U. S. 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 endedJanuary 31, 2004
[ ]
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. |
(Name of Small Business Issuer as specified in its Charter) |
Washington
91-2023071
(State or Other Jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No)
580 Hornby Street, Suite 210 |
(Address of Principal Executive Offices) |
(604) 687-6991 |
Issuer's Telephone Number |
N/A |
(Former Name or Former Address, if changed since last Report)
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.
(1) | Yes | X | No | (2) | Yes | X | No |
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Not applicable
(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:
January 31, 2004 |
Common – 19,812,500 common shares |
DOCUMENTS INCORPORATED BY REFERENCE |
A description of any "Documents Incorporated by Reference" is contained in Item 6 of this Report.
Transitional Small Business Issuer Format | Yes | X | No |
PART I - FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
To simplify the language in this Form 10-QSB, North American Natural Gas, Inc., formerly FAR Group Inc., is also referred to as the “Company” or “we”. The Financial Statements of the Company required to be filed with this 10-QSB Quarterly Report were prepared by management and commence on the following page, together with related notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Company.
North American Natural Gas Inc.
(Formerly FAR Group Inc.)
(A Development Stage Company)
Balance Sheets
January 31 2004 $ (Unaudited) | April 30 2003 $ (Audited) | |
ASSETS | ||
Current Assets | ||
Cash | 52,114 | 103,255 |
Funds held to repay share subscriptions (Note 3) | – | 1,601,485 |
Total Assets | 52,114 | 1,704,740 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current Liabilities | ||
Accounts payable | 1,690 | 14,078 |
Accrued liabilities | 1,500 | 5,500 |
Share subscriptions refundable (Note 3) | – | 1,600,000 |
Total Liabilities | 3,190 | 1,619,578 |
| �� | ||
Stockholders' Equity | ||
Common Stock: $0.0001 par value; authorized 100,000,000 common shares; 19,812,500 shares issued and outstanding respectively | 1,981 | 1,981 |
Additional Paid-in Capital | 309,019 | 309,019 |
311,000 | 311,000 | |
Preferred Stock: $.0001 par value; authorized 20,000,000 preferred shares; none issued | – | – |
Deficit Accumulated During the Development Stage | (262,076) | (225,838) |
Total Stockholders' Equity | 48,924 | 85,162 |
Total Liabilities and Stockholders' Equity | 52,114 | 1,704,740 |
(See Accompanying Notes to the Financial Statements)
North American Natural Gas Inc.
(Formerly FAR Group Inc.)
(A Development Stage Company)
Statements of Operations
(Unaudited)
Accumulated | |||||
March 24, 2000 | Three Months | Nine Months | |||
(Date of Inception) | Ended | Ended | |||
to January 31, | January 31, | January 31, | |||
2004 | 2004 | 2003 | 2004 | 2003 | |
$ | $ | $ | $ | $ | |
Revenue | – | – | – | – | – |
Expenses | |||||
Accounting and legal | 87,823 | 7,261 | 2,600 | 27,908 | 20,281 |
Business development | 25,000 | – | – | – | 5,000 |
Finance costs | 60,683 | – | – | – | – |
Consulting fees | 25,000 | – | – | – | – |
Directors fee | 9,500 | 1,500 | – | 4,500 | – |
License written-off | 35,000 | – | – | – | – |
Office | 9,308 | 503 | 107 | 1,891 | 1,381 |
Transfer agent and filing fees | 11,607 | 608 | 339 | 2,397 | 1,784 |
Less Interest Income | (1,845) | – | – | (457) | – |
Total Expenses | (262,076) | (9,872) | (3,046) | (36,239) | (28,446) |
Net loss | (262,076) | (9,872) | (3,046) | (36,239) | (28,446) |
Net loss Per Share | – | – | – | – | |
Weighted Average Number of Shares Outstanding (stock split applied retro actively) | 19,812,500 | 15,850,000 | 19,812,500 | 15,850,000 | |
(Diluted loss per share has not been presented, as the result is anti-dilutive)
(See Accompanying Notes to the Financial Statements)
North American Natural Gas Inc.
(Formerly FAR Group Inc.)
(A Development Stage Company)
Statements of Cash Flow
Nine Months Ended | ||
January 31, | ||
2004 | 2003 | |
$ | $ | |
Cash Flows From Operating Activities | ||
Net loss | (36,239) | (28,446) |
Change in non-cash working capital items | ||
Decrease in accounts payable and accrued liabilities | (16,387) | (10,233) |
Decrease in share subscriptions refundable (Note 3) | (1,600,000) | – |
Net Cash Used By Operating Activities | (1,652,626) | (38,679) |
Cash Flows From Financing Activities | ||
Common shares issued | – | 250,000 |
Increase (Decrease) In Cash | (1,652,626) | 211,321 |
Cash - Beginning of Period | 1,704,740 | 4,645 |
Cash - End of Period | 52,114 | 215,966 |
(See Accompanying Notes to the Financial Statements)
North American Natural Gas Inc.
(Formerly FAR Group Inc.)
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 – BASIS OF PRESENTATION
These unaudited financial statements have been prepared in accordance with the instructions to SEC Form 10-QSB. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such instructions. These unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto as at April 30, 2003.
In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of these unaudited financial statements have been included and all such adjustments are of a normal recurring nature. Operating results for the nine-month period ended January 31, 2004 are not necessarily indicative of the results that can be expected for the year ended April 30, 2004.
NOTE 2 – DEVELOPMENT STAGE COMPANY
North American Natural Gas, Inc. (formerly FAR Group, Inc.) herein (the “Company”) was incorporated in the State of Washington, U.S.A. on March 24, 2000. 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.
NOTE 3 – SHARE SUBSCRIPTIONS REFUNDABLE
During fiscal 2003, the Company 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 offering. All funds received were kept in a lawyer’s escrow account until the minimum was received. A total of US$3,600,000 was raised as at April 28, 2003. The Company was unsuccessful in its efforts to raise the minimum amount and all funds received pursuant to the offering were returned to the original subscribers from the escrow account and all agreements were terminated.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the accompanying financial statements and notes and the other financial information appearing elsewhere in this report. This Report contains statements that may contain forward-looking statements concerning the Company’s future operations and planned future acquisitions and other matters and the Company intends that such forward-looking statements be subject to the safe harbours for such statements. Any statements that involve discussions with respect to predictions, expectations, belief, plans, projections, objectives, assumptions or future events or performances often, but not always, using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipat e”, “plans”, “estimates”, or “intends”, or stating that certain actions, events or results “may”, “could”, or “might” or “will” be taken to occur or be achieved are not statements of historical fact and may be “forward looking statements”.
The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. Such forward-looking statements are based on the beliefs and estimates of the Company’s management as well as on assumptions made by and information currently available to the Company at the time such statements were made. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, the failure to obtain adequate financing on a timely basis and other risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements, either as a result of the matters set forth or incorporated in this Report generally and certain economic and busin ess factors, some of which may be beyond the control of the Company.
Critical Accounting Policies
The Company’s discussions and analysis of its financial condition and results of operations, including the discussion on liquidity and capital resources are based upon the Company’s financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires the Company to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management re-evaluates its estimates and judgements, particularly those related to the determination of the impairment of its intangible assets.
Plan of Operation
During the period from March 24, 2000 through January 31, 2004, we engaged in no significant operations other than organizational activities, acquisition of the rights to market Vitamineralherb, preparation for registration of its securities under the Securities Act of 1933, as amended, preparation of a supplementary business plan and completing a private placement to fund this secondary division. 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, we reverted back to our original business to determine the feasibility of marketing the Vitamineralherb.com products in various markets, and, if the products prove to be in demand, begin marketing and selling Vitamineralherb.com products.
During the last fiscal year, we extended our license with Vitamineralherb.com for an additional three years to market vitamins, minerals, nutritional supplements and other health and fitness products in Minnesota through the Vitamineralherb.com web site. The license is now valid until April 2006 subject to the payment of annual fees.
Our business plan in connection with the license to sell products through the Vitamineralherb.com web site was to determine the feasibility of selling products to targeted markets. In order to determine the feasibility of our business plan, we plan to conduct research into these various potential target markets. Should we determine that the exploitation of the license is feasible, we will engage salespeople to market the products. Based primarily on discussions with the licensor, we believe that during our first operational quarter, we will need a capital infusion of approximately $85,000 to achieve a sustainable sales level where ongoing operations can be funded out of revenues. This capital infusion is intended to cover costs of advertising, hiring and paying two salespeople, and administrative expenses. In addition, we will need approximately $260,000 in the event we determine that the market will not pay in advance and we will have to extend credit. We will have to obtain additional financing through an offering or capital contributions by current shareholders. There can be no assurance that additional financing will be available on terms acceptable to us, or at all.
The implementation of our initial plans was delayed as Vitamineralherb.com re-worked its web site rendering it non-operational for a period of time. In addition, Vitamineralherb changed its primary supplier of products again delaying our ability to initiate our business plan. During the later part of fiscal 2003, we were planning to change our business purpose to the oil and gas industry thus further delaying the implementation of the initial plans to determine the feasibility of selling the Vitamineralherb.com products. Our efforts to implement our initial plans continues to be delayed as Vitamineralherb continues to modify its web site and to find a replacement supplier for its vitamin and mineral products to offer to its licensees.
We intend to explore other business opportunities although we have not identified any new business opportunities and have no agreements related to such opportunities.
For the nine-month period ended January 31, 2004, we had total general and administrative expenses of $36,239 as compared to $28,446 during the same period ended January 31, 2003, an increase of $7,793. For the nine-month period ended January 31, 2004, a director was paid $4,500 for fees (nil in 2003).
For the remainder of the current fiscal year ending April 30, 2004, we anticipate incurring a loss as a result of expenses associated with maintaining the Company in good standing, setting up a corporate structure to begin implementing its business plan and exploring new business opportunities.
We remain a company in the development stage. Our balance sheet as of January 31, 2004 reflects total assets of $52,114 comprising of cash. We had total liabilities of $3,190 for a positive working capital position of $48,924. We have incurred a loss of $36,239 for the fiscal period to date and a total loss of $262,076 from inception. During the quarter ended January 31, 2004, we did not issue any common stock.
Liquidity
We had cash on hand of $52,114 as at January 31, 2004 and working capital of $48,924 as compared to cash on hand of $103,255 and working capital of $83,677 as at April 30, 2003. As at April 30, 2003 a total of $1,600,000 was held in escrow as funds to be used to repay share subscriptions relating to the Company’s failed financing effort. During the July 31, 2003 quarter, the $1,600,000 was paid from the escrow account. We believe that we have sufficient funds to meet our administrative operating obligations for the next twelve months but will need additional capital to carry out all of our obligations and business strategies.
We intend to raise additional capital required to fund our financing needs by issuance of debt and equity. Management has been exploring a number of other options to meet our obligations and future capital requirements, including the possibility of an equity offering, a debt financing, and a business combination. There can be no assurance capital will be available or accessible on reasonable terms.
We may engage in a combination with another business. During the last fiscal year just ended, 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 revenues 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 we currently have inadequate capital to fund all of our business strategies, which could severely limit our operations.
ITEM 3.
CONTROL AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As at the end of the period, the Company’s management has carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in connection with the filing of this Quarterly Report on Form 10-QSB for the quarter ended January 31, 2004.
There were no significant changes in the Company’s internal controls or other factors that could significantly affect these controls subsequent to their evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
None; not applicable.
ITEM 2.
CHANGES IN SECURITIES
None
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None; not applicable.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5.
OTHER INFORMATION
None
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibits
a.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer
a.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer
a.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
a.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
(a)
Reports on Form 8-K
None
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report on Form 10-KSB for the fiscal year ended April 30, 2003 filed July 9, 2003
SIGNATURES
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.
Date: | February 24, 2004 | By: | /s/ Jim Glavas |
Jim Glavas President, Chief Executive Officer and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:
Date: | February 24, 2004 | By: | /s/ Jim Glavas |
Jim Glavas President, Chief Executive Officer and Director | |||
Date: | February 24, 2004 | By: | /s/ Richard Achron |
Richard Achron Chief Financial Officer and Director | |||
Date: | February 24, 2004 | By: | /s/ Dickson Coatsworth |
Dickson Coatsworth Director |
EXHIBIT 31.1
SECTION 302 CERTIFICATION
I, Jim Glavas, certify that:
1.
I have reviewed this quarterly report of North American Natural Gas, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
paragraph omitted in accordance with SEC transition Rules contained in the SEC Release No. 33-8238;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunction);
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: | February 24, 2004 | /s/Jim Glavas____________ |
Jim Glavas | ||
Principal Executive Officer |
EXHIBIT 31.2
SECTION 302 CERTIFICATION
I, Richard Achron, certify that:
1.
I have reviewed this quarterly report of North American Natural Gas, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
paragraph omitted in accordance with SEC transition Rules contained in SEC Release No. 33-8238;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunction);
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: | February 24, 2004 | /s/Richard Achron____________ |
Richard Achron | ||
Principal Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. '1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of NORTH AMERICAN NATURAL GAS, INC. (the “Company”) on Form 10-QSB for the period ended January 31, 2004 as filed with the Securities and Exchange Commission on the date here of (the “Report”), I, Jim Glavas, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. '1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Jim Glavas_____________________ Jim Glavas Chief Executive Officer February 24, 2004 |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. '1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of NORTH AMERICAN NATURAL GAS, INC. (the “Company”) on Form 10-QSB for the period ended January 31, 2004 as filed with the Securities and Exchange Commission on the date here of (the “Report”), I, Richard Achron, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. '1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Richard Achron_____________________ Richard Achron Chief Financial Officer February 24, 2004 |
