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EXCEL - IDEA: XBRL DOCUMENT - CN Resources Inc. | Financial_Report.xls |
EX-31.01 - CN Resources Inc. | ex31-01.htm |
EX-32.01 - CN Resources Inc. | ex32-01.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2013
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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
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Accelerated Filer
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Non-accelerated Filer
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Smaller Reporting Company
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x
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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 September 20, 2013.
TABLE OF CONTENTS
Page
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PART I
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Item 1.
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3
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3
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4
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5
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6
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Item 2.
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8
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Item 3.
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9
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Item 4.
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9
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PART II
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Item 1.
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10
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Item 1A.
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10
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Item 2.
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10
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Item 6.
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10
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11
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CN RESOURCES INC.
(A development Stage Company)
Balance Sheets
(Unaudited)
August 31, 2013
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May 31, 2013
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Assets
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Current assets
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Cash and cash equivalents
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$ | 18,419 | $ | 25,468 | ||||
Other receivable
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288 | 288 | ||||||
Total current assets | 18,707 | 25,756 | ||||||
Oil and gas properties - unproved
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419,515 | 419,515 | ||||||
Total assets
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$ | 438,222 | $ | 445,271 | ||||
Liabilities and Stockholders' Equity | ||||||||
Liabilities
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Current Liabilities
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Accounts payable
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$ | 11,579 | $ | 13,180 | ||||
Due to director
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202,869 | 190,718 | ||||||
Total current liabilities | 214,448 | 203,898 | ||||||
Stockholders' equity | ||||||||
Common stock, 100,000,000 of shares authorized
with $0.00001 par value, 26,100,000 issued and |
261 | 261 | ||||||
Preferred stock, 100,000,000 shares authorized
with $0.00001 par value, none issued |
- | - | ||||||
Additional paid-in capital
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514,939 | 514,939 | ||||||
Accumulated deficit during the development stage
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(291,426 | ) | (273,827 | ) | ||||
Total stockholders' equity | 223,774 | 241,373 | ||||||
Total liabilities and stockholders' equity | $ | 438,222 | $ | 445,271 |
The accompanying notes are an integral part of these unaudited interim financial statements.
CN RESOURCES INC.
(A Development Stage Company)
Statements of Expenses
(Unaudited)
For the Three Months Ended
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Inception
(May 18, 2010) |
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August 31
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August 31
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to
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2013
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2012
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August 31, 2013
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Operating expenses
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Advertising and promotion
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$ | - | $ | - | $ | 14,129 | ||||||
Bad debt expenses
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- | - | 11,970 | |||||||||
Bank service charge
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49 | 6 | 301 | |||||||||
Management fee
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6,000 | 6,000 | 54,000 | |||||||||
Professional fees
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2,000 | 4,000 | 79,271 | |||||||||
Exchange loss (gain)
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- | (10,479 | ) | 16,150 | ||||||||
General and administrative expenses
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9,550 | 17,085 | 154,560 | |||||||||
Total operating expenses
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17,599 | 16,612 | 330,381 | |||||||||
Total expenses
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(17,599 | ) | (16,612 | ) | (330,381 | ) | ||||||
Interest income
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- | 5,988 | 38,955 | |||||||||
Net loss for the period
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$ | (17,599 | ) | $ | (10,624 | ) | $ | (291,426 | ) | |||
Loss per common share - basic and diluted
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$ | (0.00 | ) | $ | (0.00 | ) | n/a | |||||
Weighted average common shares
outstanding - basic and diluted |
26,100,000 | 26,100,000 | n/a |
The accompanying notes are integral part of these unaudited interim financial statements.
CN RESOURCES INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
Inception
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For the three Months
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For the three Months
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(May 18, 2010)
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ended
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ended
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to
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August 31, 2013
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August 31, 2012
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August 31, 2013
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Cash Flows From Operating Activities | ||||||||||||
Net Loss for the period
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$ | (17,599 | ) | $ | (10,624 | ) | $ | (291,426 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities
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Foreign exchange (gain)/loss
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- | (10,479 | ) | 16,150 | ||||||||
Bad debt expense
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- | - | 11,970 | |||||||||
Changes in operating assets and liabilities
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Other receivable
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- | (67 | ) | (12,258 | ) | |||||||
Accounts payable
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(1,601 | ) | 1,148 | 10,892 | ||||||||
Net cash used in operating activities
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(19,200 | ) | (20,022 | ) | (264,672 | ) | ||||||
Cash Flows from Investing Activities | ||||||||||||
Cash invested in note receivable
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- | - | (308,353 | ) | ||||||||
Net cash used in investing activities
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- | - | (308,353 | ) | ||||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from Director advances
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19,151 | - | 147,744 | |||||||||
Payments to Director for advances
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(7,000 | ) | (14,772 | ) | (71,500 | ) | ||||||
Proceeds from common stock issued
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- | - | 515,200 | |||||||||
Net cash (used in) provided by financing activities
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12,151 | (14,772 | ) | 591,444 | ||||||||
Net increase (decrease) in cash and cash equivalents | (7,049 | ) | (34,794 | ) | 18,419 | |||||||
Cash and cash equivalents, beginning of the period | 25,468 | 87,519 | - | |||||||||
Cash and cash equivalents, end of the period | $ | 18,419 | $ | 52,725 | $ | 18,419 | ||||||
Non-cash transactions: | ||||||||||||
Exchange of note receivable for unproved oil and gas property | $ | - | $ | - | $ | 292,890 | ||||||
Due to Director for investment in oil and gas property | - | - | 126,625 |
The accompanying notes are an integral part of these unaudited interim financial statements.
CN RESOURCES INC.
(A Development Stage Company)
Notes to the Unaudited Financial Statements
August 31, 2013
1. ORGANIZATION BUSINESS OPERATIONS AND GOING CONCERN
CN RESOURCES INC. (“the Company”) was incorporated in 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 Alberta, Canada. The Company has not generated any revenue to date except interest income and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise.
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 three months ended August 31, 2013 of $17,599 and has an accumulated deficit of $291,426 since inception; 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.
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. OIL AND GAS PROPERTIES
On March 1, 2013, the Company entered into an agreement with RedWater Energy Corporation to form a joint venture to drill in the Redwater area in Alberta, Canada. The Company agreed to pay 50% of the drilling cost to acquire a 50% working interest in the unproved property. The aggregate cost of the well is estimated to be $672,787. As of August 31, 2013, the Company exchanged the $292,890 note receivable on the balance sheet at May 31, 2012 for the working interest in the well. In addition, the President of the Company invested $126,625 on behalf of the Company in the form of a related party payable. The payable is non-interest bearing and due on demand. Included in the total $419,515 paid to RedWater Energy Corporation was $71,237 for the Company’s portion of the land acquisition cost.
As of September 18, 2013, the well is currently being completed and whether the well has commercial production potential is not known, thus, the Company has accounted for the cost of this oil and gas property as unproved properties.
4. COMMITMENTS
On March 1, 2013, the Company entered into an agreement with RedWater Energy Corporation (see note 3). The Company agreed to loan RedWater Energy Corporation the other 50% of the drilling cost in the form of a note. The loan will bear interest at 10% per annum payable quarterly, is redeemable at any time without penalty, and shall be secured by a general security agreement of RedWater Energy Corporation in favour of the Company. The Company will receive an additional 10% working interest of the property until the loan is repaid in full. As of August 31, 2013, the Company has not funded this note.
In addition, the Company will undertake additional estimated completion costs of $75,980, that is payable once the Drilling Program is successful. As of September 18, 2013, the well is unproved, thus, it is not necessary to accrue for these additional cost.
5. DUE TO DIRECTOR
The director loans the company money from time to time on an interest-free due-on-demand basis. As of August 31, 2013, the total amount advanced and unpaid is $202,869 .
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
This section of this annual 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.
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
We plan to explore and develop light oil and gas opportunities in Alberta, Canada. We have initiated joint venture discussions with other company to develop oil well in the Alberta, Canada.
We have commenced joint venture operation in drilling one oil well in Alberta, Canada and currently is evaluating the well and intend to further complete the well, if successful, we will equip the well and bring the well into production.
Our plan is to jointly develop oil wells with existing players in Alberta, Canada. The joint venture candidates we are seeking must have established oil reserve or development land with drilling locations identified, studied and ready to drill.
We then have to negotiate a reasonably favorable term with the joint venture partner before progressing to actual drilling the well.
We will consider our financial resources before entering into any joint venture arrangements.
We will engage technical expert in due diligence work before finalizing our joint venture arrangement. Once we have determined the development should proceed, 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 officers and director. Our director has agreed to loan us money if we should need it, provided the amount needed is not unreasonable in light of all of the facts and circumstances at that time. At the present time, we have not made any arrangements to raise additional cash. If we need additional cash and cannot raise it we will either have to suspend operations until we do raise the cash, or cease operations entirely.
We are not going to buy significant equipment during the next twelve months. We will not buy any equipment until we have generated revenue from oil well we drilled.
If we are unable to complete any phase of our well development program because we don’t have enough money, we will cease operations until we raise more money. If we 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. In the event we fail in our exploration activity, we will cease operations and not sell the company. We do not intend to hire additional employees at this time. Any work that would be conducted on a property that we may secure will be conducted by unaffiliated independent contractors that we will hire. The independent contractors will be responsible for surveying, geology, engineering, exploration, and excavation. The geologists will evaluate the information derived from the exploration and excavation and the engineers will advise us on the economic feasibility of removing the mineralized material.
No Operating History
We have no operations upon which to base an evaluation of our performance. We are an early stage development corporation and have not generated any revenues from operations except that we generated interest income. 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 due diligence work on the properties we intend to acquire before we start development program. We are actively sourcing and evaluating various oil and gas properties, but there is no assurance we will be able to complete an acquisition of mineral property of merit and successfully producing oil and generate revenue.
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 17, 2010 to August 31, 2013
Since inception, we obtained a loan from Oliver Xing, our sole director and one of our officers to initiate operations. Cash provided by financing activities from inception on May 17, 2010 to August 31, 2013 is $591,444 which consists of Director advances of $147,744 and repayments of $71,500 in addition to $515,200 from common stock issuance.
Liquidity and Capital Resources
On August 12, 2011, we closed our direct public offering without involvement of brokers or dealers and sold 5,000,000 shares of common stock in our public offering and raised $500,000.
As of August 31, 2013, we have cash of $18,419 (August 31, 2012 - $52,725) and our total assets were $438,222 (August 31, 2012 - $358,571) which consisted of unproved oil and gas assets of $419,515 and our total liabilities were $214,448 (August 31, 2012 - $35,312).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act 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 August 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 August 31, 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.
There are no additional securities issued for the three months period ended August 31, 2013.
ITEM 6. EXHIBITS
Exhibit
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Description
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31.01
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32.01
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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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.
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Date: September 20, 2013
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By:
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/s/ Oliver Xing
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Oliver Xing
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President, Principal Executive Officer,
Principal Accounting Officer,
Principal Financial Officer,
Secretary/Treasurer and sole member of the Board of Directors
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