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ITEM 1.
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FINANCIAL STATEMENTS.
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CN RESOURCES INC.
Consolidated Balance Sheets
Unaudited
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August 31, 2017
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May 31,
2017
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Assets
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Current assets
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Cash and cash equivalents
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1,633,666
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$
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2,606,586
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Accounts receivable - Oil and Gas
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20,273
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31,315
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Other receivable
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4,434
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4,561
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Investment in available-for-sale securities
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3,629,535
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2,285,160
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Total current assets
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$
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5,287,908
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$
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4,927,622
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Total assets
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$
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5,287,908
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$
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4,927,622
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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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12,914
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4,480
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Due to director
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40,718
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112,109
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Total current liabilities
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53,632
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116,589
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Asset retirement obligation
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8,647
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8,373
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Total liabilities
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62,279
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124,962
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Stockholders’ equity
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Common stock,100,000,000 of shares authorized with $0.00001par 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 $0.00001par value, none issued
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-
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-
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Additional paid-in capital
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6,514,639
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6,514,639
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Accumulated Other Comprehensive loss
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(567,395
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)
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(956,164
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)
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Accumulated deficit
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(722,176
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)
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(756,376
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)
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Total stockholders’ equity
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5,225,629
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4,802,660
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Total liabilities and stockholders’ equity
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$
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5,287,908
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$
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4,927,622
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The accompanying notes are an integral part of these unaudited
consolidated financial statements.
CN RESOURCES INC.
Consolidated Statements of Operations and
Comprehensive Loss
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, 2017
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August 31, 2016
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Revenue
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Oil production (net of royalty)
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$
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19,718
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$
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11,708
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Operating expenses
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Accretion expense
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273
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273
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Bank service charge
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163
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79
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General and administrative expenses
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9,000
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9,000
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Management expense
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6,000
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6,000
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Production costs
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8,418
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12,686
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Professional fees
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7,000
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-
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Regulatory filing
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10,100
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10,100
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Total operating expenses
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$
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40,954
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$
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38,138
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Foreign currency exchange gain
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308
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-
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Interest income
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55,128
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8,909
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55,436
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8,909
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Net income (loss)
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$
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34,200
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$
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(17,521
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)
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Income (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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(0.00
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)
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Weighted average common shares outstanding - basic and diluted
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56,100,000
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56,100,000
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Comprehensive loss
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Net Income (loss)
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$
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34,200
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$
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(17,521
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)
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Foreign currency translation adjustment
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388,769
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(17,255
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)
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Total comprehensive Income (loss)
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$
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422,969
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$
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(34,776
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)
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The accompanying notes are integral part
of these unaudited 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, 2017
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August 31, 2016
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Cash Flows From Operating Activities
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Net Income (Loss) for the period
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$
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34,200
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$
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(17,521
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)
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Adjustments to reconcile net loss to net cash used in operating activities Depreciation, depletion and accretion
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273
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273
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Changes in operating assets and liabilities
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Accounts receivable
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11,042
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6,826
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Other receivable
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127
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(9,926
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)
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Accounts payable
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8,434
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(7,348
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)
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Due to Director
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(71,391
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)
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23,772
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Net cash provided (used) in operating activities
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(17,315
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)
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(3,924
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)
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Cash Flows From Investing Activities
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Investment in available-for-sale securities
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(1,077,480
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)
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-
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Net cash provided (used) in investing activities
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(1,077,480
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)
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-
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Effect of foreign currency exchange rates
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121,875
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(17,255
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)
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Net increase (decrease) in cash and cash equivalents
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(972,920
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)
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(21,179
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)
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Cash and cash equivalents, beginning of the period
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2,606,586
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4,980,735
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Cash and cash equivalents, end of the period
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$
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1,633,666
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$
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4,959,556
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Supplemental cash disclosure
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Cash paid for interest payments
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$
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-
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$
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-
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Cash paid for taxes
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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
consolidated financial statements
CN RESOURCES INC.
Notes to the Consolidated Financial Statements
(Unaudited)
August 31, 2017
1. ORGANIZATION AND BUSINESS OPERATIONS
CN RESOURCES INC. (“we”, “our”,
the “Company”) was incorporated in Nevada of the United States of America on May 18, 2010. The Company has a 50% ownership
of a joint venture oil well located in Alberta, Canada and generates oil revenue entirely from this well. The Company is evaluating
other business opportunities at present to build shareholder value.
2. BASIS OF PRESENTATION AND SIGNIFICANT
ACCOUNTING POLICIES
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.
Principles of Consolidation
The consolidated financial statements include
the accounts of the Company and its wholly owned Canadian subsidiary (also named CN Resources Inc.). All inter-company amounts
and transactions are eliminated,
Use of estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States necessarily requires management to make estimates
and assumption that affect the amounts reported in the financial statements. We regularly evaluate estimates and judgments based
on historical experiences and other relevant facts and circumstance. Actual results could differ from those estimates.
Basic and Diluted Net Income (Loss)
per Common Share
Basic net income (loss) per common share
is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted
net income (loss) per common share is determined using the weighted-average number of common shares outstanding during the period,
adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number
of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. For the quarter
ended August 31, 2017, basic and diluted income per common share is the same because there were no common stock equivalents outstanding.
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. DUE TO DIRECTOR
The director loans the Company money from
time to time on an interest-free due-on-demand basis. The Company also pays a monthly fee of $2,000 to the director to cover general
expenses and management fees. As of August 31, 2017, the balance owed to the director amounted to $40,718.
The Company is currently using the office
space from its President and CEO on a rent free basis. The President also provides telephone and administrative services for the
Company for free, however, there is no agreement or guarantee that the President will provide the free services for any specific
period of time.
4. INVESTMENT SECURITIES
The Company made investments into Cornerstone
Mortgage Investment Fund (the “Investment Fund”) in which the President is also a Director and Officer of the Investment
Fund. The Investment Fund is eligible for registered plan investments, such as pension plan, registered retirement savings plan,
registered education savings plan and tax Free saving accounts, as regulated by the Government of Canada. As of August 31, 2017
and May 31, 2017, the Company made a total investment in the amount of CAD $4,550,000 (USD $3,629,535) and CAD $3,100,000 ((USD
$2,285,160), respectively. The investment is in the form of redeemable preferred shares which the Company can redeem at any time
with three-month’s written notice. The investment earned interest income interest income of CAD $65,500 (USD $51,896) for
the quarter ended August 31, 2017, representing an annualized rate of return of 6% per annum.
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ITEM 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
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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, 2017, crude oil price is still depressed at an historical low level with WTI of $46 to $50 per barrel, the Board of
Directors has decided to take a cautious approach to further investments in this sector until a clear visibility can be obtained
before venturing into any capital commitment.
The Company’s
immediate core strategy is to create and enhance shareholder value by acquiring sustainable business with stable cash flow. The
Company will not acquire any business in early stage of development.
Results of Operations
The following is a
discussion of our results of operations, financial condition and capital resources. You should read this discussion in conjunction
with our Financial Statements and the Notes thereto contained elsewhere in this Form 10-Q. Comparative results of operations for
the periods indicated are discussed below.
The following table
sets forth certain of our oil operating information for the three-month ended August 31, 2017 and 2016
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Three-month ended
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August
31, 2017
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August
31, 2016
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Production revenue (net of royalty)
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$
|
19,718
|
|
|
$
|
11,708
|
|
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Production cost
|
|
$
|
8,418
|
|
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$
|
12,686
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|
The increase in production
revenue for the three-month period ended August 31, 2017 compared with August 31, 2016 is due to slight increase in well production
volume. The decrease in production cost is due to improved management of the production process.
For the three-month
periods ended August 31, 2017 and 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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Three-month ended
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August
31, 2017
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August
31,
2016
|
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Professional fee
|
|
$
|
7,000
|
|
|
$
|
-
|
|
The professional fee
increase in the three-month period ended August 31, 2017 as compared with the three-month period ended August 31, 2016 was due
to timing difference for which the Company received invoices during the quarter and recognized as expense.
Cash Flow Analysis
For the three months
ended August 31, 2017, we used $17,315 cash in operating activities (August 31, 2016 - $(3,924)) and used cash of $1,077,480 (August
31, 2016 – ($nil)) in investing activities.
Liquidity and Capital Resources
At August 31, 2017,
we have cash and cash equivalents of $1,633,666 (May 31, 2017 - $2,606,586), oil revenue receivable of $20,273 (May 31, 2017 -
$31,315) and investment in available-for-sale securities of $3,629,535 (May 31, 2017 - $2,285,160). We have accounts payable of
$12,914 (May 31, 2017 – $4,480) and amounts due to a director of $40,718 (May 31, 2017 - $112,109).
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.