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, 2015
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 October 15, 2015.
TABLE
OF CONTENTS
|
|
Page |
PART I |
|
|
|
Item 1. |
Financial Statements |
3 |
|
|
|
|
Balance Sheets (unaudited) |
3 |
|
Statements of Operations and Comprehensive
Loss (unaudited) |
4 |
|
Statements of Cash Flows (unaudited) |
5 |
|
Notes to the Financial Statements (unaudited) |
6 |
|
|
|
Item 2. |
Management's Discussion and Analysis
of Financial Condition and Results of Operations |
8 |
|
|
|
Item 3. |
Quantitative and Qualitative Disclosures
About Market Risk |
9 |
|
|
|
Item 4. |
Controls and Procedures |
9 |
|
|
|
PART II |
|
|
|
Item 1. |
Legal Proceedings |
10 |
|
|
|
Item 1A. |
Risk Factors |
10 |
|
|
|
Item 2. |
Changes in Securities and Use of Proceeds |
10 |
|
|
|
Item 6. |
Exhibits |
10 |
|
|
|
Signatures |
11 |
PART
I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS.
CN
RESOURCES INC.
Balance
Sheets
(Unaudited)
| |
August 31, 2015 | | |
May 31, 2015 | |
Assets | |
| | |
| |
Current assets | |
| | |
| |
Cash and cash equivalents | |
$ | 3,923,575 | | |
$ | 226,786 | |
Accounts receivable | |
| 41,638 | | |
| 30,229 | |
Other receivable | |
| 6,368 | | |
| 7,301 | |
Note receivable | |
| 988,106 | | |
| 5,343,704 | |
Total current assets | |
$ | 4,959,687 | | |
$ | 5,608,020 | |
| |
| | | |
| | |
Total assets | |
$ | 4,959,687 | | |
$ | 5,608,020 | |
| |
| | | |
| | |
Liabilities and Stockholders' Equity | |
| | | |
| | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable | |
$ | 21,075 | | |
$ | 16,536 | |
Due to director | |
| 611 | | |
| 367,472 | |
Total current liabilities | |
| 21,686 | | |
| 384,008 | |
| |
| | | |
| | |
Asset retirement obligation | |
| 6,463 | | |
| 6,190 | |
| |
| | | |
| | |
Total liabilities | |
| 28,149 | | |
| 390,198 | |
| |
| | | |
| | |
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 | |
| (836,365 | ) | |
| (559,076 | ) |
Accumulated deficit | |
| (747,297 | ) | |
| (738,302 | ) |
Total stockholders' equity | |
| 4,931,538 | | |
| 5,217,822 | |
| |
| | | |
| | |
Total liabilities and stockholders' equity | |
$ | 4,959,687 | | |
$ | 5,608,020 | |
The accompanying
notes are an integral part of these unaudited financial statements.
CN
RESOURCES INC.
Statements of Operations and Comprehensive Loss
(Unaudited)
| |
For the Three Months Ended | |
| |
August 31 | | |
August 31 | |
| |
2015 | | |
2014 | |
Revenue | |
| | |
| |
Oil production (net of royality) | |
$ | 24,054 | | |
$ | 90,657 | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
| |
| | | |
| | |
Accretion expenses | |
| 273 | | |
| 230 | |
Bank service charge | |
| 54 | | |
| 5 | |
Production cost | |
| 3,641 | | |
| 7,534 | |
Depreciation and depletion | |
| - | | |
| 35,069 | |
General and administrative expenses | |
| 9,000 | | |
| 9,000 | |
Management fee | |
| 6,000 | | |
| 6,000 | |
Professional fees | |
| 7,000 | | |
| 4,360 | |
Regulatory filing | |
| 8,050 | | |
| 2,597 | |
Total operating expenses | |
| 34,018 | | |
| 64,795 | |
| |
| | | |
| | |
Interest income | |
| 969 | | |
| - | |
| |
| | | |
| | |
Net income (loss) for the period | |
$ | (8,995 | ) | |
$ | 25,862 | |
| |
| | | |
| | |
Loss per common share - basic and diluted | |
$ | (0.00 | ) | |
$ | 0.00 | |
| |
| | | |
| | |
Comprehensive income: | |
| | | |
| | |
Net income (loss) | |
$ | (8,995 | ) | |
$ | 25,862 | |
Foreign currency translation adjustment | |
| (277,289
| ) | |
| - | |
Total comprehensive income (loss) | |
| (286,284 | ) | |
| 25,862 | |
| |
| | | |
| | |
Weighted average common shares
outstanding - basic and diluted | |
| 56,100,000 | | |
| 56,100,000 | |
The
accompanying notes are integral part of these unaudited interim financial statements.
CN
RESOURCES INC.
Statements
of Cash Flows
(Unaudited)
| |
For the three Months | | |
For the three Months | |
| |
ended | | |
ended | |
| |
August 31, 2015 | | |
August 31, 2014 | |
Cash Flows From Operating Activities | |
| | |
| |
Net Income (loss) for the period | |
$ | (8,995 | ) | |
$ | 25,862 | |
Adjustments to reconcile net loss to net cash used in operating activities | |
| | | |
| | |
Depreciation, depletion and accretion | |
| - | | |
| 35,299 | |
Changes in operating assets and liabilities | |
| | | |
| | |
Accounts receivable | |
| (11,409 | ) | |
| (31,841 | ) |
Other receivable | |
| 933 | | |
| (905 | ) |
Accounts payable | |
| 4,812 | | |
| 198 | |
Net cash used in operating activities | |
| (14,659 | ) | |
| 28,613 | |
| |
| | | |
| | |
Cash Flows from Investing Activities | |
| | | |
| | |
Notes receivable | |
| 3,979,349 | | |
| - | |
Cash invested in oil and gas property | |
| - | | |
| (13,847 | ) |
Net cash provided by (used in) investing activities | |
| 3,979,349 | | |
| (13,847 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities | |
| | | |
| | |
Proceeds from Director advances | |
| 9,388 | | |
| 17,400 | |
Payments to director for advances | |
| - | | |
| - | |
Net cash provided by (used in) financing activities | |
| 9,388 | | |
| 17,400 | |
Effective of foreign currency rates | |
| (277,289 | ) | |
| - | |
Net increase (decrease) in cash and cash equivalents | |
| 3,974,078 | | |
| 32,166 | |
Cash and cash equivalents, beginning of the period | |
| 226,786 | | |
$ | 6,052,324 | |
Cash and cash equivalents, end of the period | |
| 3,923,575 | | |
$ | 6,084,490 | |
The
accompanying notes are an integral part of these unaudited interim financial statements
CN RESOURCES INC.
Notes to the Financial Statements
(Unaudited)
August 31, 2015
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
Going Concern
The financial statements have been prepared on a going concern basis
which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for
the foreseeable future. The Company has incurred a loss of $8,995 for the Quarter ended August 31, 2015 and has an accumulated
deficit of $747,297 since inception; further losses are anticipated in the development of its business raising substantial doubt
about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon
the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and
repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs
over the next twelve months with existing cash on hand and loans from director and or private placements of common stock.
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. NOTES RECEIVABLE
On November 13, 2014, the Company provided
a loan in the amount of $1,412,000 (CAD $1,600,000) to an arm’s length party with an interest of 7% per annum. On January
12, 2015 and January 21, 2015, the Company provided a further $4,329,730 (CAD $5,100,000) to the same third party with an interest
of 7% per annum. These loans are unsecured and due on demand. Interest payment is due quarterly in arrears. Management intends
to earn an interest on the Canadian dollar funds on hand and will call the notes as soon as it deem desirable to do so. The Company
called the Notes, and as of August 31, 2015, total $3,726,450 (CAD$4,900,000) has been received, and a further $376,249 (CAD $495,000)
was used to offset the loan payable to the President, effectively $4,102,898 (CAD$5,395,000) was received for the Notes. As at
August 31, 2015, total amount of the notes received is $4,355,598 (CAD 5,395,000), note receivable remaining outstanding is $988,106
(CAD$1,305,000).
Subsequent to August 31, 2015, we further received $699,660 (CAD
$920,000). Therefore, as of the date of filing, the note receivable outstanding is $292,793 (CAD$385,000) which management anticipates
the full amount will be paid shortly.
4. DUE TO DIRECTOR
The director loans the company money from
time to time on an interest-free due-on-demand basis and, as of August 31, 2015, the total amount advanced was $377,059. The Company
has successfully asked the President to use the amount owing to him to offset against the outstanding note receivable, effectively
shifted the risk of collection to the President. As a result, the President has agreed to be paid by the Note receivable for $376,249
(CAD $495,000) resulting to an unpaid balance is $611 as of August 31, 2015.
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.
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.
During
the Quarter ended August 31, 2105, Crude oil price is still depressed at an historical low level with WTI of $44 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.
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
months ended August
31, 2015 and 2014.
| |
August 31, 2015 | | |
August 31, 2014 | |
Production revenue (net of royalty) | |
$ | 24,054 | | |
$ | 90,657 | |
Production cost | |
$ | 3,641 | | |
$ | 7,534 | |
Liquidity
and Capital Resources
At August 31, 2015,
we have cash on hand of $3,923,575 (August 31, 2014 - $6,084,490), Note receivable of $988,106 (2014 – nil) and oil revenue
receivable of $41,638 (2014 - $93,173). We have accounts payable of $21,075 (2014 – $16,536) 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.
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 August 31, 2015 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 August 31, 2015.
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: October
15, 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 |
10
Exhibit
31.01
SARBANES-OXLEY
SECTION 302(a) CERTIFICATION
I,
Oliver Xing, certify that:
1. |
I
have reviewed this Form 10-Q for the period ended August 31, 2015 of CN Resources Inc.; |
|
|
2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
|
|
3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
I
am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have: |
|
|
|
a. |
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
b. |
Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
my supervision, 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; |
|
|
|
|
c. |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and, |
|
|
|
|
d. |
Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and |
|
|
|
5. |
I
have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
|
a. |
All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
|
|
|
|
b. |
Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
Date: October 15, 2015 |
/s/ Oliver Xing |
|
Oliver Xing |
|
Principal Executive Officer and
Principal Financial Officer |
Exhibit
32.01
CERTIFICATION
PURSUANT TO
18
U.S.C. Section 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of CN Resources Inc. (the “Company”) on Form 10-Q for the period ended August
31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “report”), I, Oliver Xing,
Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The
information contained in this Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
Dated: October 15, 2015 |
/s/
Oliver Xing |
|
Oliver Xing |
|
Chief Executive Officer and
Chief Financial Officer |
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