UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period endedJuly 31, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _______________
Commission File No.000-32089
NORTH AMERICAN NATURAL GAS, INC.
(Exact name of small business issuer as specified in its charter)
Washington | 91-2023071 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
580 Hornby Street, Suite 210
Vancouver, British Columbia, Canada V6C 3B6
(Address of principal executive offices)
(604) 687-6991
Issuer's telephone number
Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer's classes of common equity, as of the latest practicable date:August 15, 2006: 19,812,500 common shares
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
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North American Natural Gas, Inc.
(A Development Stage Company)
Balance Sheets
(Expressed in U.S. Dollars)
(unaudited)
July 31 | April 30 | |
ASSETS | ||
Current Assets | ||
Cash | 12,062 | 5,381 |
Total Assets | 12,062 | 5,381 |
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||
Current Liabilities | ||
Accounts payable | 8,216 | 7,164 |
Accrued liabilities | 4,865 | 365 |
Due to a related party (Note 5) | 19,500 | 9,500 |
Total Liabilities | 32,581 | 17,029 |
Contingency (Note 1) | ||
Stockholders' Deficit | ||
Preferred Stock: $.0001 par value; authorized 20,000,000 preferred shares; none issued (Note 4) | - | - |
Common Stock: $0.0001 par value; authorized 100,000,000 common shares; 19,812,500 shares issued and outstanding | 1,981 | 1,981 |
Additional Paid-in Capital | 309,019 | 309,019 |
Donated Capital (Note 5) | 2,000 | 2,000 |
Deficit Accumulated During the Development Stage | (333,519) | (324,648) |
Total Stockholders' Deficit | (20,519) | (11,648) |
Total Liabilities and Stockholders' Deficit | 12,062 | 5,381 |
The Accompanying Notes are an Integral Part of These Financial Statements
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North American Natural Gas, Inc.
(A Development Stage Company)
Statements of Operations
(Expressed in U.S. Dollars)
(unaudited)
Accumulated from | |||
March 24, 2000 | Three Months Ended | ||
(Date of Inception) | July 31, | ||
to July 31, 2006 | 2006 | 2005 | |
Revenue | - | - | - |
Expenses | |||
Business development | 24,475 | - | - |
Consulting fees | 25,000 | - | - |
Directors fees | 24,500 | 1,500 | 1,500 |
Finance costs | 75,975 | - | - |
License written-off | 35,000 | - | - |
Professional fees | 120,166 | 6,750 | 4,550 |
Office and rent (Note 5 (a)) | 12,690 | 373 | 316 |
Transfer agent and filing fees | 16,695 | 248 | 796 |
Travel | 863 | - | - |
Total Expenses | 335,364 | 8,871 | 7,162 |
Net Loss Before Other Income | (335,364) | (8,871) | (7,162) |
Other Income | |||
Interest income | 1,845 | - | - |
Net Loss for the Period | (333,519) | (8,871) | (7,162) |
Net Loss Per Share - Basic and Diluted | - | - | - |
Weighted Average Number of Shares Outstanding | 19,812,500 | 19,812,500 | |
The Accompanying Notes are an Integral Part of These Financial Statements
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North American Natural Gas, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Expressed in U.S. Dollars)
(unaudited)
Three Months Ended | |||
2006 | 2005 | ||
Operating Activities | |||
Net loss for the period | (8,871) | (7,162) | |
Adjustments to reconcile net loss to cash used in operating activities | |||
Donated rent | - | 300 | |
Change in operating assets and liabilities | |||
Accounts payable and accrued liabilities | 5,552 | 2,061 | |
Net Cash Used in Operating Activities | (3,319) | (4,801) | |
Financing Activities | |||
Advances from a related party | 10,000 | - | |
Net Cash Provided by Financing Activities | 10,000 | - | |
Increase (Decrease) In Cash | 6,681 | (4,801) | |
Cash - Beginning of Period | 5,381 | 15,078 | |
Cash - End of Period | 12,062 | 10,277 | |
Supplemental Disclosures | |||
Interest paid | - | - | |
Income taxes paid | - | - | |
The Accompanying Notes are an Integral Part of These Financial Statements
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North American Natural Gas, Inc.
(A Development Stage Company)
Notes To The Financial Statements
July 31, 2006
(Expressed in U.S. Dollars)
(Unaudited)
1. Nature of Operations and Continuance of Business
North American Natural Gas, Inc. herein (the "Company") was incorporated in the State of Washington, U.S.A. on March 24, 2000 and is a Development Stage Company as defined by Statement of Financial Accounting Standard ("SFAS") No. 7 "Accounting and Reporting for Enterprises in the Development Stage". The Company acquired a license to market and distribute vitamins, minerals, nutritional supplements, and other health and fitness products in which the grantor of the license offers these products for sale from various suppliers on their Web Site. The Company was also developing a marketing strategy to offer personal care products through a kiosk-based ordering system.
During fiscal 2003 the Company changed its name from FAR Group, Inc. to North American Natural Gas, Inc. as it had anticipated that it would undertake a new business purpose in the oil and gas exploration industry. The Company was unsuccessful in its efforts to raise the required capital to acquire the oil and gas properties contemplated and reverted back to its original business to exploit the license to market and sell vitamins and other health and fitness products. The Company is currently exploring new business opportunities after not renewing the license to market health and fitness products as described in Note 3.
These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, confirmation of the Company's interests in the underlying properties, and the attainment of profitable operations. As at July 31, 2006, the Company has never generated any revenues, has a working capital deficit of $20,519 and has accumulated losses of $333,519 since inception. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These 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.
2. Summary of Significant Accounting Policies
(a) Basis of Accounting
These financial statements are prepared in conformity with accounting principles generally accepted in the United States and are presented in United States dollars.
(b) Year end
The Company's fiscal year end is April 30.
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North American Natural Gas, Inc.
(A Development Stage Company)
Notes To The Financial Statements
July 31, 2006
(Expressed in U.S. Dollars)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
(c) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods. Actual results could differ from those estimates.
(d) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
(e) Financial Instruments
The fair values of cash, accounts payable, accrued liabilities, and due to a related party were estimated to approximate their carrying values due to the immediate short-term maturity of these financial instruments. As the Company operates in Canada, virtually all of its assets and liabilities are giving rise to significant exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company's operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. Management does not believe the Company is exposed to significant credit or interest rate risks.
(f) Concentration of Credit Risk
Financial instruments that potentially subject the company to credit risk consist principally of cash. Cash is deposited with a high quality credit institution.
(g) Long-lived Assets
In accordance with Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal Of Long-Lived Assets", the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes an impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.
(h) Foreign Currency Translation
The Company's functional currency is the United States dollar. Occasional transactions occur in Canadian currency, and management has adopted SFAS No. 52, "Foreign Currency Translation". Monetary assets and liabilities denominated in foreign currencies are translated into United States dollars at rates of exchange in effect at the balance sheet date. Non-monetary assets, liabilities and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction.
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North American Natural Gas, Inc.
(A Development Stage Company)
Notes To The Financial Statements
July 31, 2006
(Expressed in U.S. Dollars)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
(i) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109 "Accounting for Income Taxes" as of its inception. Pursuant to SFAS No. 109, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
(j) Revenue Recognition
The Company will receive, from the Grantor of the license, commissions of one-half of all the profit on all sales made through the Grantor's Web Site. The commission revenue will be recognized in the period the sales have occurred. The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements." Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectibility is reasonably assured. The Company will report the commission revenue on a net basis as the Company is acting as an Agent for the Grantor and does not assume any risks or rewards of the ownership of the products. This policy is prospective in nature, as the Company has not yet generated any revenue.
(k) Comprehensive Loss
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at July 31, 2006, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
(l) Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. Loss per share information does not include the effect of any potential common shares, as their effect would be anti-dilutive.
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North American Natural Gas, Inc.
(A Development Stage Company)
Notes To The Financial Statements
July 31, 2006
(Expressed in U.S. Dollars)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
(m) Interim Financial Statements
These interim financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
(n) Recent Accounting Pronouncements
In 2006, the Financial Accounting Standards Board ("FASB") has issued SFAS No. 155 "Accounting for Certain Hybrid Financial Instruments" and in March 2006, FASB issued SFAS No. 156 "Accounting for Servicing of Financial Assets", but they will not have a material effect in the Company's results of operations or financial position. Therefore, a description and its impact for each on the Company's operations and financial position have not been disclosed.
3. License
In 2000, the Company acquired a License Agreement with Vitamineralherb.com to market vitamins, minerals, nutritional supplements and other health and fitness products through the Grantor's Web Site. The License Agreement granted an exclusive right to distribute Vitamineralherb.com products to medical practitioners, alternative health professionals, martial arts studios and instructors, sports and fitness trainers, other health and fitness practitioners, school and other fund raising programs and other similar types of customers in Minnesota. The license was acquired on April 13, 2000 and renewed on August 15, 2003 for a term of three years. The Company was required to pay an annual fee of $500 for maintenance of the Grantor's Web Site commencing with the year ended April13, 2002. The annual fees for 2003 to 2006 were waived by the Grantor.
The Company paid total consideration of $35,000 for the license with a note payable of $35,000. The $35,000 note payable to the former President of the Company was unsecured, non-interest bearing and was repayable by December 31, 2010. On July 12, 2002, the former President of the Company forgave the note payable and released the Company from all obligations. The license was written-off to operations in fiscal 2000 due to the lack of historical cash flow and lack of a market to resell the license.
The license was valid until April 2006, but upon its expiration, the Company did not renew the license.
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North American Natural Gas, Inc.
(A Development Stage Company)
Notes To The Financial Statements
July 31, 2006
(Expressed in U.S. Dollars)
(Unaudited)
4. Preferred Stock
On March 13, 2003 the Company authorized 3,500,000 of the existing authorized preferred stock to be designated as Class "A" Convertible Preferred Shares having a par value of $10.00 per share. None have been issued. When issued, holders will be entitled to receive a 6% cash dividend of $0.60 per share payable quarterly. These shares also carry conversion features of 1 preferred share for 8 common shares.
5. Related Party Transactions
(a) For the period ended July 31, 2006, the President of the Company donated office rent of $Nil. Effective January 1, 2006, the Company leases space
on a month-to-month basis at a cost of $100 per month from a non-related third party. This amount has been charged to operations.
(b) The balance of $19,500 due to the President of the Company for cash advanced to the Company is non-interest bearing, unsecured and due on
demand.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares in our capital stock.
As used in this quarterly report the terms "we", "us", "our", the "Company" and "North American Natural Gas", means North American Natural Gas, Inc., unless otherwise indicated.
General
We were incorporated in the State of Washington on March 24, 2000 as FAR Group Inc. The Company acquired a license to market and distribute vitamins, minerals, nutritional supplements, and other health and fitness products in which the grantor of the license offers these products for sale from various suppliers on their Web site.
The Company is in the development stage. In a development stage company, management devotes most of its activities in developing a market for its products. Planned principal activities have not yet begun. The ability of the Company to emerge from the development stage with respect to any planned principal business activity is dependent upon its successful efforts to raise additional equity financing and/or attain profitable operations. There is no guarantee that the Company will be able to raise any equity financing or sell any of its products at a profit. There is substantial doubt regarding the Company's ability to continue as a going concern.
During fiscal 2003, the Company changed its name to North American Natural Gas, Inc. as it had anticipated that it would undertake a new business purpose in the oil and gas exploration industry. The Company was unsuccessful in its efforts to raise the required capital to acquire the oil and gas properties contemplated and reverted back to its original business to exploit the license to market and sell vitamins and other health and fitness products.
In light of the numerous delays with the Vitamineralherb.com website and initial reaction to our preliminary market survey, the Company decided to no longer try to exploit the license to market and sell vitamins and other health related products and is seeking new business opportunities.
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Plan of Operation
North American Natural Gas, Inc. is in the development stage. During the period from March 24, 2000 through July 31, 2006, we engaged in no significant operations other than organizational activities, acquisition of the rights to market Vitamineralherb.com, preparation for registration of securities under the Securities Act of 1933, as amended, preparation of a supplementary business plan and completing a private placement. No revenues were received by us during this period.
During the fourth quarter of fiscal 2003, we changed our name to North American Natural Gas, Inc. as we had anticipated that we would undertake a new business purpose in the oil and gas exploration industry. We entered into agreements to purchase interests in two oil and gas exploration opportunities subject to raising a minimum of US$11,000,000 in a private placement. We were unsuccessful in our efforts to raise the minimum amount and all funds received were subsequently returned to the original subscribers. All agreements were terminated. We spent an aggregate of $85,683 in connection with the failed financing efforts. As we were unsuccessful in our efforts to raise the required capital to change our business purpose, the Company extended its license with Vitamineralherb.com in 2003 for an additional three years to market vitamins, minerals, nutritional supplements and other health and fitness products through the Vitamineralherb.com website.
In April 2006, the License with Vitamineralherb.com expired and the Company did not renew the license, due to numerous delays with the Vitamineralherb.com website. For the period ended July 31, 2006, much of our efforts were directed at locating new business opportunities. We intend to continue to explore other business opportunities although we have not identified any new business opportunities and have no agreements related to such opportunities.
For the three- month period ended July 31, 2006, we had total general and administrative expenses of $8,871. For the remainder of the current fiscal year ending April 30, 2007, we anticipate incurring a loss as a result of expenses associated with maintaining the company in good standing and exploring new business opportunities.
We remain a company in the development stage. Our balance sheet as of July 31, 2006 reflects total assets of $12,062 comprising of cash. We had total liabilities of $32,581 for a working capital deficiency of $20,519. To date, our President has loaned us $19,500 for additional working capital. This loan will have to be repaid upon demand. There can be no assurance that he will continue to advance funds as required or that other methods of financing will be available or accessible on reasonable terms.
We have incurred a loss of $8,871 for the fiscal period to date and a total loss of $333,519 from inception. During the quarter ended July 31, 2006, we did not issue any common stock.
Liquidity
As of the date of this report, the Company has yet to generate any revenues from its business operations.
During the period, the Company's President loaned us an additional $10,000 for general working capital. We had cash on hand of $12,062 as at July 31, 2006 and a working capital deficiency of $20,519 as compared to cash on hand of $5,381 and working capital deficiency of $11,648 as at April 30, 2006.
We currently do not have sufficient funds to meet our cash requirements for the next twelve months. We intend to raise the capital required to fund our cash requirements and future business opportunities by issuing debt and/or equity securities, although we have no current arrangements or agreements related to such financings. Management is exploring a variety of options to meet the Company's cash requirements and future capital requirements, including the possibility of equity offerings, debt financing, and business combinations.
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We may engage in a combination with another business. During the fiscal year of 2003, we entered into agreements that would have changed our business to the oil and gas industry. We were unsuccessful in raising the minimum capital required to complete the transaction and subsequently terminated all the agreements. We have engaged in discussions concerning potential business combinations, but have not entered into any agreement for such a combination.
Our failure to generate revenue and conduct operations since inception raises substantial doubt about the Company's ability to continue as a going concern. We will require substantial working capital, and currently have inadequate capital to fund all of our business strategies, which could severely limit our operations.
ITEM 3. CONTROL AND PROCEDURES
As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this quarterly report, being July 31, 2006, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's President and Chief Financial Officer. Based upon that evaluation, our company's President and Chief Financial Officer concluded that our company's disclosure controls and procedures are effective as at the end of the period covered by this report. There have been no significant changes in our company's internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our President and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
(a) Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 -
Chief Executive Officer
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 -
Chief Financial Officer
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NORTH AMERICAN NATURAL GAS, INC. | ||||||
Date: | September 12, 2006 | By: | JIM GLAVAS | |||
Jim Glavas | ||||||
Date: | September 12, 2006 | By: | RICHARD ACHRON | |||
Richard Achron |
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