UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.  20549





FORM 10-Q


(Mark One)


x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934





For the quarterly period ended April 30, 2011


OR


 ̈
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934





For the transition period from _______ to _______





Commission File Number:  333-134549





CALIFORNIA GOLD CORP.


(Exact Name of Registrant as Specified in its Charter)





Nevada
83-483725(State of Incorporation)
(IRS Employer Identification No.)





c/o Gottbetter & Partners, LLP


488, Madison Avenue, 12th Floor, New York, NY 10022


(212) 400-6900


(Address of principal executive offices and telephone number)





Indicate whether the registrant (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act 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  ̈





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 ̈No ̈





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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):





Large accelerated filer     ̈

Accelerated filer  ̈

Non-accelerated filer  ̈

Smaller reporting company þ(Do not check if a smaller

Reporting company)





Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes x   No  ̈





There were 93,201,260 shares of common stock issued and outstanding as of June 14, 2011.





CALIFORNIA GOLD CORP.




INDEX





PagePart I Financial InformationItem 1
Financial Statements
2Balance Sheets (unaudited)
3Statements of Expenses (unaudited)
4Statements of Cash Flows (unaudited)
5Notes to the Financial Statements (unaudited)
6Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13Item 4
Controls and Procedures
16Part II Other Information
19Item 2
Unregistered Sale of Equity Securities and Use of Proceeds
19Item 6
Exhibits
19Signatures
20Exhibit – Certification of Principal  Executive Officer and Principal Financial OfficerExhibit – Certification of Chief Executive Officer and Chief Financial Officer





PART I


FINANCIAL INFORMATION





ITEM 1.  FINANCIAL STATEMENTS





The financial statements of California Gold Corp. (the “Company”) required to be filed with this Quarterly Report on Form 10-Q were prepared by management and commence on the following page, together with the related Notes.  In the opinion of management, these financial statements fairly present the financial condition of the Company, but should be read in conjunction with the financial statements of the Company for the period ended January 31, 2011, previously filed on Form 10-K with the Securities and Exchange Commission, File No. 333-134549.


2


CALIFORNIA GOLD CORP.


(AN EXPLORATION STAGE COMPANY)


BALANCE SHEETS


(Unaudited)





April 30,

2011


January 31,

2011ASSETSCurrent assets:Cash

$
1,261,115


$
1,268,254Prepaid expenses – related parties


14,204



33,784Total current assets


1,275,319



1,302,038Mining rights


20,000



20,000Total assets

$
1,295,319


$
1,322,038LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilities:Accounts payable

$
11,922


$
27,129Accounts payable – related party


-



52,250Derivative liabilities


2,910,667



2,305,770Other accrued liabilities


-



2,500Total current liabilities


2,922,589



2,387,649Total  liabilities


2,922,589



2,387,649Commitments and contingencies


-



-Stockholders' deficit:Preferred stock, par value $0.001 per share, 22,000,000 shares authorized at April 30, 2011 and January 31, 2011; 22,000,000 shares issued and outstanding at April 30, 2011 and January 31, 2011


22,000



22,000Common stock, par value $0.001 per share, 300,000,000 shares authorized at April 30, 2011 and January 31, 2011; 101,201,260 and 92,701,260 shares issued and outstanding at April 30, 2011 and January 31, 2011, respectively


101,201



92,701Additional paid-in capital


1,588,972



1,678,791Deficit accumulated during the exploration stage


(3,339,443
)


(2,859,103
)Total stockholders' deficit


(1,627,270
)


(1,065,611
)Total liabilities and stockholders' deficit

$
1,295,319


$
1,322,038





The accompanying notes are an integral part of these unaudited financial statements.


3


CALIFORNIA GOLD CORP.


(AN EXPLORATION STAGE COMPANY)


STATEMENTS OF EXPENSES


(Unaudited)





Three Months Ended


CumulativeApril 30,


From2011


2010


InceptionExpenses:Mineral property expenses

$
66,174


$
-


$
144,276Bad debt expense


-



-



559,483General and administrative


101,697



42,210



1,249,878Total operating expenses


167,871



42,210



1,953,637Loss from operations


(167,871
)


(42,210
)


(1,953,637
)Other income (expenses):Interest income


554



-



845Interest expense


-



(391
)


(1,763
)Realized and unrealized loss on derivatives, net


(313,023
)


-



(1,375,270
)Amortization of debt discount


-



-



(9,618
)Total other income (expenses)


(312,469
)


(391
)


(1,385,806
)Net loss

$
(480,340
)

$
(42,601
)

$
(3,339,443
)Loss per common share:Loss per common share - basic and diluted

$
(0.01
)

$
(0.00
)Weighted average number of common shares outstanding - basic and diluted


94,343,305



58,063,002





The accompanying notes are an integral part of these unaudited financial statements.


4


CALIFORNIA GOLD CORP.


(AN EXPLORATION STAGE COMPANY)


STATEMENTS OF CASH FLOWS


(Unaudited)





Three Months Ended


CumulativeApril 30,


From2011


2010


InceptionCash flows from operating activities:Net loss

$
(480,340
)

$
(42,601
)

$
(3,339,443
)Adjustments to reconcile net loss to net cash used in operating activities:Stock-based compensation


10,555



-



513,668Amortization of debt discount


-



-



9,618Unrealized and realized loss on derivatives, net


313,023



-



1,375,270Changes in operating assets and liabilities:Prepaid expenses


19,580



-



(14,204
)Accounts payable


(15,207
)


4,549



(46,425
)Accounts payable – related party


(52,250
)


26,163



157,665Accrued expenses


(2,500
)


-



142Interest accrued on notes payable from related party


-



389



1,621Net cash used in operating activities


(207,139
)


(11,500
)


(1,342,088
)Cash flows from investing activities:Investment in mining rights


-



-



(20,000
)Net cash used in investing activities


-



-



(20,000
)Cash flows from financing activities:Proceeds from related party loans


-



11,500



92,430Proceeds from common and preferred stock issued, net of offering costs


200,000



-



2,593,773Payments from cancellation of common stock


-



-



(63,000
)Net cash provided by financing activities


200,000



11,500



2,623,203Net increase (decrease) in cash


(7,139
)


-



1,261,115Cash - beginning of period


1,268,254



373



-Cash - end of period

$
1,261,115



373



1,261,115Noncash investing and financing activities:Contributed capital - loss on extinguishment of debt owed to related party

$
-


$
-


$
374Debt discount due to derivative liabilities


-



-



9,618Contributed capital - payables settled by stockholder


-



-



157,665Issuance of common stock for convertible notes


-



-



3,660Derecognition of derivatives related to convertible notes


-



-



91,365Issuance of derivative warrant instruments


291,874



-



1,615,007Related party note receivable write-off


-



-



557,927Common stock cancellation


-



250



61,700





The accompanying notes are an integral part of these unaudited financial statements.


5


CALIFORNIA GOLD CORP.


(AN EXPLORATION STAGE COMPANY)


NOTES TO FINANCIAL STATEMENTS


(Unaudited)





NOTE 1 – GENERAL ORGANIZATION AND BUSINESS





California Gold Corp. (“California Gold” or the “Company”) is a Nevada corporation whose principal focus is the identification, acquisition, and development of rare and precious metals mining properties in the Americas. The Company is still in the exploration stage and has not generated any revenues from its mining properties to date.





The Company was incorporated on April 19, 2004 under the name of Arbutus Resources, Inc. On August 9, 2007, the Company changed its name to US Uranium, Inc. On March 9, 2009, the Company changed its name to California Gold Corp.





NOTE 2 – BASIS OF PRESENTATION





The accompanying unaudited interim financial statements as of April 30, 2011 and 2010 and for the three months then ended have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the annual audited financial statements. The financial statements as of and for the three months ended April 30, 2011 and 2010 are unaudited. In the opinion of management, these financial statements include all adjustments, which, unless otherwise disclosed, are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year. The balance sheet at January 31, 2011 has been derived from audited financial statements; however, the notes to the financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended January 31, 2011 as filed with the SEC.





NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Reclassifications





Certain amounts in prior periods have been reclassified to conform to current period presentation.





Acquisition-Related Costs





For the three months ended April 30, 2011, the Company incurred certain costs related to the AuroTellurio Acquisition (as defined below in Note 4). Those costs included legal, valuation, travel, and other professional or consulting fees. The Company accounted for those acquisition-related costs under FASB ASC Topic 805,Business Combinations. The costs were recognized as mineral property expenses in the periods in which the costs were incurred and the services received. The Company recorded $66,174 in costs for the three months ended April 30, 2011 and none for the three months ended April 30, 2010.


6


Stock-Based Compensation





The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under FASB ASC Topic 718,Compensation – Stock Compensation, which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.





The Company also adopted FASB ASC Topic 505-50,Equity-Based Payments to Non-Employees, to account for equity instruments issued to parties other than employees for acquiring goods or services.  Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.





For the three months ended April 30, 2011, the Company recorded $10,555 in stock-based compensation as a component of general and administrative expenses. The Company did not issue any share-based payments to employees and non-employees during the three months ended April 30, 2010.





New Accounting Pronouncements





The Company does not expect adoption of the new accounting pronouncements will have a material effect on the Company’s financial statements.





NOTE 4 – MINING RIGHTS





On February 11, 2011, the Company entered into a property option agreement (the “AuroTellurio Option Agreement”) with Mexivada, which formalized and replaced the Letter Agreement. Under the terms of the AuroTellurio Option Agreement, the Company is committed to incur $3,000,000 in cumulative exploration expenditures on the Property over a four year period at an investment rate of at least $750,000 per year. The Company will earn a 20% vested interest in the AuroTellurio Property in the first year of the AuroTellurio Option Agreement by investing $750,000 in an exploration program and up to an additional 60% interest in the Property, in blocks of 20% each, by investing an additional $750,000 in the exploration program in each of the following three years, or sooner, and meeting all of the other required terms of the AuroTellurio Option Agreement. Each 20% interest will vest earlier if each year’s cash and stock payments to Mexivada and $750,000 exploration expenditure investment are completed earlier than scheduled.





Mexivada and its Mexican subsidiary hold only the mineral rights in the AuroTellurio Property, which rights were granted by the government of Mexico. Neither Mexivada nor its Mexican subsidiary owns the real property rights to the land underlying the La Viuda Concessions. The Company expects to obtain a surface rights agreement with the landowner on whose property the La Viuda Concessions are located to conduct its exploration program, and obtaining this agreement is a pre-condition to the Closing.


7


Under the terms of the Agreement, the Company will act as “Operator,” exclusively responsible, in consultation with Mexivada, for carrying out and administering exploration, development and mining work on the AuroTellurio Property. If costs of the exploration program exceed the agreed upon $300,000 investment, the Company will share additional costs with Mexivada on a proportionate share basis. Once the Company has earned its full 80% interest in the AuroTellurio Property, the Company will form a joint venture with Mexivada applicable to the further development and commercialization of the AuroTellurio Property. The Closing is expected to take place prior to the end of the Company’s second fiscal quarter.





NOTE 5 – RELATED PARTY TRANSACTIONS





Compensation of Officers and Directors





In January 2011, the Company entered into an arrangement with George Duggan to serve as the Company’s Chief Operating Officer effective January 17, 2011. Under the terms of the arrangement, the Company pays Mr. Duggan a $2,500 fee per month for his services.





On February 1, 2011, the Company entered into an independent contractor consulting agreement with James Davidson, pursuant to which the Company agreed to pay Mr. Davidson $5,000 per month for 12 months beginning February 1, 2011 for his services rendered to the Company as the Chief Executive Officer.





The total compensation to Mr. Duggan and Mr. Davidson amounted to $20,000 for the three months ended April 30, 2011 and was recorded as a component of general and administrative expenses.





Legal, Consulting and Other Professional Fees





The Company has entered into a 12-month retainer agreement with Gottbetter & Partners, LLP (“G&P”), effective December 1, 2010, pursuant to which the Company will pay G&P, a stockholder of the Company, a monthly fee of $5,500 for providing legal services relating to SEC regulatory compliance and reporting requirements. As of April 30, 2011, the Company had an outstanding advance payment for these services in the amount of $5,500.





For the three months ended April 30, 2011 and 2010, legal fees to G&P totaled $22,722 and $26,162, respectively, and primarily related to SEC filings, acquisitions, private placement offerings, and other general corporate matters. The legal fees incurred are included as a component of general and administrative expenses.





In December 2010, the Company entered into a consulting agreement with Oberal International, Inc. (“Oberal”), a stockholder of the Company. Oberal will provide the Company with regular and customary capital markets and corporate finance consulting advice, including recommendations concerning investor and strategic introductions to potential industry partners. The agreement became effective December 15, 2010, runs for a term of 90 days and may be extended upon the mutual agreement between the parties. In consideration of services to be rendered by Oberal, the Company agreed to pay Oberal $25,250 for the term of the agreement. The Company incurred $11,783 in consulting fees during the three months ended April 30, 2011, which are included as a component of general and administrative expenses.


8


In January 2011, the Company entered into an administrative services agreement with Incorporated Communications Services (“ICS”), a California corporation. George Duggan, the Company’s Chief Operations Officer, is the Vice President of ICS. Pursuant to the agreement with ICS, ICS will make available its address in La Canada, California to serve as the Company’s corporate headquarters and communications office, and provide the Company with basic administrative services, including coordinating and routing incoming telephone calls, handling investor inquiries, assisting in the preparation of press releases, developing an informational website and coordinating with the auditors and financial statement preparers. The Company pays ICS a monthly fee of $6,000 for these services. This agreement with ICS became effective January 1, 2011, runs for a term of 12 months and may be extended or terminated by the parties upon 60 days prior notice. The Company incurred $18,000 in management fees as of April 30, 2011, which are included as a component of general and administrative expenses.





In January 2011, the Company entered into a consulting agreement with Melechdavid, Inc., a stockholder of the Company. Melechdavid, Inc. will provide certain consulting services to the Company’s business for a term of 90 days, commencing on January 18, 2011, the effective date of this agreement, and fair valued at $12,500. The agreement may be extended upon the mutual agreement between the parties. In consideration of services to be rendered by Melechdavid, Inc., the Company issued the 500,000 restricted shares of its common stock, $0.001 per share, on February 28, 2011. The Company recorded the $10,555 of stock-based compensation expense for the services provided by Melechdavid, Inc. to the Company at April 30, 2011.





NOTE 6 – DERIVATIVE LIABILITIES





Derivative Warrant Instruments





In the December 2010 and January 2011 Unit Offering, the Company incurred liabilities for the estimated fair value of derivative warrant instruments in the form of warrants. The estimated fair value of the derivative warrant instruments was calculated using the Black-Scholes option pricing model and amounted to $1,323,133 at the grant dates as of December 22, 2010 and January 13, 2011. These estimates were re-valued as being $2,305,770 and $2,557,408 at the balance sheet dates as of January 31, 2011 and April 30, 2011, respectively. The Company recorded a $251,638 change in value as unrealized loss in non-operating expense for the three months ended April 30, 2011.





The fair value of each warrant granted in the private placement offering has been estimated on the dates of grant using the Black-Scholes option pricing model, under the following assumptions:





Common stock issuable upon exercise of warrants


30,739,129Market price of the Company’s common stock on the measurement dates

$
0.05 and 0.09Exercise price

$
0.125Risk free interest rate


0.475
%Dividend yield


0.00
%Volatility


257.95
%Expected exercise term in years


1.5





In April 2011, the Company added to the Unit Offering an over-allotment option. As such, the Company incurred liabilities for the estimated fair value of derivative warrant instruments in the form of warrants. The estimated fair value of the derivative warrant instruments was calculated using the Black-Scholes option pricing model and amounted to $71,973, $131,077, and $88,824 at the grant dates of April 7, 2011, April 13, 2011, and April 30, 2011, respectively. The April 7, 2011 and April 13, 2011 grants were re-valued as being $87,997 and $176,438, respectively, at the balance sheet date of April 30, 2011. The Company recorded a $61,385 change in value as unrealized loss in non-operating expense for the three months ended April 30, 2011.


9


The fair value of each warrant granted in the private placement offering has been estimated on the dates of grant using the Black-Scholes option pricing model, under the following assumptions:





Common stock issuable upon exercise of warrants


4,000,000Market price of the Company’s common stock on the measurement dates

$
0.08 and 0.10Exercise price

$
0.125Risk free interest rate range


0.61 – 0.81
%Dividend yield


0.00
%Volatility range


268.16 – 284.75
%Expected exercise term in years


1.5





NOTE 7 – FAIR VALUE MEASUREMENTS





As defined in FASB ASC Topic 820, fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Topic requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:





Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.





Level 2: Pricing inputs other than quoted market prices included in Level 1 that are based on observable market data and are directly or indirectly observable for substantially the full term of the asset or liability. These include quoted market prices for similar assets or liabilities, quoted market prices for identical or similar assets in markets that are not active, adjusted quoted market prices, inputs from observable data such as interest rate and yield curves, volatilities or default rates observable at commonly quoted intervals or inputs derived from observable market data by correlation or other means.





Level 3: Pricing inputs that are unobservable or less observable from objective sources. Unobservable inputs should only be used to the extent observable inputs are not available. These inputs maintain the concept of an exit price from the perspective of a market participant and should reflect assumptions of other market participants. An entity should consider all market participant assumptions that are available without unreasonable cost and effort. These are given the lowest priority and are generally used in internally developed methodologies to generate management's best estimate of the fair value when no observable market data is available.





Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.


10


Certain assets and liabilities are reported at fair value on a recurring or nonrecurring basis in the Company’s balance sheet. The following methods and assumptions were used to estimate the fair values:





Cash, Prepaid assets, Mining rights (deposits), Accounts payable, and Accrued liabilities


The carrying amounts approximate fair value because of the short-term nature or maturity of the instruments.





Derivative liabilities


The Company’s determination of fair value of its derivative instruments incorporates various factors required under FASB Topic ASC 815. The fair values of the Company’s derivatives are valued using less observable data from objective sources as inputs into internal valuation models. Therefore, the Company considers the fair value of its derivatives to be Level 3 hierarchy. At April 30, 2011 and January 31, 2011, the aggregate Level 3 fair value of the derivative liabilities was $2,910,667 and $2,305,770, respectively.





NOTE 8 – EQUITY





Private Placement Offering





On December 22, 2010, the Company sold to various persons (collectively, the “Investors”) 58,478,258 units of its securities (the “Units”) for gross proceeds of $1,461,956, at an offering price of $0.025 per Unit. Each of 36,478,258 of the Units consists of one common share and a warrant to purchase one-half share at $0.125 per whole share. Each of the remaining 22,000,000 Units consists of one share of the Company’s Series A Convertible Preferred Stock and warrants to purchase one-half of one share of common stock. The warrants will be exercisable from issuance until eighteen months after the closing of the PPO.





On January 13, 2011, the Company sold an additional 5,000,000 Units for a total price of $125,000. The Company repurchased and cancelled 2,000,000 Units for $50,000.





In connection with the aforementioned over-allotment option, the Company sold an additional 8,000,000 Units for a total price of $200,000 in the quarter ended April 30, 2011.





As of April 30, 2011, cumulatively the Company has sold a total of 69,478,258 Units for a total price of $1,786,956. The Company incurred closing costs of $15,500, resulting in net proceeds from the Offering of $1,771,456. The Company plans to apply the net proceeds of the closing primarily towards the AuroTellurio Acquisition (see Note 4), for the relief of certain outstanding accounts payable, and for working capital purposes.





Shares for Services





The Company recognized non-cash stock-based compensation expense of $10,555 during the three-months ended April 30, 2011 in connection with a Consulting Services Agreement between the Company and Melechdavid, Inc.


11


NOTE 9 – SUBSEQUENT EVENTS





In May 2011, in connection with the Company’s PPO over-allotment option, an additional 5,000,000 Units were sold for gross proceeds of $125,000 at an offering price of $0.025 per Unit. The Units consisted of one share of the Company’s common stock and an 18-month warrant to purchase one-half of one share of our common stock at an exercise price of $0.125 per whole share.





On May 16, 2011, the Company entered into a surface rights agreement with a land owner in Moctezuma, Sonora, Mexico. In return for the voluntary servitude or easement and the exploration permit, the Company will pay the land owner $14,400 for each year in which the Company conducts exploration work on the land.


12


ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





This report contains forward-looking statements. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “target”, “goal”, “plans”, “objective”, “should”, or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements, including, but not limited to, our ability to identify and successfully participate in any future acquisition, joint venture or other new business initiative.





OVERVIEW





California Gold is an exploration stage mining company whose principal focus is the identification, acquisition, and development of rare and precious metals mining properties in the Americas.





Our primary focus is on the exploration and development of the La Viuda Concessions south of Moctezuma, Sonora, Mexico, where, we believe, deposits of tellurium, gold and silver may exist in economically minable quantities. We are still in the exploration stage and have not generated any revenues from our mining properties in Mexico.





The Mexivada Property Option Agreement





On February 11, 2011, we entered into a property option agreement (the “AuroTellurio Option Agreement”) with Mexivada Mining Corp. (“Mexivada”) to acquire up to an 80% interest in Mexivada’s La Viuda and La Viuda-1 concessions comprising its AuroTellurio tellurium-gold-silver property (the “La Viuda Concessions,” the “AuroTellurio Property” or, the “Property”) south of Moctezuma, Sonora, Mexico.





Under the terms of the AuroTellurio Option Agreement, we will acquire up to an 80% legal and beneficial ownership interest in the AuroTellurio Property by, in addition to making certain cash payments and share issuances to Mexivada (as discussed above), incurring up to $3,000,000 in cumulative exploration expenditures on the Property over a four year period at an investment rate of at least $750,000 per year. We will earn a 20% vested interest in the AuroTellurio Property in the first year of the AuroTellurio Option Agreement by investing $750,000 in an exploration program (the “Exploration Program”) and up to an additional 60% interest in the Property, in blocks of 20% each, by investing an additional $750,000 in the exploration program in each of the following three years, or sooner, and meeting all of the other required terms of the AuroTellurio Option Agreement. Each 20% interest will vest earlier if each year’s cash and stock payments to Mexivada and $750,000 exploration expenditure investment are completed earlier than scheduled.


13


The La Viuda Concessions





The La Viuda Concessions, which cover approximately 18,840 acres (7,624 hectares) south of Moctezuma, Sonora Mexico, comprise two exploration concessions granted by the Mexican government to Compania Minera Mexivada, S.A. de C.V., a wholly owned subsidiary of Mexivada.





On May 16, 2011, we entered into a surface rights agreement with a land owner in Moctezuma, Sonora, Mexico where the La Viuda Concessions are located. In return for the voluntary servitude or easement for our exploration of the La Viuda Concessions, we will pay the land owner $14,400 for each year in which we conduct exploration work on the land.





RESULTS OF OPERATIONS





Three Months Ended April 30, 2011 and 2010





We are still in our exploration stage and have generated no revenues to date.




We incurred total operating expenses of $167,871 and $42,210 for the three months ended April 30, 2011 and 2010, respectively. These expenses increased in the three months ended April 30, 2011, primarily as a result of increased general and administrative expenses. General and administrative expenses increased from $42,210 in the three months ended April 30, 2010 to $101,697 in the three months ended April 30, 2011, primarily due to stock-based compensation expenses relating to certain consulting services provided to the Company, as well as management fees, salaries and wages, and other consulting expenses. Additionally, we incurred acquisition-related costs, recorded as mineral property expenses on the statements of expenses, as a result of the Company entering into the AuroTellurio Option Agreement in February 2011 with Mexivada, pursuant to which we have been granted an option to acquire up to an 80% legal and beneficial ownership interest in Mexivada’s La Viuda Concessions in Moctezuma, Sonora, Mexico. We did not have such costs in the prior year.





We also incurred non-operating expenses of $312,469 in the three months ended April 30, 2011, compared to $391 in the three months ended April 30, 2010. The increase of $312,078 over the prior year was primarily due to a $313,023 unrealized loss on derivative instruments relating to the issuance of the 2010 and 2011 warrants as a result of the private placement offering completed in December 2010 and January 2011, and the over-allotment in April 2011.





Our net losses for three months ended April 30, 2011 and 2010 were $480,340 and $42,601, respectively.





We have generated no revenues and our net operating loss from inception through April 30, 2011 was $3,339,443.


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LIQUIDITY AND CAPITAL RESOURCES





Our cash and cash equivalents balance as of April 30, 2011 was $1,261,115 compared to $1,268,254 as of January 31, 2011.





On January 13, 2011, we completed a private placement (the “2010 Private Placement”) of 61,478,258 units (the “Units”) of our securities for gross proceeds of $1,536,956, at an offering price of $0.025 per Unit. 39,478,258 of the Units consisted of one share of our common stock and an 18-month warrant to purchase one-half of one share of our common stock at an exercise price of $0.125 per whole share. The remaining 22,000,000 Units included our Series A Preferred Stock instead of our common stock and warrants exercisable for our common stock.





In April 2011, we entered into a PPO over-allotment option and sold an additional 8,000,000 Units of our securities for gross proceeds of $200,000 at an offering price of $0.025 per Unit. The Units consisted of one share of our common stock and an 18-month warrant to purchase one-half of one share of our common stock at an exercise price of $0.125 per whole share.





Due to our brief history and historical operating losses, our operations have not been a source of liquidity, and our sources of liquidity primarily have been debt and proceeds from the sale of Units in our 2010 Private Placement and the 2011 over-allotment. Although we have begun the acquisition of the AuroTellurio Property, this property will require exploration and development that could take years to complete before it begins to generate revenues. There can be no assurances that the AuroTellurio Property will be successfully developed to the revenue producing stage. If we are not successful in our proposed rare and precious metals mining operations, our business, results of operations, liquidity and financial condition will suffer materially.





As a result of the 2010 Private Placement, we have sufficient funds to meet our first year requirements under the AuroTellurio Agreement, including the requirement that we pay Mexivada an additional $10,000 at the Closing and invest $750,000 in the Exploration Program.  If we determine to proceed with the exploration of the AuroTellurio Property after the first year, we will be required under the terms of the AuroTellurio Agreement to invest an additional $750,000 in the Exploration Program per year for each of the following three years. We will also be required to pay Mexivada $40,000 upon the first anniversary of the Closing, $50,000 upon the second anniversary of the Closing, $70,000 upon the third anniversary of the Closing, and $100,000 upon the fourth anniversary of the Closing, for a total of $290,000. We do not have this capital at this time and we will have to raise these amounts, plus additional amounts for general working capital purposes, in the capital markets. We plan to seek to raise such capital through additional sales of our equity or debt securities. There can be no assurance, however, that such financing will be available to us or, if it is available, that it will be available on terms acceptable to us and that it will be sufficient to fund our expected needs. If we are unable to obtain sufficient financing, we may not be able to proceed with our exploration and development plans for the AuroTellurio Property or meet our ongoing operational working capital needs.


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Various factors outside of our control, including the price of rare and precious metals, overall market and economic conditions, the downturn and volatility in the US equity markets, and the trading price of our common stock may limit our ability to raise the capital needed to execute our plan of operations in the following years. We recognize that the US economy is currently experiencing a period of uncertainty and that the capital markets have been depressed from recent levels. These or other factors could adversely affect our ability to raise additional capital.  As a result of an inability to raise additional capital, our short-term or long-term liquidity and our ability to execute our plan of operations, including our ability to exercise our rights to acquire up to an additional 60% interest in the La Viuda Concessions, could be significantly impaired.





OFF-BALANCE SHEET ARRANGEMENTS





We have no off-balance sheet arrangements.





SIGNIFICANT ACCOUNTING POLICIES





It is suggested that these financial statements be read in conjunction with our January 31, 2011, audited financial statements and notes thereto, which can be found in our Form 10-K filing on the SEC website at www.sec.gov under our SEC File Number 333-134549.





ITEM 4.  CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and Procedures





Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act of 1934 (the “Exchange Act”) is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.





The management of California Gold Corp. is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our senior management, consisting of James D. Davidson, our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded, as of the Evaluation Date, that our disclosure controls and procedures were not effective because of the identification of what might be deemed a material weakness in our internal control over financial reporting which is identified below.


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Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on this evaluation, our sole officer concluded that, during the period covered by this quarterly report, our internal controls over financial reporting were not operating effectively. Management did not identify any material weaknesses in our internal control over financial reporting as of April 30, 2011; however, it has identified the following deficiencies that, when aggregated, may possibly be viewed as a material weakness in our internal control over financial reporting as of that date:




1.
We do not have an audit committee. While we are not currently obligated to have an audit committee, including a member who is an “audit committee financial expert,” as defined in Item 407 of Regulation S-K, under applicable regulations or listing standards; however, it is management’s view that such a committee is an important internal control over financial reporting, the lack of which may result in ineffective oversight in the establishment and monitoring of internal controls and procedures.




2.
We did not maintain proper segregation of duties for the preparation of our financial statements. We currently only have one officer overseeing all transactions. This has resulted in several deficiencies including the lack of control over preparation of financial statements, and proper application of accounting policies:




Management believes that the material weaknesses set forth the two items above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.





Management's Remediation Initiatives





In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to initiate the following series of measures once we have raised sufficient capital to do so:





We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.


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Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, would remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.





Changes in Internal Controls over Financial Reporting





There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.


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PART II


OTHER INFORMATION





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





None.





ITEM 6.  EXHIBITS





The following exhibits are included with this quarterly report.





ExhibitNumber

Description31.1

Certification of Principal Executive and Principal Financial Officer,pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1

Certification of Chief Executive and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*





* This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.


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SIGNATURES





In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





Date:  June 14, 2011
California Gold Corp.By
/s/ James D. DavidsonJames D. DavidsonPresident, Treasurer, PrincipalExecutive Officer, PrincipalFinancial Officer


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