UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 10-Q

 

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x      QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2014
OR
o      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 000-54482

 

CN RESOURCES INC.

(Exact name of registrant as specified in its charter)

 

NEVADA

(State or other jurisdiction of incorporation or organization)

 

255 Duncan Mill Road, Suite 203

Toronto, Ontario

Canada M3B 3H9

(Address of principal executive offices, including zip code)

 

(416) 510-2991

(Registrant’s telephone number, including area code)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES  x   NO  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  o   NO  x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

	Large Accelerated Filer	o	Accelerated Filer	o
	Non-accelerated Filer	o	Smaller Reporting Company	x

 

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

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 56,100,000 as of January 19, 2015.

 

 

 

TABLE OF CONTENTS

 

		Page
PART I
Item 1.	Financial Statements	3
	Balance Sheets	3
	Statements of Expenses	4
	Statements of Cash Flows	5
	Notes to the Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8
Item 4.	Controls and Procedures	8
PART II
Item 1.	Legal Proceedings	8
Item 1A.	Risk Factors	8
Item 2.	Changes in Securities and Use of Proceeds	8
Item 6.	Exhibits	8
Signatures		9

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.   FINANCIAL STATEMENTS.

 

CN RESOURCES INC.

Balance Sheets

(Unaudited)

 

		November 30, 2014				May 31, 2014
Assets
Current assets
Cash and cash equivalents		$	4,686,132			$	6,052,324
Accounts receivable			53,517				61,332
Note receivable			1,411,313				-
Other receivables			5,342				4,296
Total current assets		$	6,156,304			$	6,117,952
Oil and gas properties (successful efforts), net		$	447,209			$	451,043
Total assets		$	6,603,513			$	6,568,995
Liabilities and Stockholders' Equity
Liabilities
Current Liabilities
Accounts payable		$	5,370			$	5,952
Due to director			338,975				319,492
Total current liabilities			344,345				325,444
Asset retirement obligation			6,346				5,960
Total liabilities			350,691				331,404
Stockholders' equity
Common stock,100,000,000 of shares authorized with $0.00001 par value, 56,100,000 issued and outstanding			561				561
Preferred stock,100,000,000 shares authorized with $0.00001 par value, none issued			-				-
Additional paid-in capital			6,514,639				6,514,639
Accumulated deficit			(262,378	)			(277,609	)
Total stockholders' equity			6,252,822				6,237,591
Total liabilities and stockholders' equity		$	6,603,513			$	6,568,995

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

CN RESOURCES INC.

Statements of Expenses

(Unaudited)

 

		For the Three Months Ended								For the Six Months Ended
		November 30,				November 30,				November 30,				November 30,
		2014				2013				2014				2013
Revenue		$	63,671			$	41,035			$	178,738			$	41,035
Royalty			14,471				-				38,881				-
Cost of production			5,345				16,571				12,879				16,571
			19,816				16,571				51,760				16,571
Gross profit			43,855				24,464				126,978				24,464
Operating expenses
Accretion Expense			156				-				386				-
Bank service charge			92				87				97				136
Management fee			6,000				6,000				12,000				12,000
Professional fees			15,700				8,178				20,060				10,178
Depreciation and depletion expense			8,511				2,513				43,580				2,513
General and administrative expenses			13,377				9,000				22,377				18,550
Regulatory filing			10,650				-				13,247				-
Total operating expenses			54,486				25,778				111,747				43,377
Operating income (loss)			(10,631	)			(1,314	)			15,231				(18,914	)
Net income (loss)		$	(10,631	)		$	(1,314	)		$	15,231			$	(18,914	)
Loss per common share - basic and diluted		$	(0.00	)		$	(0.00	)		$	0.00			$	(0.00	)
Weighted average common shares outstanding - basic and diluted			56,100,000				26,100,000				56,100,000				26,100,000

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

CN RESOURCES INC.

Statements of Cash Flows

(Unaudited)

 

		For the six Months				For the six Months
		ended				ended
		November 30, 2014				November 30, 2013
Cash Flows From Operating Activities
Net income (loss) for the period		$	15,231			$	(18,914	)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation, depletion, and accretion			43,966				2,513
Changes in operating assets and liabilities
Accounts Receivable			7,815				-
Other receivable			(359	)			(4,142	)
Accounts Payable			1,532				(61,470	)
Net cash (used in) provided by operating activities			68,185				(82,013	)
Cash Flows from Investing Activities
Issuance of Note Receivable			(1,412,000	)			-
Oil and gas property expenditures			(39,746	)			-
Net cash used in investing activities			(1,451,746	)			-
Cash Flows from Financing Activities
Proceeds from Director advances			41,933				78,546
Payments to Director for advances			(24,564	)			(9,412	)
Net cash (used in) provided by financing activities			17,369				69,134
Net increase (decrease) in cash and cash equivalents			(1,366,192	)			(12,879	)
Cash and cash equivalents, beginning of the period			6,052,324				25,468
Cash and cash equivalents, end of the period		$	4,686,132			$	12,589
Non-Cash transactions
Due to Director for equipment purchased			-				91,837

 

The accompanying notes are an integral part of these unaudited interim financial statements.

 

 

CN RESOURCES INC.

Notes to the Financial Statements

(Unaudited)

November 30, 2014 

 

1. BUSINESS OPERATIONS

 

CN Resources Inc. is an independent energy company engaged in the exploration, development, production, and sale of crude oil. Our operations are conducted through a 100% wholly owned Ontario Corporation (also named CN Resources Inc.) which owns a producing joint venture oil well in the Redwater area in Alberta, Canada.

 

2. BASIS OF PRESENTATION

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

3. NOTE RECEIVABLE

 

On November 13, 2014, the Company provided a loan in the amount of $1,411,313 (CAD $1,600,000) to a third party with an interest of 7% per annum. The loan is unsecured and due on demand.

 

4. DUE TO DIRECTOR

 

The director loans the company money from time to time on an interest-free due-on-demand basis. As of November 30, 2014, the total amount advanced and unpaid is $338,975 including $91,837 the director paid for the equipment of the joint venture well.

 

The Company is currently using the office space from its President and CEO and on rent free basis.

 

 

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

 

This section of this annual report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

 

The following discussion and analysis presents management's perspective of our business, financial condition, and overall performance. This information is intended to provide investors with an understanding of our past performance, current financial condition, and outlook for the future, and should be read in conjunction with our Audited Annual Financial Statements Form 10-K.

 

OVERVIEW OF THE COMPANY

 

CN Resources Inc. is an independent energy company engaged in the exploration, development, production, and sale of crude oil. Our operations are conducted through a 100% wholly owned Ontario Corporation (also named CN Resources Inc.) which owns a producing joint venture oil well in the Redwater area in Alberta, Canada.

 

The Company’s immediate core strategy is to create and enhance shareholder value by acquiring proved developed and producing light oil assets, optimize the producing assets to increase production and fully develop the assets potential for reserves. Management believes that this is the best approach to create shareholder value based on risk and rewards analysis.

 

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.

 

The following table sets forth certain of our oil operating information for the three months ended November 30, 2014.

 

		2014
Production Data :
Oil production (bbls)			916
Average daily oil production (bbl/d)			10
Revenue Data :
Oil revenue ($)			63,671
Average realized oil sales price ($/bbl)			69.51
Royalty expenses			14,471
Production expenses			5,345
Average operating expenses ($/boe)			21.63
Operating Margin ($/bbl)			47.88
Depreciation, depletion, and amortization			8,511

 

Liquidity and Capital Resources

 

On May 28, 2014, we closed an equity financing of $6,000,000 and as at November 30, 2014, we have cash on hand of $4,686,132 and oil revenue receivable of $53,517. We have no material third party debt other than debt owed to our Director and Officer.

 

On November 13, 2014, we issued a note to a third party in the amount of $1,411,313 (CAD $1,600,000), the note is due on demand and bears an interest of 7% per annum payable quarterly in arrears.

 

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.

 

 

Off Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

ITEM 4.  CONTROLS AND PROCEDURES.

 

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are not effective due to limited segregation of duties, lack of independent directors, and no written internal control procedure manual. The Company plans to address the weakness in control as soon as the Company considers that the financial situation allows the Company to spend the limited resources to mitigate the weakness in control.

 

There were no material changes in our internal control over financial reporting during the quarter ended November 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS

 

We are not aware of any pending or threatened litigation against us or our officers and director in their capacity as such.

 

ITEM 1A.  RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

 

There is no change in securities in the three-month period ended November 30, 2014.

 

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

 

 

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: January 19, 2015	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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