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EX-32.01 - CERTIFICATION - CN Resources Inc. | f10q0217ex32i_cnresourcesinc.htm |
EX-31.01 - CERTIFICATION - CN Resources Inc. | f10q0217ex31i_cnresourcesinc.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 FEBRUARY 28, 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, 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 | ☐ | Accelerated Filer | ☐ | |
Non-accelerated Filer | ☐ | Smaller Reporting Company | ☒ |
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 April 14, 2017
TABLE OF CONTENTS
Page | ||
PART I | ||
Item 1. | Financial Statements | 1 |
Consolidated Balance Sheets (unaudited) | 1 | |
Consolidated Statements of Operations and Comprehensive Loss (unaudited) | 2 | |
Consolidated Statements of Cash Flows (unaudited) | 3 | |
Notes to the Consolidated Financial Statements (unaudited) | 4 | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 5 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 6 |
Item 4. | Controls and Procedures | 6 |
PART II | ||
Item 1. | Legal Proceedings | 7 |
Item 1A. | Risk Factors | 7 |
Item 2. | Changes in Securities and Use of Proceeds | 7 |
Item 6. | Exhibits | 7 |
Signatures | 8 |
PART I - FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS. |
CN RESOURCES INC.
Consolidated Balance Sheets
Unaudited
February 28, 2017 | May 31, 2016 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 2,883,145 | $ | 4,980,735 | ||||
Accounts receivable - Oil and Gas | 26,089 | 26,351 | ||||||
Investment | 2,037,960 | - | ||||||
Other current assets | 4,513 | 1,584 | ||||||
Total current assets | $ | 4,951,707 | $ | 5,008,670 | ||||
Total assets | $ | 4,951,707 | $ | 5,008,670 | ||||
Liabilities and Stockholders' Equity | ||||||||
Liabilities | ||||||||
Current Liabilities | ||||||||
Accounts payable | 1,416 | 7,448 | ||||||
Due to director | 91,474 | 45,629 | ||||||
Total current liabilities | 92,890 | 53,077 | ||||||
Asset retirement obligation | 8,091 | 7,282 | ||||||
Total liabilities | 100,981 | 60,359 | ||||||
Stockholders' equity | ||||||||
Common stock,100,000,000 of shares authorized with $0.00001 par value, 56,100,000 issued and outstanding | 561 | 561 | ||||||
Preferred stock,100,000,000 shares authorized with $0.00001 par value, none issued | - | - | ||||||
Additional paid-in capital | 6,514,639 | 6,514,639 | ||||||
Accumulated Other Comprehensive loss | (878,671 | ) | (790,882 | ) | ||||
Accumulated deficits | (785,803 | ) | (776,007 | ) | ||||
Total stockholders' equity | 4,850,726 | 4,948,311 | ||||||
Total liabilities and stockholders' equity | $ | 4,951,707 | $ | 5,008,670 |
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
1 |
CN RESOURCES INC.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
February 28, | February 29, | February 28, | February 29, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue | ||||||||||||||||
Oil production (net of royality) | $ | 19,325 | $ | 9,822 | $ | 42,112 | $ | 53,774 | ||||||||
Operating expenses | ||||||||||||||||
Accretion expenses | 263 | - | 809 | - | ||||||||||||
Bank service charge | 55 | 102 | 159 | 205 | ||||||||||||
Production cost | 7,934 | 5,820 | 26,054 | 17,148 | ||||||||||||
General and administrative expenses | 9,005 | 9,000 | 27,005 | 27,546 | ||||||||||||
Management expenses | 6,000 | 6,000 | 18,000 | 18,000 | ||||||||||||
Professional fees | 3,750 | 8,250 | 22,324 | 25,760 | ||||||||||||
Regulatory filing | 901 | 2,031 | 12,634 | 11,160 | ||||||||||||
Total operating expenses | 27,908 | 31,203 | $ | 106,985 | 99,819 | |||||||||||
Interest income | 35,636 | 30 | $ | 55,077 | 3,591 | |||||||||||
Net income (loss) for the period | $ | 27,053 | $ | (21,351 | ) | $ | (9,796 | ) | $ | (42,454 | ) | |||||
Loss per common share - basic and diluted | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||
Comprehensive income: | ||||||||||||||||
Net income (loss) | $ | 27,053 | $ | (21,351 | ) | $ | (9,796 | ) | $ | (42,454 | ) | |||||
Foreign currency translation adjustment | 60,263 | (73,360 | ) | (87,789 | ) | (379,456 | ) | |||||||||
Total comprehensive income (loss) | 87,316 | (94,711 | ) | (97,585 | ) | (421,910 | ) | |||||||||
Weighted average common shares outstanding - basic and diluted | 56,100,000 | 56,100,000 | 56,100,000 | 56,100,000 |
The accompanying notes are integral part of these unaudited interim consolidated financial statements.
2 |
CN RESOURCES INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the nine Months | For the nine Months | |||||||
ended | ended | |||||||
February 28, 2017 | February 29, 2016 | |||||||
Cash Flows From Operating Activities | ||||||||
Net loss for the period | $ | (9,796 | ) | $ | (42,454 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Accretion | 809 | 819 | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | 262 | 7,469 | ||||||
Other current assets | (2,929 | ) | 5,572 | |||||
Accounts payable | (6,032 | ) | (2,878 | ) | ||||
Net cash used in operating activities | (17,686 | ) | (31,472 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Note receivable | - | 4,718,126 | ||||||
Investment | (2,037,960 | ) | - | |||||
Net cash provided (used) in investing activities | (2,037,960 | ) | 4,718,126 | |||||
Cash Flows from Financing Activities | ||||||||
Proceeds from Director advances | 45,845 | 27,773 | ||||||
Net cash provided by financing activities | 45,845 | 27,773 | ||||||
Effective of foreign currency rates | (87,789 | ) | (130,127 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (2,097,590 | ) | 4,584,300 | |||||
Cash and cash equivalents, beginning of the period | 4,980,735 | 226,786 | ||||||
Cash and cash equivalents, end of the period | 2,883,145 | 4,811,086 | ||||||
Supplemental cash disclosure | ||||||||
cash paid for interest payment | $ | - | $ | - | ||||
cash paid for tax | $ | - | $ | - | ||||
Non-cash transaction, proceeds from Note Receivable paid director loan | $ | - | $ | 376,249 |
The accompanying notes are an integral part of these unaudited interim consolidated financial statements
3 |
CN RESOURCES INC.
Notes to the Consolidated Financial Statements
(Unaudited)
February 28, 2017
1. BUSINESS OPERATIONS
CN Resources Inc. (the “Company”) is an independent energy company engaged in the exploration, development, production, and sale of crude oil. Our operations are conducted through a 100% wholly owned Ontario Corporation (also named CN Resources Inc.) which owns a producing joint venture oil well in the Redwater area in Alberta, Canada.
2. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year.
Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.
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.
3. INVESTMENT
The Company investment is recorded at cost. The investment is redeemable with three-month written notice and is at the sole discretion of the Company. Therefore, the Company recorded its investment at its cost.
At the end of quarter, the Company made an investment in DX Mortgage Income Fund, an unrelated party, in the amount of CAD $2,700,000 (USD $2,040,060), with an annualized interest rate payment of approximately 6%. The investment is redeemable at any time by written notice to the fund manager. The Company has received interest income of CAD $40,500 (USD $30,780) in the quarter ended February 28, 2017.
4. DUE TO DIRECTORS
A director loans the Company money from time to time on an interest-free due-on-demand basis and, as of February 28, 2017 total amount advanced was $91,474 (May 31, 2016 - $45,629). The Company pays a monthly management fee of $2,000 to the Director since the inception of the Corporation,
The Company is currently using the office space from its President and CEO and on rent free basis, the President is also provided telephone and administrative services for the Company on free basis, however, there is no agreement or guarantee that the President will provide the free services for any specific period of time.
4 |
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 February 28, 2017, Crude oil price is still depressed at an historical low level with WTI of $46 to $54 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 and nine-month ended February 28, 2017 and February 29, 2016
Three-month ended | Nine-month ended | |||||||||||||||
February 28, 2017 | February 29, 2016 | February 28, 2017 | February 29, 2016 | |||||||||||||
Production revenue (net of royalty) | $ | 19,325 | $ | 9,822 | $ | 42,112 | $ | 53,774 | ||||||||
Production cost | $ | 7,934 | $ | 5,820 | $ | 26,054 | $ | 17,148 |
The increase in production and revenue for the three-month period ended February 28, 2017 compared with February 29, 2016 is due to slight increase in well production volume. The overall decrease for the nine-month period ended February 28, 2017 compared with the nine-month period ended February 29, 2016 is primarily due to the continued depression in crude price.
For the three-month and nine-month periods ended February 28, 2017 and February 29, 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 | Nine-month ended | |||||||||||||||
February 28, 2017 | February 29, 2016 | February 28, 2017 | February 29, 2016 | |||||||||||||
Professional fee | $ | 3,750 | $ | 8,250 | $ | 22,324 | $ | 25,760 |
The professional fee decrease in the three-month period ended February 28, 2017 as compared with the three-month period ended February 29, 2016 was due to timing difference. For the nine-month period ended February 28, 2017, the professional fee did not change materially.
5 |
Cash Flow Analysis
For the nine months ended February 28, 2017, we used $17,686 cash in operating activities (February 29, 2016 - $(31,472), cash used in investing activities is $2,037,960 (February 29, 2016 – ($4,718,126)) and cash flow generated from financing activities is $45,845 (February 29, 2016 - $27,773).
Liquidity and Capital Resources
At February 28, 2017, we have cash and cash equivalents on hand of $2,883,145 (May 31, 2016 - $4,980,735), oil revenue receivable of $26,089 (May 31, 2016 - $26,351). We have short-term investment of $2,037,960 (May 31, 2016 - $ nil). We have accounts payable of $1,416 (May 31, 2016 – $7,448) and we have no other material debts to anyone.
Planned Capital Expenditures
The Company is evaluating its various options in its development strategies, have not committed to any specific capital expenditure at this time due to the unsettling global market conditions for crude oil.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 4. | CONTROLS AND PROCEDURES. |
Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are not effective due to limited segregation of duties, lack of independent directors, and no written internal control procedure manual. The Company plans to address the 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 February 28, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
6 |
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 February 28, 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 |
7 |
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: April 14, 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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