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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X]

QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED JULY 31, 2011

 

 

OR

 

 

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 000-52747

 

CHINA FOREST ENERGY CORP.  

(Exact name of registrant as specified in its charter)

 

NEVADA
(State or other jurisdiction of incorporation or organization)

 

#41 Huancheng Road

Xinjian Township

Jinyun County

Zhejiang, P.R. China

 (Address of principal executive offices, including zip code.)

 

011 86 578 388 1262

(telephone number, including area code)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 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,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

Large Accelerated Filer

[  ]

 

Accelerated Filer

[  ]

 

Non-accelerated Filer

[  ]

 

Smaller Reporting Company

[X]

 

(do not check if smaller reporting company)

 

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  

YES [X]  NO [  ]

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 18,081,000 as of September 9, 2011.

 

 

 


 

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

The financial statements of China Forest Energy Corp. (the “Company”), included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company as included in the Company’s Form 10-K for the year ended April 30, 2011.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 


 

 

 

 

 

 

 

PAGE

 

 

BALANCE SHEETS

4

 

 

STATEMENTS OF OPERATIONS

5

 

 

STATEMENTS OF CASH FLOWS

6

 

 

NOTES TO FINANCIAL STATEMENTS

7 – 9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3

 

 

 

China Forest Energy Corp.  

 (An Exploration Stage Company)

Balance Sheets

(Unaudited)

 

 

 

July 31,

2011

 

April 30,

2011

ASSETS

 

 

 

 

Current Assets

 

 

 

 

Cash

$

2,076

$

578

Prepaid expenses

 

-

 

3,500

 

 

 

 

 

Total Assets

$

2,076

$

4,078

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Accounts payable and accrued liabilities

$

7,786

$

1,817

Note payable

 

28,500

 

28,500

Advances from related party

 

21,000

 

21,000

Total Liabilities

 

57,286

 

51,317

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

-

 

-

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

Preferred stock $0.00001 par value, 100,000,000 shares authorized,

none issued and outstanding

 

-

 

-

Common stock, $0.00001 par value, 900,000,000 shares authorized,

18,081,000 shares issued and outstanding

 

181

 

181

Additional paid-in capital

 

177,151

 

174,183

Deficit accumulated during the exploration stage

 

(232,542)

 

(221,603)

Total Stockholders' Deficit

 

(55,210)

 

(47,239)

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

$

2,076

$

4,078

 

 

 

 

 

 

 

 

 

 

 

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

 

4

 

 

 

 

 

China Forest Energy Corp.  

 (An Exploration Stage Company)

Statements of Operations

(Unaudited)

 

 
















 

For the Three Months Ended

July 31,

2011 

For the Three Months Ended

July 31,
2010

January 26,

For the Period

2006

(Inception) to

July 31,

2011

 

 

 

 

 

 

 

REVENUES

$

-

$

-

$

-

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

General and administrative

 

10,221

 

6,986

 

227,674

Impairment of mineral property costs

 

-

 

-

 

3,500

Total operating expenses

 

10,221

 

6,986

 

231,174

 

 

 

 

 

 

          Interest expense

718

-

1,368

                 NET LOSS

$

(10,939)

$

(6,986)

$

(232,542)

 

 

 

 

 

 

LOSS PER COMMON SHARE

 

 

 

 

 

 

Basic and diluted

$

(0.00)

$

(0.00)

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER

OF SHARES OUTSTANDING

 

 

 

 

 

 

Basic and diluted

 

18,081,000

 

18,081,000

 

 

             

 

 

 

 

 

 

 

 

 

 

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

 

5

 

 

 

China Forest Energy Corp.  

 (An Exploration Stage Company)

Statements of Cash Flows

(Unaudited)

 

 

 

For the Three Months Ended

July 31,

2011

 

For the Three Months Ended

July 31,

2010

 

For the Period

January 26,

2006

(Inception) to

July 31,

2011

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

$

(10,939)

$

(6,986)

$

(232,542)

Adjustment to reconcile net loss to net

 

 

 

 

 

 

cash provided by (used in) for operating activities:

 

 

 

 

 

 

Impairment of mineral property costs

 

-

 

-

 

3,500

Donated services

 

1,500

 

1,500

 

33,000

Donated rent

 

750

750

 

16,500

     Imputed interest

718

-

1,368

Changes in operating assets and liabilities

 

 

 

 

 

 

Prepaid expenses

 

-

 

(7,000)

 

(3,500)

Refund of prepaid expenses

 

3,500

 

-

 

3,500

Accounts payable and accrued liabilities

 

5,969

 

3,938

 

7,786

Net cash provided by (used in) operating activities

 

1,498

 

(7,798)

 

(170,388)

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Mineral property costs

 

-

 

-

 

(3,500)

Net cash used in investing activities

 

-

 

-

 

(3,500)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Advances from related party

 

-

 

7,000

 

46,554

Proceeds from note payable

 

-

 

-

 

28,500

Proceeds from issuance of common stock

 

-

 

-

 

100,910

Net cash provided by financing activities

 

-

 

7,000

 

175,964

 

 

 

 

 

Net increase (decrease) in cash

 

1,498

 

(798)

 

2,076

 

 

 

 

 

 

 

Cash, beginning of period

 

578

 

1,982

 

-

 

 

 

 

 

 

 

Cash, end of period

$

2,076

$

1,184

$

2,076

 

Supplemental information:

 

 

 

 

 

 

Interest paid

$

-

$

-

$

-

Income taxes paid

$

-

$

-

$

-

Non-cash investing and financing activity:

Capital contribution of shareholder loan

$

-

$

-

$

22,554

 

      

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

 

6

 

 

 

China Forest Energy Corp.  

(An Exploration Stage Company)

Notes to Financial Statements

(Unaudited)

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

China Forest Energy Corp. (the “Company”) was incorporated in the State of Nevada on January 26, 2006. The Company is an Exploration Stage Company, as defined by Accounting Standards Codification (“ASC”) 915. The Company’s principal business is the acquisition, exploration and development of mineral properties.

 

On December 16, 2010, the Company filed articles of merger with its wholly-owned subsidiary to change the Company’s name to China Forest Energy Corp. and filed a certificate of change with the Nevada Secretary of State to give effect to a forward split of the Company’s authorized and issued and outstanding shares of common stock on a nine (9) new for one (1) old basis. Upon effect of the forward stock split, the authorized capital increased from 100,000,000 to 900,000,000 shares of common stock and, correspondingly, the issued and outstanding increased from 2,009,000 to 18,081,000 shares of common stock, with a par value of $0.00001. The Company’s preferred stock was unaffected as a result of the forward split. The Company’s financial statements have been retroactively restated to incorporate the effect of the forward split.

 

On January 12, 2011, the Company entered into share exchange agreement with Zhejiang Forest Bamboo Tec Co., Ltd., a People’s Republic of China corporation, and Forest Energy Co., Ltd., a British Virgin Islands corporation. Forest Energy Co., Ltd. is the registered and beneficial owner of all of the issued and outstanding common shares in the capital of Sinoport Enterprises Limited, a British Virgin Islands corporation (“Sinoport”); Sinoport is the sole owner of all share capital of USCNHK Group Limited, a Hong Kong corporation, (“USCNHK”), and USCNHK is the owner of 95%, or 76,000,000 shares, of the share capital of Zhejiang Forest Bamboo Tec Co., Ltd. The Company has agreed to issue 15,919,000 common shares to the Forest Energy Co., Ltd.’s Shareholder as consideration for the purchase of 50,000 common shares of Zhejiang Forest Bamboo Tec Co., Ltd. Upon closing of the share exchange, Yongfu Zhu, one of the Company’s current officers and directors, will cancel 9,000,000 shares of the Company’s common stock held in his name and the Company will have no more than 25,000,000 shares of common stock issued and outstanding. As of September 7, 2011, this share exchange agreement has not been closed.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

These 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 April 30.

 

Interim Financial Statements

 

The interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended April 30, 2011, included in the Company’s Annual Report on Form 10-K filed on August 4, 2011 with the SEC. The financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position at July 31, 2011 and at April 30, 2011, and the results of its operations for the three months ended July 31, 2011 and 2010 and cash flows for the three months ended July 31, 2011 and 2010. The results of operations for the three months ended July 31, 2011 are not necessarily indicative of the results to be expected for future quarters or the full year.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to donated expenses and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent

 

 

7

 

 

 

China Forest Energy Corp.  

(An Exploration Stage Company)

Notes to Financial Statements

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Earnings (Loss) Per Share

 

Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method for options and warrants and the if-converted method for convertible preferred stock and convertible debt. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

 

Foreign Currency Translation

 

The Company’s functional and reporting currency is the United States dollar. Occasional transactions may occur in a foreign currency. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

 

Subsequent Events

 

The Company has evaluated subsequent events through the filing date of this Form 10-Q and has determined that there were no subsequent events to recognize or disclose in these financial statements.

 

Recent Accounting Pronouncements

 

The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant effect on its financial position or results of operations.

 

8

 

 

 

China Forest Energy Corp.

(An Exploration Stage Company)

Notes to Financial Statements

(Unaudited)

 

NOTE 3 – GOING CONCERN

 

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. Since inception, the Company has not generated revenues and has not paid any dividends and is unlikely to either pay dividends or generate revenues in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing, the Company’s success in acquiring interests in properties that have economically recoverable reserves, and the attainment of profitable operations. As at July 31, 2011, the Company has a working capital deficit, generated no  revenues since inception, and has an accumulated deficit totaling $232,542 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

As of July 31, 2011 and April 30, 2011, the Company was indebted to a current director, and current CFO, Treasurer and Secretary of the Company in the amount of $21,000 and $21,000, respectively, representing cash advances and expenses paid on behalf of the Company. The balances consist of advances that are non-interest bearing, unsecured and due on demand.

 

During the three months ended July 31, 2011 and 2010, the Company recognized $750 and $750, respectively, for donated rent and $1,500 and $1,500, respectively, for donated services. These amounts were charged to operations and recorded as additional paid-in capital.

 

 

NOTE 5 – NOTES PAYABLE

 

As of July 31, 2011 and April 30, 2011, the Company had non-interest bearing loans totaling $28,500. These loans are unsecured and due on demand. During the three months ended July 31, 2011, the Company recorded imputed interest in the amount of $718 on these non-interest bearing loans and recorded as additional paid-in capital.

 

 

 

 

 

 

 

 

 

9

 

 

 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

 

As used in this current report and unless otherwise indicated, the terms "we", "us", "our" and "our company" mean China Forest Energy Corp., unless otherwise stated.

 

General Overview

 

We were incorporated in Nevada on January 26, 2006 under the name Henix Resources, Inc. On December 16, 2010, we changed our name to China Forest Energy Corp. by way of a merger with our wholly-owned subsidiary China Forest Energy Corp. which was formed for the sole purpose of the change of name. In addition to our change of name, we effected a nine (9) for one (1) forward split of our authorized and issued and outstanding common shares. Our preferred shares were not affected by the stock split.

 

Our principal business address is #41 Huancheng Road, Xinjian Township, Jinyun County, Zhejian, P.R. China. Our telephone number is 011 86 578 388 1262.

 

Current Business

 

We are an exploration stage company in the business of the acquisition and exploration of mineral properties. As at the date of this annual report, we do not own or have any rights to any mineral property.

 

On December 16, 2010, we filed articles of merger with our wholly-owned subsidiary to change our name to China Forest Energy Corp. and filed a certificate of change with the Nevada Secretary of State to give effect to a forward split of our authorized and issued and outstanding shares of common stock on a 9 new for 1 old basis. Upon effect of the forward stock split, our authorized capital increased from 100,000,000 to 900,000,000 shares of common stock and, correspondingly, our issued and outstanding increased from 2,009,000 to 18,081,000 shares of common stock, with a par value of $0.00001. Our preferred stock was unaffected as a result of the forward split.

 

On January 12, 2011, we entered into share exchange agreement with Zhejiang Forest Bamboo Tec Co., Ltd. a People’s Republic of China corporation and Forest Energy Co., Ltd., a British Virgin Islands corporation. Forest Energy Co., Ltd. is the registered and beneficial owner of all of the issued and outstanding common shares in the capital of Sinoport Enterprises Limited, a British Virgin Islands corporation. Sinoport is the sole owner of all share capital of USCNHK Group Limited, a Hong Kong corporation and USCNHK is the owner of 95%, or 76,000,000 shares, of the share capital of Zhejiang Forest Bamboo Tec Co., Ltd. Our company has agreed to issue 15,919,000 common shares to the Forest Energy Co., Ltd.’s shareholder as consideration for the purchase of 50,000 common shares of Zhejiang Forest Bamboo Tec Co., Ltd. Upon closing of the share exchange, Yongfu Zhu, one of our current officers and directors, will cancel 9,000,000 shares of our common stock held in his name and we will have no more than 25,000,000 shares of common stock issued and outstanding. As of the date of this quarterly report, the share exchange agreement has not been closed.

 

If we are not able to close the share exchange agreement, we will continue with our original plan of acquisition and exploration of mineral properties. This business is further described below.

 

10


 

Plan of Operation

 

We are a start-up, exploration-stage mining corporation and have not yet generated or realized any revenues from our business operations. We raised $100,900 from our initial public offering and issued 9,080,100 common shares at $0.01 per share on November 16, 2006. We believe that further financing (either debt or equity financing) is required for us to acquire, explore and develop mineral properties.

 

Our exploration target is to find properties containing gold. Our success depends upon finding mineralized material from such acquired properties. This includes a determination by a consultant if the property contains reserves. Although we successfully raised capital in 2006, we must raise additional capital to acquire other mineral properties for further exploration.

 

We intend to acquire a property and prospect for gold in China. Our target is mineralized material. Our success depends upon finding mineralized material. No acquisition has materialized as of this report. Mineralized material is a mineralized body which has been delineated by appropriate spaced drilling or underground sampling to support sufficient tonnage and average grade of metals to justify removal. If we do not find mineralized material or we cannot remove mineralized material, either because we do not have the money to do it or because it is not economically feasible to do it, we may cease operations.

 

In addition, we may not have enough capital to complete the exploration of our property. If it turns out that we have not raised enough capital to complete our exploration program, we will try to raise additional funds from a public offering, a private placement or loans. At the present time, we have not made any plans to raise additional capital and there is no assurance that we would be able to raise additional capital in the future. If we need additional capital and cannot raise it, we may have to suspend or cease operations.

 

After we acquire a property, we must conduct exploration to determine what amount of minerals, if any, exist on our properties and if any minerals which are found can be economically extracted and profitably processed. There is no assurance that we will ever acquire or option a property.

 

                We intend to seek out raw undeveloped property by retaining the services of a professional mining geologist to be selected. As of the date of this registration statement, we have not selected a geologist. Our properties will in all likelihood be undeveloped raw land. That is because raw undeveloped land is much cheaper than to try to acquire an existing developed property. A developed property is one with a defined ore body.

 

Thereafter, exploration will be initiated.

 

We do not know if we will find mineralized material.

 

Our exploration program is designed to economically explore any property we may obtain. Again, at the present time we do not own any interest in any properties.

 

We do not claim to have any minerals or reserves whatsoever.

 

We intend to implement an exploration program which consists of rock sampling. Rock sampling is the collection of a series of small chips over a measured distance, which is then submitted for a chemical analysis, usually to determine the metallic content over the sampled interval, a pre-determined grid laid out on the property. If the rock sampling is successful, then further work by way of a controlled source magneto telluric survey may be in order. This is an electromagnetic method used to map the variation of the Earth's resistivity (the resistance of the earth to conduct electricity) by measuring naturally occurring electric and magnetic fields at the Earth's surface. This process gives an indication of where drilling locations may be warranted. If drilling were to be indicated, then our first choice would be reverse circulation drilling. This is a less expensive form of drilling that does not allow for the recovery of a tube or core of rock. The material is brought up from depth as a series of small chips of rock that are then bagged and sent in for analysis. This is a quicker and cheaper method of drilling, but does not necessarily give one as much information about the underlying rocks. If warranted, core sampling would follow this stage. Core sampling is the process of drilling holes to a depth of up to 1,400 feet in order to extract samples of earth. Our mining engineer will determine where drilling will occur on the property. As of the date of this quarterly report, we have not retained the services of any mining engineers, and would not entertain doing so until an appropriate property has been secured. The drill samples will be tested to determine if mineralized material is located on the property. Based upon the tests of the drill samples, we will determine if we will terminate operations; proceed with additional exploration of the property; or develop the property. Our current financial condition is designed to only fund the costs of rock sampling and testing.

 

 

11

 

 

 

Our plan of operation and costs are as follows:

 

Item or Activity

 

Cost

Property Acquisition

$

10,000

Consulting Service

$

5,000

Surface Sampling & Geochemical Analysis

$

15,000

Mobilization/Demobilization Contractor

$

12,000

Dozer, Grader, Backhoe, ATV

$

12,000

Reclamation/Bond

$

3,000

Field Supplies

$

300

Travel Expenses

$

3,000

 

We will allocate $10,000 for the securing of one property in China. We have not selected a property at this time. We intend to secure a property within the next twelve months, the cost of which should not exceed $10,000.

 

Exploration expenditures consist of fees to be paid for consulting services connected with exploration, the cost of rock sampling (the collection of a series of small chips over a measured distance, which is then submitted for a chemical analysis, usually to determine the metallic content over the sampled interval, a pre-determined location(s) on the property), and cost of analyzing these samples. Since we do not own an interest in any properties, we have not begun exploration. Consulting fees will not be paid except on an as needed basis and should not exceed $5,000 for the next 12 months.

 

We cannot be more specific about the application of proceeds for exploration, because we do not know what we will find.

 

We will allocate a range of money for exploration. That is because we do not know how much will ultimately be needed for exploration. If our initial exploration proves positive results, we will expand the exploration activities to include reverse circulation drilling. This is a less expensive form of drilling that does not allow for the recovery of a tube or core of rock. The material is brought up from depth as a series of small chips of rock that are then bagged and sent in for analysis. This is a quicker and cheaper method of drilling, but does not necessarily give one as much information about the underlying rocks. If warranted, core drilling would follow this stage.

 

If we discover significant quantities of mineralized material, we will begin technical and economic feasibility studies to determine if we have reserves. Only if we have reserves will we consider developing the property.

 

Once we have secured a property, and if through early stage exploration we find mineralized material and it is feasible to expand the exploration program, we will attempt to raise additional money through a subsequent private placement, public offering or through loans. If we do not raise all of the money we need, we will have to find alternative sources of funding, like a public offering, a private placement of securities, or loans from our officers or others.

 

We have discussed this matter with our officer and director, however, our officer and director is unwilling to make any commitment to loan us any significant amounts of money at this time. At the present time, we have not made any arrangements to raise additional cash. If we need additional cash and can't raise it, we will either have to suspend operations until we do raise the cash, or cease operations entirely.

 

We will be conducting research in the form of exploration of the property we intend to secure. We are not going to buy or sell any plant or significant equipment during the next twelve months. We will not buy any equipment until we have located a body of minerals and we have determined they are economical to extract from the land.

 

The breakdown of estimated times and dollars was made in consultation with mining engineers in China. 

 

We do not intend to interest other companies in the property if we find mineralized materials. We intend to try to develop the reserves ourselves.

 

If we are unable to complete exploration because we do not have enough money, we will cease operations until we raise more money. If we cannot or do not raise more money, we will cease operations. If we cease operations, we don't know what we will do and we don't have any plans to do anything else.

 

 

12


 

 

                We cannot provide a more detailed discussion of how our exploration program will work and what we expect will be our likelihood of success. That is because we do not own an interest in a property. We may or may not find any mineralized material. We hope we do, but it is impossible to predict the likelihood of such an event.

 

We do not have a projection of future revenues for our company because we have not located an ore body yet and as such it is impossible to project future revenues. 

 

Limited Operating History

 

                There is limited historical financial information about us upon which to base an evaluation of our performance. We are an exploration-stage corporation and have not generated any revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of our properties, and possible cost overruns due to price and cost increases in services.

 

                To become profitable and competitive, we must find and acquire mineral properties and conduct more comprehensive exploration of such properties before we start development and production of any minerals we may find.

 

Results of Operations

 

We have not generated any revenue since inception and are dependent upon obtaining financing to pursue our business activities. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

 

Our operating results for the three month periods ended July 31, 2011 and 2010 and the changes between those periods for the respective items are summarized as follows:

 

 

 

Three Month Period Ended
July 31, 2011

 

Three Month Period Ended
July 31, 2010

 

Period from

January 26, 2006 (Inception) to
July 31, 2011

Revenue

$

Nil

$

Nil

$

Nil

General and Administrative

$

10,221

$

6,986

$

227,674

Impairment of mineral property costs

$

Nil

$

Nil

$

3,500

Net loss

$

(10,939)

$

(6,986)

$

(232,542)

 

For the three months ended July 31, 2011 and 2010, our company reported no revenues. For the three months ended July 31, 2011, total expenses were $10,939, a $3,953, or 57%, increase from the $6,986 reported for the same period in 2010. Approximately $3,250 of this increase is attributable to an increase in professional fees and $700 of this increase is attributable to an increase in imputed interest.

 

Total expenses reported for the three months ended July 31, 2011 and 2010 primarily represent expenses incurred for general administration, rent, filing fees, professional services, and bank service charges. Shareholders of our company have been making advances to our company for the payment of operating expenses; they have agreed to continue providing capital for ongoing operations, until such time our company can generate revenues from commercial operations or increase capital through various financing arrangements.

 

Liquidity and Capital Resources  

 

Working Capital

 

  

At
July 31, 2011
($)

At
April 30, 2011
($)

Current Assets

2,076

4,078

Current Liabilities

57,286

51,317

Working Capital/(Deficit)

(55,210)

(47,239)

 

 

 

13

 

 

 

Cash Flows

 

Three Months Ended

July 31, 2011

($)

Three Months Ended

July 31, 2010

($)

Period from Inception (January 26, 2006) to

July 31, 2011
($)

Cash Flows provided by/(used in) Operating Activities

1,498

(7,798)

(170,388)

Cash Flows provided by/(used in) Investing Activities

Nil

Nil

(3,500)

Cash Flows provided by/(used in) Financing Activities

Nil

7,000

175,964

Net Increase (Decrease) in Cash During Period

1,498

(798)

2,076

 

                To meet our initial need for cash, we raised $100,900 from our public offering. As of July 31, 2011, we have $2,076 in cash available.  If we acquire a property, find mineralized material, and it is economically feasible to remove the mineralized material, we will attempt to raise additional money through a subsequent private placement, public offering or through loans.

                                            

                As of the date of this report, we have yet to generate any revenues.

 

                Since inception and up to July 31, 2011, we have issued 18,081,000 shares (adjusted for split) of our common stock and received $100,910.

 

                As of July 31, 2011, our total current assets were $2,076 and our total current liabilities were $57,286 for a working capital deficit of $55,210.

 

The financial statements have been prepared on a going concern basis, which implies our company will continue to realize its assets and discharge its liabilities in the normal course of business. Since inception, our company has not generated revenues and has not paid any dividends and is unlikely to either pay dividends or generate revenues in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from its shareholders, the ability of our company to obtain necessary equity financing, our company’s success in acquiring interests in properties that have economically recoverable reserves, and the attainment of profitable operations. As at July 31, 2011, our company has not generated revenues and has accumulated losses totaling $232,542 since inception. These factors raise substantial doubt regarding our company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should our company be unable to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our investors.

 

Critical Accounting Policies

 

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America.  Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.  These estimates and assumptions are affected by management’s application of accounting policies.  We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

14

 

 

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our company regularly evaluates estimates and assumptions related to donated expenses and deferred income tax asset valuation allowances. Our company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by Our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Earnings (Loss) Per Share

 

Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method for options and warrants and the if-converted method for convertible preferred stock and convertible debt. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

 

Cash and Cash Equivalents

 

Our company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

 

Foreign Currency Translation

 

Our company’s functional and reporting currency is the United States dollar. Occasional transactions may occur in a foreign currency. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

 

Item 3.  Quantitative and Qualitative Disclosure About Market Risks

 

                As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

 

 

 

15

 

 

 

Item 4.  Controls and Procedures

 

Management’s Report on Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.

 

As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended July 31, 2011 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

              We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

Item 1A.  Risk Factors

 

                As a “small reporting company”, we are not required to provide the information required by this Item.

 

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

 

                 None. 

 

Item 3.  Defaults Upon Senior Securities

 

               None.

 

Item 4.  [Removed and Reserved]

 

               None.

 

Item 5.  Other Information

 

              None.

 

16

 

 

 

Item 6.  Exhibits

 

Exhibit No.

Description

(3)  

Articles of Incorporation and Bylaws  

3.1

Articles of Incorporation (incorporated by reference to our Registration Statement on Form SB-2 filed on August 17, 2006)

3.2

Bylaws (incorporated by reference to our Registration Statement on Form SB-2 filed on August 17, 2006)

3.3

Articles of Merger (incorporated by reference to our Current Report on Form 8-K filed on December 23, 2010)

3.4

Certificate of Change (incorporated by reference to our Current Report on Form 8- K filed on December 23, 2010)

(10)  

Material Contracts  

10.1

Share Exchange Agreement dated January 12, 2011 (incorporated by reference to our Current Report on Form 8-K filed on January 18, 2011)

(14)  

Code of Ethics  

14.1

Code of Ethics (incorporated by reference to our Annual Report on Form 10-KSB filed on July 30, 2007)

(31)  

Rule 13a-14(a)/15d-14(a) Certifications  

31.1*

Section 302 Certification under Sarbanes-Oxley Act of 2002 of Principal Executive Officer.

31.2*

Section 302 Certification under Sarbanes-Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer.

(32)  

Section 1350 Certifications  

32.1*

Section 906 Certifications under Sarbanes-Oxley Act of 2002 of Principal Executive Officer.

32.2*

Section 906 Certifications under Sarbanes-Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer.

101*

Interactive Data Files

101 INS - XBRL Instance Document

101 SCH - XBRL Taxonomy Schema

101 CAL - XBRL Taxonomy Calculation Linkbase

101 DEF - XBRL Taxonomy Definition Linkbase

101 LAB - XBRL Taxonomy Label Linkbase

101 PRE - XBRL Taxonomy Presentation Linkbase

 

* Filed herewith.

 

 

 

 

 

 

 

 

17

 

 

 

SIGNATURES

 

                Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CHINA FOREST ENERGY CORP.

(Registrant)

 

 

 

Date: September 14, 2011

By:

/s/ Zhengyu Wang

 

 

Zhengyu Wang

 

 

President, Chief Executive Officer, and Director

(Principal Executive Officer)

 

 

 

 

 

 

Date: September 14, 2011

By:

/s/ Yongfu Zhu

 

 

Yongfu Zhu

 

 

Chief Financial Officer, Treasurer, Secretary and Director

 

 

(Principal Financial Officer and Principal Accounting Officer)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18