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.
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.
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
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.
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.
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.