UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2016

or

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to __________.

Commission file number 333-175692

Florida

(State or other jurisdiction of incorporation or organization)

20-8926549

(I.R.S. Employer Identification No.)

Unit 1 – 550 Browning Place, North Vancouver, British Columbia V7H 3A9

(Address of principal executive offices and Zip Code)

Registrant’s telephone number, including area code: (778) 772-8184

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes   ¨ 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   x 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” “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

The number of shares of the issuer’s common stock, par value $.00001 per share, outstanding as of November 21, 2016 was 56,915,448.

TABLE OF CONTENTS

Part I. Financial Information

Item 1. Financial Statements.

North America Frac Sand, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

See notes to unaudited condensed consolidate financial statements

North America Frac Sand, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

See notes to unaudited condensed consolidated financial statements

North America Frac Sand, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

See notes to unaudited condensed consolidated financial statements

NOTE 1. NATURE OF BUSINESS

The Company is Florida corporation which was incorporated on April 26, 2007. The Company was formed as New Found Shrimp, Inc. to provide consultation to the aquatic farming industry. It was the Company’s plan to provide consolidation opportunities for on-going and start up aquatic farming operations. The Company’s approach was to be to assist aquatic farming operations with the organizational structure, customer service and marketing aspects of their business, allowing our customers to focus on the business aspects of operating the farms. On April 25, 2014, the Company changed its name to Xterra Building Systems, Inc. On July 10, 2015, the Company entered into a Share Purchase Agreement with Canadian Sandtech Inc. to acquire its wholly owned subsidiary, North America Frac Sand (CA) Ltd. (“NAFS-CA”). In accordance with this Share Purchase Agreement, the Company issued 37,800,000 shares of common stock and placed these shares in escrow. On September 17, 2015, the Company changed its name to North America Frac Sand, Inc. On February 29, 2016, all subjects were removed by the Company to close on the acquisition of NAFS-CA, except for the issuance of audited financial statements. On August 29, 2016, the Company closed on its acquisition of NAFS- CA with the filing of NAFS-CA’s financial statements and the shares held in escrow were released. NAFS-CA has approximately 30,000 acres of mineral leases located approximately 30 kilometers east of Saskatoon, Saskatchewan. During the year, the Company has advanced funds ($10,950), provided management, and have commenced exploration activities on the mineral leases.

The Company is now headquartered in North Vancouver, British Columbia.

NOTE 2. GOING CONCERN

The Company has a history of losses, including $1,616,392 and $19,565 the quarters ending September 30, 2016 and 2015, respectively. Losses result in an accumulated deficit of $36,263,932. The Company has negative working capital of $486,915 and $91,884 as at September 30, 2016 and December 31, 2015 respectively. The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating cost and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which require 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents totaled $Nil at September 30, 2016 and December 31, 2015, respectively.

CASH FLOWS REPORTING

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.

PRINCIPALS OF CONSOLDIATION

The consolidated financial statements include the Company’s wholly-owned subsidiary company, North America Frac Sand (CA) Ltd. All significant intercompany transactions have been eliminated. The Company closed on the acquisition on August 29, 2016.

IMPAIRMENT OF LONG- LIVED ASSETS

The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under FASB ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of FASB ASC 930-360-35, Asset Impairment, and 360-0 through 15-5, Impairment or Disposal of Long- Lived Assets.

FINANCIAL INSTRUMENTS

The Company’s balance sheet includes financial instruments, specifically accounts payable, accrued expenses, and payables to related parties. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.

REVENUE RECOGNITION

The Company follows ASC 605, Revenue Recognition -The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company has not generated any revenues for the periods presented.

MINERAL PROPERTY ACQUISITION AND EXPLORATION COSTS

Mineral property acquisition costs are initially capitalized when incurred. These costs are then assessed for impairment when factors are present to indicate the carrying costs may not be recoverable. Mineral exploration costs are expensed when incurred.

DEFERRED INCOME TAXES AND VALUATION ALLOWANCE

The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements 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 the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of September 30, 2016 or December 31, 2015.

NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per share is calculated in accordance with ASC 260, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Because 37,800,000 shares of common stock have been issued under escrow subject to closing on the NAFS-CA acquisition, these shares are deemed contingent shares and have not been included in the calculation of loss per share. Dilutive potential common shares are additional common shares assumed to be exercised. Currently there are 126 shares of $0.00001 par value Series B Preferred Shares. Each share is convertible into 250,000 common shares. If all of the Preferred B shares were converted to common shares, there would be 31,500,000 shares issued.

Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at September 30, 2016 and 2015. The Series B Preferred stock can be converted to common shares at a rate determined by the Board of Directors.

SHARE-BASED EXPENSE

ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.

Share-based expense for the periods ended September 30, 2016 and 2015 totaled $-0- and $-0-, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as “Development Stage Entities” (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has adopted this standard.

In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation — Stock Compensation. As a result, the target is not reflected in the estimation of the award’s grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after 15 December 2015 and interim periods within those annual periods. Early adoption is permitted. Management has reviewed the ASU and believes that they currently account for these awards in a manner consistent with the new guidance, therefore there is no anticipation of any effect to the consolidated financial statements.

In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15 Preparation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements—Liquidation Basis of Accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU, however, at the current period, management does not believe that it has met conditions which would subject these financial statements for additional disclosure.

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

NOTE 4. INVESTMENT IN EAGLE CREEK PROPERTY

On August 29, 2016, the Company acquired through NAFS-CA acquired the Eagle Creek Properties. A description of the mineral leases are as follow:

A description of the Company’s mineral leases is as follows:

Prior to acquisition, the leases have been explored through extensive drilling operations. As there has not been an economic evaluation of the mineral leases, the investment in the mineral leases have been expensed as Impairment of mineral leases of $1,539,430. On May 27, 2016, the Company entered into an agreement with Northwest Corporation to undertake exploration activities and to prepare an economic evaluation through the preparation NI43-101 report on the mineral leases. As of September 30, 2016, the Company had expended approximately $69,485. As these expenditures were undertaken prior to the effective date of the transaction, they have not been incorporated into the consolidated financial statements.

NOTE 5. INCOME TAXES

At September 30, 2016, the Company had a net operating loss carry–forward for Federal income tax purposes of $711,454 that may be offset against future taxable income through 2032. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets of $241,894, calculated at an effective tax rate of 34%, was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a valuation allowance of $241,894.

Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.

The Company has open tax periods, subject to IRS audit for the years 2009 through 2015.

NOTE 6. SHAREHOLDERS' EQUITY

On July 28, 2016, the Company amended its Articles of Incorporation. The Company has been authorized to issue 500,000,000 shares of common stock, $0.00001 par value. (On September 17, 2014, the Company amended its Articles of Incorporation. The Company has been authorized to issue 10,000,000,000 shares of common stock, $0.00001 par value.) Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the corporation upon liquidation or dissolution.

On July 10, 2015, the Company issued 37,800,000 shares of the Company pursuant to a Share Purchase Agreement. The 37,800,000 shares were placed into escrow pending the Closing of the acquisition of NAFS-CA.

On July 17, 2015, the Company allowed several non-related parties to convert a total of 15 shares of Series B Preferred stock into 3,750,000 unrestricted shares of common stock. The conversion rate was done at par, $0.00001 according to the stated articles of designation.

On August 25, 2015, the Company allowed several non-related parties to convert a total of 2 shares of Series B Preferred stock into 500,000 unrestricted shares of common stock. The conversion rate was done at par, $0.00001 according to the stated articles of designation.

On September 18, 2015, the Company allowed several non-related parties to convert a total of 3 shares of Series B Preferred stock into 750,000 unrestricted shares of common stock. The conversion rate was done at par, $0.00001 according to the stated articles of designation

On October 13, 2015, the Company allowed several non-related parties to convert a total of 8 shares of Series B Preferred stock into 2,000,000 unrestricted shares of common stock. The conversion rate was done at par, $0.00001 according to the stated articles of designation

On March 28, 2016, the Company allowed a non-related party to convert a total of 2 shares of Series B Preferred stock into 500,000 unrestricted shares of common stock. The conversion rate was done at par, $0.00001 according to the stated articles of designation.

On April 1, 2015, the Company allowed several non-related parties to convert a total of 5 shares of Series B Preferred stock into 1,250,000 unrestricted shares of common stock. The conversion rate was done at par, $0.00001 according to the stated articles of designation

On June 20, 2016, the Company allowed a non-related party to convert a total of 10 shares of Series B Preferred stock into 2,500,000 unrestricted shares of common stock. The conversion rate was done at par, $0.00001 according to the stated articles of designation.

On July 28, 2016, the Company received into treasury for cancellation 72,598 Series B Preferred stock.

On July 28, 2016, the Company allowed a non-related party to convert a total of 14 shares of Series B Preferred stock into 3,500,000 unrestricted shares of common stock. The conversion rate was done at par, $0.00001 according to the stated articles of designation.

On August 29, 2016, the Company released from the escrow the 37,800,000 shares issued in exchange for the issued and outstanding shares of NAFS-CA. The market value at the date of the release from escrow was $0.036 per share consequently, the valuation of the shares issued was calculated to be $1,360,800.

At September 30, 2016 and December 31, 2015 there were 53,415,448 and 45,665,448 shares of common stock issued and outstanding, respectively.

PREFERRED STOCK

On September 17, 2014, the Company amended its Articles of Incorporation. The Company has been authorized to issue 100,000,000 shares of $0.00001 par value Preferred Stock. The Board of Directors is expressly vested with the authority to divide any or all of the Preferred Stock into series and to fix and determine the relative rights and preferences of the shares of each series so established, within certain guidelines established in the Articles of Incorporation.

Series A: 10 shares of preferred stock have been designated as Series A. The certificate of designations for the Series A Preferred stock provides that it may only be issued in exchange for the partial or full retirement of debt held by management, employees or consultants, or as directed by a majority vote of the Board of Directors. Until the Articles of Incorporation was amended on July 28, 2016, the Series A Preferred stock could be convertible into the number of shares of common stock which equals four times the sum of (i) the total number of shares of common stock which are issued and outstanding at the time of conversion, plus (ii) the total number of shares of Series B and Series C preferred stocks which are issued and outstanding at the time of conversion. The Series A class possesses a number of votes equal to the number of common stock equivalents, if converted. On July 28, 2016, the Company amended its Articles of Incorporation removing the conversion rights of Series A Preferred Stock.

Series B: 999,999,990 shares of preferred stock have been designated as Series B. The certificate of designation for the Preferred B Stock provides that as a class shall be entitled to receive dividends when, as and if declared by the Board of Directors, in its sole discretion. Preferred Series B will have liquidation rites, an amount equal to $1.00 per share, plus any declared but unpaid dividends for each share held. Each share will have 10 votes. The initial price of each share of Series B Preferred Stock is $2.50. Each share of Series B Preferred Stock shall be convertible into common shares, at any time, and/or from time to time, into the number of shares of the Corporation’s Common Stock, par value $0.00001 per share, equal to the $2.50 price of the Series B Preferred Stock, divided by the par value of the Common Stock of $0.00001 which equals 250,000 shares of Common Stock, subject to adjustment as may be determined by the Board of Directors from time to time (the “Conversion Rate”).

When on September 17, 2014, the Company amended its Articles of Incorporation, the amendment modified the terms of the Preferred Series A conversion exchange to common stock. As a result of this modification, because there was insufficient authorized capital, the addition of a material conversion option which the Series A Preferred Stock were granted, triggered extinguishment accounting. Under the terms of the SEC rules governing extinguishment accounting, a fair value of the Company had to be estimated and the portion of the value which attributed to newly modified Series A Preferred Stock was estimated. As per SEC guidelines, the market share price as of September 17,2014 (the “date of modification”) was used to value the Company. This prescribed value represents the estimate of fair value of the modified Preferred Stock used to represent the carrying value at the date of modification as a reduction of the income available to common shareholders. The Series A Preferred Stock was deemed to have a fair value of $13,741,679 based upon the converted valuation approach as the primary driver of value in the instrument, its common stock equivalency.

In addition, as a result of this new conversion feature, the Company cannot assert it has sufficient shares to settle both Preferred Series A and Preferred Series B and accordingly has re-classed such share to mezzanine equity. The Preferred Series A is reclassified at its modification fair value of $13,741,679.

At September 30, 2016 and December 31, 2015 there was 1 share of Series A Convertible Preferred Stock issued and outstanding.

At September 30, 2016 and December 31, 2015 there were 76,088 and 76,105 shares of Series B Convertible Preferred Stock issued and outstanding, respectively. On July 20, 2016, there were 75,948 shares of Series B Preferred stock cancelled and returned to treasury resulting in a balance of 140 Series B Preferred stock currently being outstanding.

OPTIONS AND WARRANTS

There are no warrants or options outstanding to acquire any additional shares of common stock of the Company.

NOTE 7. RELATED PARTY TRANSACTIONS

NOTES PAYABLE

In support of the Company’s efforts and cash requirements, it has relied on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by these related parties. Amounts represent advances or amounts paid in satisfaction of liabilities of the Company. The advances are considered temporary in nature and have not been formalized by a promissory note.

As of September 30, 2016, David Alexander has advanced to the Company $0 ($67,582- December 31, 2015) with no stated interest rate, payment terms and is due on demand.

As of September 30, 2016, Mr. David Alexander accrued and unpaid consulting fees and expenses of $155,007 ($23,000- December 31, 2015).

OTHER

The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.

The Company does not own or lease property or lease office space. The Company has been provided office space by a member of the Board of Directors at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its financial statements.

The above amounts are not necessarily indicative of the amounts that would have been incurred had comparable transactions been entered into with independent parties.

NOTE 8. PROMISSORY NOTES

______ 

* The note payable for $91,488 although in default, repayment has not been demanded at this time.

NOTE 9. COMMITMENTS AND CONTINGENCIES

From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

NOTE 10. SUBSEQUENT EVENTS

On October 31, 2016, the Company allowed several non-related parties to convert a total of 10 shares of Series B Preferred stock into 2,500,000 unrestricted shares of common stock. The conversion rate was done at par, $0.00001 according to the stated articles of designation.

Item 2. Management’s Discussion and Analysis or Plan of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this report. The management’s discussion, analysis of financial condition, and results of operations should be read in conjunction with our financial statements and notes thereto contained elsewhere in this prospectus.

Our Business Overview

North America Frac Sand, Inc. is a Florida corporation (the "Company"). On August 29, 2016, we acquired the issued and outstanding shares of North America Frac Sand (CA) Ltd (“NAFS-CA”)., an Alberta Corporation.

Previously, the Company was providing consulting services to independent aquatic farming operators and other market participants located in the Midwest of the United States. Historically, we conducted initial marketing and sales activities to take advantage of opportunities related to time, location and quality of aquatic farming operations. We have conducted our operations primarily in Indiana.

On April 25, 2014, the Company entered into a Share Purchase Agreement to acquire the issued and outstanding shares of Innovate Building Systems, Inc., (“Innovate”) a manufacturer of modular buildings located in Edmonton Alberta, Canada. In accordance with the Agreement, the Company changed its name from New Found Shrimp, Inc. to Innovate Building Systems, Inc. In the course of the due diligence, the Innovate (the Alberta Company) was unable to supply audited financial statements. For this and other reasons, the Company decided not to proceed with the acquisition. On September 9, 2014, the Company changed its name from Innovate Building Systems Inc. to Xterra Building Systems Inc.

On July 10, 2015, the Company entered into a Share Purchase Agreement to acquire the issued and outstanding shares of North America Frac Sand (CA) Ltd. (“NAFS-CA”). where the Company would issue 37,800,000 shares of common stock in the Company in exchange for the issued and outstanding shares of NAFS-CA. In accordance with the agreement, the Company changed its name from Xterra Building Systems, Inc. to North America Frac Sand, Inc. The final release of the shares held in escrow is subject to the completion the audit of NAFS-CA and the requisite filings.

Industry Overview

Frac Sand Industry

The practice of fracturing reservoir rock in the United States as a method to increase the flow of oil and gas from wells has a relatively long history and can be traced back to 1858 in Fredonia, New York, when a gas well situated in shale of the Marcellus Formation was successfully fractured using black powder as a blasting agent. Nearly all domestic hydraulic fracturing, often referred to as hydro-fracking or fracking, is a process where fluids are injected under high pressure through perforations in the horizontal portion of a well casing in order to generate fractures in reservoir rock with low permeability (“tight”). Because the fractures are in contact with the well bore they can serve as pathways for the recovery of gas and oil. To prevent the fractures generated by the fracking process from closing or becoming obstructed with debris, material termed “proppant,” most commonly high silica sand, is injected along with water-rich fluids to maintain or “prop” open the fractures. The first commercial application of fracking in the oil and gas industry took place in Oklahoma and Texas during the 1940s. In 1949, over 300 wells, mostly vertical, were fracked (ALL Consulting, LLC, 2012; McGee, 2012; Veil, 2012) and used silica sand as a proppant (Fracline, 2011).

The resulting increase in well productivity demonstrated the significant potential that fracking might have for the oil and gas industry. The first horizontal well was successfully completed in 1948, and the first commercial “unconventional well,” a horizontal gas well in “tight” shale, was drilled in 1988. The Society of Petroleum Engineers describes unconventional resources as petroleum accumulations that are pervasive throughout a large area and are not significantly affected by pressure generated by water. The extremely small pore-size and absence of favorable permeability results in high resistance to hydrocarbon flow. Recovery of gas and oil from these units presents technological challenges. The extremely low permeability typically causes the hydrocarbons to remain in the source rock unless artificially induced fracturing is introduced and proppants are injected to maintain the fracture openings and to provide a pathway through the rock to facilitate the flow of hydrocarbons through the well (Ratner and Tiemann, 2014).

Technological advances in directional drilling and hydraulic fracturing coupled with increases in natural gas prices in the late 1990s and early 2000s spurred aggressive exploration drilling activities and eventually significant production from unconventional oil and gas reservoirs contained in several major sedimentary shale basins in the United States [U.S. Energy Information Administration (EIA), 2014]. Formations or basins, shown in Figure 2, include the Anadarko Basin in Oklahoma and Texas, the Bakken/Three Forks Basin in eastern Montana and North Dakota, the Barnett Formation in the Fort Worth Basin, the Eagle Ford and Woodbine Formations in the East Texas Basin, and the Appalachia Basin in the northeastern part of the United States. Most of the production from these formations is in the form of gas rather than oil because methane molecules and those of natural gas liquids are smaller than crude oil molecules and are therefore more responsive to fracking when moving through fine-grained sedimentary rock such as shale

(Ratner and Tiemann, 2014; Tucker, 2013).

In 2003, nearly 2.2 Mt of sand was sold or used for fracking, a 45 percent increase over the previous year. The rapid growth in the demand for frac sand at this time was a direct result of the petroleum industry’s start of aggressive horizontal drilling and hydraulic fracturing programs in unconventional oil and gas targets contained in tight sedimentary formations. In 2009, the global recession and lower petroleum prices were reflected by a decrease in the number of active drilling rigs and a slowdown in the growth rate of frac sand consumption. By 2012, oil petroleum prices had recovered and the rate of growth in frac sand demand accelerated. In 2012, there was an average of approximately 1,150 horizontal rotary drilling rigs in the United States operating per week, which represented nearly 60 percent of the total number of active drilling rigs. At the same time, the number of vertical and directional (angled or deviated drilling, but not horizontal) active drilling rigs represented a 29 percent and 11 percent share, respectively (Baker Hughes Inc., 2014). The compound annual growth rate (CAGR) for frac sand sold or used for the years 2003 through 2012 was nearly 32 percent.

U.S. Production of Frac Sand

Common names of the frac sand stratigraphic units, which are mined from the Ordovician Saint Peter Sandstone, include Jordan Sand, Ottawa Sand, Northern White Sand, Saint Peter; and Sierra Gold. In addition, these sands are also used in glass making and in foundries. Nearly 70 percent of the estimated 2014 domestic frac sand, or about 38 metric tons (Mt), was mined in the Great Lakes Region owing to the premium sand deposits in the region; existing railway infrastructure, and long term presence in the industry. The states that comprise this region and their respective estimated annual production, rounded to the nearest Mt listed in descending order are Wisconsin (24 Mt), Illinois (8Mt), Minnesota (5 Mt), and Michigan (1 Mt). Iowa and Missouri produce approximately 2 million

metric tons per year (Mt/yr) and 1 Mt/yr of frac sand, respectively. These sands are similar in character to the frac sands produced in the Great Lakes Region.

Nearly all of the premium sands are transported by rail to transfer points in areas where fracking is occurring and trucked to fracking sites or stockpiled at locations to await orders for frac sand. Some Great Lakes frac sand is also shipped to Canadian fracking sites since Canada produces only about 30 percent of its frac sand requirements. In 2014, Canada imported about 1.5 Mt of sand from the United States.

Most of the remaining frac sand production in the United States, approximately 13 Mt rounded to the nearest Mt, originates from outside the Great Lakes Region. In descending order of production, they are: Texas (8 Mt), Arkansas (2 Mt), Nebraska (2 Mt) and Arizona (1 Mt). A large percentage of the sand produced from the mines in these states is considered “brown sand” and sold as Brady, Brown, EF (economical frac), Hickory, and Texas Brown. These sands may contain minor amounts of impurities, have lower strength.

Frac Sand Pricing

Since the oil prices dropped in 2015, the previous high demand and tight supply of frac sand resulted in the prices dropping from a national average of about $63 per ton in 2013 to approximately 20% less than that today. The major factors that determine the cost and application for frac sand include: (1) grain strength, which is based on its SiO2 content and internal structure; (2) grain sphericity; (3) grain size; (4) grain size distribution; (5) and overall purity. In general, the relatively clean, coarse and high-silica high-strength “white” sands mined in Arkansas, Illinois, Minnesota, and Wisconsin bring the highest prices per ton FOB plant. The coarser-cleaner fractions bring premium prices, because of higher conductivity which is especially desirable for the recovery of oil.

In most cases, rail is the primary form of transportation to get sand from the mine to a transfer point and then, from there, trucked to the well site, and represents the highest post-mine cost. Adding to the cost burden of transportation some suppliers and consumers of frac sand are affected with logistical “bottlenecks” that result from the: lack of available hopper cars, limitations of branch lines to accommodate rail traffic, weight, and speed; complications associated with moving sand through the network of rail freight carriers that traverse the Midwest United States; shortages of truck drivers and truck availability; and constrained capacity at trans loading terminals (Gopinath and Pramanick, 2014; Minnesota Department of Transportation, 2012; Vectora Transportation, 2013).

Our Target Market

There are several factors which determine what is our target market:

We feel that being closer to the frac sand markets of B.C., Alberta, Saskatchewan, Manitoba, North Dakota, and Montana will give us a significant advantage, due to the fact that we are in the range of truck able distances. This will result in reduced transportation costs, ensured delivery schedules, and be able to meet the frac sand inventory needs of our potential customers on a just in time, cost efficient manner, resulting in increased customer service.

Eagle Creek Mineral Leases

In the Report prepared by Green Engineering Ltd (“GEL”) dated December 15, 2014, GEL reported that GEL was retained by CSI to observe sand mineral exploration excavation work completed by CSI in the winter of 2011 on a potential frac-sands industrial property, the “Eagle Creek Property” (the “target property”), on land located 30 kilometers west of Saskatoon, Saskatchewan. At the Eagle Creek Property, thirteen (13) back-hoe holes were excavated to obtain 60 lb pails of sand to send to SGS laboratories for flotation process testing, including the crush testing of flotation quartz sand concentrate and:

The summary report prepared by GEL stated that 24 holes were excavated, logged and sampled during mid-February 2011. These holds were drilled on a nominal 600 ft. spacing pattern in a search for more sand mineral. The samples were placed into sample containers, sealed, and retained by GEL.

Of the samples obtained Four composite samples were mixed and one single sample retained. These were placed in sample pails weighing 60 lb. each and were sealed by D. Green, PEng of GEL and sent to SGS laboratories. D. Green, PEng observed the laboratory testing at the CSI facility.

Further sampling was done in April 2012 on the target property and 5 composite samples were placed in sample pails sealed by D. Green, PEng and sent to Met-Solve Laboratories. Met-Solve processed the sand with acid treatment and scrubbing. The following indicated the quality of the sand on tests conducted by Met-Solve:

Tested by a hand-held magnifier, the sand mineral’s quartz was in the rage of 80%-95%, and; spherical/ovaloid for all sand examined, within the range that likely could be flotation concentrated for the -40/+70 and -70/+140 sieve sizes and possibly for the -20/+40 size.

Met-Solve Laboratories/Stim-Labs Testing resulted in the following results:

On May 27, 2016, we received a proposal from Norwest Corporation, a Calgary based engineering company, to complete a NI 43-101 Technical Report to determine resources for the Eagle Creek Project. Under the terms of this proposal there are several Project Phases:

Cost of NI 43-101 Report Preparation Project was estimated to be CAD$50,532 (US$37,900).

Upon completion Phase One, it was determined that additional data was required and that a field program was necessary to confirm results from the previous field program datasets with a certified laboratory and to expand on existing high potential areas. The field program is outlined as follows:

Cost of Auger Drilling Program and Testing was estimated at CAD $58,615 (US$44,000).

Drilling commenced in early July 2016. We expect to receive the reports in late November, 2016.

Critical Accounting Policies

We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared and actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. On a regular basis, we review our accounting policies and how they are applied and disclosed in our financial statements.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

Results of Operations for nine months ended September 30, 2016 and September 30, 2015

During the 9 months ended September 30, 2016 (YTD-16) the Company incurred a loss of $1,755,831 compared to a loss of $56,442 of the nine month period ended September 30, 2015 (YTD-15). This increase in loss of $1,699,389 was mostly caused by the impairment loss on mineral properties of $1,539,430. This impairment loss was incurred because the Company cannot provide evidence of value of the frac sand resource discovered on the mineral property at this time. Due to increased business activity during YTD-16 consulting fees increased to $108,920 from $9,000 during YTD-15. This $99,520 was due to increase compensation paid to the Company’s officer and director. Due to the acquisition of NAFS-CA during YTD-16 audit fees increased to $44,280 from $10,700 during YTD -15.

Results of Operations for three months ended September 30, 2016 and September 30, 2015

During the 3 months ended September 30, 2016 (Q3-16) the Company incurred a loss of $1,616,392 compared to a loss of $19,565 of the three month period ended September 30, 2015 (Q3-15). This increase in loss of $1,596,828 was mostly caused by the impairment loss on mineral properties of $1,539,430. This impairment loss was incurred because the Company cannot provide evidence of value of the frac sand resource discovered on the mineral property at this time. Due to increased business activity during Q3-16 consulting fees increased to $33,920 from $3,000 during Q3-15. This $30,920 was due to increase compensation paid to the Company’s officer and director. Due to the acquisition of NAFS-CA during Q3-16 audit fees increased to $25,920 from $3,000 during Q3 -15.

Financial Condition

Total Assets. Total assets at September 30, 2016 and December 31, 2015 were $Nil and $Nil, respectively.

Total Liabilities. Total liabilities at September 30, 2016 and December 31, 2015 were $486,915 and $91,884, respectively. Total liabilities consist of accounts payable of $60,675 and $1,302; related party accounts payable of $155,007 and $23,000; note payable to a director of $0 and $67,582; and third party notes payable of $271,233 and $0, respectively.

Liquidity

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.

The Company sustained a net loss for the nine months ended September 30, 2016 and 2015 of $1,755,831 and $56,443 respectively. Because of the absence of positive cash flows from operations, the Company will require additional funding for continuing the development and marketing of products. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We are presently not able to meet our obligations as they come due. At September 30, 2016 we had working capital deficit of $486,915. Our working capital is due to the results of operations.

Net cash from (used in) operating activities for the nine months ended September 30, 2016 and 2015 was $(48,661) and $(52,386), respectively. Net cash used in operating activities includes our net loss and changes in working capital components, such as accounts payable.

Net cash from (used in) financing activities for the nine months ended September 30, 2016 and 2015 was $(154,989) and $0, respectively.

Net cash provided by (used in) financing activities for the nine months ended September 30, 2016 and 2015 was $203,651 and $52,386, respectively.

We anticipate that our future liquidity requirements will arise from the need to fund our growth from operations, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional funds from the private sources and/or debt financing. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and/or obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. Our Plan of Operation for the next twelve months is to raise capital to continue to expand our operations. Although we are not presently engaged in any capital raising activities, we anticipate that we may engage in one or more private offering of our company’s securities after the completion of this offering. We would most likely rely upon the transaction exemptions from registration provided by Regulation D, Rule 506 or conduct another private offering under Section 4(2) of the Securities Act of 1933. See “Note 3 – Going Concern” in our financial statements for additional information as to the possibility that we may not be able to continue as a “going concern.”

We have no known demands or commitments and are not aware of any events or uncertainties that will result in or that are reasonably likely to materially increase or decrease our current liquidity.

We are not aware of any trends or known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in material increases or decreases in liquidity.

Capital Resources.

We had no material commitments for capital expenditures as of September 30, 2016.

Off-Balance Sheet Arrangements

We have made 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 investors.

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.

(a) Management’s Annual Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with the U.S. generally accepted accounting principles.

As of September 30, 2016, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934. Based on this evaluation, management concluded that our financial disclosure controls and procedures were not effective so as to timely identify, correct and disclose information required to be included on our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.

As of September 30, 2016, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of the design and operations of our internal control over financial reporting, as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 and based on the criteria for effective internal control described in Internal Control – Integrated Framework -2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was not effective so as to timely identify, correct and disclose information required to be included on our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.

The management, including our Principal Executive Officer and Principal Financial Officer, does not expect that its disclosure controls and procedures, or its internal controls over financial reporting will prevent all error and all fraud. A control system no matter how well conceived and operated, can provide only reasonable not absolute assurance that the objectives of the control system are met. Further, the design of control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any within the Company have been detected.

Material weaknesses identified by management included: lack of an audit committee and audit committee financial expert; lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; inadequate segregation of duties consistent with control objectives and affecting the functions of authorization, recordkeeping, custody of assets, and reconciliation; and, management dominated by a single individual without adequate compensating controls.

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

Management’s Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

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

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

We will work as quickly as possible to implement these initiatives; however, the lack of adequate working capital and positive cash flow from operations will likely slow this implementation.

This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of this section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Change in internal controls

We have not made any significant changes to our internal controls subsequent to the Evaluation Date. We have not identified any significant deficiencies or material weaknesses or other factors other than those specified above that could significantly affect these controls, and therefore, no corrective action was taken.

For a full discussion of controls and procedures refer to Item 9A, Controls and Procedures, in our 2015 Annual Report on Form 10K.

Part II. Other Information

Item 1. Legal Proceedings.

None.

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. Unregistered Sales of Equity Securities and Use of Proceeds.

During the period ending September 30, 2016, the Company did not issue any unregistered shares of its common stock.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibit Key

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.

NORTH AMERICA FRAC SAND, INC.