CN Resources Inc. - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - CN Resources Inc.	Financial_Report.xls
EX-32.01 - CN Resources Inc.	ex32-01.htm
EX-31.01 - CN Resources Inc.	ex31-01.htm

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 FEBRUARY 28, 2013
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-54482

CN RESOURCES INC.

(Exact name of registrant as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

255 Duncan Mill Road, Suite 203

Toronto, Ontario

Canada M3B 3H9

(Address of principal executive offices, including zip code)

(416) 510-2991

(Registrant’s 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 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 o NO x

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	o	Accelerated Filer	o
	Non-accelerated Filer	o	Smaller Reporting Company	x

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 26,100,000 as of April 15, 2013.

Table of Contents

TABLE OF CONTENTS

		Page
PART I

Item 1.	Financial Statements	3

	Balance Sheets	3
	Statements of Expenses	4
	Statements of Cash Flows	5
	Notes to the Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	7

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9

Item 4.	Controls and Procedures	9

PART II

Item 1.	Legal Proceedings	10

Item 1A.	Risk Factors	10

Item 2.	Changes in Securities and Use of Proceeds	10

Item 6.	Exhibits	10

Signatures		11

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CN RESOURCES INC.

(A Development Stage Company)

Balance Sheets

(Unaudited)

	February 28, 2013			May 31, 2012


Assets
Current assets
Cash and cash equivalents	$	24,769		$	87,519
Other receivable		13,214			3,097
Note receivable		302,682			292,203
Total current assets	$	340,665			382,819

Total assets	$	340,665		$	382,819


Liabilities and Stockholders' Equity

Liabilities
Current Liabilities
Accounts payable		3,817			4,437
Due to director		38,865			44,499
Total current liabilities	$	42,682		$	48,936

Stockholders' equity
Common stock,100,000,000 of shares authorized with $0.00001par value,26,100,000 issued and outstanding	$	261		$	261
Preferred stock,100,000,000 shares authorized with $0.00001par value, none issued
Additional paid-in capital	$	514,939			514,939
Accumulated deficit during the development stage		(217,217	)		(181,317	)
Other comprehensive Income (loss)		-			-
Total stockholders' equity	$	297,983		$	333,883

Total liabilities and stockholders' equity	$	340,665		$	382,819

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

Table of Contents

CN RESOURCES INC.

(A Development Stage Company)

Statements of Expenses

(Unaudited)

													Inception
	For the Three Months Ended						For the Nine Months Ended						(May 18, 2010)
	February 28			February 29			February 28			February 29			to
	2013			2012			2013			2012			February 28, 2013

Operating expenses
Bank service charge		-			-			6			94			252
Management fee		6,000			6,000			18,000			18,000			42,000
Professional fees		1,600			2,960			7,200			25,618			70,518
General and administrative expenses		11,208			36,105			39,254			60,634			137,762
Total operating expenses		18,808			45,065			64,460			104,346			250,532

Foreign Exchange Gain/Loss		-			-			10,478			-			(5,671	)

Interest income	$	6,018		$	5,932		$	18,082		$	14,926		$	38,986

Net loss for the period	$	(12,790	)	$	(39,133	)	$	(35,900	)	$	(89,420	)	$	(217,217	)

Loss per common share - basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Weighted average common shares outstanding - basic and diluted		26,100,000			26,100,000			26,100,000			26,100,000

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

Table of Contents

CN RESOURCES INC.

(A Development Stage Company)

Statements of Cash Flows

	For the nine			For the nine			Date of inception
	months			months			May 18, 2010
	ended			ended			to
	February 28, 2013			February 29, 2012			February 28, 2013
	(Unaudited)			(Unaudited)			(Unaudited)

Cash Flows From Operating Activities
Net Loss for the period	$	(35,900	)	$	(89,420	)	$	(217,217	)
Adjustments to reconcile net loss to net cash in operating activities
Unrealized gain (loss) on foreign currency		(10,479	)		(5,173)			5,671
Changes in operating assets and liabilities
Accounts payable		(620	)		5,923			3,817
Other receivable		(10,117	)		(3,200	)		(13,214	)
Net cash used in operating activities		(57,116	)		(91,870	)		(220,943	)

Cash Flow From Investing Activities
Loan receivable		0			(303,180	)		(308,353	)
Net cash used in investment activities		0			(303,180	)		(308,353	)

Cash Flows from Financing Activities
Due to Director		(5,634	)		(18,415	)		38,865
Proceeds from common stock issued		-			500,000			515,200
Net cash provided by financing activities		(5,634	)		481,585			554,065



Net increase (decrease) in cash and cash equivalents		(62,750	)		86,535			24,769
Cash and cash equivalents, beginning of the period		87,519			915			-
Cash and cash equivalents, end of the period		24,769			87,450			24,769

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

Table of Contents

CN RESOURCES INC.

(A Development Stage Company)

Notes to the Financial Statements

(Unaudited)

1. ORGANIZATION AND BUSINESS OPERATIONS

CN RESOURCES INC. (“the Company”) was incorporated in the state of Nevada of the United States of America on May 18, 2010. The Company is in the development stage as defined under the Financial Accounting Standards Board codification 915 “Development Stage Entities” and it intends to identify, acquire, explore and develop natural resources properties in the world. The Company has not generated any revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise.

2. BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

3. GOING CONCERN

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses for the hree and nine-months period ended February 28, 2013 of $12,790 (February 29, 2012 – 39,133) and since inception of May 18, 2010 to February 28, resulting in an accumulated deficit of $217,217; further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from director and or private placements of common stock.

4. RELATED PARTY TRANSACTIONS

The Company shares office space with its President and does not separately pay for rent, telephone, internet or reception or services a corporation would normally incur in order to carry on its business. As a result, for the three-month ended February 28, 2013, the Company has accrued management fee of $6,000 (February 29, 2012 - $6,000). For the three-month ended February 28, 2013, the Company also accrued $9,000 (February 29, 2012 - $9,000) for general and administrative expenses payable to the President.

The President loans the company money from time to time on an interest-free due-on-demand basis. As of February 28, 2013, the total amount advanced and still unpaid was $38,865.

5. SUBSEQUENT EVENT

On March 6, 2013, the Corporation borrowed $1,600,000 Canadian Dollars from a private Ontario Corporation. The Convertible Debenture bears an annual interest of 12%, payable monthly in arrears. The Principal amount is required to be paid in full within 5 years, but the Corporation can elect to make a full repayment earlier as long as the debenture holder is notified in writing and the debenture holder does not exercise its conversion right within 30 days after receiving the notice. The principal amount, plus any unpaid interest, is convertible into the Corporation common shares at $0.10 per share at anytime for a period of 5 years at the option of the debenture holder.

Table of Contents

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

This section of this quarterly report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

We are a start-up, exploration stage corporation that does not own any interests in any properties or ore bodies, and has not yet generated or realized any revenues from our business operations.

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated until we obtain an interest in a property, find mineralized material, delineate an ore body, and begin removing and selling minerals.

Plan of Operation

For the three months ended February 28, 2013, we have continued to concentrate our efforts in sourcing, identifying and securing business opportunities with business substance in the resources section of the economy. During the three-month period we have selected and review a number of business opportunities, but have not been able to enter into any contract or commence any commercial operation.

On March 6, 2013, the Corporation issued a convertible debenture in the amount of $1,600,000 Canadian Dollars with a private Ontario Corporation. The Debenture bears an annual interest of 12%, payable monthly in arrears. The Principal amount is required to be paid in full within 5 years, but the Corporation can elect to make a full repayment earlier as long as the debenture holder is notified in writing and the debenture holder does not excise its conversion right within 30 days after receiving the notice. The principal amount, plus any unpaid interest, is convertible into the Corporation common shares at $0.10 per share at anytime for a period of 5 years at the option of the debenture holder.

On March 3, 2013, the Corporation entered into a definitive Joint Venture Agreement with a third party in Alberta, Canada to drill two offset oil wells in the Redwater area of Alberta, Canada. The third party will act as the Operator of the two well drilling program.

The Joint Venture Agreement ensures the Corporation has a 50% working interest in the two offset wells by providing 50% of the costs, and provide a loan for the joint venture partner’s 50% share of the total cost on turnkey basis.

The loan in the amount of $745,000 Canadian dollars bears interest of 10% per annum and both the loan and interest are repayable within 24 months of the rig release date. The Operator has an option to repay the loan and interest in full at anytime.

Until the Loan plus interest is repaid in full, the net revenue interest in the drilling program will be allocated 60% to the Corporation and 40% to the Operator. After the loan and interest is fully repaid, the share of the net revenue will be 50% for the Corporation and 50% to the Operator.

In the event that the well is deemed non productive, the loan principal plus any unpaid interest will be converted into common shares of the Operator at $0.20 per common share or the 30 day average closing price of the operator’s share, whichever is lower.

The entire drilling program fund will be deposited into a Trust Account with Calgary law firm who will act as Trustee and administer the drilling program fund.

Concurrent with the signing of the Joint Venture Agreement, the Corporation also acquired approximately 1,500 acres of Petroleum and Natural Gas rights for $142,475.62 Canadian Dollars, excluding Viking rights, in the 55-20W4M area of Alberta, Canada. The P&NG right s are subject to a freehold royalty with Canadian Natural Resources Limited.

Table of Contents

No Operating History

We have no operations 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 properties we may secure, and possible cost overruns due to price and cost increases in services.

To become profitable and competitive, we will have to conduct research and exploration of the properties we intend to acquire before we start exploration.

We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.

Results of Operations

From Inception on May 18, 2010

Since inception, we obtained a loan from Oliver Xing, our sole director and officer to initiate operations. Cash provided by Oliver Xing from inception on May 18, 2010 to February 28, 2013 was $38,865.

We had a net loss of $12,790 for the three-month ended February 28, 2013 and net loss of $217,217 for the period of inception, May 18, 2010, to February 28, 2013. We utilized office space provided by our president and we concentrated our efforts in raising the funds for our business in the past and actively secure properties of merits.

Liquidity and Capital Resources

At February 28, 2013, we had cash of $24,769 and short-term note receivable of $302,682. Note Receivable yields an interest of 8% per annum and is due on demand.

We are in the start-up stage of operations and have not yet generated any revenues. 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 and possible cost overruns.

We will continue to seek additional financing in order to obtain the capital required to continue implementation of our business plan.

We have no assurance that future financing will be available to us on acceptable terms. If financing is not available to us on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to our existing shareholders.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES.

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are not effective due to limited segregation of duties, lack of independent directors, and no written internal control procedure manual. The Company plans to address the weakness in control as soon as the Company considers that the financial situation allows the Company to spend the limited resources to mitigate the weakness in control.

There were no material changes in our internal control over financial reporting during the quarter ended February 28, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not aware of any pending or threatened litigation against us or our officers and director in their capacity as such.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

There is no change in securities in the three-month period ended February 28, 2013, except as disclosed below.

On January 12, 2011, our Form S-1 registration statement (SEC file no. 333-167804) was declared effective by the SEC. Pursuant to the S-1, we are offering 2,000,000 shares of common stock minimum, 5,000,000 shares maximum at an offering price of $0.10 per share in a direct public offering, without any involvement of underwriters or broker-dealers.

As at November 30, 2011, we have completed the maximum offering of 5,000,000 common stock at $0.10 per share and received $500,000 and closed the public offering.

We plan to use proceeds raised through the sale of the Company’s securities for operating expenses, working capital, and general corporate activities, including the acquisition of mineral properties if an opportunity arises that we believe would justify the expenditure and capital is available to make the acquisition.

ITEM 6. EXHIBITS

Exhibit		Description
31.01		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Table of Contents

SIGNATURE

Pursuant to the requirements 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.

	CN Resources Inc.

Date: April 15, 2013	By:	/s/ Oliver Xing
		Oliver Xing
		President, Principal Executive Officer, Principal Accounting Officer, Principal Financial Officer, Secretary/Treasurer and sole member of the Board of Directors

Table of Contents

CN Resources Inc. - FORM 10-Q - April 15, 2013

Attached files

CN Resources Inc. Reports