingly, actual results could differ from these estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. At March 31, 2015 and
December 31, 2014, cash includes cash on hand and cash in the bank.
Revenue
Recognition
Pacific
Gold recognizes revenue from the sale of minerals when persuasive evidence of
an arrangement exists, services have been rendered, the sales price is fixed or
determinable, and collection is reasonably assured, which is determined when it
places a sale order of gold from its inventory on hand with the refinery.
Property
and Equipment
Property
and equipment are valued at cost. Additions are capitalized and
maintenance and repairs are charged to expense as incurred. Gains and losses on
dispositions of equipment are reflected in operations. Depreciation is
provided using the straight-line method over the estimated useful lives of the
assets, which are 2 to 10 years.
Mineral
Rights
All
mine-related costs, other than acquisition costs, are expensed prior to the
establishment of proven or probable reserves. Reserves designated as proven and
probable are supported by a final feasibility study, indicating that the
reserves have had the requisite geologic, technical and economic work performed
and are legally extractable at the time of reserve determination. Once
proven or probable reserves are established, all development and other
site-specific costs are capitalized.
Capitalized
development costs and production facilities are depleted using the
units-of-production method based on the estimated gold which can be recovered
from the ore reserves processed. There has been no change to the estimate
of proven and probable reserves. Lease development costs for non-producing
properties are amortized over their remaining lease term if limited.
Maintenance and repairs are charged to expense as incurred.
As
per Industry Guide 7, there are no proven or probable reserves.
Impairment
of Long-Lived Assets
The
Company reviews the carrying value of its long-lived assets annually or
whenever events or changes in circumstances indicate that the historical
cost-carrying value of an asset may no longer be appropriate. Pacific Gold
assesses recoverability of the carrying value of the asset by estimating the
undiscounted future net cash flows, which depend on estimates of metals to be
recovered from proven and probable ore reserves, and also identified resources
beyond proven and probable reserves, future production costs and future metals
prices over the estimated remaining mine life. If undiscounted cash flows
are less than the carrying value of a property, an impairment loss is
recognized based upon the estimated expected future net cash flows from the
property discounted at an interest rate commensurate with the risk involved.
If the future net cash flows are less than the carrying value of the
asset, an impairment loss is recorded equal to the difference between the
asset’s carrying value and fair value.
The
fair value of an asset retirement obligation is recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
present value of the estimated asset retirement costs is capitalized as part of
the carrying amount of the long-lived asset. For Pacific Gold, asset retirement
obligations primarily relate to the abandonment of ore-producing property and
facilities.
The
Company reviews the carrying value of its interest in each group of mineral
claims owned by its subsidiaries on an annual basis to determine whether
impairment has incurred in the claim value. The Company evaluates the mineral
claim values based on one of four criteria; cash flow projection, geological
reports, asset sale and option agreements, and comparative market analysis
including public market value. Where information and conditions suggest
impairment, the Company writes-down these properties to the lowest estimated
value based on its evaluation criteria. The estimate of gold price, mineralized
materials, operating capital, and reclamation costs are subject to risks and
uncertainties affecting the recoverability of investment in property, plant,
and equipment. Although the Company has made its best estimate of these factors
based on current conditions, it is possible that changes could occur in the
near term that could adversely affect the estimate of net cash flows expected
to be generated from operating properties and the need for possible asset
impairment write-downs.
Where
estimates of future net operating cash flows are not available and where other
conditions suggest impairment, the Company assesses if carrying value can be
recovered from net cash flows generated by the sale of the asset or other
means.
Income
Taxes
In
accordance with Accounting Standards Codification (“ASC”) Topic 740,
Income
Taxes,
Pacific Gold recognizes deferred tax assets and liabilities
based on differences between the financial reporting and tax bases of assets
and liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to be recovered.
Loss
per Share
The
basic net loss per common share is computed by dividing the net loss by the
weighted average number of common shares outstanding. Diluted net loss per
common share is computed by dividing the net loss adjusted on an “as if
converted” basis, by the
weighted average number of
common shares outstanding plus potential dilutive securities. For the quarter
ended March 31, 2015 potential dilutive securities had an anti-dilutive effect
and were not included in the calculation of diluted net loss per common share.
As of March 31, 2015 and December 31, 2014, the Company had 12,632,500,000 and
25,388,473,000
, respectively, of potentially
dilutive common stock equivalents.
Advertising
The
Company’s policy is to expense advertising costs as incurred. For the three
months ended March 31, 2015 and 2014, the Company incurred $51 and $461, respectively,
in advertising costs.
Environmental
Remediation Liability
The
Company has posted a bond with the State of Nevada in the amount required by
the State of Nevada equal to the maximum cost to reclaim land disturbed in its
mining process. The bond requires a quarterly premium to be paid to the
State of Nevada Division of Minerals. The Company is current on all payments.
Due to its investment in the bond and the close monitoring of the State
of Nevada, the Company believes that it has adequately mitigated any liability
that could be incurred by the Company to reclaim lands disturbed in its mining
process.
Financial
Instruments
The
Company’s financial instruments, when valued using market interest rates, would
not be materially different from the amounts presented in the consolidated financial
statements.
Convertible
Debentures
Convertible
debt is accounted for under ASC 470-20,
Debt – Debt with Conversion and
Other Options
. The Company records a beneficial conversion feature
(BCF) related to the issuance of convertible debt that have conversion features
at fixed or adjustable rates that are in-the-money when issued and records the
fair value of warrants issued with those instruments. The BCF for the
convertible instruments is recognized and measured by allocating a portion of
the proceeds to warrants and as a reduction to the carrying amount of the
convertible instrument equal to the intrinsic value of the conversion features,
both of which are credited to paid-in-capital. The Company calculates the fair
value of warrants issued with the convertible instruments using the
Black-Scholes valuation method, using the same assumptions used for valuing
employee options for purposes of following ASC Topic 718
Compensation –
Stock Compensation
, except that the contractual life of the warrant is used.
Under these guidelines, the Company allocates the value of the proceeds
received from a convertible debt transaction between the conversion feature and
any other detachable instruments (such as warrants) on a relative fair value
basis. The allocated fair value is recorded as a debt discount or premium and
is amortized over the expected term of the convertible debt to interest
expense. For a conversion price change of a convertible debt issue, the
additional intrinsic value of the debt conversion feature, calculated as the
number of additional shares issuable due to a conversion price change
multiplied by the previous conversion price, is recorded as additional debt
discount and amortized over the remaining life of the debt.
The
Company accounts for modifications of its Embedded Conversion Features in
accordance with ASC 470-50,
Debt – Modifications and Extinguishments,
which requires the modification of a convertible debt instrument that changes
the fair value of an embedded conversion feature and the subsequent recognition
of interest expense or the associated debt instrument when the modification
does not result in a debt extinguishment pursuant to ASC 470-50-40
, Debt –
Modification and Extinguishments – Derecognition
.
Derivative
Liability Related to Convertible Notes
The
derivative liability related to convertible notes and warrants arises because
the conversion price of the Company’s convertible notes is discounted from the
market price of the Company’s common stock. Thus, the number of shares that may
be issued upon conversion of such notes is indeterminate, which gives rise to
the possibility that the Company may not be able to fully settle its
convertible note and warrant obligations by the issuance of common stock.
The
derivative liability related to convertible notes and warrants is adjusted to
fair value as of each date that a note is converted or a warrant is exercised,
as well as at each reporting date, using the Black-Scholes pricing model. Any
change in fair value between reporting dates that arises because of changes in
market conditions is recognized as a gain or loss. To the extent the derivative
liability is reduced as a consequence of the conversion of notes or the
exercise of warrants, such reduction is recognized as additional paid-in
capital as of the conversion or exercise date.
Stock Based Compensation
The
Company accounts for stock-based compensation in accordance with ASC Topic
718,
Compensation – Stock Compensation
which requires that the
fair value compensation cost relating to share-based payment transactions be
recognized in the consolidated financial statements. Share-based
compensation cost is measured at the grant date, based on the fair value of the
award, and is recognized over the employee’s requisite service period, which is
generally the vesting period. The fair value of the Company’s stock
options is estimated using a Black-Scholes option valuation model. There were
no stock options granted during the three months ended March 31, 2015 or 2014.
Recently
Issued Accounting Pronouncements
The
Company does not expect the adoption of any other recently issued accounting
pronouncements to have a significant impact on its results of operations,
financial position or cash flow.
NOTE
2 - INTERIM FINANCIAL STATEMENTS
The
accompanying interim unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 8 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In our opinion, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 2015
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2015. For further information, refer to the financial statements
and footnotes thereto included in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2014.
NOTE
3 – MINERAL RIGHTS
Pilot
Mountain Resources Royalty
On
February 10, 2011, our prior subsidiary Pilot Mountain Resources Inc. (“PMR”)
entered into an Option and Asset Sale Agreement (“Agreement”) with Pilot Metals
Inc., a subsidiary of Black Fire Minerals of Australia, whereby Pilot Metals
secured an option on the Project W Tungsten claims. Pilot Metals exercised
their purchase option and subsequently transferred their interest in Project W
to Thor Mining LLC. Upon the commencement of commercial mining, Pacific Gold is
owed a final payment of $1,500,000 subject to a 15% share of any payments being
made to Platoro West, Inc.
NOTE
4 – PLANT AND EQUIPMENT
Plant
and equipment at March 31, 2015 and December 31, 2014, consisted of the
following:
PLANT
AND EQUIPMENT
|
March 31,
2015
|
|
December 31,
2014
|
Building
|
$
|
720,355
|
|
$
|
720,355
|
Accumulated
Depreciation
|
|
(711,449)
|
|
|
(701,596)
|
Equipment
|
|
898,038
|
|
|
917,038
|
Accumulated
Depreciation
|
|
(813,075)
|
|
|
(807,459)
|
|
$
|
93,869
|
|
$
|
128,338
|
Depreciation
expense was $25,286 and $26,366, for the three months ended March 31, 2015 and March
31, 2014, respectively.
NOTE
5 – SHAREHOLDER NOTE PAYABLE/RELATED PARTY TRANSACTIONS
As of March 31, 2015, Pacific Gold owes $1,189,500 in principal
and $28,602 in accrued interest to a company owned by the Chief Executive
Officer. The amount due is represented by a promissory note accruing interest
at 10% per year. The note is due on June 30, 2016 and is convertible into
shares of common stock of Pacific Gold at $0.0001 per share. For the quarter
ended March 31, 2015, the Company received $37,500 in additional proceeds and
have paid $12,500 towards the balance. The note is presented net of $781,250 in
discount.
As of March 31, 2015, Pacific Gold owes a total of $952,000 in
principal and $74,898 in accrued interest to a related party of our Chief
Executive Officer. The amount due is represented by promissory notes accruing
interest at 10% per year and due on June 30, 2016
and
is convertible into shares of common stock of Pacific Gold at $0.01 per share
.
Compensation
for Robert Landau’s services as CEO is Paid to Leveljump Inc. a Company that
Mr. Landau controls.
An
officer of the Company has provided office space to the Company without charge.
There is no obligation for the officer to continue this arrangement. Such costs
are immaterial to the consolidated financial statements and accordingly are not
reflected herein.
NOTE
6 – PROMISSORY NOTES
The notes accrue interest at a rate of 10% per annum and are due on
June 30, 2016. As of March 31, 2015 there was a principal balance of $265,000
and $20,460 in accrued interest
and is convertible into
shares of common stock of Pacific Gold at $0.01 per share
.
NOTE
7 – COMMON STOCK AND PREFERRED STOCK
In the quarter ended March 31, 2015, 625,000,000 shares of common
stock were issued in exchange for $62,500 of a related party convertible
promissory note.
In 2014, 3,499,064,577 common shares were issued for $354,344 in
principal and $9,084 in interest on the conversion of convertible notes.
NOTE
8 – OPERATING LEASES
The
Company has leased approximately 440 acres of privately owned land adjacent to
its staked prospects from Corporate Creditors Committee LLC, by lease dated
October 1, 2003. The Company paid an advance royalty of $7,500 for the first
year, which amount is increased by $2,500 in each of the next five years to be
$20,000 in the sixth year. For the last four years of the lease, the
advance royalty is $20,000 per year. The lease was renewed in 2012, and
the new annual advance royalty is $20,000. The advance royalty is
credited to and recoverable from the production rental amounts. The royalty is
the greater of a 4% net smelter royalty or $0.50 per yard of material
processed. The lease is for 10 years.
In
2011, Nevada Rae Gold (“NRG”) entered into a lease agreement to lease a 100%
interest in 45 mining claims covering approximately 2,000 acres in Lander
County, Nevada. The lease calls for NRG to pay the claim owners a gross royalty
of 4% on gold sales or $0.50 per yard of gravels mined, whichever is greater.
NRG will be required to make annual minimum advance royalty payments of
$20,000. The term of the lease is for 10 years with an option for NRG to extend
the term for a further 10 years.
On
January 8, 2014, NRG, signed a sub-lease for ten mining claims to permit
exploration and mining for barite. The lease is for a period of 8 years. The
lease, as amended, provides that NRG will receive an initial payment of
$40,000, advance annual payments of $20,000 per year and provides for royalty
payments to NRG of $2.00 per yard of processed barite. The rights under
the lease exclude any recovery of gold mineralizations. The lease requires
the lease holder to provide bonding and other regulatory deposits in respect of
its mining activities to satisfy state and federal requirements and
indemnification of the Company for breaches of the lease. The lease is
subject to the over-lease held by NRG, and NRG is required to pay the holder of
the over-lease $10,000 per year plus $0.50 per yard of barite processed.
The
following is a schedule by years of future minimum lease payments required
under operating leases that have initial or remaining non-cancellable lease
terms in excess of one year as of March 31, 2015:
Year
ended
|
|
Total
|
December
31, 2015
|
|
$
|
50,000
|
December
31, 2016
|
|
|
50,000
|
December
31, 2017
|
|
|
50,000
|
December
31, 2018
|
|
|
50,000
|
December
31, 2019
|
|
|
50,000
|
Thereafter
|
|
|
115,000
|
Total
|
|
$
|
365,000
|
Nevada
Rae Gold has a lease for its mobile office at a cost of approximately $407 per
month. This lease was accounted for as an operating lease on a month to month
basis. Rental Expense for the three months ended March 31, 2015 and March 31, 2014
was $1,221.
NOTE
9 – LEGAL PROCEEDINGS
A
subsidiary of the Company, NRG, has an outstanding payroll tax obligation from
employees located in Nevada to the Internal Revenue Service. The IRS has
asserted that approximately $180,200 is owed at this time. The IRS has
filed a general lien on all the properties of Nevada Rae, and is taking steps
to enforce the liens and collect the funds owed. The enforcement actions will
include seeking and taking any funds that are in the Company’s bank accounts,
causing any persons owing funds to NRG to direct the funds to the IRS, and
taking possession of assets of NRG and selling them. These actions would
be disruptive to the operations of the
Company and the
subsidiary and may impair the ability of NRG to operate. In that event, NRG
will be unable to generate any revenues and the financial position of the
Company will be severely impaired and the Company may have to curtail its
subsidiary’s operations or put the subsidiary into receivership.
NOTE
10 – GOING CONCERN
The
Company’s financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As of March 31, 2015, the Company
had an accumulated deficit of $47,122,805, negative working capital of $1,150,047,
and negative cash flows from the three months ended March 31, 2015 of $41,755,
raising substantial doubt about its ability to continue as a going concern.
During the three months ended March 31, 2015, the company financed its
operations through the sale of securities, proceeds received from sale of
mining claims, and issuance of debt.
Management’s
plan to address the Company’s ability to continue as a going concern includes
obtaining additional funding from the sale of the Company’s securities and
establishing revenues. Although management believes that it will be able
to obtain the necessary funding to allow the Company to remain a going concern
through the methods discussed above, there can be no assurances that such
methods will prove successful. Should we be unsuccessful, the Company may need
to discontinue its operations.
NOTE
11 – SUBSEQUENT EVENTS
On July 15, 2015, the Company sold all of its interest in Nevada
Rae Gold, Inc. and the Black Rock Canyon Mine for the following consideration:
$300,000, which was all used to satisfy some of the immediate accounts payable
of Nevada Rae Gold, Inc.; $100,000 due to the Company on July 15, 2016; and a
royalty of 4% on all Nevada Rae Gold, Inc. gold sales up to a maximum total
royalty payments of $720,000. The royalty payments can be bought out by the
purchaser for $500,000 any time prior to July 15, 2016. All of the payments are
subject to a 10% finder’s fee which has not yet been paid.
On August 26, 2015, the Company let lapse all of its mining rights
to the Butcher Boy claims that it leased under a lease agreement held through
Fernley Gold. These claims reverted to the claim holders, and the Company will
write off the value of the leased interests in its financial statements.
On August 31, 2015, the Company acquired the Graysill Mining
claims for no consideration, but assumed the annual claims registration fees.
These claims had been previously owned by its subsidiary company, Pacific
Metals Corp.
The Company evaluated subsequent events through the date the
consolidated financial statements were issued.
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward
Looking Statements
From
time to time, we or our representatives have made or may make forward-looking
statements, orally or in writing. Such forward-looking statements may be
included in, but not limited to, press releases, oral statements made with the
approval of an authorized executive officer or in various filings made by us
with the SEC. Words or phrases "will likely result", "are
expected to", "will continue", "is anticipated",
"estimate", "project or projected", or similar expressions
are intended to identify "forward-looking statements". Such
statements are qualified in their entirety by reference to and are accompanied
by the above discussion of certain important factors that could cause actual
results to differ materially from such forward-looking statements.
Management
is currently unaware of any trends or conditions other than those previously
mentioned in this management's discussion and analysis that could have a
material adverse effect on our consolidated financial position, future results
of operations, or liquidity. However, investors should also be aware of factors
that could have a negative impact on our prospects and the consistency of
progress in the areas of revenue generation, liquidity, and generation of
capital resources. These include: (i) variations in revenue, (ii) possible
inability to attract investors for its equity securities or otherwise raise
adequate funds from any source should the company seek to do so, (iii)
increased governmental regulation, (iv) increased competition, (v) unfavorable
outcomes to litigation involving the company or to which the company may become
a party in the future and, (vi) a very competitive and rapidly changing
operating environment.
The
above identified risks are not all inclusive. New risk factors emerge from time
to time and it is not possible for management to predict all of such risk
factors, nor can it assess the impact of all such risk factors on the company's
business or the extent to which any factor or combination of factors may cause
actual results to differ materially from those contained in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon
as a prediction of actual results.
The
financial information set forth in the following discussion should be read with
the consolidated financial statements of Pacific Gold included elsewhere
herein.
Introduction
Pacific
Gold Corp. (“Pacific Gold” or “the Company”) is engaged in the identification,
acquisition, and development of mining prospects believed to have known gold or
tungsten mineral deposits. The main objective is to identify and develop
commercially viable mineral deposits on prospects over which the company has
rights that could produce revenues. These types of prospects may also contain
mineral deposits of metals often found with gold and/or tungsten which also may
be worth processing. Development of commercially viable mineral deposits of any
metal includes a high degree of risk which careful evaluation, experience and
factual knowledge may not eliminate, and therefore, we may never produce any
significant revenues.
Pacific
Gold Corp. has two subsidiaries through which it holds mineral prospects in Nevada;
Nevada Rae Gold, Inc., and Fernley Gold, Inc.
Nevada
Rae Gold, Inc.
NRG has permitted the Black Rock Canyon Mine (“BRCM”)
with the BLM and the Nevada State Division of Environmental Protection (NDEP).
NRG built a gravel screening facility at the Black Rock Canyon Mine. The plant is
in good physical condition. The plant consists of a 60 foot by 90 foot by 30
foot steel building with offices, plumbing, electrical and a sloped floor for
drainage; additionally the site has fuel storage, settling ponds, security
offices and the entire are is fenced in for security along with exterior
lighting and security cameras that allow management remote access viewing of
the site from any internet access point in the world. The plant equipment
primarily consists of a grizzly hopper, conveyors, trommels, high gravity
bowls, sand screw, and a variety of pumps, cyclones and small equipment. The
Company currently plans to rent or lease earth moving equipment including
bulldozers, haul trucks, excavators, front end loaders and other smaller
pieces. The plant is serviced via power lines provided by NV Energy and via two
water wells that the Company owns.
In general, the operations will require the excavation
of the gravel within the prospect. Typically, the vegetation and minor soil
cover will be stripped and side cast for future reclamation. The mineral
deposit bearing gravel will be dug with an excavator until bedrock is reached
and then hauled to the screen site. The screening plant area is about four
miles away from the mine site. The plant site is equipped with two functioning
wells for process water and is connected to the power grid. The screening
plant is located on fee simple land owned by the company.
Through March 31, 2015 the Company has invested
approximately $11,958,298 into NRG.
Because the definitions of
“reserves”, “proven reserves” and “probable reserves” under the Industry Guide
7 of the SEC have specific requirements to be satisfied before there may be
disclosure of reserve estimates, the Company is without known reserves.
Project
W (formerly Pilot Mountain Resources Inc.)
On
February 18, 2014, the Company completed an amendment to its Option and Asset
Sale Agreement with Pilot Metals Inc. As amended, instead of $850,000 to be
paid on March 31, 2014 and $1,000,000 on the commencement of commercial mining,
the Company received $200,000 on February 18, 2014 and received $400,000 on
March 31,2014 with $1,500,000 to be received on the commencement of commercial
mining. Pilot Metals has an option that is good until September 30, 2014, to purchase
$500,000 of the final $1,500,000 payment for $250,000.
The
payments made to PMR are subject to a 15% royalty to Platoro West, Inc. All
royalty payments have been made.
Pilot
Mountain Resources Inc. was merged into Pacific Gold Corp. on September 30,
2013.
Fernley
Gold, Inc.
There
were no material changes to report for Fernley Gold during the first quarter of
2015.
Financial
Condition and Changes in Financial Condition
The Company had no revenue from the sale of gold in
the three months ended March 31, 2015.
Operating expenses for the three months ended March
31, 2015, totaled $111,940. The Company incurred labor, fuel and other costs
associated primarily to maintain the plant and equipment at Black Rock
Canyon. The Company had a foreign exchange gain of $1,118 and had rent
expense of $5,000. Interest expense totaled $59,613. Amortization of debt
discount totaled $156,250. The remaining expenses relate to general
administrative expenses.
The Company had no revenue from the sale of gold in
the three months ended March 31, 2014.
Operating expenses for the three months ended March
31, 2014, totaled $245,560. The Company incurred labor, fuel and productions
costs associated with the various mining activities. Equipment operating costs,
tools and materials of $2,049 were incurred primarily to maintain the plant and
equipment at Black Rock Canyon. Legal and professional fees of $32,479
were incurred for services performed with respect to acquisitions and mining
prospect evaluation, as well as SEC reporting compliance and accounting
fees. The Company also incurred expenses related to geological studies,
fieldwork, site visits, preparation of mining permit applications and
consulting fees of $22,735. Interest expense totaled $126,698; of this
amount, $65,575 was a non-cash expense that included amounts for interest on
the convertible debentures that were not paid out in cash. Amortization of debt
discount totaled $88,446. The remaining expenses relate to general
administrative expenses. We believe we will incur substantial expenses for the
near term as we build up operations at the Black Rock Canyon Mine and progress
with our evaluations of future mining prospects.
Liquidity
and Capital Resources
Since inception to March 31, 2015, we have funded our operations
from the sale of securities, issuance of debt and loans from a shareholder.
As of March 31, 2015, our assets totaled $405,739,
which consisted primarily of mineral rights, land and water rights, and related
equipment. Our total liabilities were $2,909,519 which primarily consisted of
related parties’ notes payable and accrued interest of $1,463,750, accounts
payable and accrued expenses of $1,145,309, and promissory notes with accrued
interest of $285,460. We had an accumulated deficit of $47,122,805 and a
working capital deficit of $1,150,047 at March 31, 2015.
Our independent auditors, in their report on the
consolidated financial statements, have indicated that the Company has
experienced recurring losses from operations and may not have enough cash
and working capital to fund its operations beyond the very near term, which
raises substantial doubt about our ability to continue as a going concern.
Management has made a similar note in the consolidated financial statements.
As indicated herein, we need capital for the implementation of our
business plan, and we will need additional capital for continuing our
operations. We do not have sufficient revenues to pay our expenses of
operations. Unless the company is able to raise working capital, it is
likely that the Company either will have to cease operations or substantially
change its methods of operations or change its business plan.
New Accounting Pronouncements
Pacific
Gold does not expect the adoption of recently issued accounting pronouncements
to have a significant impact on the Company, or any of its subsidiaries’
operating results, financial position, or cash flow.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
N/A
ITEM
4. CONTROLS AND PROCEDURES
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in company reports filed or
submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in company reports
filed under the Exchange Act is accumulated and communicated to management,
including the Company’s Chief Executive Officer and Chief Financial Officer
(the “Certifying Officers”), as appropriate to allow timely decisions regarding
required disclosure.
As
required by Rules 13a-15 and 15d-15 under the Exchange Act, the Certifying
Officers carried out an evaluation of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures as of March 31,
2015. Their evaluation was carried out with the participation of other members
of the Company’s management. Based on an evaluation conducted by management, of
the effectiveness of the design and operation of our disclosure controls and
procedures, as required by Exchange Act Rule 13a-15(e) management concluded
that our disclosure controls and procedures were ineffective as of March 31,
2015. Our disclosure controls and procedures did not ensure that
information required to be disclosed by us in the reports that we file or
submit under the Exchange Act was (i) recorded, processed, summarized and
reported within the time periods specified by the SEC rules, and (ii) the
necessary information was not accumulated and communicated to management,
including the Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure as
specified by the SEC rules and forms.
Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities
Exchange Act of 1934 as a process designed by, or under the supervision of, the
Company's principal executive and principal financial officers and effected by
the Company's board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external purposes in
accordance with accounting principles generally accepted in the United States
and includes those policies and procedures that:
(a)
Pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the Company;
(b)
Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of consolidated financial statements in accordance with
accounting principles generally accepted in the United States and that receipts
and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the company; and
(c)
Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company's assets that could
have a material effect on the consolidated financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. Because of the inherent limitations of internal
control, 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 safeguards
to reduce this risk.
Based
on its assessment, management has concluded that the Company's disclosure
controls and procedures and internal control over financial reporting are
ineffective, based in part on the absence of separation of duties with respect
to internal financial controls of the Company.
The
Board of Directors has assigned a priority to the short-term and long-term
improvement of our internal control over financial reporting. Notwithstanding
this commitment, given the limited operations and consequently the limited
revenues and capital resources, the Board of Directors and management are not
now able to engage additional personnel to remedy the processes that would
eliminate the issues that may arise due to the absence of separation of duties
within the financial reporting
functions.
Therefore, there is not specific timing for the remediation procedures.
Additionally, the Board of Directors will work with management to
continuously review controls and procedures to identified deficiencies and
implement remediation within our internal controls over financial reporting and
our disclosure controls and procedures.