ITEM
2.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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This section of this quarterly 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.
We are a start-up, exploration stage corporation that does not own any interests in any properties or ore bodies, and has not yet generated or realized any revenues from our business operations.
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated until we obtain an interest in a property, find mineralized material, delineate an ore body, and begin removing and selling minerals.
Plan of Operation
We have allocated between $45,000 and $150,000 for the securing of one property. The property will most likely be located in the state of Nevada, U.S.A. We have not selected a property at this time. We intend to secure a property within the next twelve months. Because the amount of funds available for the acquisition of the properties is dependent on the success of this offering, we cannot determine the amount of acreage or the specific location thereof of the property.
Exploration expenditures consist of fees to be paid for consulting services connected with exploration, the cost of rock sampling (the collection of a series of small chips over a measured distance, which is then submitted for a chemical analysis, usually to determine the metallic content over the sampled interval, a pre-determined location(s) on the property), and cost of analyzing these samples. Since we do not own an interest in any properties, we have not begun exploration. Consulting fees will not be paid except on an as needed basis and should not exceed $50,000 for the next 12 months.
We plan to use the proceeds as follows:
Our offering was completed on a self-underwritten basis. The table below sets forth the use of proceeds.
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$
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500,000
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Gross proceeds
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$
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500,000
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Net proceeds
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$
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500,000
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The net proceeds will be used as follows:
Claim Acquisition
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$
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150,000
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Exploration
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$
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200,000
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Geological Consultant
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$
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50,000
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Reclamation
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$
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15,000
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Working capital
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$
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85,000
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We cannot be more specific about the application of proceeds for exploration, because we do not know what we will find. If we attempted to be too specific, every time an event occurred that would change our allocation, we would have to amend this registration statement. We believe that the process of amending the registration statement would take an inordinate amount of time and not be in your best interest in that we would have to spend money for legal fees which could then not be spent on exploration.
Working capital is the cost related to operating our office. It comprises expenses for mail, stationary and other office supplies, and legal and accounting fees related to filing reports with the SEC. Telephone, office equipment, and minor office services are provided free of charge as an accommodation by one of our officers and director, Oliver Xing. We have allocated a range of money for exploration. That is because we do not know how much will ultimately be needed for exploration. If our initial exploration proves positive results, we will expand the exploration activities.
If we discover significant quantities of mineralized material, we will begin technical and economic feasibility studies to determine if we have reserves. We estimate that the feasibility studies could cost somewhere between $10,000 and $50,000, depending on the estimated size of the ore body. Since we have no ore body, it is impossible to accurately estimate the cost of the feasibility studies. Only if we have reserves will we consider developing the property.
Once we have secured a property, and if through early stage exploration we find mineralized material and it is feasible to expand the exploration program, we will attempt to raise additional money through a subsequent private placement, public offering or through loans. If we do not raise all of the money we need, we will have to find alternative sources of funding, like a public offering, a private placement of securities, or loans from our officers or others.
We have discussed this matter with our officers and sole director. Our sole director has agreed to loan us money if we should need it, provided the amount needed is not unreasonable in light of all of the facts and circumstances at that time. At the present time, we have not made any arrangements to raise additional cash. If we need additional cash and can’t raise it we will either have to suspend operations until we do raise the cash, or cease operations entirely.
We will be conducting research in the form of exploration of the property we intend to secure. Our exploration program is explained in as much detail as possible in the business section of this registration statement. We are not going to buy or sell any plant or significant equipment during the next twelve months. We will not buy any equipment until we have located a body of minerals and we have determined they are economical to extract from the land.
We do not intend to interest other companies in the properties if we find mineralized materials. We intend to try to develop the reserves ourselves.
If we are unable to complete any phase of exploration because we don’t have enough money, we will cease operations until we raise more money. If we can’t or don’t raise more money, we will cease operations. If we cease operations, we don’t know what we will do and we don’t have any plans to do anything. In the event we fail in our exploration activity, we will cease operations and not sell the company. We do not intend to hire additional employees at this time. Any work that would be conducted on a property that we may secure will be conducted by unaffiliated independent contractors that we will hire. The independent contractors will be responsible for surveying, geology, engineering, exploration, and excavation. The geologists will evaluate the information derived from the exploration and excavation and the engineers will advise us on the economic feasibility of removing the mineralized material.
No Operating History
We have no operations upon which to base an evaluation of our performance. We are an exploration stage corporation and have not generated any revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of properties we may secure, and possible cost overruns due to price and cost increases in services.
To become profitable and competitive, we will have to conduct research and exploration of the properties we intend to acquire before we start exploration.
We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
Results of Operations
From Inception on May 18, 2010
Since inception, we obtained a loan from Oliver Xing, our director and officer to initiate operations. Cash provided by Oliver Xing from inception on May 18, 2010 to August 31, 2012 was $29,727 (August 31, 2011 - $59,646).
We had a net loss of $10,624 for the three-month ended August 31, 2012, compared to net loss of $23,509 for the three months ended August 31, 2011. We incurred net loss of $191,941 for the period of inception, May 18, 2010, to August 31, 2012, compared to a net loss of $80,312 for the period of inception, May 18, 2010, to August 31, 2011. We utilized office space provided by our president and we concentrated our efforts in raising the funds for our business.
Liquidity and Capital Resources
At August 31, 2012, we had cash of $52,725 as compared to $194,201 at August 31, 2011 and short-term note receivable of $302,682 as compared to $306,630 at August 31, 2011. Note Receivable yields an interest of 8% per annum and is due on demand.
We are in the start-up stage of operations and have not yet generated any revenues. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns.
We will continue to seek additional financing in order to obtain the capital required to continue implementation of our business plan.
We have no assurance that future financing will be available to us on acceptable terms. If financing is not available to us on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to our existing shareholders.
ITEM
3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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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
4.
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CONTROLS AND PROCEDURES.
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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, 2012 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.
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.
On January 12, 2011, our Form S-1 registration statement (SEC file no. 333-167804) was declared effective by the SEC. Pursuant to the S-1, we are offering 2,000,000 shares of common stock minimum, 5,000,000 shares maximum at an offering price of $0.10 per share in a direct public offering, without any involvement of underwriters or broker-dealers.
As at August 31, 2011, we have completed the maximum offering of 5,000,000 common stock at $0.10 per common stock and received $500,000 and closed the public offering.
We plan to use proceeds raised through the sale of the Company’s securities for operating expenses, working capital, and general corporate activities, including the acquisition of mineral properties if an opportunity arises that we believe would justify the expenditure and capital is available to make the acquisition.
For the three-month ended August 31, 2012, there is no change in securities.
ITEM
6. EXHIBITS
Exhibit
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Description
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31.01
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32.01
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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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.
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CN Resources Inc.
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Date: October 1, 2012
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By:
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/s/ Oliver Xing
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Oliver Xing
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President, Principal Executive Officer, Principal Accounting Officer, Principal Financial Officer, Secretary/Treasurer and sole member of the Board of Directors
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