Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2015 |
OR
☐ | 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: 56,100,000 as of January 19, 2016
Page | ||
PART I | ||
Item 1. | Financial Statements | 3 |
Consolidated Balance Sheets (unaudited) | 3 | |
Consolidated Statements of Operations and Comprehensive Loss (unaudited) | 4 | |
Consolidated Statements of Cash Flows (unaudited) | 5 | |
Notes to the Consolidated Financial Statements (unaudited) | 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 | 8 |
Item 4. | Controls and Procedures | 8 |
PART II | ||
Item 1. | Legal Proceedings | 8 |
Item 1A. | Risk Factors | 8 |
Item 2. | Changes in Securities and Use of Proceeds | 8 |
Item 6. | Exhibits | 8 |
Signatures | 9 |
2
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets
(Unaudited)
November 30, 2015 |
May 31, 2015 |
|||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 4,895,940 | $ | 226,786 | ||||
Accounts receivable | 32,676 | 30,229 | ||||||
Note receivable | - | 5,343,704 | ||||||
Other receivable | 1,658 | 7,301 | ||||||
Total current assets | $ | 4,930,274 | $ | 5,608,020 | ||||
Total assets | $ | 4,930,274 | $ | 5,608,020 | ||||
Liabilities and Stockholders' Equity | ||||||||
Liabilities | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 21,843 | $ | 16,536 | ||||
Due to director | 12,151 | 367,472 | ||||||
Total current liabilities | 33,994 | 384,008 | ||||||
Asset retirement obligation | 6,736 | 6,190 | ||||||
Total liabilities | 40,730 | 390,198 | ||||||
Stockholders' equity | ||||||||
Common stock, 100,000,000 of shares authorized | ||||||||
with $0.00001 par value, 56,100,000 issued and | ||||||||
outstanding | 561 | 561 | ||||||
Preferred stock, 100,000,000 shares authorized | ||||||||
with $0.00001 par value, none issued | - | - | ||||||
Additional paid-in capital | 6,514,639 | 6,514,639 | ||||||
Accumulated Other Comprehensive Loss | (865,172 | ) | (559,076 | ) | ||||
Accumulated deficits | (760,484 | ) | (738,302 | ) | ||||
Total stockholders' equity | 4,889,544 | 5,217,822 | ||||||
Total liabilities and stockholders' equity | $ | 4,930,274 | $ | 5,608,020 |
The accompanying notes are an integral part of these unaudited financial statements.
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CN RESOURCES INC.
Consolidated Statements of Expenses
(Unaudited)
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
November 30, | November 30, | November 30, | November 30, | |||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue | ||||||||||||||||
Revenue (net of royalty) | $ | 19,898 | $ | 49,200 | $ | 43,952 | $ | 139,857 | ||||||||
Operating expenses | ||||||||||||||||
Accretion expenses | 273 | 156 | 546 | 386 | ||||||||||||
Bank service charge | 49 | 92 | 103 | 97 | ||||||||||||
Management fee | 6,000 | 6,000 | 12,000 | 12,000 | ||||||||||||
Production and operating expenses | 7,687 | 5,345 | 11,328 | 12,879 | ||||||||||||
Professional fees | 10,510 | 15,700 | 17,510 | 20,060 | ||||||||||||
Depreciation and depletion expense | - | 8,511 | - | 43,580 | ||||||||||||
General and administrative expenses | 9,000 | 13,377 | 18,000 | 22,377 | ||||||||||||
Regulatory filing | 2,158 | 10,650 | 10,208 | 13,247 | ||||||||||||
Total operating expenses | 35,677 | 59,831 | 69,695 | 124,626 | ||||||||||||
Operating income (loss) | (15,779 | ) | (10,631 | ) | (25,743 | ) | 15,231 | |||||||||
Interest income | 2,592 | - | 3,561 | - | ||||||||||||
Net income (loss) | $ | (13,187 | ) | $ | (10,631 | ) | $ | (22,182 | ) | $ | 15,231 | |||||
Loss per common share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | 0.00 | |||||
Comprehensive income: | ||||||||||||||||
Net income (loss) | $ | (13,187 | ) | $ | (10,631 | ) | $ | (22,182 | ) | $ | 15,231 | |||||
Foreign currency translation adjustment | (28,807 | ) | - | (306,096 | ) | - | ||||||||||
Total comprehensive income (loss) | (41,994 | ) | (10,631 | ) | (328,278 | ) | 15,231 | |||||||||
Weighted average common shares | ||||||||||||||||
outstanding - basic and diluted | 56,100,000 | 56,100,000 | 56,100,000 | 56,100,000 |
The accompanying notes are an integral part of these unaudited financial statements.
4
CN RESOURCES INC.
Consolidated Statements of Cash Flows
For the Six Months | For the Six Months | |||||||
Ended | Ended | |||||||
November 30, | November 30, | |||||||
2015 | 2014 | |||||||
Cash Flows From Operating Activities | ||||||||
Net income (loss) for the period | $ | (22,182 | ) | $ | 15,231 | |||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Depreciation and depletion | - | 43,966 | ||||||
Accretion | 546 | |||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | (2,447 | ) | 7,815 | |||||
Other receivable | 5,307 | (359 | ) | |||||
Accounts payable | 5,643 | 1,532 | ||||||
Net cash (used in) provided in operating activities | (13,133 | ) | 68,185 | |||||
Cash Flows from Investing Activities | ||||||||
Note receivable | 4,718,126 | (1,412,000 | ) | |||||
Oil and gas property expenditure | - | (39,746 | ) | |||||
Net cash (used in) provided in investing activities | 4,718,126 | (1,451,746 | ) | |||||
Cash Flows from Financing Activities | ||||||||
Proceeds from Director advances | 20,928 | 41,933 | ||||||
Payments to Director for advances | - | (24,564 | ) | |||||
Net cash (used in) provided by financing activities | 20,928 | 17,369 | ||||||
Foreign currency adjustment | (56,767 | ) | - | |||||
Net increase (decrease) in cash and cash equivalents | 4,669,154 | (1,366,192 | ) | |||||
Cash and cash equivalents, beginning of the period | 226,786 | 6,052,324 | ||||||
Cash and cash equivalents, end of the period | $ | 4,895,940 | $ | 4,686,132 | ||||
Supplemental cash flow information | ||||||||
cash paid for interest | $ | - | $ | - | ||||
cash paid for income tax | $ | - | $ | - | ||||
Non cash transaction | $ | 376,249 | $ | - |
The accompanying notes are an integral part of these unaudited financial statements.
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CN RESOURCES INC.
Notes to the Consolidated Financial Statements
(Unaudited)
November 30, 2015
1. BUSINESS OPERATIONS
CN Resources Inc. is an independent energy company engaged in the exploration, development, production, and sale of crude oil. Our operations are conducted through a 100% wholly owned Ontario Corporation (also named CN Resources Inc.) which owns a producing joint venture oil well in the Redwater area in Alberta, Canada.
2. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated 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.
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 a loss of $22,182 for the six months ended November 30, 2015 and has an accumulated deficit of $760,484 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.
3. NOTES RECEIVABLE
On November 13, 2014, the Company provided a loan in the amount of $1,412,000 (CAD $1,600,000) to an arm’s length party with an interest of 7% per annum. On January 12, 2015 and January 21, 2015, the Company provided a further $4,329,730 (CAD $5,100,000) to the same third party with an interest of 7% per annum. These loans are unsecured and due on demand. As of November 30, 2015, we have received complete payment for the Note receivable, and no amount is outstanding.
4. DUE TO DIRECTOR
The director loans the Company money from time to time on an interest-free due-on-demand basis and, as of November 30, 2015, the total amount advanced was $12,151.
The Company is currently using the office space from its President and CEO and on rent free basis, the President is also provided telephone and administrative services for the Company on free basis, however, there is no agreement or guarantee that the President will provide the free services for any specific period of time.
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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.
The following discussion and analysis presents management's perspective of our business, financial condition, and overall performance. This information is intended to provide investors with an understanding of our past performance, current financial condition, and outlook for the future, and should be read in conjunction with our Audited Annual Financial Statements Form 10-K.
OVERVIEW OF THE COMPANY
CN Resources Inc. is an independent energy company engaged in the exploration, development, production, and sale of crude oil. Our operations are conducted through a 100% wholly owned Ontario Corporation (also named CN Resources Inc.) which owns a producing joint venture oil well in the Redwater area in Alberta, Canada.
The Company’s immediate core strategy is to create and enhance shareholder value by acquiring proved developed and producing light oil assets, optimize the producing assets to increase production and fully develop the assets potential for reserves. Management believes that this is the best approach to create shareholder value based on risk and rewards analysis.
During the Quarter ended November 30, 2105, Crude oil price is still depressed at an historical low level with WTI of $34 per barrel, the Board of Directors has decided to take a cautious approach to further investments in this sector until a clear visibility can be obtained before venturing into any capital commitment.
Results of Operations
The following is a discussion of our results of operations, financial condition and capital resources. You should read this discussion in conjunction with our Financial Statements and the Notes thereto contained elsewhere in this Form 10-Q. Comparative results of operations for the periods indicated are discussed below.
The following table sets forth certain of our oil operating information for the three months ended November 30, 2015 and 2014.
November
30, | November 30, 2014 | |||||||
Production revenue (net of royalty) | $ | 19,898 | $ | 49,200 | ||||
Production cost | $ | 7,687 | $ | 5,345 |
The following table sets forth certain of our oil operating information for the six months ended November 30, 2015 and 2014.
November 30, 2015 | November 30, 2014 | |||||||
Production revenue (net of royalty) | $ | 43,952 | $ | 139,857 | ||||
Production cost | $ | 11,328 | $ | 12,879 |
Cash Flow Analysis
For the six months ended November 30, 2015, we used $13,133 cash in operating activities (November 20, 2014 - $68,185), cash generate from investing activities is $4,718,126 (November 30, 2014 - $(1,451,746)) and Cash flow from financing activities is $20,928 (November 30, 2014 - $17,369).
7
Liquidity and Capital Resources
At November 30, 2015, we have cash on hand of $4,895,940 (November 30, 2014 - $4,686,132), oil revenue receivable of $32,676 (2014 - $53,517). We have accounts payable of $21,843 (2014 – $5,370) and we have no other material debts to anyone.
Planned Capital Expenditures
The Company is evaluating its various options in its development strategies, have not committed to any specific capital expenditure at this time due to the unsettling global market conditions for crude oil.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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 November 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
We are not aware of any pending or threatened litigation against us or our officers and director in their capacity as such.
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 November 30, 2015.
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 |
8
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: January 19, 2016 | 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 |