UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2011
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ______________
Commission File Number 333-133347
CREENERGY CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
Nevada 98-0479983
----------------------------------- ------------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
57113, 2020 Sherwood Drive, Sherwood Park, AB, Canada, T8A 5L7
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (780) 668-7422
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant 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 has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Larger accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes [ ] No [X]
Number of shares issued and outstanding of the registrant's class of common
stock as of July 13 2011: 96,000,000 shares of common stock
The Company recognized revenues of $nil during the quarter ended May 31, 2011.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Interim Balance Sheets F-6
Interim Statements of Loss and Comprehensive Loss F-7
Interim Statements of Cash Flows F-8
Interim Statement of Changes in Stockholders' Deficiency F-9
Notes to Interim Financial Statements F-10 to F-14
Item 2. Management's Discussion and Analysis or Plan of Operations 15
Item 3 Quantitative and Qualitative Disclosure about Market Risk 18
Item 4 Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults upon Senior Securities - Not Applicable 19
Item 4. Removed and Reserved 19
Item 5. Other Information 19
Item 6. Exhibits 19
SIGNATURES 20
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CREENERGY CORPORATION
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
(Unaudited)
MAY 31, 2011
Financial Statements
Page
Interim Balance Sheets F-6
Interim Statements of Loss and Comprehensive Loss F-7
Interim Statements of Cash Flows F-8
Interim Statement of Changes in Stockholders' Deficiency F-9
Notes to Interim Financial Statements F-10 to F-14
F-4
CREENERGY CORPORATION
(A Development Stage Company)
Interim Financial Statements
(Express in U.S. Dollars)
(Unaudited)
May 31, 2011
F-5
CREENERGY CORPORATION
(A Development Stage Company)
INTERIM BALANCE SHEETS
May 31, November 30,
2011 2010
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $ 488 $ 6,090
Prepaid expenses 109 200
-----------------------------------------
TOTAL ASSETS $ 597 $ 6,290
=========================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities (Note 3) $ 6,675 $ 13,133
Note payable (Note 4) 16,000 16,000
-----------------------------------------
Total Current Liabilities 22,675 29,133
-----------------------------------------
STOCKHOLDERS' DEFICIENCY
Capital Stock (Note 6)
Authorized:
675,000,000 common shares, par value $0.001 per share
Issued and outstanding:
96,000,000 common shares 96,000 96,000
Additional paid-in capital 25,000 13,000
Accumulated other comprehensive income - 333
Accumulated deficit (105,837) (105,837)
Accumulated deficit during Development Stage (37,241) (26,339)
-----------------------------------------
Total Stockholders' Deficiency (22,078) (22,843)
-----------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 597 $ 6,290
=========================================
The accompanying notes are an integral part of these statements.
F-6
CREENERGY CORPORATION
(A Development Stage Company)
INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)
Cumulative
Amounts from
re-entering of
For the For the For the For the development
three-month three-month six-month six-month stage on June
period ended period ended period ended period ended 26, 2010 to
May 31, 2011 May 31, 2010 May 31, 2011 May 31, 2010 May 31, 2011
--------------------------------------------------------------------------------------------
Expenses
Office and administration $ 172 $ 124 $ 566 $ 284 $ 2,846
Professional fees 1,678 4,418 10,669 7,253 34,728
--------------------------------------------------------------------------------------------
1,850 4,542 11,235 7,537 37,574
--------------------------------------------------------------------------------------------
Net Loss before Other Item (1,850) (4,542) (11,235) (7,537) (37,574)
--------------------------------------------------------------------------------------------
Other Item
Foreign exchange gain - - 333 - 333
Net loss from Continuing
Operations (1,850) (4,542) (10,902) (7,537) (37,241)
--------------------------------------------------------------------------------------------
Discontinued Operations
(Note 8)
Net Profit from
discontinued operations - 1,819 - 4,070 -
--------------------------------------------------------------------------------------------
Net Loss For The Period (1,850) (2,723) (10,902) (3,467) (37,241)
============================================================================================
Other Comprehensive Loss
Foreign currency
translation adjustment - 6 (333) 7 -
--------------------------------------------------------------------------------------------
Comprehensive Loss For the
Period $ (1,850) $ (2,717) $ (11,235) $ (3,460) $ (37,241)
============================================================================================
Loss per share from
continuing operations -
Basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
Loss per share from
discontinued operations -
Basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
========================================================================
Weighted Average Number of
Shares Outstanding 96,000,000 116,652,170 96,000,000 103,912,080
========================================================================
The accompanying notes are an integral part of these statements.
F-7
CREENERGY CORPORATION
(A Development Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative from
For the re-entering of
six-month For the development
period ended six-month stage on June
May 31, period ended 26, 2010 to
2011 May 31, 2010 May 31, 2011
Cash Flows used in Operating Activities
Net loss $ (10,902) $ (3,467) $ (37,241)
Adjustments to Reconcile Net Loss to Net
Cash Used by Operating Activities:
Depreciation and amortization - 476 -
Prepaid expenses 91 (1,750) 2,600
Accounts payable and accrued
liabilities (6,458) (9,571) 5,926
-------------------------------------------------------
Net Cash Used in Operating
Activities (17,269) (14,312) (28,715)
=======================================================
Cash Flows From Financing Activities
Increase in note payable - 16,000 -
Contribution by related party 12,000 - 25,000
-------------------------------------------------------
Net Cash Provided by Financing
Activities 12,000 16,000 25,000
=======================================================
Decrease in Cash during the Period (5,269) 1,688 (3,715)
Effect of Exchange Rate Changes on Cash (333) 7 (333)
Cash, Beginning of Period 6,090 2,841 4,536
-------------------------------------------------------
Cash, End of Period 488 $ 4,536 $ 488
=======================================================
Supplemental Disclosure of Cash Flow
Cash paid for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
The accompanying notes are an integral part of these statements.
F-8
CREENERGY CORPORATION
(A Development Stage Company)
INTERIM STATEMENT OF STOCKHOLDERS' DEFICIENCY
For the Period from November 30, 2008 through May 31, 2011
(Unaudited)
CAPITAL STOCK ACCUMULATED
-------------------------------------------------
ADDITIONAL DEFICIT DURING ACCUMULATED
PAID-IN ACCUMULATED DEVELOPMENT COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT STAGE INCOME (LOSS) TOTAL
-----------------------------------------------------------------------------------------------------------------
Balance,
November 30,
2008 96,000,000 $ 96,000 $ - $ (98,397) $ - $ (129) $ (2,526)
-----------------------------------------------------------------------------------------------------------------
Foreign
currency
translation
adjustment - - - - - 441 441
Net loss for
the year ended - - - (6,389) - - (6,389)
-----------------------------------------------------------------------------------------------------------------
Balance,
November 30,
2009 96,000,000 96,000 - (104,786) - 312 (8,474)
-----------------------------------------------------------------------------------------------------------------
Common shares
issued - cash
($0.004 per share)
(Note 6) 120,000,000 120,000 - (104,000) - - 16,000
Foreign currency
translation
adjustment - - - - - 7 7
Net loss for
the period - - - - (3,467) - (3,467)
-----------------------------------------------------------------------------------------------------------------
Balance, May 31,
2010 216,000,000 216,000 - (208,786) (3,467) 319 4,066
-----------------------------------------------------------------------------------------------------------------
Common shares
cancelled (120,000,000) (120,000) 104,000 (16,000)
Contribution by
related party
(Note 5) - - 13,000 - - - 13,000
Foreign currency
translation
adjustment - - - - - 14 14
Net loss for
the year - - - (1,051) (22,872) - (23,923)
-----------------------------------------------------------------------------------------------------------------
Balance, November
30, 2010 96,000,000 96,000 13,000 (105,837) (26,339) 333 (22,843)
-----------------------------------------------------------------------------------------------------------------
Foreign currency
translation
adjustment - - - - - (333) (333)
Contribution by
related party
(Note 5) - - 12,000 - - - 12,000
Net loss for
the period - - - - (10,902) - (10,902)
-----------------------------------------------------------------------------------------------------------------
Balance, May 31,
2011 96,000,000 $ 96,000 $ 25,000 $ (105,837) $ (37,241) $ - $ (22,078)
=================================================================================================================
The accompanying notes are an integral part of these statements.
F-9
CREENERGY CORPORATION
(A Development stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2011
(Unaudited)
1. NATURE AND CONTINUANCE OF OPERATIONS
a) Organization
CREENERGY Corporation (formerly Online Originals, Inc.) (the
"Company") was incorporated in the State of Nevada, United States of
America, on November 18, 2005. On July 29, 2010, the Company's name
was changed from Online Originals, Inc. to CREENERGY Corporation. The
Company's yearend is November 30.
b) Nature of Operations and Change in Business
Since the date of inception on November 18, 2005, the Company's
business plan was to develop a membership-based website art
gallery/auction house specifically focused on displaying and selling
original artwork.
The Company changed its status from a development stage company to an
operating company on November 30, 2009. Management realized that the
results of operations from the sale of artwork lacks luster and
decided to change the Company's business focus and plan for other
strategic opportunities and discontinued the sale of artwork with
effect from June 25, 2010. Accordingly, the Company has disclosed
these activities as discontinued operations in the accompanying
interim financial statements. Effective June 26, 2010, the Company
became a development stage company focusing on new business
development in the form of obtaining leases for the exploration and
production of oil and gas in areas of northern Alberta, Canada.
c) Unaudited Statements
While the information presented in the accompanying interim financial
statements is unaudited, it includes all adjustments which are, in the
opinion of management, necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented. Except as disclosed below, these interim financial
statements follow the same accounting policies and methods of their
application as the Company's audited November 30, 2010 annual
financial statements. It is suggested that these interim financial
statements be read in conjunction with the Company's audited financial
statements for the year ended November 30, 2010, included in the
annual report previously filed with the Securities and Exchange
Commission on Form 10-K. The results of operations for the interim
periods presented are not necessarily indicative of the results to be
expected for the full year.
The information as of November 30, 2010 is taken from the audited
financial statements as of that date.
d) Basis of Presentation
The accompanying interim financial statements have been prepared in
conformity with generally accepted accounting principles in the United
States of America, which contemplates the continuation of the Company
as a going concern. However, the Company has negative working capital
and stockholders' deficiency at May 31, 2011 and has losses to date of
approximately $143,000. These matters raise substantial doubt about
its ability to continue as a going concern. In view of these matters,
realization of certain of the assets in the accompanying balance sheet
is dependent upon its ability to meet its financing requirements,
raise additional capital, and the success of its future operations.
There is no assurance that future capital raising plans will be
successful in obtaining sufficient funds to assure its eventual
profitability. Management is actively seeking to add new products
and/or services in order to show profitability. In addition, one of
the members of the board of directors has agreed to loan funds to the
Company if needed. To date, due to the continued economic conditions,
they have not yet been able to find products and services that would
contribute to their business. We believe that actions planned and
presently being taken to revise its operating and financial
F-10
CREENERGY CORPORATION
(A Development stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2011
(Unaudited)
requirements will provide the opportunity for the Company to continue
as a going concern. The interim financial statements do not include
any adjustments that might result from these uncertainties.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2011, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2011-05, "Presentation of
Comprehensive Income". This update presents an entity with the option
to present the total of comprehensive income, the components of net
income, and the components of other comprehensive income either in a
single continuous statement of comprehensive income or in two separate
but consecutive statements. In both choices, an entity is required to
present each component of net income along with total net income, each
component of other comprehensive income along with a total for other
comprehensive income, and a total amount for comprehensive income.
This update eliminates the option to present the components of other
comprehensive income as part of the statement of changes in
stockholders' equity. The amendments in this update do not change the
items that must be reported in other comprehensive income or when an
item of other comprehensive income must be reclassified to net income.
As ASU 2011-05 relates only to the presentation of Comprehensive
Income, the Company does not expect that the adoption of this update
will have a material effect on its financial statements.
In January 2010, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update ("ASU") 2010-06, "Improving
Disclosures about Fair Value Measurements". This update requires
additional disclosure within the roll forward of activity for assets
and liabilities measured at fair value on a recurring basis, including
transfers of assets and liabilities between Level 1 and Level 2 of the
fair value hierarchy and the separate presentation of purchases,
sales, issuances and settlements of assets and liabilities within
Level 3 of the fair value hierarchy. In addition, the update requires
enhanced disclosures of the valuation techniques and inputs used in
the fair value measurements within Levels 2 and 3. The new disclosure
requirements are effective for interim and annual periods beginning
after 15 December 2009, except for the disclosure of purchases, sales,
issuances and settlements of Level 3 measurements. Those disclosures
are effective for fiscal years beginning after 15 December 2010. As
ASU 2010-06 only requires enhanced disclosures, the Company does not
expect that the adoption of this update will have a material effect on
its financial statements.
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities are non-interest bearing,
unsecured and have settlement dates within one year.
4. NOTE PAYABLE
As of May 31, 2011, the Company had $16,000 note payable to an
unrelated party for expenses paid on behalf of the Company. The note
payable is unsecured, non-interest bearing, and has no fixed terms of
repayment.
5. RELATED PARTY TRANSACTIONS
During the three month period ended May 31, 2011, a director and
shareholder of the Company made cash contribution in the amount of
$12,000 (May 31, 2010 - $Nil, Cumulative - $25,000).
F-11
CREENERGY CORPORATION
(A Development stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2011
(Unaudited)
6. CAPITAL STOCK
Authorized
The Company's authorized common stock consists of 675,000,000 shares
of common stock with a par value of $0.001 per share. On August 10,
2010, the Company increased the number of authorized share capital
from 75,000,000 shares of common stock to 675,000,000 shares of common
stock with the same par value of $0.001 per share.
Issued and outstanding
On June 2, 2010, and effective August 10, 2010, the directors of the
Company approved a forward split of the common stock of the Company on
a basis of 30 new common shares for 1 old common share. As a result of
the forward stock split, 208,800,000 additional shares were issued.
Capital and additional paid-in capital have been adjusted accordingly.
When adjusted retroactively, there was an $119,501 shortage of
additional paid-in capital; thus an adjustment to accumulated deficit
of $104,000 was recorded on May 21, 2010 (the date of issuance of
120,000,000 shares) and $15,501 to the beginning balance. The interim
financial statements contained herein reflect the appropriate values
for capital stock and accumulated deficit. Unless otherwise noted, all
references in the accompanying interim financial statements to the
number of common shares and per share amounts have been retroactively
restated to reflect the forward stock split.
The total issued and outstanding capital stock is 96,000,000 common
shares with a par value of $0.001 per common share. The Company's
common stock issuances to date are as follows:
i) On November 18, 2005, 54,000,000 shares of the Company's common
stock were issued to a former director and officer of the Company
for cash proceeds of $18,000.
ii) On November 28, 2005, 21,000,000 shares of the Company's common
stock were issued to a former director and officer of the company
for cash proceeds of $7,000.
iii) On July 21, 2006, the Company completed a public offering and
issued 21,000,000 shares of the Company's common stock for cash
totalling $70,000. The Company incurred offering costs of $14,501
related to this offering, resulting in net proceeds of $55,499.
iv) On May 21, 2010, 120,000,000 shares of the Company's restricted
common stock, valued at $16,000, were issued to a former director
and officer of the Company. On October 29, 2010, the 120,000,000
restricted common shares of the Company previously issued to a
former director and officer of the Company were returned to
treasury for no consideration. The shares were cancelled on 2
November 2010.
7. INCOME TAXES
The Company has losses carry forward for income tax purposes to May
31, 2011. There are no current or deferred tax expenses for the period
ended May 31, 2011 due to the Company's loss position. The Company has
fully reserved for any benefits of these losses. The deferred tax
consequences of temporary differences in reporting items for financial
statement and income tax purposes are recognized, as appropriate.
Realization of the future tax benefits related to the deferred tax
assets is dependent on many factors, including the Company's ability
to generate taxable income within the net operating loss carryforward
period. Management has considered these factors in reaching its
conclusion as to the valuation allowance for financial reporting
purposes.
F-12
CREENERGY CORPORATION
(A Development stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2011
(Unaudited)
The provision for refundable federal income tax consists of the
following:
For the six-month period ended
-------------------------------------------
May 31, 2011 May 31, 2010
-------------------------------------------
Deferred tax asset attributable to
Current operations $ 3,816 $ 1,213
Less: Change in valuation allowance (3,816) (1,213)
-------------------------------------------
Net refundable amount $ - $ -
-------------------------------------------
The composition of the Company's deferred tax asset as at May 31, 2011
and November 30, 2010 are as follows:
May 31, November 30,
2011 2010
(Unaudited) (Audited)
-----------------------------------
Net operation loss carry-forward $ 127,577 116,675
Statutory federal income tax rate 35% 35%
Deferred tax assets 44,652 40,836
Less: Valuation allowance (44,652) (40,836)
-----------------------------------
Net Deferred Tax Assets $ - $ -
-----------------------------------
The potential income tax benefit of these losses has been offset by a
full valuation allowance.
As at May 31, 2011, the Company has an unused net operating loss carry
forward balance of approximately $127,577 that is available to offset
future taxable income. This unused net operation loss carry forward
balance for income tax purposes expires as follows:
$
2025 2,680
2026 14,178
2027 37,588
2028 28,450
2029 6,389
2030 27,390
2031 10,902
----------------------
127,577
----------------------
8. DISCONTINUED OPERATIONS AND NEW DEVELOPMENTS
The Company's attempts over the past years to build a business that
provides a website where members and customers are able to bid on and
purchase pieces of art had not come to fruition so management decided
to change the business focus and look for other opportunities.
Therefore, management decided to discontinue selling art pieces and
reflect such discontinuance in its operating statement and cash flow
statements effective June 25, 2010.
F-13
CREENERGY CORPORATION
(A Development stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
May 31, 2011
(Unaudited)
Management decided on that date to focus on new business development
in the form of obtaining leases for the exploration and production of
oil and gas in First Nation areas of northern Alberta, Canada.
During the six month period ended May 31, 2011 and the six month
period ended May 31, 2010, the Company had $Nil and $6,042 in revenue,
respectively, related to its discontinued operations.
For the six month For the six month
period ended Period ended
May 31, 2011 May 31, 2010
Revenue $ - $ 6,042
-------------------------------------------------
Expenses
Depreciation and amortization - 477
Office and administration - 1,495
-------------------------------------------------
- 1,972
-------------------------------------------------
Net Profit from Discontinued Operations $ - $ 4,070
=================================================
9. CONTINGENCY
On November 22, 2010, the Company was served with a claim filed by a
former director and officer of the Company. The claim alleges that the
former director and officer of the Company suffered losses and damages
as a result of the failure of the Company in providing him with
corporate documents and implementing a change of the board of
directors. The Company has retained legal counsel to address the
claim. On December 8, 2010, the Company filed a Statement of Defense
requesting that the claim be dismissed. In the opinion of management,
this claim is without merit and the Company intends to defend this
claim vigorously. As a loss is not deemed probable, and as such, no
accruals have been made as of May 31, 2011.
10. COMPARATIVE FIGURES
Certain comparative figures have been adjusted to conform to the
current period's presentation.
11. SUBSEQUENT EVENT
There are no reportable events during the period from the six month
period ended May 31, 2011 to the date the interim financial statements
are available to be issued on July 7, 2011.
F-14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results, or other developments.
Forward-looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic, and competitive,
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward-looking
statements made by or on our behalf. We disclaim any obligation to update
forward-looking statements.
The following discussion of the plan of operation, financial condition, results
of operations, cash flows and changes in financial position of our Company
should be read in conjunction with our most recent financial statements and
notes appearing elsewhere in this Quarterly Report on Form 10-Q, our Schedule
14C Information Statement filed July 7, 2010, our Quarterly Report on Form 10-Q
filed on July 19, 2010, our Quarterly Report on Form 10-Q filed on April 14,
2011, and our Annual Report on Form 10-K filed on March 11, 2011.
The independent registered public accounting firms' reports on the Company's
financial statements as of November 30, 2010, and for each of the years in the
two-year period then ended; include a "going concern" explanatory paragraph that
describes substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to the factors prompting the explanatory
paragraph are discussed below and also in Note 1 to the unaudited quarterly
financial statements.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
DISCONTINUED OPERATIONS AND NEW DEVELOPMENTS
Since inception, the Company's business plan was to develop a membership based
website art gallery/auction house specifically focused on displaying and selling
original artwork. The Company changed its status from a development stage
company to an operating company on November 30, 2009. Management realized that
the results of operations from the sale of artwork was lack-luster, and it was
decided to change the Company's business focus and plan for other strategic
opportunities and discontinued the sale of artwork to be effective June 25,
2010. Effective June 26, 2010, the Company started to focus on a new business
development. On July 29, 2010, the Company's name changed from Online Originals,
Inc. to Creenergy Corporation. The name change was intended to convey a sense of
the Company's new business focus as it looks to pursue other opportunities.
Specifically, the Company intends to obtain leases for the exploration and
production of oil and gas in northern Canada and the United States. At the date
of this Quarterly Report, the Company has not identified any prospects or
entered into any leases or agreements.
Creenergy Corporation is a development stage oil and gas company that is engaged
in the development and exploration for natural resources. The Company is active
in Canada and the United States and is seeking to acquire properties that are
prospective for petroleum and natural gas and related hydrocarbons. The
prospects the Company intends to target are those properties that are generally
under leases and include partial and full working interests. It is intended that
in all of the core properties, Creenergy will be the operator and majority
interest owner. It is understood that, the prospects are subject to varying
royalties due to the state, province, territory, or federal governments and, in
some instances, to other royalty owners in the prospect.
Principal Products and Services
-------------------------------
Currently, we have not acquired any leases or working interests. We do not have
any production.
15
Markets.
-------
The availability of a ready market for oil and gas discovered, if any, will
depend on numerous factors beyond the Company's control, including the proximity
and capacity of refineries, pipelines, and the effect of provincial regulation
of production and of regulations of products sold in interstate commerce, and
recent intrastate sales. The market price of oil and gas are volatile and beyond
the Company's control. The market for natural gas is also unsettled, and gas
prices have increased dramatically in the past four years with substantial
fluctuation, seasonally and annually.
There generally are only a limited number of gas transmission companies with
existing pipelines in the vicinity of a gas well or wells. In the event that
producing gas properties are not subject to purchase contracts or that any such
contracts terminate and other parties do not purchase the Company's gas
production, there is no assurance that Creenergy will be able to enter into
purchase contracts with any transmission companies or other purchasers of
natural gas and there can be no assurance regarding the price which such
purchasers would be willing to pay for such gas. There presently exists an
oversupply of gas in the certain areas of the marketplace due to pipeline
capacity, the extent and duration of which is not known. Such oversupply may
result in restrictions of purchases by principal gas pipeline purchasers.
Effect of Changing Industry Conditions on Drilling Activity.
-----------------------------------------------------------
Lower oil and gas prices have caused a decline in drilling activity in the U.S.
from time to time. However, such reduced activity has also resulted in a decline
in drilling costs, lease acquisition costs and equipment costs, and an
improvement in the terms under which drilling prospects are generally available.
Creenergy cannot predict what oil and gas prices will be in the future and what
effect those prices may have on drilling activity in general, or on its ability
to generate economic drilling prospects and to raise the necessary funds with
which to drill them.
Material Changes in Financial Condition
At May 31, 2011, our cash balance was $488. In addition, we have prepaid
expenses of $109. Cash on hand is currently our only source of liquidity. We do
not have any lending arrangements in place with banking or financial
institutions and we do not anticipate that we will be able to secure these
funding arrangements in the near future.
At May 31, 2011, we had a working capital deficit of $22,078 compared to a
working capital deficit of $22,843 at November 30, 2010. At May 31, 2011, our
total assets consisted of cash of $488 and prepaid expenses of $109. This
compares with total assets at November 30, 2010, which consisted of cash of
$6,090, and prepaid expenses of $200.
At May 31, 2011, our total current liabilities decreased to $22,675 from $29,133
at November 30, 2010. During the three months ended May 31, 2011, accounts
payable and accrued liabilities decreased by $11,792.
We believe our existing cash balances will not be sufficient to carry our normal
operations over the next three (3) months. Our short and long-term survival is
dependent on sales of securities as necessary or from shareholder loans, and
thus, to the extent that we require additional funds to support our operations
or the expansion of our business, we will attempt to sell additional equity
shares or issue debt. Any sale of additional equity securities will result in
dilution to our stockholders. Continuing events in worldwide capital markets may
make it more difficult for us to raise additional equity or capital. There can
be no assurance that additional financing, if required, will be available to us
or on acceptable terms.
Result of Operations
For The Three Months Ended May 31, 2011 Compared To The Three Months Ended May
31, 2010.
We recognized nil revenues from operational sales during the three months ending
May 31, 2011.
During the three months ended May 31, 2011, operating expenses were $1,850
compared to $4,542 for the three months ended May 31, 2010. The decrease of
$2,692 was due to decrease in our operational activities over the prior period.
Operating expenses during the three months ended May 31, 2011, consisted of
professional fees of $1,678 and office and administration costs of $172 compared
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to professional fees of $4,418 and office and administration fees of $124
incurred for the three months ended May 31, 2010.
We recognized a net loss of $1,850 for the three months ended May 31, 2011,
compared to a net loss of $2,723 for the three months ended May 31, 2010.
For The Six Months Ended May 31, 2011 Compared To The Six Months Ended May 31,
2010.
We recognized nil revenues from operational sales during the six months ending
May 31, 2011. We do not show any cumulative revenue amounts since re-entering
the development stage on June 26, 2010.
During the six months ended May 31, 2011, operating expenses were $10,902
compared to $7,537 for the six months ended May 31, 2010. The increase of $3,365
was due to increase in our operational activities over the prior period.
Operating expenses during the six months ended May 31, 2011, consisted of
professional fees of $10,669 and office and administration costs of $566
compared to professional fees of $7,253 and office and administration fees of
$284 incurred for the six months ended May 31, 2010.
We recognized a net loss of $10,902 for the six months ended May 31, 2011,
compared to a net loss of $3,467 for the six months ended May 31, 2010. The
cumulative loss of $37,241 is for the period June 26, 2010, to May 31, 2011.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make assumptions and estimates that affect the reported amounts of
assets, liabilities, revenues and expenses as well as the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
following is a summary of the significant accounting policies and related
estimates that affect the Company's financial disclosures.
Revenue Recognition
Revenues are recognized when persuasive evidence of an arrangement
exists, delivery has occurred (or service has been performed), the
sales price is fixed and determinable and collectability is reasonably
assured. Revenue recognition from consignment inventory consists of
commission income.
Foreign Currency Translations
The functional currency is the Canadian dollar and the reporting
currency is the U.S. dollar. At each balance sheet date, assets and
liabilities that are denominated in a currency other than U.S. dollars
are adjusted to reflect the current exchange rate which may give rise
to a foreign currency translation adjustment accounted for as a
separate component of shareholders' equity and included in other
comprehensive loss.
Revenues and expenses are translated at the average daily rate for the
year covering the financial statement year to approximate the rate of
exchange on the transaction date. Exchange gains and losses are
included in the determination of net income (loss) for the period.
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ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the
Company is not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we conducted an evaluation,
under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act). Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in reports that we file or submit
under the 1934 Act is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission rules and
forms.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles.
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended May 31,
2011. We believe that our internal control over financial reporting was not
effective due to material weaknesses in the system of internal control.
Specifically, management identified the following control deficiency:
The Company has installed accounting software that does not prevent
erroneous or unauthorized changes to previous reporting periods and
does not provide an adequate audit trail of entries made in the
accounting software.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended May 31, 2011, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On November 22, 2010, the Company was served with a claim filed by a former
director and officer of the Company. The claim, filed in the court of Queen's
Bench of Alberta, Canada, alleges that the former director and officer of the
Company suffered losses and damages as a result of the failure of the Company in
providing him with corporate documents and implementing a change of the board of
directors. The Company has retained legal counsel to address the claim. On
December 8, 2010, the Company filed a Statement of Defense requesting that the
claim be dismissed. The Company intends to defend this claim vigorously.
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Other then the above preceding, the Company is not a party to any other pending
legal proceedings, nor is the Company aware of any civil proceeding or
government authority contemplating any legal proceeding as of the date of this
filing.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. REMOVED AND RESERVED.
Item 5. Other Information
None.
Item 6. Exhibits
(a) Pursuant to Item 601 of Regulation S-K, the following exhibits are included
herein.
Exhibit
Number Description
31.1 Section 302 Certification - Chief Executive Officer and 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 and Chief Financial Officer.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 13 day of July,
2011.
CREENERGY CORPORATION
Date: July 13, 2011 By: /s/ Shari Sookarookoff
----------------------
Name: Shari Sookarookoff
Title: President/Chief Executive Officer and
Chief Financial (Accounting) Officer
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