ITEM 1. FINANCIAL STATEMENTS.
CN RESOURCES INC.
Consolidated Balance Sheets
(Unaudited)
|
|
February 29,
2016
|
|
|
May 31,
2015
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,811,086
|
|
|
$
|
226,786
|
|
Accounts receivable
|
|
|
22,760
|
|
|
|
30,229
|
|
Note receivable
|
|
|
-
|
|
|
|
5,343,704
|
|
Other receivable
|
|
|
1,729
|
|
|
|
7,301
|
|
Total current assets
|
|
$
|
4,835,575
|
|
|
$
|
5,608,020
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,835,575
|
|
|
$
|
5,608,020
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
13,658
|
|
|
$
|
16,536
|
|
Due to director
|
|
|
18,996
|
|
|
|
367,472
|
|
Total current liabilities
|
|
|
32,654
|
|
|
|
384,008
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligation
|
|
|
7,009
|
|
|
|
6,190
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
39,663
|
|
|
|
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
|
|
|
(938,532
|
)
|
|
|
(559,076
|
)
|
Accumulated deficit
|
|
|
(780,756
|
)
|
|
|
(738,302
|
)
|
Total stockholders' equity
|
|
|
4,795,912
|
|
|
|
5,217,822
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
4,835,575
|
|
|
$
|
5,608,020
|
|
The accompanying notes are an integral part of
these unaudited interim consolidated financial statements.
CN RESOURCES INC.
Consolidated Statements of Operations
& Comprehensive Loss
(Unaudited)
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
February 29
|
|
|
February 28
|
|
|
February 29
|
|
|
February 28
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (net of royalty)
|
|
$
|
9,821
|
|
|
$
|
11,837
|
|
|
$
|
53,774
|
|
|
$
|
151,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank service charge and bad debt
|
|
|
102
|
|
|
|
79
|
|
|
|
205
|
|
|
|
176
|
|
Production and operating expenses
|
|
|
5,820
|
|
|
|
19,510
|
|
|
|
17,148
|
|
|
|
32,383
|
|
Depreciation and depletion
|
|
|
-
|
|
|
|
19,754
|
|
|
|
-
|
|
|
|
63,334
|
|
Management fee
|
|
|
6,000
|
|
|
|
6,000
|
|
|
|
18,000
|
|
|
|
18,000
|
|
Professional fees
|
|
|
8,250
|
|
|
|
39,396
|
|
|
|
25,760
|
|
|
|
59,456
|
|
Regulatory filing
|
|
|
2,031
|
|
|
|
3,200
|
|
|
|
11,160
|
|
|
|
16,447
|
|
General and administrative expenses
|
|
|
9,000
|
|
|
|
8,845
|
|
|
|
27,546
|
|
|
|
31,608
|
|
Total operating expenses
|
|
|
31,203
|
|
|
|
96,784
|
|
|
|
99,819
|
|
|
|
221,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(21,382
|
)
|
|
|
(84,947
|
)
|
|
|
(46,045
|
)
|
|
|
(69,711
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
30
|
|
|
|
44,057
|
|
|
$
|
3,591
|
|
|
|
44,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(21,351
|
)
|
|
|
(40,890
|
)
|
|
$
|
(42,454
|
)
|
|
|
(25,653
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share - basic
and diluted
|
|
$
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(21,351
|
)
|
|
|
(40,890
|
)
|
|
|
(42,454
|
)
|
|
|
(25,653
|
)
|
Foreign currency translation adjustment
|
|
|
(73,360
|
)
|
|
|
(449,752
|
)
|
|
|
(379,456
|
)
|
|
|
(449,752
|
)
|
Total comprehensive loss
|
|
$
|
(94,711
|
)
|
|
$
|
(490,642
|
)
|
|
|
(421,910
|
)
|
|
$
|
(475,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted
|
|
|
56,100,000
|
|
|
|
56,100,000
|
|
|
|
56,100,000
|
|
|
|
56,100,000
|
|
The accompanying
notes are an integral part of these unaudited interim consolidated financial statements.
CN RESOURCES INC.
Consolidated Statements of Cash Flows
Unaudited
|
|
For the nine months
|
|
|
For the nine months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
February 29, 2016
|
|
|
February 28, 2015
|
|
|
|
|
|
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
Net Income (loss) for the period
|
|
$
|
(42,454
|
)
|
|
$
|
(475,410
|
)
|
Adjustments to reconcile net loss to net cash in operating activities
|
|
|
|
|
|
|
|
|
Depreciation and depletion
|
|
|
-
|
|
|
|
63,334
|
|
|
|
|
819
|
|
|
|
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
7,469
|
|
|
|
38,430
|
|
Accounts payable
|
|
|
(2,878
|
)
|
|
|
(32,443
|
)
|
Other receivable
|
|
|
5,572
|
|
|
|
(75,441
|
)
|
Net cash used in operating activities
|
|
|
(31,472
|
)
|
|
|
(481,530
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows used in Investing Activities
|
|
|
|
|
|
|
|
|
Oil and Gas properties
|
|
|
-
|
|
|
|
(39,516
|
)
|
Note receivable
|
|
|
4,718,126
|
|
|
|
(5,741,043
|
)
|
Net cash used in financing activities
|
|
|
4,718,126
|
|
|
|
(5,780,559
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Due to Director
|
|
|
27,773
|
|
|
|
60,133
|
|
Payment to Director for advances
|
|
|
-
|
|
|
|
(24,564
|
)
|
Net cash provided by financing activities
|
|
|
27,773
|
|
|
|
35,569
|
|
|
|
|
|
|
|
|
|
|
Foreign currency adjustment
|
|
|
(130,127
|
)
|
|
|
449,752
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
4,584,300
|
|
|
|
(5,776,768
|
)
|
Cash and cash equivalents, beginning of the period
|
|
|
226,786
|
|
|
|
6,052,324
|
|
Cash and cash equivalents, end of the period
|
|
|
4,811,086
|
|
|
|
275,556
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
|
cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
cash paid for income 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.
CN RESOURCES INC.
Notes to the Consolidated Financial Statements
(Unaudited)
February 29, 2016
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 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.
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 $42,454 for the nine months ended February 29, 2016 and has an accumulated
deficit of $780,756 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 consolidated
financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.
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. As of November 30, 2015, we have received complete payment for the Note receivable,
and no amount is outstanding. In the note receivable, $376,249 was used to pay off the outstanding director loan
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 29, 2016 total amount advanced was $18,996. 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. The president has advanced large sum of money in the past fiscal year and the President agreed to be paid by the
Note receivable from 3
rd
party as a result the $376,249 was paid through the Note Receivable as previously disclosed.
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 February 29,
2016, Crude oil price is still depressed at an historical low level with WTI of $30 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
February
29, 2016 and February 28, 2015
.
|
|
February 29, 2016
|
|
|
February 28, 2015
|
|
Production revenue (net of royalty)
|
|
$
|
9,821
|
|
|
$
|
11,837
|
|
Production cost
|
|
$
|
5,820
|
|
|
$
|
19,510
|
|
The decrease in production and revenue
is due to the crude price depression caused production to drop and revenue to decrease because the incentive to increase production
is not present.
The
following
table
sets
forth
certain
of
our
oil
operating
information
for
the
nine
months
ended
February 29, 2016
and 2015.
|
|
February 29, 2016
|
|
|
February 28, 2015
|
|
Production revenue (net of royalty)
|
|
$
|
53,774
|
|
|
$
|
151,693
|
|
Production cost
|
|
$
|
17,148
|
|
|
$
|
32,383
|
|
For the period three-month period ended
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.
|
|
February 29, 2016
|
|
|
February 28, 2015
|
|
Depreciation and depletion
|
|
$
|
-
|
|
|
$
|
19,754
|
|
Professional fee
|
|
$
|
8,250
|
|
|
$
|
39,396
|
|
There is no depreciation and depletion
cost for the period ended February 29, 2016 due to the fact the Company has written off its entire oil and gas assets in previous
fiscal year due to significant crude oil price decrease, in the opinion of management, such write-off of oil and gas asset is prudent.
Professional fee is significantly lower
for this three month period due to the fact that there was no acquisition or any other activity requires extra legal or other professional
services. For the three quarter ended February 28, 2015, the Company conducted business acquisition due diligence and incurred
legal fees as a result.
Cash Flow Analysis
For the nine months ended February 29,
2016, we used $31,472 cash in operating activities (February 28, 2015 - $(9,870)), cash generated from investing activities is
$4,718,126 (February 28, 2015 - $(5,822,212)) and Cash flow generated from financing activities is $27,773 (February 28, 2015 -
$(35,569)).
Liquidity and Capital Resources
At February 29,
2016, we have cash and cash equivalent on hand of $4,811,086 (May 31, 2015 - $226,786), oil revenue receivable of $22,760 (May
31, 2015 - $30,229). We have accounts payable of $13,658 (May 31, 2015 – $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 due to the unsettling
global market conditions for crude oil.
Off
Balance
Sheet
Arrangements
We
have
no
off-balance
sheet
arrangements.