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EX-10 - EXHIBIT 10.1 - Pacific Gold & Royalty Corp.exhibit101.htm
EX-32 - EXHIBIT 32.1 - Pacific Gold & Royalty Corp.exhibit321.htm
EX-31 - EXHIBIT 31.2 - Pacific Gold & Royalty Corp.exhibit312.htm
EX-31 - EXHIBIT 31.1 - Pacific Gold & Royalty Corp.exhibit311.htm

UNITED STATES

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 September 30, 2014


Commission File Number       000-32629


PACIFIC GOLD CORP.

 (Exact name of registrant as specified in charter)


Nevada

 

98-0408708

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer Identification No.)


848 N. Rainbow Blvd. #2987, Las Vegas, Nevada

 

89107

(Address of principal executive offices)

 

(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 January 2, 2015, the Company had outstanding 3,644,909,409 shares of its common stock, par value $0.0000000001.







TABLE OF CONTENTS


ITEM NUMBER AND CAPTION

PAGE

 

 

 

PART I

 

 

 

 

 

  ITEM 1.       Consolidated Financial Statements

3

  ITEM 2.       Management’s Discussion and Analysis of Financial Condition And Results of Operations

20

  ITEM 3.       Quantitative and Qualitative Disclosures About Market Risk

22

  ITEM 4.       Controls and Procedures

23

 

 

 

PART II

 

 

 

 

 

  ITEM 1.       Legal Proceedings

24

  ITEM 1A     Risk Factors

24

  ITEM 2.       Unregistered Sales of Equity Securities and Use of Proceeds

24

  ITEM 3.       Defaults Upon Senior Securities

24

  ITEM 4.       Mine Safety Disclosures.

24

  ITEM 5.       Other Information

25

  ITEM 6.       Exhibits

25









2





PART I

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

Pacific Gold Corp.

Consolidated Balance Sheets (Unaudited)


 

September 30,

 

December 31,

 

2014

 

2013

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and Cash Equivalents

$

257 

 

$

2,020 

Prepaid Expenses

 

 

 

4,709 

Amounts Receivable for Assets Sale

 

3,432 

 

 

Total Current Assets

 

3,689 

 

 

6,729 

Mineral Rights, Plant and Equipment

 

 

 

 

 

Mineral rights, net

 

629,285 

 

 

544,715 

Plant and Equipment, net

 

154,574 

 

 

234,710 

Water Rights and Wells

 

90,000 

 

 

90,000 

Land

 

13,670 

 

 

13,670 

Total Mineral Rights, Plant and Equipment, net

 

887,529 

 

 

883,095 

Intangibles

 

 

 

 

 

Total Intangibles, net

 

10,073 

 

 

8,417 

Other Assets:

 

 

 

 

 

Amounts Receivable for Assets Sale

 

 

 

830,233 

Reclamation Bond

 

197,938 

 

 

197,938 

Total Other Assets

 

197,938 

 

 

1,028,171 

TOTAL ASSETS

$

1,099,229 

 

$

1,926,412 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts Payable

$

909,392 

 

$

899,849 

Accrued Expenses

 

200,472 

 

 

333,281 

Accrued Interest - Convertible Note

 

 

 

13,023 

Convertible Notes, Net

 

 

 

86,782 

Derivative Liability

 

 

 

350,832 

Accrued Interest - Promissory Notes, short - term portion

 

 

 

36,888 

Promissory Notes, short - term portion

 

 

 

223,500 

Accrued Interest - Related Party Notes Payable

 

 

 

293,082 

Related Party Notes Payable

 

 

 

2,098,680 

Total Current Liabilities

 

1,109,864 

 

 

4,335,917 

Long Term Liabilities:

 

 

 

 

 

Accrued Interest - Promissory Notes

 

6,708 

 

 

Promissory Notes, long - term portion

 

265,000 

 

 

Accrued Interest - Related Party Notes Payable

 

58,209 

 

 

Related Party Notes Payable - long - term portion

 

2,375,000 

 

 

Total Liabilities

 

3,814,781 

 

 

4,335,917 

Stockholders' Deficit:

 

 

 

 

 

Preferred Stock - $0.001 par value; 5,000,000 shares authorized, 300,000 shares outstanding at September 30, 2014 and December 31, 2013

 

300 

 

 

300 

Common Stock - $0.0000000001 par value; 10,000,000,000 shares authorized, 3,294,909,409 and 145,844,832 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively

 

 

 

Additional Paid-in Capital

 

43,222,999 

 

 

42,174,767 

Non - Controlling Interests

 

(21,705)

 

 

(12,816)

Accumulated Deficit

 

(45,917,146)

 

 

(44,571,756)

Total Stockholders' Deficit

 

(2,715,552)

 

 

(2,409,505)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

1,099,229 

 

$

1,926,412 


See accompanying notes to the consolidated financial statements




3





Pacific Gold Corp.

Consolidated Statements of Operations (Unaudited)



 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

2014

 

2013

 

2014

 

2013

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$

 

$

 

$

 

$

Production Costs

 

 

 

 

 

 

 

 

 

 

 

Production Costs

 

 

 

 

 

 

 

 

Depreciation

 

26,678 

 

 

39,422 

 

 

79,941 

 

 

118,267 

Gross Margin

 

(26,678)

 

 

(39,422)

 

 

(79,941)

 

 

(118,267)

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

General and Administrative

 

147,963 

 

 

267,239 

 

 

530,376 

 

 

647,033 

Inventory Write Down

 

 

 

 

 

 

 

 

Total Operating Expenses

 

147,963 

 

 

267,239 

 

 

530,376 

 

 

647,033 

Loss from Operations

 

(174,641)

 

 

(306,661)

 

 

(610,317)

 

 

(765,300)

Other Income (Expenses)

 

 

 

 

 

 

 

 

 

 

 

Gain (Loss) on Extinguishment of Debt

 

 

 

82,729 

 

 

32,194 

 

 

194,405 

Foreign Exchange Gain (Loss)

 

2,017 

 

 

(949)

 

 

2,198 

 

 

1,484 

Amortization of Debt Discount

 

(77,333)

 

 

(100,823)

 

 

(282,262)

 

 

(598,338)

Bad Debt Expense

 

(5,783)

 

 

 

 

(250,000)

 

 

Interest Expense

 

(118,091)

 

 

(70,533)

 

 

(386,594)

 

 

(626,454)

Imputed Interest Income

 

5,783 

 

 

19,767 

 

 

19,767 

 

 

19,767 

Sub Lease Rents

 

 

 

 

 

40,000 

 

 

Other Income

 

 

 

1,165 

 

 

 

 

1,165 

Gain (Loss) on Sale of Equipment

 

5,394 

 

 

 

 

5,394 

 

 

Gain (Loss) on Sale of Assets

 

 

 

940,879 

 

 

 

 

940,879 

Change in Fair Value of Derivative Liability

 

 

 

217,963 

 

 

72,841 

 

 

876,237 

Total Other Income (Expenses)

 

(188,013)

 

 

1,090,198 

 

 

(746,462)

 

 

809,145 

Net Loss Before Non Controlling Interests

 

(362,654)

 

 

783,537 

 

 

(1,356,779)

 

 

43,845 

Less: Loss Attributable to Non - Controlling Interests

 

(1,119)

 

 

(5,663)

 

 

(8,889)

 

 

(9,091)

Net Loss  

 

(361,535)

 

 

789,200 

 

 

(1,347,890)

 

 

52,936 

Basic and Diluted Loss per Share

$

(0.00013)

 

$

0.03319 

 

$

(0.00095)

 

$

0.00355 

Weighted Average Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

2,740,483,282 

 

 

23,775,807 

 

 

1,427,014,935 

 

 

14,902,570 


See accompanying notes to the consolidated financial statements





4





Pacific Gold Corp.

Consolidated Statements of Cash Flows (Unaudited)


 

Nine Months Ended

 

September 30,

2014

 

September 30,

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net Income (Loss)

$

(1,347,890)

 

$

52,936 

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities

 

 

 

 

 

Depreciation and Depletion

 

79,942 

 

 

118,267 

Loss Attributable to Non - Controlling Interests

 

(8,889)

 

 

(9,091)

Imputed Interest Income

 

(19,767)

 

 

(19,767)

Bad Debt Expense

 

250,000 

 

 

Non-Cash Portion of Interest on Convertible Debt

 

214,248 

 

 

417,775 

(Gain) Loss on Sales of Assets

 

(5,394)

 

 

(940,879)

(Gain) Loss on Extinguishment of Debt

 

(32,194)

 

 

(194,185)

Amortization of Debt Discount

 

282,262 

 

 

598,338 

Change in Fair Value of Derivative Liability

 

(72,841)

 

 

(876,237)

Changes in:

 

 

 

 

 

Amounts Receivable on Assets Sale

 

(3,432)

 

 

 

Prepaid Expenses

 

4,709 

 

 

5,320 

Accounts Payable

 

34,124 

 

 

(8,430)

Accrued Expenses

 

(132,809)

 

 

65,222 

Accrued Interest

 

172,171 

 

 

205,344 

NET CASH USED IN OPERATING ACTIVITIES

 

(585,760)

 

 

(585,387)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Purchases and Development of Property Plant, Equipment and Mineral Rights

 

(84,570)

 

 

(87,640)

Proceeds from Sale of Assets

 

606,432 

 

 

350,000 

NET CASH  USED IN INVESTING ACTIVITIES

 

521,862 

 

 

262,360 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Payments on Related Party Notes Payable

 

(181,500)

 

 

(13,000)

Proceeds from Related Party Notes Payable

 

160,835 

 

 

50,000 

Proceeds from Promissory Notes

 

115,000 

 

 

361,500 

Payment on Convertible Notes

 

(32,200)

 

 

(81,847)

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

62,135 

 

 

316,653 

 

 

 

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(1,763)

 

 

(6,374)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

2,020 

 

 

12,198 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

257 

 

$

5,824 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

Interest

$

 

$

Income Taxes

$

 

$

 

 

 

 

 

 

Non-cash financing and investing activities:

 

 

 

 

 

Assignment of Portion of Promissory Note to Convertible Note

$

120,000 

 

$

365,000 

Assignment of Portion of Related Party Notes to Convertible Note

$

90,000 

 

$

Conversion of Notes Payable into Common Stock

$

336,844 

 

$

11,167,292 

Change in and accelerated amortization of derivative liability on conversions

$

702,239 

 

$

Conversion of Accrued Interest into Common Stock

$

9,150 

 

$

48,562 

Subsidiary Shares Issued for Purchase of Intangibles

$

2,500 

 

$

Amounts Receivable for Assets Sale

$

 

$

790,698 

Accrued Interest added to Note Principal

$

433,484 

 

$

Deemed Dividend related to Conversion of Debt to Preferred Shares

$

 

$

300,000 


See accompanying notes to the consolidated financial statements




5





Pacific Gold Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2014



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION


Pacific Gold Corp. (“Pacific Gold”) 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 consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company’s fiscal year-end is December 31.


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., and its majority – owned subsidiary, Pacific Metals Corp. 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 accounting principles generally accepted in the United States (“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 September 30, 2014, and December 31, 2013, 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.


Accounts Receivable/Bad Debt


The allowance for doubtful accounts is maintained at a level sufficient to provide for estimated credit losses based on evaluating known and inherent risks in the receivables portfolio.  Management evaluates various factors including expected losses and economic conditions to predict the estimated realization on outstanding receivables. As of September 30, 2014 and December 31, 2013, allowance for bad debt was $250,000, and $0, respectively.




6




Inventories


Inventories are stated at the lower of average cost or net realizable value.  Costs included are limited to those directly related to mining. There were no inventories as of September 30, 2014 or December 31, 2013.


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, we have no proven or probable reserves.


Intangible Assets


The company follows the provisions of ASC 350-30, Intangibles Other Than Goodwill, and ASC 805-50-30-30-1 Acquisition of Assets Rather than a business. Intangible assets acquisitions in which the consideration given is cash are measured by the amount of cash paid. If the consideration given is not in the form of cash, measurement is based on either the cost which shall be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus more reliably measureable.


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.


We review the carrying value of our interest in each group of mineral claims owned by our subsidiaries on an annual basis to determine whether impairment has incurred in the claim value. We evaluate 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, we write-down these properties to the lowest estimated value based on our evaluation criteria. Our estimate of gold price, mineralized materials, operating capital, and reclamation costs are subject to risks and uncertainties affecting the recoverability of our investment in property, plant, and equipment. Although we have made our best estimate of these factors based on current conditions, it is possible that changes could occur in the near term that could adversely affect our estimate of net cash flows expected to be generated from our 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, we assess if carrying value can be recovered from net cash flows generated by the sale of the asset or other means.




7




Fair Value for Financial Assets and Financial Liabilities


The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification (“ASC”) for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:


Level 1

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.


Level 2

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.


Level 3

Pricing inputs that are generally observable inputs and not corroborated by market data.


The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their fair values because of the short maturity of these instruments.


The company does not have assets and liabilities that are carried at fair value on a recurring basis.


Income Taxes


In accordance with 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.  Pacific Gold provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.


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 September 30, 2014 potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. As of September 30, 2014, and December 31, 2013 the Company had 3,004,917,000 and 1,405,382,164, respectively, of potentially dilutive common stock equivalents.


Advertising


The Company’s policy is to expense advertising costs as incurred. For the three months ended September 30, 2014, and 2013, the Company incurred $11,515 and $753, 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.




8




Convertible Debentures


Convertible debt is accounted for under ASC 470, 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, 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 Exchanges, 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 Exchanges – Extinguishment of Debt.


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 and nine months ended September 30, 2014 or 2013.


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 and nine month period ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. 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, 2013.




9




NOTE 3 – LOAN RECEIVABLE


As part of the asset sale agreement of Pilot Mountain mineral rights, Pilot Metals, Inc. (“the purchaser”) agreed to pay the sum of $850,000 on or before March 31, 2014. In the event that the purchaser did not pay the sum of $850,000 on or before March 31, 2014, the escrow holder was to record the Special Warranty deed with the mineral county recorder. The sum of $850,000 includes imputed interest at a rate of 10% per annum. On February 18, 2014, the company completed an amendment to its Option and Asset Sale Agreement with Pilot Metals Inc. (See Note 4). 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. All payments received are subject to a 15% royalty to be paid to Platoro West.


NOTE 4 – MINERAL RIGHTS


Mineral rights at September 30, 2014 and December 31, 2013 consisted of the following:


MINERAL RIGHTS

September 30,

2014

 

December 31,

2013

Nevada Rae Gold – Morris Land

$

387,289 

 

$

337,529 

Accumulated Depletion

 

(381)

 

 

(381)

Undeveloped mineral rights

 

10,000 

 

 

Fernley Gold – Lower Olinghouse

 

183,962 

 

 

165,352 

Pacific Metals – Graysill Claims

 

48,415 

 

 

42,215 

 

$

629,285 

 

$

544,715 


Option and Asset Sale Agreement


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.


The basic monetary terms of the Agreement called for Pilot Metals to pay PMR $50,000 for a 100 day due diligence period on the mining claims. The option payment was received on signing the agreement and recorded as income. Within the initial 100 day option period, Pilot Metals had the right to exercise an additional 24 month option on the claims by paying a further $450,000. The right for an additional 24 months option period was exercised and during the 24 month option period, Pilot Metals has conducted physical due diligence work including sampling, drilling and any other work on the claims it deemed necessary. A payment of $450,000 was received on September 9, 2011 and recorded as income.


At any point prior to the conclusion of the 24 month option period, Pilot Metals had the option to exercise an option and election to purchase 100% of the claims.


On July 5, 2013, PMR and Pilot Metals agreed to an early exercise of the option to purchase the Project W claims.  Ownership of the Project W claims has now been transferred to Pilot Metals, subject to a security interest retained by PMR until the full purchase price is paid. As part of the decision to exercise the purchase option, the purchaser of the claims, Pilot Metals, agreed to amend the purchase terms to accelerate the ownership of and payment for the claims. The initial three payments of $500,000 each due in September 2013, 2014 and 2015 were amended to two payments, the first paid on July 5, 2013 in the amount of $350,000 and a second payment of $850,000 was due on March 31, 2014.


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.


The payments made to PMR are subject to a 15% royalty to Platoro West, Inc. all royalty payments have been made.


NOTE 5 – INTANGIBLE ASSETS


The Company’s subsidiary, Pacific Metals, has acquired a mining claims database which will be amortized over its estimated useful life of ten years using the straight-line method.




10




On May 20, 2014, Pacific Metals has acquired numerous maps, old drill log results and other data from a mining data base containing information produced by past Graysill area claim owners. In exchange for the data 100,000 shares of common stock were issued. The acquired data was recognized as an intangible asset and measured at the market value of the common stock on date of issuance of $0.025; as such the cost base of the assets was $2,500.


Intangibles Assets

September 30,

2014

 

December 31,

2013

Mining Claims Database

$

12,500 

 

$

10,000 

Accumulated Amortization

 

(2,427)

 

 

(1,583)

Net

$

10,073 

 

$

8,417 


Amortization Expense for the three months ended September 30, 2014 and 2013 was $237, and $190, respectively.


Amortization expense for the nine months ended September 30, 2014 and 2013 was $641, and $570, respectively.


For these assets, amortization expense over the estimated useful life is expected to be $10,073.


Year

 

USD

2014

 

$

313

2015

 

 

1,250

2016

 

 

1,250

2017

 

 

1,250

2018

 

 

1,250

Thereafter

 

 

4,760

 

 

$

10,073


NOTE 6 – PLANT AND EQUIPMENT


During the nine months ended September 30, 2014 the company disposed of equipment for total proceeds of $6,432, and have recorded a gain of $5,394 from the sale.


During the nine months ended September 30, 2014 the company has written off $49,480 of obsolete equipment.


Plant and equipment at September 30, 2014 and December 31, 2013, consisted of the following:


PLANT AND EQUIPMENT

September 30,

2014

 

December 31,

2013

Building

$

720,355 

 

$

720,355 

Accumulated Depreciation

 

(691,743)

 

 

(662,184)

Equipment

 

917,038 

 

 

983,622 

Accumulated Depreciation

 

(791,076)

 

 

(807,083)

 

$

154,574 

 

$

234,710 


Depreciation expense was $26,366 and $38,672, for the three months ended September 30, 2014 and 2013, respectively.


Depreciation expense was $79,098, and $117,453, for the nine months ended September 30, 2014 and 2013, respectively.


NOTE 7 – SHAREHOLDER NOTE PAYABLE/RELATED PARTY TRANSACTIONS


As of September 30, 2014, Pacific Gold owes $1,270,000 in principal and $31,251 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. On June 10, 2013 the Company issued 300,000 of Series A preferred shares on conversion of $300,000 of the note principal. For the nine months ended September 30, 2014, the company received $26,000 in additional proceeds and have paid $181,500 towards the balance.


As of September 30, 2014, Pacific Gold owes a total of $1,105,000 in principal and $26,958 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. For the nine months ended September 30, 2014, the company received $134,835 in additional proceeds and have sold $90,000 of the notes to a third party investor.


Compensation for Robert Landau’s services as CEO is Paid to Jabi Inc. a Company that Mr. Landau controls.




11




A Company controlled by 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 8 – PROMISSORY NOTES


During the year ended December 31, 2013, the Company received total additional proceeds of $108,500 from a non – affiliate. The notes accrue interest at a rate of 10% per annum and were due January 2, 2015. On June 30, 2014 the notes terms were amended with a new maturity date of June 30, 2016.


During the nine months ended September 30, 2014, the Company received total additional proceeds of $115,000 from a non – affiliate. The notes accrue interest at a rate of 10% per annum and are due June 30, 2016.


A summary of the notes is as follows:


Balance at January 1, 2013

 

$

240,000 

Proceeds Received

 

 

108,500 

Interest Accrued thru December 31, 2013

 

 

21,888 

Payments thru December 31, 2013

 

 

Conversions thru December 31, 2013

 

 

Assignment of Promissory Note to Convertible Note thru December 31, 2013

 

 

(110,000)

Balance at December 31, 2013

 

$

260,388 

Proceeds Received

 

 

115,000 

Interest Accrued thru September 30, 2014

 

 

16,320 

Payments thru September 30, 2014

 

 

Conversions thru September 30, 2014

 

 

Assignment of Promissory Note to Convertible Note thru September 30, 2014

 

 

(120,000)

Balance at September 30, 2014

 

$

271,708 


NOTE 9 – FINANCING


Convertible Notes


Convertible Notes Series A:


Series A  notes (i) have a conversion rate of a 45% discount to the daily VWAP (volume – weighted average price, which is a measure of the average price the stock has traded over the trading horizon) price of the common stock based on a five day period prior to the date of conversion, the rate is subject to certain adjustments, (ii) have an annual interest rate of 12%, due at maturity, (iii) have a new maturity date of 1 year from issuance date, (iv) prepayment is permitted only with a premium of 50% of the amount being repaid, (v) have a ratchet protection of the conversion anti-dilution provisions for all future issuances or potential issuances of securities by the company at less than the then conversion rate, and (vi) have additional default provisions, including additional events of default and an default interest rate of 24.99%.  The company has also agreed that the assigned debt will not be subordinate to new debt, other than purchase money and similar debt, which may have the effect of limiting the company’s access to additional debt capital while the notes are outstanding.  Based on the above and without taking into account the conversion of any of the interest to be earned or converted, the principal if fully converted represents the potential issuance of 50,000,000 shares, limited to a maximum conversion right at any one time to 4.99% of the then outstanding shares of common stock of the company.


During the year ended December 31, 2013, the company agreed to the assignment of an additional $175,000 in principal of outstanding promissory note to a third party under the same terms as discussed above.


During the nine months ended September 30, 2014, the company agreed to the assignment of an additional $100,000 in principal of outstanding promissory note to a third party under the same terms as discussed above.







12




A summary of the carrying value of the notes outstanding for the nine months ended September 30, 2014 and year ended December 31, 2013 is as follows:


Series A Notes

Note F

 

Note G

 

Note H

 

Note I

 

Total

Issuance Date

May-08-12

 

July-18-12

 

April-12-13

 

March-07-14

 

 

Carrying Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Face Value at January 1, 2013

$

280,000 

 

$

18,000 

 

$

 

$

 

$

298,000 

Unamortized Discount at January 1, 2013

 

(116,667)

 

 

(9,750)

 

 

 

 

 

 

(126,417)

Proceeds thru December 31, 2013

 

 

 

 

 

 

 

 

 

Convertible note assigned thru December 31, 2013

 

 

 

 

 

175,000 

 

 

 

 

175,000 

Discount recorded on note thru December 31, 2013

 

 

 

 

 

(175,000)

 

 

 

 

(175,000)

Discount amortization thru December 31, 2013

 

116,667 

 

 

9,750 

 

 

174,579 

 

 

 

 

300,996 

Conversions to shares thru December 31, 2013

 

(280,000)

 

 

(18,000)

 

 

(149,500)

 

 

 

 

(447,500)

Payments thru December 31, 2013

 

 

 

 

 

 

 

 

 

Face Value at December 31, 2013

 

 

 

 

 

25,500 

 

 

 

 

25,500 

Unamortized Discount at December 31, 2013

 

 

 

 

 

(421)

 

 

 

 

(421)

Carrying value at December 31, 2013

$

 

$

 

$

25,079 

 

$

 

$

25,079 

Proceeds thru September 30, 2014

 

 

 

 

 

 

 

 

 

Convertible note assigned thru September 30, 2014

 

 

 

 

 

 

 

100,000 

 

 

100,000 

Discount recorded on note thru September 30, 2014

 

 

 

 

 

 

 

(100,000)

 

 

(100,000)

Discount amortization thru September 30, 2014

 

 

 

 

 

421 

 

 

100,000 

 

 

100,421 

Conversions to shares thru September 30, 2014

 

 

 

 

 

(25,500)

 

 

(100,000)

 

 

(125,500)

Payments thru September 30, 2014

 

 

 

 

 

 

 

 

 

Face Value at September 30, 2014

 

 

 

 

 

 

 

 

 

Unamortized Discount at September 30, 2014

 

 

 

 

 

 

 

-

 

 

-

Carrying value at September 30, 2014

$

 

$

 

$

 

$

 

$

Accrued Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued Interest at January 1, 2013

 

39,161 

 

 

918 

 

 

 

 

 

 

40,079 

Interest accrued thru December 31, 2013

 

4,390 

 

 

573 

 

 

6,546 

 

 

 

 

11,509 

Conversions to shares thru December 31, 2013

 

(43,551)

 

 

(1,491)

 

 

 

 

 

 

(45,042)

Payments thru December 31, 2013

 

 

 

 

 

 

 

 

 

Accrued Interest Balance at December 31, 2013

$

 

$

 

$

6,546 

 

$

 

$

6,546 

Interest accrued thru September 30, 2014

 

 

 

 

 

424 

 

 

2,115 

 

 

2,539 

Conversions to shares thru September 30, 2014

 

 

 

 

 

(6,970)

 

 

(2,115) 

 

 

(9,085)

Payments thru September 30, 2014

 

 

 

 

 

 

 

 

 

Accrued Interest Balance at September 30, 2014

$

 

$

 

$

 

$

 

$

Derivative Liability:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Liability at January 1, 2013

 

9,927,273 

 

 

638,182 

 

 

 

 

 

 

10,565,455 

Derivative Liability added

 

 

 

 

 

254,545 

 

 

 

 

254,545 

Accelerated amortization on conversions and payments

 

(9,722,614)

 

 

(32,727)

 

 

(238,646)

 

 

 

 

(9,993,987)

Change in fair value of derivative liability thru December 31, 2013

 

(204,659)

 

 

(605,455)

 

 

42,055 

 

 

 

 

(768,059)

Derivative Liability at December 31, 2013

$

 

$

 

$

57,954 

 

$

 

$

57,954 

Derivative Liability added

 

 

 

 

 

 

 

165,575 

 

 

165,575 

Accelerated amortization on conversions and payments

 

 

 

 

 

(44,702)

 

 

(164,959)

 

 

(209,661)

Change in fair value of derivative liability thru September 30, 2014

 

 

 

 

 

(13,252)

 

 

(616)

 

 

(13,868)

Derivative Liability at September 30, 2014

$

 

$

 

$

 

$

 

$


Convertible Notes Series B:


On August 2, 2012, September 10, 2012, October 25, 2012, November 9, 2012, and December 5, 2012 a holder of $354,000 in principal amount of debt issued by Pacific Gold Corp. transferred these obligations to a third party. In connection with the transfer, the Company agreed to modify the rate of conversion of principal and interest into shares of common stock to a formula based on the market value of a share of common stock, from time to time. As a result of the modifications the notes had a conversion rate of 47% discount to the market price calculated as the average of the lowest three (3) trading prices for the common stock during the twenty trading day period ending the latest complete trading day prior to conversion date. As of December 31, 2013, the investor has converted $354,000 of debt obligations into 333,970 shares of common stock of the Company. The notes were converted in full at December 31, 2013 year end.


On February 5, 2013, and March 19, 2013 a holder of $110,000 in principal amount of debt issued by Pacific Gold Corp. transferred these obligations to a third party. In connection with the transfer, the Company agreed to modify the rate of conversion of principal and interest into shares of common stock to a formula based on the market value of a share of common stock, from time to time. As a result of the modifications the notes had a conversion rate of 47% discount to the market price calculated as the average of the lowest three (3) trading prices for the common stock during the twenty trading day period ending the latest complete trading day prior to conversion date. As of September 30, 2014 the investor has converted $77,800 of debt obligations into 69,623,819 shares of common stock of the Company. As of September 30, 2014 the remaining balance of the note issued on March 19, 2013, “Note L” of $32,200 was paid.



13





On July 27, 2012, August 29, 2012, September 10, 2012, November 2, 2012, and December 11, 2012 the company issued $53,000, $35,000, $78,500, $37,500, and $32,500, respectively, in convertible notes to the same third party discussed above. The notes are convertible beginning at a date which is one hundred and eighty (180) days following the issuance dates and have a conversion rate of 42% discount to the market price calculated as the average of the lowest three (3) trading prices for the common stock during the ten trading day period ending the latest complete trading day prior to conversion date. Interest at an annual rate of 8% from the issuance date is due at maturity or upon acceleration or by prepayment. As of December 31, 2013 the investor has converted $165,820 of debt obligations into 6,283,323 shares of common stock of the Company. As of December 31, 2013 the company has made payments of $81,847 towards the balance owing on the notes. The notes were converted in full at December 31, 2013 year end.


A summary of the carrying value of the notes outstanding for the nine months ended September 30, 2014 and year ended December 31, 2013 is as follows:


Series B Notes

Note A

 

Note C

 

Note E

 

Note F

 

Note I

Issuance Date

July-27-12

 

August-29-12

 

September-10-12

 

November-02-12

 

December-05-12

Carrying Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Face Value at January 1, 2013

$

53,000 

 

$

35,000 

 

$

78,500 

 

$

37,500 

 

$

40,000 

Unamortized Discount at January 1, 2013

 

 

 

 

 

 

 

 

 

(40,000)

Proceeds thru December 31, 2013

 

 

 

 

 

 

 

 

 

 

Convertible note assigned thru December 31, 2013

 

 

 

 

 

 

 

 

 

 

Discount recorded on note thru December 31, 2013

 

(53,000)

 

 

(18,286)

 

 

(41,432)

 

 

(27,709)

 

 

Discount amortization thru December 31, 2013

 

53,000 

 

 

18,286 

 

 

41,432 

 

 

27,709 

 

 

40,000 

Conversions to shares thru December 31, 2013

 

(53,000)

 

 

(35,000)

 

 

(74,300)

 

 

 

 

(40,000)

Payments thru December 31, 2013

 

 

 

 

 

(4,200)

 

 

(37,500)

 

 

Face Value at December 31, 2013

 

 

 

 

 

 

 

 

 

Unamortized Discount at December 31, 2013

 

 

 

 

 

 

 

 

 

Carrying value at December 31, 2013

$

 

$

 

$

 

$

 

$

Proceeds thru September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

Convertible note assigned thru September 30, 2014

 

 

 

 

 

 

 

 

 

Discount recorded on note thru September 30, 2014

 

 

 

 

 

 

 

 

 

Discount amortization thru September 30, 2014

 

 

 

 

 

 

 

 

 

Conversions to shares thru September 30, 2014

 

 

 

 

 

 

 

 

 

Payments thru September 30, 2014

 

 

 

 

 

 

 

 

 

Face Value at September 30, 2014

 

 

 

 

 

 

 

 

 

Unamortized Discount at September 30, 2014

 

 

 

 

 

 

 

 

 

Carrying value at September 30, 2014

$

 

$

 

$

 

$

 

$

Accrued Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued Interest at January 1, 2013

 

1,767 

 

 

933 

 

 

2,093 

 

 

500 

 

 

Interest accrued thru December 31, 2013

 

353 

 

 

467 

 

 

707 

 

 

2,212 

 

 

Conversions to shares thru December 31, 2013

 

(2,120)

 

 

(1,400)

 

 

 

 

 

 

Payments thru December 31, 2013

 

 

 

 

 

(2,800)

 

 

(2,712)

 

 

Accrued Interest Balance at December 31, 2013

$

 

$

 

$

 

$

 

$

Interest accrued thru September 30, 2014

 

 

 

 

 

 

 

 

 

Conversions to shares thru September 30, 2014

 

 

 

 

 

 

 

 

 

Payments thru December 31, 2013

 

 

 

 

 

 

 

 

 

Accrued Interest Balance at September 30, 2014

$

 

$

 

$

 

$

 

$

Derivative Liability:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Liability at January 1, 2013

 

 

 

 

 

 

 

 

 

40,000 

Derivative Liability added

 

164,483 

 

 

18,286 

 

 

41,432 

 

 

27,709 

 

 

Accelerated amortization on conversions and payments

 

(164,483)

 

 

(18,286)

 

 

(93,787)

 

 

(64,655)

 

 

(40,000)

Change in fair value of derivative liability thru December 31, 2013

 

 

 

 

 

52,355 

 

 

36,946 

 

 

Derivative Liability at December 31, 2013

$

 

$

 

$

 

$

 

$

Derivative Liability added

 

 

 

 

 

 

 

 

 

Accelerated amortization on conversions and payments

 

 

 

 

 

 

 

 

 

Change in fair value of derivative liability thru September 30, 2014

 

 

 

 

 

 

 

 

 

Derivative Liability at September 30, 2014

$

 

$

 

$

 

$

 

$





14





Series B Notes (Continued)

Note J

 

Note K

 

Note L

 

Total

Issuance Date

December-11-12

 

February-05-13

 

March-19-13

 

 

Carrying Value:

 

 

 

 

 

 

 

 

 

 

 

Face Value at January 1, 2013

$

32,500 

 

$

 

$

 

$

276,500 

Unamortized Discount at January 1, 2013

 

 

 

 

 

 

 

(40,000)

Proceeds thru December 31, 2013

 

 

 

 

 

 

 

Convertible note assigned thru December 31, 2013

 

 

 

60,000 

 

 

50,000 

 

 

110,000 

Discount recorded on note thru December 31, 2013

 

(32,500)

 

 

(60,000)

 

 

(45,283)

 

 

(278,210)

Discount amortization thru December 31, 2013

 

32,500 

 

 

60,000 

 

 

45,283 

 

 

318,210 

Conversions to shares thru December 31, 2013

 

 

 

(60,000)

 

 

(7,800)

 

 

(270,100)

Payments thru December 31, 2013

 

(32,500)

 

 

 

 

 

 

(74,200)

Face Value at December 31, 2013

 

 

 

 

 

42,200 

 

 

42,200 

Unamortized Discount at December 31, 2013

 

 

 

 

 

 

 

Carrying value at December 31, 2013

$

 

$

 

$

42,200 

 

$

42,200 

Proceeds thru September 30, 2014

 

 

 

 

 

 

 

Convertible note assigned thru September 30, 2014

 

 

 

 

 

 

 

Discount recorded on note thru September 30, 2014

 

 

 

 

 

 

 

Discount amortization thru September 30, 2014

 

 

 

 

 

 

 

Conversions to shares thru September 30, 2014

 

 

 

 

 

(10,000)

 

 

(10,000)

Payments thru September 30, 2014

 

 

 

 

 

(32,200)

 

 

(32,200)

Face Value at September 30, 2014

 

 

 

 

 

 

 

Unamortized Discount at September 30, 2014

 

 

 

 

 

 

 

Carrying value at September 30, 2014

$

 

$

 

$

 

$

Accrued Interest:

 

 

 

 

 

 

 

 

 

 

 

Accrued Interest at January 1, 2013

 

217 

 

 

 

 

 

 

5,510 

Interest accrued thru December 31, 2013

 

1,917 

 

 

 

 

3,657 

 

 

9,313 

Conversions to shares thru December 31, 2013

 

 

 

 

 

 

 

(3,520)

Payments thru December 31, 2013

 

(2,134)

 

 

 

 

 

 

(7,646)

Accrued Interest Balance at December 31, 2013

$

 

$

 

$

3,657 

 

$

3,657 

Interest accrued thru September 30, 2014

 

 

 

 

 

934 

 

 

934 

Conversions to shares thru September 30, 2014

 

 

 

 

 

 

 

Payments thru December 31, 2013

 

 

 

 

 

(4,592)

 

 

(4,592)

Accrued Interest Balance at September 30, 2014

$

 

$

 

$

 

$

Derivative Liability:

 

 

 

 

 

 

 

 

 

 

 

Derivative Liability at January 1, 2013

 

 

 

 

 

 

 

40,000 

Derivative Liability added

 

56,034 

 

 

254,717 

 

 

45,283 

 

 

607,944 

Accelerated amortization on conversions and payments

 

 

 

(237,736)

 

 

 

 

 

(618,947)

Change in fair value of derivative liability thru December 31, 2013

 

(56,034)

 

 

(16,981)

 

 

34,340 

 

 

50,626 

Derivative Liability at December 31, 2013

$

 

$

 

$

79,623 

 

$

79,623 

Derivative Liability added

 

 

 

 

 

 

 

Accelerated amortization on conversions and payments

 

 

 

 

 

(37,099)

 

 

(37,099)

Change in fair value of derivative liability thru September 30, 2014

 

 

 

 

 

(42,524)

 

 

(42,524)

Derivative Liability at September 30, 2014

$

 

$

 

$

 

$


Convertible Notes Series C:


On September 25, 2013 and October 2, 2013 a holder of $80,000 and $40,000, respectively, in principal amount of debt issued by Pacific Gold Corp. transferred these obligations to a third party. In connection with the transfer, the Company agreed to modify the rate of conversion of principal and interest into shares of common stock to a formula based on the market value of a share of common stock, from time to time. As a result of the modifications, the notes had a conversion rate of 45% discount to the market price calculated as the average of the lowest three (3) market prices (VWAP) for the common stock during the twenty trading day period ending the latest complete trading day prior to conversion date. Both convertible notes have been fully converted into shares at September 30, 2014.


On May 12, 2014 and June 25, 2014 a holder of $60,000 and $30,000, respectively, in principal amount of debt issued by Pacific Gold Corp. transferred these obligations to a third party. In connection with the transfer, the Company agreed to modify the rate of conversion of principal and interest into shares of common stock to a formula based on the market value of a share of common stock, from time to time. As a result of the modifications, the notes had a conversion rate of 50% discount to the market price calculated as the lowest VWAP for the common stock during the ten trading day period ending the latest complete trading day prior to conversion date. Both convertible notes have been fully converted into shares at September 30, 2014.




15




On August 20, 2014 a holder of  $20,000, in principal amount of debt issued by Pacific Gold Corp. transferred the obligation to a third party. In connection with the transfer, the Company agreed to modify the rate of conversion of principal and interest into shares of common stock to a formula based on the market value of a share of common stock, from time to time. As a result of the modifications, the notes had a conversion rate of 50% discount to the market price calculated as the lowest VWAP for the common stock during the ten trading day period ending the latest complete trading day prior to conversion date. The convertible note has been fully converted into shares at September 30, 2014.


A summary of the carrying value of the notes is as follows:


Series C Notes

Note A

 

Note B

 

Note C

 

Note D

 

Note E

 

Total

Issuance Date

September-25-13

 

October-02-13

 

May-12-14

 

June-25-14

 

August-20-14

 

 

Carrying Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Face Value at January 1, 2013

$

 

$

 

$

 

$

 

$

 

$

Unamortized Discount at January 1, 2013

 

 

 

 

 

 

 

 

 

 

 

Proceeds thru December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Convertible note assigned thru December 31, 2013

 

80,000 

 

 

40,000 

 

 

 

 

 

 

 

 

120,000 

Discount recorded on note thru December 31, 2013

 

(80,000)

 

 

(40,000)

 

 

 

 

 

 

 

 

(120,000)

Discount amortization thru December 31, 2013

 

41,492 

 

 

6,667 

 

 

 

 

 

 

 

 

48,159 

Conversions to shares thru December 31, 2013

 

(28,656)

 

 

 

 

 

 

 

 

 

 

(28,656)

Payments thru December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Face Value at December 31, 2013

 

51,344 

 

 

40,000 

 

 

 

 

 

 

 

 

91,344 

Unamortized Discount at December 31, 2013

 

(38,508)

 

 

(33,333)

 

 

 

 

 

 

 

 

(71,841)

Carrying value at December 31, 2013

$

12,836 

 

$

6,667 

 

$

 

$

 

$

 

$

19,503 

Proceeds thru September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

Convertible note assigned thru September 30, 2014

 

 

 

 

 

60,000 

 

 

30,000 

 

 

20,000 

 

 

110,000 

Discount recorded on note thru September 30, 2014

 

 

 

 

 

(60,000)

 

 

(30,000)

 

 

(20,000)

 

 

(110,000)

Discount amortization thru September 30, 2014

 

38,508 

 

 

33,333 

 

 

60,000 

 

 

30,000 

 

 

20,000 

 

 

181,841 

Conversions to shares thru September 30, 2014

 

(51,344)

 

 

(40,000)

 

 

(60,000)

 

 

(30,000)

 

 

(20,000)

 

 

(201,344)

Payments thru September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Face Value at September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

Unamortized Discount at September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

Carrying value at September 30, 2014

$

 

$

 

$

 

$

 

$

 

$

Accrued Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued Interest at January 1, 2013

 

 

 

 

 

 

 

 

 

 

 

Interest accrued thru December 31, 2013

 

1,834 

 

 

986 

 

 

 

 

 

 

 

 

2,820 

Conversions to shares thru December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Payments thru December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Accrued Interest Balance at December 31, 2013

$

1,834 

 

$

986 

 

$

 

$

 

$

 

$

2,820 

Interest accrued thru September 30, 2014

 

(1,834)

 

 

(920)

 

 

 

 

 

 

 

 

(2,754)

Conversions to shares thru September 30, 2014

 

 

 

(66)

 

 

 

 

 

 

 

 

(66)

Payments thru September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

Accrued Interest Balance at September 30, 2014

$

 

$

 

$

 

$

 

$

 

$

Derivative Liability:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Liability at January 1, 2013

 

 

 

 

 

 

 

 

 

 

 

Derivative Liability added

 

88,496 

 

 

93,559 

 

 

 

 

 

 

 

 

182,055 

Accelerated amortization on conversions and payments

 

(33,582)

 

 

 

 

 

 

 

 

 

 

(33,582)

Change in fair value of derivative liability thru December 31, 2013

 

64,956 

 

 

(174)

 

 

 

 

 

 

 

 

64,782 

Derivative Liability at December 31, 2013

$

119,870 

 

$

93,385 

 

$

 

$

 

$

 

$

213,255 

Derivative Liability added

 

 

 

 

 

134,053 

 

 

51,534 

 

 

73,086 

 

 

258,673 

Accelerated amortization on conversions and payments

 

(104,946)

 

 

(72,882)

 

 

(181,650)

 

 

(59,811)

 

 

(73,086)

 

 

(492,375)

Change in fair value of derivative liability thru September 30, 2014

 

(14,924)

 

 

(20,503)

 

 

47,597 

 

 

8,277 

 

 

 

 

20,447 

Derivative Liability at September 30, 2014

$

 

$

 

$

 

$

 

$

 

$


Inputs used in computation of Black-Scholes were as follow:


 

Note E

 

 

Initial Valuation

(August 20, 2014)

 

Input Variables:

 

 

 

Stock Price @ grant date

$

0.00020

 

Exercise Price  (3)

$

0.00005

 

Expected Life of the Option  (4)

 

1

 

Volatility  (5)

 

263

%

Annual Rate of Quarterly Dividends (6)

 

0.00

%

Risk-Free Rate  (7)

 

0.12

%




16




NOTE 10 – COMMON STOCK AND PREFERRED STOCK


For the nine months ended September 30, 2014, 3,149,064,577 common shares were issued for $336,844 in principal and $9,084 in interest on the convertible notes as discussed in Note 9 above.


In 2013, 144,616,858 common shares were issued for $746,256 in principal and $48,562 in accrued interest on the convertible notes discussed in Note 9 above.


In 2013, 18,334 shares were issued for $220 as part of a settlement agreement.


In 2013, 300,000 preferred shares were issued on debt conversion at a price of $1.00 per share and a deemed dividend of $300,000 was recorded related to the conversion.


On October 18, 2013, Pacific Gold Corp. (the “Company”) announced that, effective upon market open on October 21, 2013, every one hundred twenty shares of the Company’s issued and outstanding Common Stock, par value $0.0000000001 (the "Common Stock"), would convert into one share of Common Stock (the “Second Reverse Stock Split”).  Any fractional shares resulting from the Second Reverse Stock Split will be rounded up to the next whole share. As a result of the Second Reverse Stock Split, the total number of issued and outstanding shares of the Company's Common Stock have decreased from 3,270,157,366 pre-split shares to approximately 27,254,565 shares after giving effect to the Second Reverse Stock Split.


On January 22, 2013, every twenty shares of the company’s issued and outstanding Common Stock, par value $0.0000000001 (the "Common Stock"), was converted into one share of New Common Stock (the “First Reverse Stock Split”).  Any fractional shares resulting from the First Reverse Stock Split will be rounded up to the next whole share. As a result of the First Reverse Stock Split, the total number of issued and outstanding shares of the Company's Common Stock decreased from 3,867,674,530 pre-split shares to 193,383,727 shares after giving effect to the First Reverse Stock Split. In addition to the First Reverse Stock Split, the Company has also reduced its total number of the Company’s authorized shares of common stock from 5,000,000,000 to 3,000,000,000.


All share and per share date in these consolidated financial statements and notes has been retrospectively restated to account for the stock splits.


NOTE 11 – 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.  If the lease is renewed, the 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 with a renewal option for another 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, and amended on January 30, 2014, NRG, a subsidiary of the company signed a sub-lease for ten mining claims held NRG under a lease, 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 the NRG of $2.00 per yard of processed barite. The rights under the lease exclude any recovery of gold mineralization. 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.





17




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 September 30, 2014:


Year ended

 

Total

December 31, 2014

 

$

40,000

December 31, 2015

 

 

50,000

December 31, 2016

 

 

50,000

December 31, 2017

 

 

50,000

December 31, 2018

 

 

50,000

Total

 

$

240,000


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 nine months ended September 30, 2014 and 2013 was $3,663.


NOTE 12 – MAJOR CUSTOMERS


For the nine months ended September 30, 2014 and in 2013, there were no gold sales. In prior years, all gold sales were made to two refineries.  Many refineries are available with similar pricing and the refineries were chosen for convenience.


Revenue is derived primarily from the sale of only one product – gold.  Should the market for gold become unavailable and or the value of gold becomes significantly decreased, the Company could experience severe negative impact.


NOTE 13 – NON–CONTROLLING INTEREST


On November 2, 2012, the board of Pacific Gold Corp. agreed to a dividend of up to 5,000,000 of the shares of Pacific Metals Corp. One share of Pacific Metals Corp. was distributed as a dividend to shareholders of the Company for every 420 shares of Pacific Gold Corp. owned by shareholders of record as of November 1, 2012. As a result of the stock dividend, Pacific Metals Corp. is no longer a wholly-owned subsidiary of the Company. The Company now holds a controlling interest of 75% in Pacific Metals Corp.


NOTE 14 – LEGAL PROCEEDINGS


On July 12, 2013, Nevada Rae Gold, Inc. was sued by Cashman Equipment Company for approximately $56,000 in past due equipment rentals in Clark County, Nevada, Case number A-13-685083-C. The Company believes that the amounts in question are overstated and did not apply appropriate credits. In April 2014 the company paid $35,000 to settle the suit in order to avoid significant legal fees.


A subsidiary of the Company, Nevada Rae Gold, Inc., has an outstanding tax obligation to the Internal Revenue Service.  The IRS has asserted that approximately $300,000 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 Nevada Rea to direct the funds to the IRS, and taking possession of assets of Nevada Rae and selling them.  These actions would be disruptive to the operations of the Company and the subsidiary and may impair the ability of Nevada Rae to operate.  In that event, Nevada Rae 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. In April 2014 the company has made payments total of approximately $170,000 towards its amounts owing to the IRS.


NOTE 15 – 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 September 30, 2014, the Company had an accumulated deficit of $45,917,146, negative working capital of $1,106,175, and negative cash flows from the nine months ended September 30, 2014 of $585,760, raising substantial doubt about its ability to continue as a going concern. During the nine months ended September 30, 2014, 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.




18




NOTE 16 – SUBSEQUENT EVENTS


On October 20, 2014, the company agreed to the assignment of $17,500, in principal amount of outstanding notes to a non – affiliate third party investor. In connection with the transfer, the Company agreed to modify the rate of conversion of principal and interest into shares of common stock to a formula based on the market value of a share of common stock, from time to time. As a result of the modifications, the notes had a conversion rate of 50% discount to the market price calculated as the lowest VWAP for the common stock during the ten trading day period ending the latest complete trading day prior to conversion date. The debenture holders of the convertible note converted the $17,500 in principal into 350,000,000 shares of common stock.


On December 12, 2014, the company the Company sold 15,110,823 shares of Pacific Metals Corp. for $136,000 in a private transaction. As a result, as of date of sale, Pacific Metals Corp. has ceased being a subsidiary of the company.


The company evaluated subsequent events through the date the consolidated financial statements were issued.






19





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 three subsidiaries through which it holds various mineral prospects in Nevada. The Two subsidiaries are wholly-owned and include; Nevada Rae Gold, Inc., 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.





20




Through September 30, 2014 the Company has invested approximately $11,861,275 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 31st with $1,500,000 to be received on the commencement of commercial mining.


The payments made to PMR are subject to a 15% royalty to Platoro West, Inc. all royalty payments have been made.


Fernley Gold, Inc.


There were no material changes to report for Fernley Gold during the third quarter of 2014.


Financial Condition and Changes in Financial Condition


The Company had no revenue from the sale of gold for the nine months ended September 30, 2014.


Operating expenses for the nine months ended September 30, 2014, totaled $530,376. The Company incurred labor, fuel and productions costs associated with the various mining activities. Equipment operating costs, tools and materials of $5,806 were incurred primarily to maintain the plant and equipment at Black Rock Canyon.  Legal and professional fees of $72,693 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 $28,374.  Interest expense totaled $386,594; of this amount, $214,248 was a non-cash expense that included amounts for interest on the convertible debentures that were not paid out in cash. 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.


The Company had no revenue from the sale of gold for the nine months ended September 30, 2013.


Operating expenses for the nine months ended September 30, 2013, totaled $647,033. The Company incurred labor, fuel and productions costs associated with various mining activities. Equipment operating costs, tools and materials of $26,231 were incurred primarily to maintain the plant and equipment at Black Rock Canyon.  Legal and professional fees of $99,978 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 $52,848.  Interest expense totaled $626,454; of this amount, $417,775 was a non-cash expense that included amounts for interest on the convertible debentures that were not paid out in cash. 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.


The Company had no revenue from the sale of gold for the three months ended September 30, 2014.


Operating expenses for the three months ended September 30, 2014, totaled $147,963. The Company incurred labor, fuel and productions costs associated with the various mining activities. Equipment operating costs, tools and materials of $1,641 were incurred primarily to maintain the plant and equipment at Black Rock Canyon.  Legal and professional fees of $18,232 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 $1,342.  Interest expense totaled $118,091; of this amount, $53,086 was a non-cash expense that included amounts for interest on the convertible debentures that were not paid out in cash. 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.


The Company had no revenue from the sale of gold for the three months ended September 30, 2013.




21





Operating expenses for the three months ended September 30, 2013, totaled $267,239. The Company incurred labor, fuel and productions costs associated with various mining activities. Equipment operating costs, tools and materials of $13,246 were incurred primarily to maintain the plant and equipment at Black Rock Canyon.  Legal and professional fees of $24,039 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 $34,103.  Interest expense totaled $70,533; of this amount, $8,495 was a non-cash expense that included amounts for interest on the convertible debentures that were not paid out in cash. 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 September 30, 2014, we have funded our operations from the sale of securities, issuance of debt and loans from a shareholder.


As of September 30, 2014, our assets totaled $1,099,229, which consisted primarily of mineral rights, land and water rights, and related equipment. Our total liabilities were $3,814,781 which primarily consisted of related parties’ notes payable of $2,375,000, accounts payable and accrued expenses of $1,109,864, and promissory notes of $265,000. We had an accumulated deficit of $45,917,146 and a working capital deficit of $1,106,175 at September 30, 2014.


For the nine months ended September 30, 2014, the convertible note holders have converted $336,844 in principal and $9,150 in accrued interest on the Convertible notes. An additional $210,000 was assigned to the convertible notes.  The conversion rate of the notes is discussed in Note 9 to the consolidated financial statements.


For the nine months ended September 30, 2014, the company issued additional $115,000 in promissory notes to a non–related party. The promissory notes are due on June 30, 2016. Interest expense on the promissory notes accrues at a rate of 10% per annum. Interest accrued on the notes for the nine months ended September 30, 2014 was $16,320. At September 30, 2014 the balance on the promissory notes was $265,000, representing promissory notes owed to an individual debt holder.


As of September 30, 2014, Pacific Gold owes $1,270,000 in principal and $31,251 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 was due on June 30, 2016 and is convertible into shares of common stock of Pacific Gold at $0.001 per share. On June 10, 2013 the Company issued 300,000 of Series A preferred shares on conversion of $300,000 of the note principal. For the nine months ended September 30, 2014, the company received $26,000 in additional proceeds and have paid $181,500 towards the balance.


As of September 30, 2014, Pacific Gold owes a total of $1,105,000 in principal and $26,958 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. For the nine months ended September 30, 2014, the company received $134,835 in additional proceeds and have sold $90,000 of the notes to a third party investor.


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





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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 September 30, 2014. 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 September 30, 2014.  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.





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PART II OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


A subsidiary of the Company, Nevada Rae Gold, Inc., has an outstanding tax obligation to the Internal Revenue Service.  The IRS has asserted that approximately $115,000 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 Nevada Rea to direct the funds to the IRS, and taking possession of assets of Nevada Rae and selling them.  These actions would be disruptive to the operations of the Company and the subsidiary and may impair the ability of Nevada Rae to operate.  In that event, Nevada Rae 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.


From time to time the Company is involved in minor trade, employment and other operational disputes, none of which have or are expected to have a material impact on the current or future consolidated financial statements or operations.


ITEM 1A. RISK FACTORS


N/A


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


During the quarter the Company issued a total of 1,746,356,365 shares of common stock for debt repayment of $86,986 in principal, and $2,115 in interest.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES


None


ITEM 4. MINE SAFETY DISCLOSURES


Mine

/Operating

Name

MSHA ID

#

Section

104

S & S

Citations

(#)

Section

104 (b)

Orders

(#)

Section

104(d)

Citations

& Orders

(#)

Section

110(b)(2)

Violations

(#)

Section

107 (a)

Orders

(#)

Value of

MSHA

Assessments

Proposed

($)

Mining

Related

Facilities

(#)

Received

Notice of

Pattern of

Violations

Section

104 (e)

(Yes / No)

Received

Notice of

Potential

to have

Pattern

Under

Section

104 (e)

(Yes / No)

Legal

Actions

Pending

as of

Last

Day of

Period

(#)

Legal

Actions

Initiated

During

Period

(#)

Legal

Actions

Resolved

During

Period

(#)

Black Rock Canyon /

2602572

0

0

0

0

0

$0

1

No

No

0

0

0


The Black Rock Canyon mine did not receive any citations for the nine months ended September 30, 2014.





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ITEM 5. OTHER INFORMATION


None


ITEM 6. EXHIBITS


31.1

Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. *


31.2

Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. *


32.1

Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. *


10.1

Convertible Note issued to Jabi Inc. on June 30, 2014 *


*    Filed herewith







25





SIGNATURES



In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.


(Registrant)

 

PACIFIC GOLD CORP.

 

 

 

By:

 

/s/  Robert Landau

 

 

Robert Landau, President

 

 

(Chief Executive Officer)

 

 

 

Date:

 

January 12, 2015




In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signatures

 

Title

 

Date

 

 

 

 

 

/s/ Robert Landau

 

Chief Executive Officer, Chief Financial Officer ,Secretary, Treasurer and Director

 

January 12, 2015

Robert Landau

 

 

 

 

 

 

 

 

 






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