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EX-32.01 - CERTIFICATION - CN Resources Inc. | f10q0817ex32-1_cnresources.htm |
EX-31.01 - CERTIFICATION - CN Resources Inc. | f10q0817ex31-1_cnresources.htm |
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 AUGUST
31, 2017
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 ☒ 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 (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 ☐ NO ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☒
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 September 29, 2017
PART I - FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS. |
CN RESOURCES INC.
Consolidated Balance Sheets
Unaudited
August 31, 2017 | May 31, 2017 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | 1,633,666 | $ | 2,606,586 | |||||
Accounts receivable - Oil and Gas | 20,273 | 31,315 | ||||||
Other receivable | 4,434 | 4,561 | ||||||
Investment in available-for-sale securities | 3,629,535 | 2,285,160 | ||||||
Total current assets | $ | 5,287,908 | $ | 4,927,622 | ||||
Total assets | $ | 5,287,908 | $ | 4,927,622 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Current Liabilities | ||||||||
Accounts payable | 12,914 | 4,480 | ||||||
Due to director | 40,718 | 112,109 | ||||||
Total current liabilities | 53,632 | 116,589 | ||||||
Asset retirement obligation | 8,647 | 8,373 | ||||||
Total liabilities | 62,279 | 124,962 | ||||||
Stockholders’ equity | ||||||||
Common stock,100,000,000 of shares authorized with $0.00001par value, 56,100,000 issued and outstanding | 561 | 561 | ||||||
Preferred stock,100,000,000 shares authorized with $0.00001par value, none issued | - | - | ||||||
Additional paid-in capital | 6,514,639 | 6,514,639 | ||||||
Accumulated Other Comprehensive loss | (567,395 | ) | (956,164 | ) | ||||
Accumulated deficit | (722,176 | ) | (756,376 | ) | ||||
Total stockholders’ equity | 5,225,629 | 4,802,660 | ||||||
Total liabilities and stockholders’ equity | $ | 5,287,908 | $ | 4,927,622 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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CN RESOURCES INC.
Consolidated Statements of Operations and Comprehensive Loss
Unaudited
For the three months | For the three months | |||||||
ended | ended | |||||||
August 31, 2017 | August 31, 2016 | |||||||
Revenue | ||||||||
Oil production (net of royalty) | $ | 19,718 | $ | 11,708 | ||||
Operating expenses | ||||||||
Accretion expense | 273 | 273 | ||||||
Bank service charge | 163 | 79 | ||||||
General and administrative expenses | 9,000 | 9,000 | ||||||
Management expense | 6,000 | 6,000 | ||||||
Production costs | 8,418 | 12,686 | ||||||
Professional fees | 7,000 | - | ||||||
Regulatory filing | 10,100 | 10,100 | ||||||
Total operating expenses | $ | 40,954 | $ | 38,138 | ||||
Foreign currency exchange gain | 308 | - | ||||||
Interest income | 55,128 | 8,909 | ||||||
55,436 | 8,909 | |||||||
Net income (loss) | $ | 34,200 | $ | (17,521 | ) | |||
Income (Loss) per common share - basic and diluted | $ | 0.00 | $ | (0.00 | ) | |||
Weighted average common shares outstanding - basic and diluted | 56,100,000 | 56,100,000 | ||||||
Comprehensive loss | ||||||||
Net Income (loss) | $ | 34,200 | $ | (17,521 | ) | |||
Foreign currency translation adjustment | 388,769 | (17,255 | ) | |||||
Total comprehensive Income (loss) | $ | 422,969 | $ | (34,776 | ) |
The accompanying notes are integral part of these unaudited consolidated financial statements.
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CN RESOURCES INC.
Consolidated Statements of Cash Flows
Unaudited
For the three months | For the three months | |||||||
ended | ended | |||||||
August 31, 2017 | August 31, 2016 | |||||||
Cash Flows From Operating Activities | ||||||||
Net Income (Loss) for the period | $ | 34,200 | $ | (17,521 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities Depreciation, depletion and accretion | 273 | 273 | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | 11,042 | 6,826 | ||||||
Other receivable | 127 | (9,926 | ) | |||||
Accounts payable | 8,434 | (7,348 | ) | |||||
Due to Director | (71,391 | ) | 23,772 | |||||
Net cash provided (used) in operating activities | (17,315 | ) | (3,924 | ) | ||||
Cash Flows From Investing Activities | ||||||||
Investment in available-for-sale securities | (1,077,480 | ) | - | |||||
Net cash provided (used) in investing activities | (1,077,480 | ) | - | |||||
Effect of foreign currency exchange rates | 121,875 | (17,255 | ) | |||||
Net increase (decrease) in cash and cash equivalents | (972,920 | ) | (21,179 | ) | ||||
Cash and cash equivalents, beginning of the period | 2,606,586 | 4,980,735 | ||||||
Cash and cash equivalents, end of the period | $ | 1,633,666 | $ | 4,959,556 | ||||
Supplemental cash disclosure | ||||||||
Cash paid for interest payments | $ | - | $ | - | ||||
Cash paid for taxes | $ | - | $ | - |
The accompanying notes are an integral part of these unaudited consolidated financial statements
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CN RESOURCES INC.
Notes to the Consolidated Financial Statements
(Unaudited)
August 31, 2017
1. ORGANIZATION AND BUSINESS OPERATIONS
CN RESOURCES INC. (“we”, “our”, the “Company”) was incorporated in Nevada of the United States of America on May 18, 2010. The Company has a 50% ownership of a joint venture oil well located in Alberta, Canada and generates oil revenue entirely from this well. The Company is evaluating other business opportunities at present to build shareholder value.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
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.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned Canadian subsidiary (also named CN Resources Inc.). All inter-company amounts and transactions are eliminated,
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States necessarily requires management to make estimates and assumption that affect the amounts reported in the financial statements. We regularly evaluate estimates and judgments based on historical experiences and other relevant facts and circumstance. Actual results could differ from those estimates.
Basic and Diluted Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. For the quarter ended August 31, 2017, basic and diluted income per common share is the same because there were no common stock equivalents outstanding.
Recent Accounting Pronouncements
There are no new accounting pronouncements issued or effective that had, or are expected to have, a material impact on the Company’s financial statements.
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3. DUE TO DIRECTOR
The director loans the Company money from time to time on an interest-free due-on-demand basis. The Company also pays a monthly fee of $2,000 to the director to cover general expenses and management fees. As of August 31, 2017, the balance owed to the director amounted to $40,718.
The Company is currently using the office space from its President and CEO on a rent free basis. The President also provides telephone and administrative services for the Company for free, however, there is no agreement or guarantee that the President will provide the free services for any specific period of time.
4. INVESTMENT SECURITIES
The Company made investments into Cornerstone Mortgage Investment Fund (the “Investment Fund”) in which the President is also a Director and Officer of the Investment Fund. The Investment Fund is eligible for registered plan investments, such as pension plan, registered retirement savings plan, registered education savings plan and tax Free saving accounts, as regulated by the Government of Canada. As of August 31, 2017 and May 31, 2017, the Company made a total investment in the amount of CAD $4,550,000 (USD $3,629,535) and CAD $3,100,000 ((USD $2,285,160), respectively. The investment is in the form of redeemable preferred shares which the Company can redeem at any time with three-month’s written notice. The investment earned interest income interest income of CAD $65,500 (USD $51,896) for the quarter ended August 31, 2017, representing an annualized rate of return of 6% per annum.
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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.
During the quarter ended August 31, 2017, crude oil price is still depressed at an historical low level with WTI of $46 to $50 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.
The Company’s immediate core strategy is to create and enhance shareholder value by acquiring sustainable business with stable cash flow. The Company will not acquire any business in early stage of development.
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-month ended August 31, 2017 and 2016
Three-month ended | ||||||||
August 31, 2017 | August 31, 2016 | |||||||
Production revenue (net of royalty) | $ | 19,718 | $ | 11,708 | ||||
Production cost | $ | 8,418 | $ | 12,686 |
The increase in production revenue for the three-month period ended August 31, 2017 compared with August 31, 2016 is due to slight increase in well production volume. The decrease in production cost is due to improved management of the production process.
For the three-month periods ended August 31, 2017 and 2016, the following table indicates major variances compared with previous period. The other expense items on the Consolidated Statements of Operations have no material variances.
Three-month ended | ||||||||
August 31, 2017 | August
31, 2016 | |||||||
Professional fee | $ | 7,000 | $ | - |
The professional fee increase in the three-month period ended August 31, 2017 as compared with the three-month period ended August 31, 2016 was due to timing difference for which the Company received invoices during the quarter and recognized as expense.
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Cash Flow Analysis
For the three months ended August 31, 2017, we used $17,315 cash in operating activities (August 31, 2016 - $(3,924)) and used cash of $1,077,480 (August 31, 2016 – ($nil)) in investing activities.
Liquidity and Capital Resources
At August 31, 2017, we have cash and cash equivalents of $1,633,666 (May 31, 2017 - $2,606,586), oil revenue receivable of $20,273 (May 31, 2017 - $31,315) and investment in available-for-sale securities of $3,629,535 (May 31, 2017 - $2,285,160). We have accounts payable of $12,914 (May 31, 2017 – $4,480) and amounts due to a director of $40,718 (May 31, 2017 - $112,109).
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 weaknesses in controls as soon as the Company considers that the financial situation allows the Company to spend the limited resources to mitigate the weaknesses in controls.
There were no material changes in our internal control over financial reporting during the quarter ended August 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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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, 2017
ITEM 6. | EXHIBITS |
Exhibit | Description | |
31.01 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.01 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CN Resources Inc. | ||
Date: September 29, 2017 | 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 |
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