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EX-32 - Eternelle Skincare Products Inc.ex32-1.txt
EX-31 - Eternelle Skincare Products Inc.ex31-1.txt

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

                                    FORM 10-Q

(Mark One)

[X]                  QUARTERLY REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended February 28, 2011

                                       OR

[_]                 TRANSITION REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

           For the transition period from __________ to ______________

                        Commission File Number 333-133347

                              CREENERGY CORPORATION
                              ---------------------
             (Exact name of registrant as specified in its charter)

          Nevada                                              98-0479983
          ------                                              ----------
(State or other jurisdiction                                  (IRS Employer
    of incorporation or                                     Identification No.)
     organization)


         57113, 2020 Sherwood Drive, Sherwood Park, AB, Canada, T8A 5L7
        ----------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (780) 668-7422

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 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 past 90 days.

Yes [X]    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, or a smaller reporting company. See
definition  of "large  accelerated  filer,"  "accelerated  filer"  and  "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Larger accelerated filer [_]                               Accelerated filer [_]
Non-accelerated filer [_]                          Smaller reporting company [X]

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


Number of shares issued and outstanding of the registrant's class of common stock as of April 10 2011: 96,000,000 shares of common stock The Company recognized revenues of $nil during the quarter ended February 28, 2011. 2
PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Page ---- Interim Balance Sheets F-5 Interim Statements of Loss and Comprehensive Loss F-6 Interim Statements of Cash Flows F-7 Interim Statement of Changes in Stockholders' Deficiency F-8 Notes to Interim Financial Statements F-9 to F-13 Item 2. Management's Discussion and Analysis or Plan of Operations 14 Item 3 Quantitative and Qualitative Disclosure about Market Risk 16 Item 4 Controls and Procedures 16 PART II - OTHER INFORMATION Item 1 Legal Proceedings 17 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17 Item 3. Defaults upon Senior Securities - Not Applicable 17 Item 4. Removed and Reserved 17 Item 5. Other Information 18 Item 6. Exhibits 18 SIGNATURES 19 3
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CREENERGY CORPORATION (A Development Stage Company) INTERIM FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (Unaudited) FEBRUARY 28, 2011 Financial Statements Page Balance Sheets F-5 Interim Statements of Loss and Comprehensive Loss F-6 Interim Statements of Cash Flows F-7 Interim Statement of Changes in Stockholders' Deficiency F-8 Notes to Interim Financial Statements F-9 to F-13 F-4
CREENERGY CORPORATION (A Development Stage Company) INTERIM BALANCE SHEETS February 28, November 30, 2010 2011 (Unaudited) (Audited) ASSETS Current Assets Cash and cash equivalents $ 2,039 $ 6,090 Prepaid expenseS 200 200 -------------------------------------- TOTAL ASSETS $ 2,239 $ 6,290 ====================================== LIABILITIES AND STOCKHOLDERS' DEFICIENCY LIABILITIES Current Liabilities Accounts payable and accrued liabilities (Note 3) $ 18,467 $ 13,133 Note payable (Note 4) 16,000 16,000 -------------------------------------- Total Current Liabilities 34,467 29,133 -------------------------------------- STOCKHOLDERS' DEFICIENCY Capital Stock (Note 6) Authorized: 675,000,000 common shares, par value $0.001 per share Issued and outstanding: 96,000,000 common shares 96,000 96,000 Additional paid-in capital 13,000 13,000 Accumulated other comprehensive income - 333 Accumulated deficit (105,837) (105,837) Accumulated Deficit during Development Stage (35,391) (26,339) Total Stockholders' Deficiency (32,228) (22,843) -------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 2,239 $ 6,290 ====================================== The accompanying notes are an integral part of these statements. F-5
CREENERGY CORPORATION (A Development Stage Company) INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Unaudited) Cumulative Amounts from For the three-month For the re-entering of period ended three-month development stage on February 28, 2011 period ended June 26, 2010 to February 28, 2010 February 28, 2011 --------------------------------------------------------------------------- Expenses Office and administration 394 160 2,674 Professional fees 8,991 2,835 33,050 --------------------------------------------------------------------------- 9,385 2,995 35,724 --------------------------------------------------------------------------- Net Loss before Other Item (9,385) (2,995) (35,724) Other Item Foreign exchange gain 333 - 333 --------------------------------------------------------------------------- Net loss from Continuing Operations (9,052) (2,995) (35,391) --------------------------------------------------------------------------- Discontinued Operations (Note 8) Net Profit from discontinued operations - 2,551 - --------------------------------------------------------------------------- Net Loss For The Period (9,052) (744) (35,391) =========================================================================== Other Comprehensive Income (Loss) Foreign currency translation adjustment (333) - (333) --------------------------------------------------------------------------- Comprehensive Loss For the Period $ (9,385) $ (744) $ (35,724) =========================================================================== Loss per share from continuing operations - Basic and diluted $ (0.00) $ (0.00) Earnings (loss) per share from discontinued operations - Basic and diluted $ (0.00) $ 0.00 ============================================== Weighted Average Number of Shares Outstanding 96,000,000 96,000,000 ============================================== F-6
CREENERGY CORPORATION (A Development Stage Company) INTERIM STATEMENTS OF CASH FLOWS (Unaudited) Cumulative from Three-month Three-month re-entering of period ended period ended development stage on February 28, February 28, June 26, 2010 to 2011 2010 February 28, 2011 Cash Flows from Operating Activities Net loss $ (9,052) $ (744) $ (35,391) Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities Depreciation and amortization - 477 - Prepaid expenses - (50) 2,509 Accounts payable and accrued liabilities 5,334 (2,276) 17,718 ----------------------------------------------------------------- Cash Used in Operating Activities (3,718) (2,593) (15,164) Cash Flows From Financing Activities Contribution by related party - - 13,000 ----------------------------------------------------------------- Net Cash Provided by (Used in) Financing Activities - - 13,000 Decrease in Cash during the Period (3,718) (2,593) (2,164) Effect of Exchange Rate Changes on Cash (333) - (333) ----------------------------------------------------------------- Cash, Beginning Of Period 6,090 2,841 4,536 ----------------------------------------------------------------- Cash, End Of Period $ 2,039 $ 248 $ 2,039 ================================================================= Supplemental Disclosure Of Cash Flow Information Cash paid for: Interest $ - $ - $ - Income taxes $ - $ - $ - ================================================================= The accompanying notes are an integral part of these statements. F-7
CREENERGY CORPORATION (A Development Stage Company) INTERIM STATEMENT OF STOCKHOLDERS' DEFICIENCY For the Period from November 30, 2008 through February 28, 2011 (Unaudited) CAPITAL STOCK ACCUMULATED --------------------------------------------------- ADDITIONAL DEFICIT DURING ACCUMULATED PAID-IN ACCUMULATED DEVELOPMENT COMPREHENSIVE SHARES AMOUNT CAPITAL DEFICIT STAGE INCOME (LOSS) TOTAL ------------------------------------------------------------------------------------------------------------- Balance, November 30, 2008 96,000,000 $ 96,000 $ - $ (98,397) $ - $ (129) $ (2,526) ------------------------------------------------------------------------------------------------------------- Foreign currency translation adjustment - - - - - 441 441 Net loss for the year ended - - - (6,389) - - (6,389) ------------------------------------------------------------------------------------------------------------- Balance, November 30, 2009 96,000,000 96,000 - (104,786) - 312 (8,474) ------------------------------------------------------------------------------------------------------------- Common shares issued - cash ($0.004) per share) (Note 6) 120,000,000 120,000 - (104,000) - - 16,000 Common shares cancelled (120,000,000) (120,000) - 104,000 - - (16,000) Contribution by related party - - 13,000 - - - 13,000 (Note 5) Foreign currency translation adjustment - - - - - 21 21 Net loss for the year - - - (1,051) (26,339) - (27,390) ------------------------------------------------------------------------------------------------------------- Balance, November 30, 2010 96,000,000 96,000 13,000 (105,837) (26,339) 333 (22,843) ------------------------------------------------------------------------------------------------------------- Foreign currency translation adjustment - - - - - (333) (333) Net loss for the period - - - - (9,052) - (9,052) ============================================================================================================= Balance, February 28, 2011 96,000,000 $ 96,000 $ 13,000 $ (105,837) $ (35,391) $ - $ (32,228) ============================================================================================================= The accompanying notes are an integral part of these statements. F-8
CREENERGY CORPORATION (A Development stage Company) NOTES TO INTERIM FINANCIAL STATEMENTS February 28, 2011 (Unaudited) 1. NATURE AND CONTINUANCE OF OPERATIONS a) Organization CREENERGY Corporation (formerly Online Originals, Inc.) (the "Company") was incorporated in the State of Nevada, United States of America, on November 18, 2005. On July 29, 2010, the Company's name was changed from Online Originals, Inc. to CREENERGY Corporation. The Company's year end is November 30. b) Nature of Operations and Change in Business Since the date of inception on November 18, 2005, the Company's business plan was to develop a membership-based website art gallery/auction house specifically focused on displaying and selling original artwork. The Company changed its status from a development stage company to an operating company on November 30, 2009. Management realized that the results of operations from the sale of artwork lacks luster and decided to change the Company's business focus and plan for other strategic opportunities and discontinued the sale of artwork with effect from June 25, 2010. Accordingly, the Company has disclosed these activities as discontinued operations in the accompanying interim financial statements. Effective June 26, 2010, the Company became a development stage company focusing on new business development in the form of obtaining leases for the exploration and production of oil and gas in areas of northern Alberta, Canada. c) Unaudited Statements While the information presented in the accompanying interim financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Except as disclosed below, these interim financial statements follow the same accounting policies and methods of their application as the Company's audited November 30, 2010 annual financial statements. It is suggested that these interim financial statements be read in conjunction with the Company's audited financial statements for the year ended November 30, 2010, included in the annual report previously filed with the Securities and Exchange Commission on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. The information as of November 30, 2010 is taken from the audited financial statements as of that date. d) Basis of Presentation The accompanying interim financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates the continuation of the Company as a going concern. However, the Company has negative working capital and stockholders' deficiency at February 28, 2011 and has losses to date of approximately $141,000. These matters raise substantial doubt about its ability to continue as a going concern. In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon its ability to meet its financing requirements, raise additional capital, and the success of its future operations. There is no assurance that future capital raising plans will be successful in obtaining sufficient funds to assure its eventual profitability. Management is actively seeking to add new products and/or services in order to show profitability. In addition, one of the members of the board of directors has agreed to loan funds to the Company if needed. To date, due to the continued economic conditions, they have not yet been able to find products and services that would contribute to their business. We believe that actions planned and F-9
CREENERGY CORPORATION (A Development stage Company) NOTES TO INTERIM FINANCIAL STATEMENTS February 28, 2011 (Unaudited) presently being taken to revise its operating and financial requirements will provide the opportunity for the Company to continue as a going concern. The interim financial statements do not include any adjustments that might result from these uncertainties. 2. RECENT ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2010-06, "Improving Disclosures about Fair Value Measurements". This update requires additional disclosure within the roll forward of activity for assets and liabilities measured at fair value on a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales, issuances and settlements of assets and liabilities within Level 3 of the fair value hierarchy. In addition, the update requires enhanced disclosures of the valuation techniques and inputs used in the fair value measurements within Levels 2 and 3. The new disclosure requirements are effective for interim and annual periods beginning after 15 December 2009, except for the disclosure of purchases, sales, issuances and settlements of Level 3 measurements. Those disclosures are effective for fiscal years beginning after 15 December 2010. As ASU 2010-06 only requires enhanced disclosures, the Company does not expect that the adoption of this update will have a material effect on its financial statements. 3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year. 4. NOTE PAYABLE As of February 28, 2011, the Company had $16,000 note payable to an unrelated party for expenses paid on behalf of the Company. The note payable is unsecured, non-interest bearing, and has no fixed terms of repayment. 5. RELATED PARTY TRANSACTIONS During the three month period ended February 28, 2011, a director and shareholder of the Company made cash contribution in the amount of $Nil (February 28, 2010 - $Nil, Cumulative - $13,000). 6. CAPITAL STOCK Authorized The Company's authorized common stock consists of 675,000,000 shares of common stock with a par value of $0.001 per share. On August 10, 2010, the Company increased the number of authorized share capital from 75,000,000 shares of common stock to 675,000,000 shares of common stock with the same par value of $0.001 per share. Issued and outstanding On June 2, 2010, and effective August 10, 2010, the directors of the Company approved a forward split of the common stock of the Company on a basis of 30 new common shares for 1 old common share. As a result of the forward stock split, 208,800,000 additional shares were issued. Capital and additional paid-in capital have been adjusted accordingly. When adjusted retroactively, there was a $119,501 shortage of additional paid-in capital; thus an adjustment to accumulated deficit of $104,000 was recorded on May 21, 2010 (the date of issuance of 120,000,000 shares) and $15,501 to the beginning balance. The interim financial statements contained herein reflect the appropriate values for capital stock and accumulated deficit. Unless otherwise noted, all references in the accompanying interim financial statements to the number of common shares and per share amounts have been retroactively restated to reflect the forward stock split. F-10
CREENERGY CORPORATION (A Development stage Company) NOTES TO INTERIM FINANCIAL STATEMENTS February 28, 2011 (Unaudited) The total issued and outstanding capital stock is 96,000,000 common shares with a par value of $0.001 per common share. The Company's common stock issuances to date are as follows: i) On November 18, 2005, 54,000,000 shares of the Company's common stock were issued to a former director and officer of the Company for cash proceeds of $18,000. ii) On November 28, 2005, 21,000,000 shares of the Company's common stock were issued to a former director and officer of the company for cash proceeds of $7,000. iii) On July 21, 2006, the Company completed a public offering and issued 21,000,000 shares of the Company's common stock for cash totaling $70,000. The Company incurred offering costs of $14,501 related to this offering, resulting in net proceeds of $55,499. iv) On May 21, 2010, 120,000,000 shares of the Company's restricted common stock, valued at $16,000, were issued to a former director and officer of the Company. On October 29, 2010, the 120,000,000 restricted common shares of the Company previously issued to a former director and officer of the Company were returned to treasury for no consideration. The shares were cancelled on 2 November 2010. 7. INCOME TAXES The Company has losses carry forward for income tax purposes to February 28, 2011. There are no current or deferred tax expenses for the period ended February 28, 2011 due to the Company's loss position. The Company has fully reserved for any benefits of these losses. The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as appropriate. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company's ability to generate taxable income within the net operating loss carryforward period. Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes. The provision for refundable federal income tax consists of the following: For the three-month period ended ----------------- February 28, February 28 2011 2010 ----------------------------------------- Deferred tax asset attributable to Current operations $ 3,168 $ 186 Less: Change in valuation allowance (3,168) (186) --------------------------------------------- Net refundable amount $ - $ - --------------------------------------------- F-11
CREENERGY CORPORATION (A Development stage Company) NOTES TO INTERIM FINANCIAL STATEMENTS February 28, 2011 (Unaudited) The composition of the Company's deferred tax asset as at February 28, 2011 and November 30, 2010 are as follows: November 30, 2010 February 28, 2011 (Audited) ----------------------------------------- Net operation loss carry-forward $ 125,727 116,675 Statutory federal income tax rate 35% 35% Deferred tax assets 44,004 40,836 Less: Valuation allowance (44,004) (40,836) ----------------------------------------- Net Deferred Tax Assets $ - $ - ----------------------------------------- The potential income tax benefit of these losses has been offset by a full valuation allowance. As at February 28, 2011, the Company has an unused net operating loss carry forward balance of approximately $125,727 that is available to offset future taxable income. This unused net operation loss carry forward balance for income tax purposes expires as follows: $ 2025 2,680 2026 14,178 2027 37,588 2028 28,450 2029 6,389 2030 27,390 2031 9,052 --------------------- 125,727 --------------------- 8. DISCONTINUED OPERATIONS AND NEW DEVELOPMENTS The Company's attempts over the past years to build a business that provides a website where members and customers are able to bid on and purchase pieces of art had not come to fruition so management decided to change the business focus and look for other opportunities. Therefore, management decided to discontinue selling art pieces and reflect such discontinuance in its operating statement and cash flow statements effective June 25, 2010. Management decided on that date to focus on new business development in the form of obtaining leases for the exploration and production of oil and gas in First Nation areas of northern Alberta, Canada. F-12
CREENERGY CORPORATION (A Development stage Company) NOTES TO INTERIM FINANCIAL STATEMENTS February 28, 2011 (Unaudited) During the three month period ended February 28, 2011 and the three month period ended February 28, 2010, the Company had $Nil and $3,520 in revenue, respectively, related to its discontinued operations. For the three For the three month period month period ended ended February 28, 2011 February 28, 2010 Revenue $ - $ 3,520 ----------------------------------- Expenses Depreciation and amortization - 477 Office and administration - 792 ----------------------------------- - 1,269 ----------------------------------- Net Profit from Discontinued Operations $ - $ 2,251 =================================== 9. CONTINGENCY On November 22, 2010, the Company was served with a claim filed by a former director and officer of the Company. The claim alleges that the former director and officer of the Company suffered losses and damages as a result of the failure of the Company in providing him with corporate documents and implementing a change of the board of directors. The Company has retained legal counsel to address the claim. On December 8, 2010, the Company filed a Statement of Defense requesting that the claim be dismissed. In the opinion of management, this claim is without merit and the Company intends to defend this claim vigorously. As a loss is not deemed probable, and as such, no accruals have been made as of February 28, 2011. 10. COMPARATIVE FIGURES Certain comparative figures have been adjusted to conform to the current period's presentation. 11. SUBSEQUENT EVENT There are no reportable events during the period from the three month period ended February 28, 2011 to the date the interim financial statements are available to be issued on April 8, 2011. F-13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The following discussion should be read in conjunction with our unaudited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic, and competitive, uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by or on our behalf. We disclaim any obligation to update forward-looking statements. The following discussion of the plan of operation, financial condition, results of operations, cash flows and changes in financial position of our Company should be read in conjunction with our most recent financial statements and notes appearing elsewhere in this Quarterly Report on Form 10-Q, our Schedule 14C Information Statement filed July 7, 2010, our Quarterly Report on Form 10-Q filed on July 19, 2010, our Quarterly Report on Form 10-Q filed on April 13, 2010, and our Annual Report on Form 10-K filed on March 11, 2011. The independent registered public accounting firms' reports on the Company's financial statements as of November 30, 2010, and for each of the years in the two-year period then ended; include a "going concern" explanatory paragraph that describes substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to the factors prompting the explanatory paragraph are discussed below and also in Note 1 to the unaudited quarterly financial statements. Management's Discussion and Analysis of Financial Condition and Results of Operations DISCONTINUED OPERATIONS AND NEW DEVELOPMENTS Since inception, the Company's business plan was to develop a membership based website art gallery/auction house specifically focused on displaying and selling original artwork. The Company changed its status from a development stage company to an operating company on November 30, 2009. Management realized that the results of operations from the sale of artwork was lack-luster, and it was decided to change the Company's business focus and plan for other strategic opportunities and discontinued the sale of artwork to be effective June 25, 2010. Effective June 26, 2010, the Company started to focus on a new business development. On July 29, 2010, the Company's name changed from Online Originals, Inc. to Creenergy Corporation. The name change was intended to convey a sense of the Company's new business focus as it looks to pursue other opportunities. Specifically, the Company intends to obtain leases for the exploration and production of oil and gas in northern Canada and the United States. At the date of this Quarterly Report, the Company has not identified any prospects or entered into any leases or agreements. Creenergy Corporation is a development stage oil and gas company that is engaged in the development and exploration for natural resources. The Company is active in Canada and the United States and is seeking to acquire properties that are prospective for petroleum and natural gas and related hydrocarbons. The prospects the Company intends to target are those properties that are generally under leases and include partial and full working interests. It is intended that in all of the core properties, Creenergy will be the operator and majority interest owner. It is understood that, the prospects are subject to varying royalties due to the state, province, territory, or federal governments and, in some instances, to other royalty owners in the prospect. Principal Products and Services ------------------------------- Currently, we have not acquired any leases or working interests. We do not have any production. 14
Markets. ------- The availability of a ready market for oil and gas discovered, if any, will depend on numerous factors beyond the Company's control, including the proximity and capacity of refineries, pipelines, and the effect of provincial regulation of production and of regulations of products sold in interstate commerce, and recent intrastate sales. The market price of oil and gas are volatile and beyond the Company's control. The market for natural gas is also unsettled, and gas prices have increased dramatically in the past four years with substantial fluctuation, seasonally and annually. There generally are only a limited number of gas transmission companies with existing pipelines in the vicinity of a gas well or wells. In the event that producing gas properties are not subject to purchase contracts or that any such contracts terminate and other parties do not purchase the Company's gas production, there is no assurance that Creenergy will be able to enter into purchase contracts with any transmission companies or other purchasers of natural gas and there can be no assurance regarding the price which such purchasers would be willing to pay for such gas. There presently exists an oversupply of gas in the certain areas of the marketplace due to pipeline capacity, the extent and duration of which is not known. Such oversupply may result in restrictions of purchases by principal gas pipeline purchasers. Effect of Changing Industry Conditions on Drilling Activity. ----------------------------------------------------------- Lower oil and gas prices have caused a decline in drilling activity in the U.S. from time to time. However, such reduced activity has also resulted in a decline in drilling costs, lease acquisition costs and equipment costs, and an improvement in the terms under which drilling prospects are generally available. Creenergy cannot predict what oil and gas prices will be in the future and what effect those prices may have on drilling activity in general, or on its ability to generate economic drilling prospects and to raise the necessary funds with which to drill them. Material Changes in Financial Condition At February 28, 2011, our cash balance was $2,039. In addition, we have prepaid expenses of $200. Cash on hand is currently our only source of liquidity. We do not have any lending arrangements in place with banking or financial institutions and we do not anticipate that we will be able to secure these funding arrangements in the near future. At February 28, 2011, we had a working capital deficit of $32,228 compared to a working capital deficit of $22,843 at November 30, 2010. At February 28, 2011, our total assets consisted of cash of $2,039 and prepaid expenses of $200. This compares with total assets at November 30, 2010, which consisted of cash of $6,090, and prepaid expenses of $200. At February 28, 1011, our total current liabilities increased to $34,467 from $29,133 at November 30, 2010. During the three months ended February 28, 2011, accounts payable and accrued liabilities increased by $5,334. We believe our existing cash balances will not be sufficient to carry our normal operations over the next three (3) months. Our short and long-term survival is dependent on sales of securities as necessary or from shareholder loans, and thus, to the extent that we require additional funds to support our operations or the expansion of our business, we will attempt to sell additional equity shares or issue debt. Any sale of additional equity securities will result in dilution to our stockholders. Continuing events in worldwide capital markets may make it more difficult for us to raise additional equity or capital. There can be no assurance that additional financing, if required, will be available to us or on acceptable terms. Result of Operations For The Three Months Ended February 28, 2011 Compared To The Three Months Ended February 28, 2010. We recognized nil revenues from operational sales during the three months ending February 28, 2011. We do not show any cumulative revenue amounts since re-entering the development stage on June 26, 2010. During the three months ended February 28, 2011, operating expenses were $9,385 compared to $2,995 for the three months ended February 28, 2010. The increase of $6,390 was due to increase in our operational activities over the prior period. Operating expenses during the three months ended February 28, 2011, consisted of professional fees of $8,991 and office and administration costs of $394 compared 15
to professional fees of $2,835 and office and administration fees of $160 incurred for the three months ended February 28, 2010. We recognized a net loss of $9,385 for the three months ended February 28, 2011, compared to a net loss of $2,995 for the three months ended February 28, 2010. The cumulative loss of $35,724 is for the period June 26, 2010, to February 28, 2011, Off-Balance Sheet Arrangements We currently do not have any off-balance sheet arrangements. Critical Accounting Policies and Estimates The preparation of the Company's financial statements in conformity with generally accepted accounting principles in the United States requires management to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses as well as the 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. The following is a summary of the significant accounting policies and related estimates that affect the Company's financial disclosures. Revenue Recognition Revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable and collectability is reasonably assured. Revenue recognition from consignment inventory consists of commission income. Foreign Currency Translations The functional currency is the Canadian dollar and the reporting currency is the U.S. dollar. At each balance sheet date, assets and liabilities that are denominated in a currency other than U.S. dollars are adjusted to reflect the current exchange rate which may give rise to a foreign currency translation adjustment accounted for as a separate component of shareholders' equity and included in other comprehensive loss. Revenues and expenses are translated at the average daily rate for the year covering the financial statement year to approximate the rate of exchange on the transaction date. Exchange gains and losses are included in the determination of net income (loss) for the period. ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item. ITEM 4. CONTROLS AND PROCEDURES As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. 16
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management's assessment of the effectiveness of the small business issuer's internal control over financial reporting is as of the quarter ended February 28, 2011. We believe that our internal control over financial reporting was not effective due to material weaknesses in the system of internal control. Specifically, management identified the following control deficiency: The Company has installed accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail of entries made in the accounting software. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended February 28, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings On November 22, 2010, the Company was served with a claim filed by a former director and officer of the Company. The claim, filed in the court of Queen's Bench of Alberta, Canada, alleges that the former director and officer of the Company suffered losses and damages as a result of the failure of the Company in providing him with corporate documents and implementing a change of the board of directors. The Company has retained legal counsel to address the claim. On December 8, 2010, the Company filed a Statement of Defense requesting that the claim be dismissed. The Company intends to defend this claim vigorously. Other then the above preceding, the Company is not a party to any other pending legal proceedings, nor is the Company aware of any civil proceeding or government authority contemplating any legal proceeding as of the date of this filing. Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. Item 3. DEFAULTS UPON SENIOR SECURITIES None. Item 4. REMOVED AND RESERVED. 17
Item 5. OTHER INFORMATION None. Item 6. EXHIBITS (a) Pursuant to Item 601 of Regulation S-K, the following exhibits are included herein. Exhibit Number Description 31.1 Section 302 Certification - Chief Executive Officer and Chief Financial Officer. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer and Chief Financial Officer. 18 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, on this 12 day of April, 2011. CREENERGY CORPORATION Date: April 12, 2011 By: /s/ Shari Sookarookoff ---------------------- Name: Shari Sookarookoff Title: President/Chief Executive Officer and Chief Financial (Accounting) Officer 1