ITEM
1. FINANCIAL STATEMENTS.
CN
RESOURCES INC.
Consolidated
Balance Sheets
Unaudited
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August 31,
2016
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May 31,
2016
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Assets
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Current assets
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Cash and cash equivalents
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$
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4,959,556
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$
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4,980,735
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Accounts receivable - Oil and Gas
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19,525
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26,351
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Other current assets
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11,510
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1,584
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Total current assets
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$
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4,990,591
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$
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5,008,670
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Total assets
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$
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4,990,591
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$
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5,008,670
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Liabilities and Stockholders' Equity
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Liabilities
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Current Liabilities
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Accounts payable
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100
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7,448
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Due to director
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69,401
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45,629
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Total current liabilities
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69,501
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53,077
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Asset retirement obligation
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7,555
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7,282
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Total liabilities
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77,056
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60,359
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Stockholders' equity
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Common stock,100,000,000 of shares authorized with
$0.00001 par value, 56,100,000 issued and outstanding
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561
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561
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Preferred stock,100,000,000 shares authorized with
$0.00001 par value, none issued
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-
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-
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Additional paid-in capital
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6,514,639
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6,514,639
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Accumulated Other Comprehensive loss
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(808,137
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)
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(790,882
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)
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Accumulated deficits
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(793,528
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)
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(776,007
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)
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Total stockholders' equity
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4,913,535
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4,948,311
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Total liabilities and stockholders' equity
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$
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4,990,591
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$
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5,008,670
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The
accompanying notes are an integral part of these unaudited interim consolidated financial statements.
CN
RESOURCES INC.
Consolidated
Statements of Operations and Comprehensive Loss
(Unaudited)
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For the Three Months Ended
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August 31
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August 31
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2016
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2015
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Revenue
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Oil production (net of royalty)
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$
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11,708
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$
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24,054
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Operating expenses
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Accretion expenses
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$
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273
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273
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Bank service charge
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$
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79
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54
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Production cost
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$
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12,686
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3,641
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General and administrative expenses
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$
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9,000
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9,000
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Management fee
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$
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6,000
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6,000
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Professional fees
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$
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-
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7,000
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Regulatory filing
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$
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10,100
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8,050
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Total operating expenses
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$
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38,138
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34,018
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Interest income
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$
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8,909
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969
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Net loss for the period
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$
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(17,521
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)
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$
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(8,995
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)
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Loss per common share - basic and diluted
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$
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(0.00
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)
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$
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(0.00
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)
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Comprehensive income:
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Net income (loss)
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$
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(17,521
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)
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$
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(8,995
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)
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Foreign currency translation adjustment
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$
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(17,255
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)
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(277,289
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)
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Total comprehensive income (loss)
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$
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(34,776
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)
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(286,284
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)
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Weighted average common shares
outstanding - basic and diluted
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$
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56,100,000
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56,100,000
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The
accompanying notes are integral part of these unaudited interim consolidated financial statements.
CN
RESOURCES INC.
Consolidated
Statements of Cash Flows
(Unaudited)
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For the three Months
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For the three Months
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ended
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ended
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August 31, 2016
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August 31, 2015
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Cash Flows From Operating Activities
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Net loss for the period
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$
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(17,521
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)
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$
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(8,995
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)
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Adjustments to reconcile net loss to net cash used in operating activities
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Depreciation, depletion and accretion
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273
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-
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Changes in operating assets and liabilities
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Accounts receivable
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6,826
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(11,409
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)
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Other current assets
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(9,926
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)
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933
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Accounts payable
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(7,348
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)
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4,812
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Net cash used in operating activities
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(27,696
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)
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(14,659
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Cash Flows from Investing Activities
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Notes receivable
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-
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3,979,349
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Net cash provided by investing activities
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-
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3,979,349
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Cash Flows from Financing Activities
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Proceeds from Director advances
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23,772
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9,388
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Net cash provided by financing activities
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23,772
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9,388
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Effective of foreign currency rates
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(17,255
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)
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(277,289
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)
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Net increase (decrease) in cash and cash equivalents
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(21,179
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)
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3,974,078
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Cash and cash equivalents, beginning of the period
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4,980,735
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226,786
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Cash and cash equivalents, end of the period
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4,959,556
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3,923,575
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Supplemental cash disclosure
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cash paid for interest payment
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$
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-
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$
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-
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cash paid for tax
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$
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-
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$
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-
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The
accompanying notes are an integral part of these unaudited interim consolidated financial statements
CN RESOURCES INC.
Notes
to the Consolidated Financial Statements
(Unaudited)
August
31, 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
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.
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.
3.
DUE TO DIRECTORS
A
director loans the Company money from time to time on an interest-free due-on-demand basis and, as of August 31, 2016 total amount
advanced was $69,401(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.
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 August 31, 2016, Crude oil price is still depressed at an historical low level with WTI of $40 to $50 per barrel,
the Board of Directors has decided to take a cautious approach to further investments in this sector until a clear visibility
can be obtained before venturing into any capital commitment.
The
Company’s immediate core strategy is to create and enhance shareholder value by acquiring sustainable business with stable
cash flow. The Company will not acquire any business in early stage of development.
Results
of Operations
The
following is a discussion of our results of operations, financial condition and capital resources. You should read this discussion
in conjunction with our Financial Statements and the Notes thereto contained elsewhere in this Form 10-Q. Comparative results
of operations for the periods indicated are discussed below.
The
following table sets forth certain of our oil operating information for the three months ended August 31, 2016 and August 31,
2015.
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August 31,
2016
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August 31,
2015
|
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Production revenue (net of royalty)
|
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$
|
11,708
|
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$
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24,054
|
|
Production cost
|
|
$
|
12,686
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$
|
3,641
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|
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 increase in production costs are due to some vendor invoices were not
entered into prior periods because of the third party invoices late. However, this is not unusual for oil and gas industry in
Canada and it is beyond the Company’s control.
For
the period three-month period ended August 31, 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.
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August 31,
2016
|
|
|
August 31,
2015
|
|
Regulatory fee
|
|
$
|
10,100
|
|
|
$
|
8,050
|
|
Professional fee
|
|
$
|
-
|
|
|
$
|
7,000
|
|
The
regulatory fee increase is due to small fee increase in the fiscal year. The professional fee was due to timing difference, the
Company received the fee invoice after August 31, 2016.
Cash
Flow Analysis
For
the three months ended August 31, 2016, we used $27,696 cash in operating activities (August 31, 2015 - $(14,659)), cash generated
from investing activities is $nil (August 31, 2015 - $3,979,349) and Cash flow generated from financing activities is $23,772(August
31,2015 - $9,388).
Liquidity
and Capital Resources
At
August 31, 2016, we have cash and cash equivalents on hand of $4,959,556(May 31, 2016 - $4,980,735), oil revenue receivable of
$19,524 (May 31, 2016 - $26,351). We have accounts payable of $100(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.