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 ended July 31, 2003
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[ ] 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
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NORTH AMERICAN NATURAL GAS, INC.
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(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
Vancouver, British Columbia, Canada V6C 3B6
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(Address of Principal Executive Offices)
(604) 687-6991
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Issuer's Telephone Number
N/A
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(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:
July 31, 2003
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.
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)
Interim Balance Sheet
July 31 April 30
2003 2003
$ $
(Unaudited) (Audited)
ASSETS
Current Assets
Cash 68,885 103,255
Funds held to repay share subscriptions (Note 3) - 1,601,485
- ------------------------------------------------------------------------------------
Total Assets 68,885 1,704,740
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable 4,427 19,078
Accrued liabilities 600 500
Share subscriptions refundable (Note 3) - 1,600,000
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Total Liabilities 5,027 1,619,578
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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
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Preferred Stock: $.0001 par value; authorized 20,000,000
preferred shares; none issued - -
- ------------------------------------------------------------------------------------
Deficit Accumulated During the Development Stage (247,142) (225,838)
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Total Stockholders' Equity 63,858 85,162
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Total Liabilities and Stockholders' Equity 68,885 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 Three Months Ended
March 24, 2000 July 31 July 31
(Date of Inception) 2003 2002
To July 31, 2003
$ $ $
Revenue - - -
- ------------------------------------------------------------------------------------------------
Expenses
Accounting and legal 77,782 17,867 12,589
Business development 25,000 - 5,000
Finance costs 60,683 - -
Consulting fees 25,000 - -
Directors fee 6,500 1,500 -
License written-off 35,000 - -
Office 8,441 1,025 398
Transfer agent and filing fees 10,579 1,369 782
Less interest income (1,843) (457) -
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Total Expenses (247,142) (21,304) 18,769
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Net loss (247,142) (21,304) (18,769)
================================================================================================
Net loss Per Share - - -
================================================================================================
Weighted Average Number of Shares Outstanding
(stock split applied retroactively) 19,813,000 19,530,000
================================================================================================
(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
Three Months Ended
July 31 July 31
2003 2002
$ $
Cash Flows From Operating Activities
Net loss (21,304) (18,769)
Change in non-cash working capital items
Increase (Decrease) in accounts payable and
accrued liabilities (14,551) 2,776
Decrease in share subscriptions refunded
(Note 3) (1,600,000) -
- -----------------------------------------------------------------------
Net Cash Used In
Operating Activities (1,635,855) (15,993)
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Cash Flows From Financing Activities
Common shares issued - 250,000
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Increase (Decrease) In Cash (1,635,855) 234,007
Cash and equivalents - Beginning of Period 1,704,740 4,645
=======================================================================
Cash and equivalents - End of Period 68,885 238,652
=======================================================================
Non-Cash Financing Activities - -
Supplemental Disclosures - -
Interest paid - -
Income tax paid - -
(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 three month period ended July 31, 2003 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 was also developing a marketing
strategy to offer personal care products through a kiosk-based ordering system.
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 FAR Group'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 harbors 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 anticipate",
"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 business 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 July 31, 2003, the Company has
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 the Company
during this period.
During the fourth quarter of 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 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. The Company was unsuccessful in its efforts to raise the minimum
amount and all funds received were subsequently returned to the original
subscribers. All agreements were terminated. The Company spent $85,683 in
connection with the failed financing efforts.
As the Company was unsuccessful in its efforts to raise the required capital to
change its business purpose, it reverted back to the 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, the Company extended its 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.
The Company's 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
its business plan, the Company plans to conduct research into these various
potential target markets. Should the Company determine that the exploitation of
the license is feasible, it will engage salespeople to market the products.
Based primarily on discussions with the licensor, the Company believes that
during its first operational quarter, it 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, the Company will need approximately
$260,000 in the event it determines that its market will not pay in advance and
it will have to extend credit. The Company 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 the Company, or at all.
The implementation of the Company's 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 the Company's ability to initiate its business plan.
During the later part of fiscal 2003, the Company was planning to change its
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. The Company's efforts to implement its 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.
The company had total general and administrative expenses of $21,761 for the
three-month period ended July 31, 2003 as compared to $18,769 during the same
period ended July 31, 2002, an increase of $2,992. The increase was primarily
due to additional accounting, administrative and office costs relating to the
failed financing efforts to raise the funds for the proposed oil and gas
exploration industry.
For the three-month period ended July 31, 2003, an independent director was paid
$1,500 for fees (nil in 2002).
For the remainder of the current fiscal year ending April 30, 2004, the Company
anticipates incurring a loss as a result of expenses associated with setting up
a company structure to begin implementing its business plans. The Company
anticipates that until these procedures are completed, it will not generate
revenues, and may continue to operate at a loss thereafter, depending upon the
performance of the business.
The Company remains in the development stage. The Company's balance sheet as of
July 31, 2003 reflects total assets of $68,885 comprising of all cash. The
Company had total liabilities of $5,027 for a positive working capital position
of $63,858. The Company has incurred a loss of $21,304 for the fiscal period to
date and a total loss of $247,142 from inception. During the quarter ended July
31, 2003, the Company did not issue any of common stock.
Liquidity
- ---------
The Company had cash on hand of $68,885 as at July 31, 2003 and working capital
of $63,858 as compared to cash on hand of $103,255 and a working capital of
$83,677 as at April 30, 2003. As at April 30, 2003 $1,600,000 was held in
escrow as funds to be used to repay share subscriptions relating to the
Company's failed financing efforts. During the July 31, 2003 quarter, the
$1,600,000 was paid from the escrow account. The Company believes that it has
sufficient funds to meet its administrative operating obligations for the next
twelve months but will need additional capital to carry out all of its
obligations and business strategies. The Company believes that it has
sufficient funds to meet its administrative operating obligations for the next
twelve months but will need additional capital to carry out all of its
obligations and business strategies.
The Company intends to raise any additional capital required to fund its
financing needs by issuance of debt and equity. The Company's management has
been exploring a number of other options to meet the Company's obligations and
future capital requirements, including the possibility of equity offering, debt
financing, and business combination. There can be no assurance financing will
be available or accessible on reasonable terms.
North American Natural Gas, Inc. may engage in a combination with another
business. During the last fiscal year just ended, the Company entered into
agreements that would have changed its business to the oil and gas industry.
The Company was unsuccessful in raising the minimum capital required to complete
the transaction and subsequently terminated all the agreements. The Company has
engaged in discussions concerning potential business combinations, but has not
entered into any agreement for such a combination.
The Company's failure to generate revenues and conduct operations since its
inception raise substantial doubt about the Company's ability to continue as a
going concern. The Company will require substantial working capital, and
currently has inadequate capital to fund all of its business strategies, which
could severely limit the Company's operations.
Item 3. Controls and Procedures
- --------------------------------
The Company maintains 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.
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 July
31, 2003.
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.
On August 12, 2003, the Company held an annual meeting of its
stockholders in Vancouver, British Columbia. At the meeting the
following persons were elected to serve as directors of the Company
until the next annual meeting of the Company's stockholders or until
the election or appointment of their successors:
Jim Glavas
Richard Achron
Dickson Coatsworth
At the meeting, the stockholders also ratified and confirmed the
appointment of Manning Elliott, Chartered Accountants as the Company's
independent auditors for the fiscal year ended April 30, 2004.
Item 5. Other Information.
The Company's Board of Directors held a meeting on August 12, 2003,
immediately after the completion of the meeting of the stockholders.
At the Board meeting the following persons were elected to service in
the capacities indicated for the ensuing year or until they are
replaced by the Board:
Jim Glavas - President and Chief Executive Officer
Richard Achron - Chief Financial Officer
Coreena Hansen - Secretary
Item 6. Exhibits and Reports on Form 8-K.
(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
(b) 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 Other definitive proxy statement on Form Def14A
filed July 10, 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.
NORTH AMERICAN NATURAL GAS, INC.
Date: September 2 , 2003 By: /s/ Jim Glavas
---------------------- ----------------------------
Jim Glavas
President, CEO, 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: September 2 , 2003 By: /s/ Jim Glavas
---------------------- ----------------------------
Jim Glavas
President, CEO, and Director
Date: September 2 , 2003 By: /s/ Richard Achron
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Richard Achron
CFO, Director
Date: September 2 ,2003 By: /s/ Dickson Coatsworth
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Dickson Coatsworth
Director