EXHIBIT 3.4
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended May 31, 2016 |
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from __________to_____________
Commission file number 000-52831
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NATE’S FOOD CO. |
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(Exact name of registrant as specified in its charter) |
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Colorado |
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46-3403755 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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15151 Springdale Street, Huntington Beach, California |
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92649 |
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(Address of principal executive offices) |
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(Zip Code) |
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Registrant’s telephone number, including area code: |
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(949) 381-1834 |
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Name of Each Exchange On Which Registered |
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N/A |
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N/A |
Securities registered pursuant to Section 12(g) of the Act:
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Common Stock, $0.0001 par value |
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(Title of class) |
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes o No x |
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 last 90 days. Yes x No o |
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 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 x No o |
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o |
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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. |
The aggregate market value of Common Stock held by non-affiliates of the Registrant on November 30, 2015 was $561,748 based on a $0.0059 closing price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date. 278,266,510 common shares as of September 30, 2016.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this current report and unless otherwise indicated, the terms “we”, “us” and “our” mean Nate’s Food Co., unless otherwise indicated.
General Overview
We were incorporated under the laws of the State of Colorado on January 12, 2000 under the name Capital Resources Alliance, Inc. At inception, we were a development stage company in the business of mining and exploration. On May 19, 2014 our company completed a reverse merger with Nate’s Pancakes, Inc., an Indiana company, with Nate’s Pancakes being the surviving entity. In May 2014, we changed our name from Capital Resource Alliance, Inc. to Nate’s Food Co.
In connection with the reverse merger, we became a food manufacturing and product company, and in May 2014, we executed a licensing agreement with Nate’s Pancakes to market and sell “Nate’s Homemade”, exclusively throughout the world.
Emerging Growth Company Status
We are an “emerging growth company” as defined under the Jumpstart Our Business Startups Act, commonly referred to as the JOBS Act. We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
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As an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:
| · | not being required to comply with the auditor attestation requirements of section404(b) of the Sarbanes-Oxley Act (we also will not be subject to the auditor attestation requirements of Section404(b) as long as we are a “smaller reporting company,” which includes issuers that had a public float of less than $ 75 million as of the last business day of their most recently completed second fiscal quarter); | |
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| · | reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and | |
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| · | exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. |
In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Under this provision, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. In other words, an “emerging growth company” can delay the adoption of such accounting standards until those standards would otherwise apply to private companies until the first to occur of the date the subject company (i) is no longer an “emerging growth company” or (ii) affirmatively and irrevocably opts out of the extended transition period provided in Securities Act Section 7(a) (2) (B). Our company has elected to take advantage of this extended transition period and, as a result, our financial statements may not be comparable to the financial statements of other public companies. Accordingly, until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a) (2) (B), upon the issuance of a new or revised accounting standard that applies to your financial statements and has a different effective date for public and private companies, clarify that we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
Our Current Business
We are a food manufacturing and product company that manufactures, distributes and sells ready-to-use, pre-mixed pancake and waffle batter. We hold a 20 year worldwide exclusive license agreement for Nate’s Homemade.
On August 23, 2016, we entered in to an arrangement with one of California's largest aerosol producers to begin pilot production runs of Nate's Homemade Pancake and Waffle Batter in order to start supplying Southern California grocery stores. This will enable our company to expand our current online sales activity to include distribution to regional grocery chains without impacting our ongoing development activities with ABCO Laboratories Inc. in Northern California.
License Agreement
Term
The license agreement is for a term of twenty (20) years. Our company has the right to renew the license agreement for successive ten (10) year period by paying $1,000,000 for each new term.
Payments/Royalty
Our company shall pay a royalty equal to Three Percent (3%) of the Gross Revenue from the licensed products. Gross revenue is defined as total revenue minus discounts and allowances. The license requires that we pay a minimum monthly fee of $7,500 beginning twelve (12) months from the execution of the license agreement (June 1, 2015) which is against the 3% royalty. The fee began accruing on June 1, 2015. As at May 31, 2016, accrued fees are $34,000 and is included in accounts payable and accrued liabilities in the accompanying financial statements.
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Product Ordering
Our company is able to purchase raw materials directly from 3 rd party suppliers and manufacture the product for sales. Our company may also develop and create additional flavors such as chocolate, blueberry, or strawberry.
Buy-Out
Our company also has the option, at our election, to purchase the intellectual property associated to the license agreement. The buy-out amount is equal to revenue for the 12 months immediately prior to the buy-out.
Our Product
Through Nate’s Homemade we sell a ready-to-use, pre-mixed pancake and waffle batter delivered in a pressurized can. Our current product is an original flavor of pancake and waffle batter. We are currently in the process of developing additional flavors and products with the goal to have 10 products in development in 2017. Currently, we have developed three flavors for our pancake and waffle mix. We plan to continue to expand into other baked goods and other non-breakfast areas.
Our Customers
We sell our products across the United States to a variety of customers through our online store.
We have delivered samples and will continue to deliver samples of our products to retail chains such as Wal-Mart, Target, Sam’s Club, Costco, Kroger, BJ’s and Albertson’s and in retail stores and evaluate their interest of our product.
Sales and Marketing
To date, our sales have primarily been through our online store at www.nateshomemade.com. We continue presenting the product and providing samples to distributors and retailers. We have prepared several advertisements for placement in various grocery industry related journals and magazines, but we have not begun placement yet. We anticipate an increase in marketing activity in the 4 th quarter, 2016.
Manufacturing and Distribution
Raw materials used in our products include cans, valves, caps, flour and other commodities. We continuously monitor worldwide supply and cost trends of these raw materials to enable us to take appropriate action to obtain the ingredients and packaging we need for production. Although the prices of our principal raw materials may fluctuate based on adverse weather, the economy, and other conditions, we believe such raw materials to be generally available from numerous sources.
We currently utilize one production facility in the United States which manufactures and distributes our products.
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Seasonality
Sales of our products are generally evenly distributed throughout the year.
Competition
We operate in a highly competitive environment. We have numerous competitors of varying sizes, including manufacturers of private label products, as well as manufacturers of other branded food products, which compete for trade merchandising support and consumer dollars. We compete with large conventional consumer packaged foods companies. We also compete with natural and organic consumer packaged foods companies. At present, there are no other companies manufacturing or distributing aerosol delivered pancake and waffle batters.
Competitive factors in our industry include product innovation, product quality, price, brand recognition and loyalty, product variety and ingredients, product packaging and package design, effectiveness of marketing and promotional activity, and our ability to identify and satisfy consumer tastes and preferences.
Compliance with Government Regulation
Food-Related Regulations
As a manufacturer and distributor of food products, we are subject to a number of food-related regulations, including the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the FDA. This comprehensive regulatory framework governs the manufacture (including composition and ingredients), labeling, packaging, and safety of food in the United States. The FDA:
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regulates holding, distribution and manufacturing practices for food ingredients and foods through its current good manufacturing practices regulations and periodically inspects manufacturing facilities to audit compliance; | |
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specifies the standards of identity for certain foods, including many of the products we sell; and | |
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| · | prescribes the format and content of certain information required to appear on food product labels. |
In March 2014, the FDA issued a proposed rule that would make significant changes to the information appearing in, and the format of, the nutrition facts appearing on food labels. In July 2015, the FDA issued a supplemental proposed rule to establish a reference value for added sugars and to require a declaration of the percent daily value of added sugars on the food label. The proposed rule would also revise the footnote in the nutrition label regarding the percent daily value. It is not clear whether FDA will issue final regulation or, if it does, how much time FDA will give food manufactures to bring their labels into compliance.
In addition, the FDA enforces the Public Health Service Act and regulations issued thereunder, which authorizes regulatory activity necessary to prevent the introduction, transmission, or spread of communicable diseases. These regulations require, for example, pasteurization of milk and milk products. The FDA also is implementing the Food Safety Modernization Act of 2011 ("FSMA") which, among other things, mandates that the FDA adopt preventive controls to be implemented by farms, warehouses, food facilities and transporters in order to minimize or prevent hazards to food safety.
In September 2015, FDA released final rules implementing the Produce Safety and Current Good Manufacturing Practices, Hazard Analysis and Risk Based Preventive Controls (HARPC) requirements for human food and animal food, which was a major milestone in the implementation of FSMA. The final rules revise the FDA’s food safety regulations by: (1) codifying good agricultural practices and water fertilizer action limits, (2) updating and revising certain requirements in the existing current good manufacturing practices regulations (current 21 CFR Part 110), (3) requiring the establishment and implementation of a food safety system that includes an analysis of hazards and risk-based preventive controls and sets requirements for a written food safety plan, and (4) adding new requirements for a risk-based end-to-end supply chain program. Compliance is required by September 19, 2016, with respect to the new good manufacturing practices and HARPC regulations, and by January 2017, with respect to the new produce safety rules.
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We are subject to numerous other federal, state, and local regulations involving such matters as the licensing and registration of manufacturing facilities, enforcement by government health agencies of standards for our products, inspection of our facilities, and regulation of our trade practices in connection with the sale of our products. In response to food-borne illness events, FDA scrutiny of the food and beverage industry has increased over the past few years, which has required food and beverage companies to dedicate additional resources to the areas regulated by the FDA.
Labeling Regulations
We are subject to various labeling requirements with respect to our products at the federal, state, and local levels. At the federal level, the FDA has authority to review product labeling, and the Federal Trade Commission may review labeling and advertising materials, including online and television advertisements to determine if advertising materials are misleading. Similarly, many states review dairy product labels to determine whether they comply with applicable state laws. In addition, the European Union has issued and enforces rules governing foodstuff labeling, nutrition, and health claims. We believe we are in material compliance with all labeling laws and regulations applicable to our business.
We believe that we are and will continue to be in compliance in all material respects with applicable statutes and the regulations passed in the United States. There are no current orders or directions relating to our company with respect to the foregoing laws and regulations.
Research and Development
We have incurred $107,082 in research and development expenditures over the last two fiscal years.
Intellectual Property
We currently have the exclusive license to all intellectual property held by IPC, Inc., the Patent filed by Nate Steck for delivery of pancake and waffle batter contained in an aerosol can, as well as the our domain names and websites, www.natesfoodco.com and www.nateshomemade.com.
Employees
Other than our directors and officers, who provide their services to our company and independent consultants, we have no full time employees.
As a “smaller reporting company”, we are not required to provide the information required by this Item.
The above statement notwithstanding, shareholders and prospective investors should be aware that certain risks exist with respect to our company and our business, including those risk factors contained in our most recent Registration Statements on Form 10, as amended. These risks include, among others: limited assets, lack of significant revenues and only losses since inception, industry risks, dependence on third party manufacturers/suppliers and the need for additional capital. Our company’s management is aware of these risks and has established the minimum controls and procedures to insure adequate risk assessment and execution to reduce loss exposure.
Item 1B. Unresolved Staff Comments
As a “smaller reporting company”, we are not required to provide the information required by this Item.
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Our corporate head office is located at 15151 Springdale Street, Huntington Beach, California 92649. This location is currently provided to us at no cost. We believe that this space is sufficient to meet our present needs. Our product development, food science division and production facilities are located at ABCO Laboratories, Inc., located at 2450 South Watney Way, Fairfield, California, 94533.
From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party and which would reasonably be likely to have a material adverse effect on our company. To date, our company has never been involved in litigation, as either a party or a witness, nor has our company been involved in any legal proceedings commenced by any regulatory agency against our company.
Item 4. Mine Safety Disclosures
Not applicable.
Our common shares are quoted on the OTC Markets under the symbol “NHMD.” The following quotations, obtained from Stockwatch, reflect the high and low bids for our common shares based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
The following table reflects the high and low bid information for our common stock obtained from Nasdaq and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.
The high and low bid prices of our common stock for the periods indicated below are as follows:
Our shares are issued in registered form. ClearTrust, LLC, 16540 Pointe Village Drive, Suite 210, Lutz, FL 33558 (Telephone: (813) 235-4490; Facsimile: (813) 388-4549 is the registrar and transfer agent for our common shares.
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On September 30, 2016, the shareholders’ list showed 26 registered shareholders with 278,266,510 common shares outstanding.
Dividend Policy
We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.
Equity Compensation Plan Information
During our year ended May 31, 2016, we did not have any equity compensation plans.
Convertible Securities
During the year ended May 31, 2016, our company granted 32,000 shares of Series C Preferred Stock to consultants for services. The shares were valued at $59,862. The Preferred Stock can be converted to common stock, at a conversion rate of 66 common shares for each preferred share.
On September 21, 2015, as a stock dividend to the common shareholders, our company issued (1) share of newly created Series E Preferred Stock for every ten (10) shares of common stock outstanding. Our company issued 7,725,000 shares of Series E Preferred Stock for a value of $773. Beginning October 1, 2016, each share of Series E Preferred Stock is convertible into ten (10) shares of common stock. From October 1, 2016 to October 1, 2018, holders of Series E Preferred Stock may at any time convert to shares of common stock, thereafter, our company may elect to convert any outstanding stock at any time without notice to the shareholders.
On September 29, 2015, our company granted 1,000,000 warrants to Vista Capital Investments, LLC, in exchange for interest owed of $12,222, and recognized a loss on debt settlement of $16,778. Warrants are originally exercisable into 1,000,000 shares of common stock, for a period of five years from issuance, at a price of $0.05 per share, with multiple reset provisions when the share price is below $0.05. As a result of the reset features the warrants became exercisable into 31,929,349 shares of common stock at $0.0009 per share. On June 28, 2016, we issued a promissory note in the amount of $57,000 to MSM Investments, a company related to Marc Kassoff, a director and officer of our company. The note is payable on June 28, 2017, with interest at a rate of 10% per annum. Early payment may be made before June 28, 2017 subject to an additional fee of 10% of the outstanding principal due, in addition to all interest accrued and the balance remaining to be paid.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
We did not sell any equity securities which were not registered under the Securities Act during the year ended May 31, 2016 that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the year ended May 31, 2016.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during our fourth quarter of our fiscal year ended May 31, 2016.
Item 6. Selected Financial Data
As a “smaller reporting company”, we are not required to provide the information required by this Item.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled “Risk Factors” beginning on page 7 of this annual report.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Plan of Operations and Cash Requirements
Cash Requirements
Over the next twelve months we expect to expend funds as follows:
Estimated Net Expenditures During the Next Twelve Months
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General, Administrative Expenses |
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980,000 |
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Research and Development |
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110,000 |
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Total |
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1,090,000 |
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We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed.
The continuation of our business is dependent upon obtaining further financing and achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders.
There are no assurances that we will be able to obtain further funds required for our continued operations. As noted herein, we are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
Results of Operations - Years Ended May 31, 2016 and 2015
The following summary of our results of operations should be read in conjunction with our financial statements for the years ended May 31, 2016 and 2015, which are included herein.
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Our operating results for the years ended May 31, 2016 and 2015 and the changes between those periods for the respective items are summarized as follows:
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2016 |
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2015 |
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Change |
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Sales from a related party |
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$ | 29,250 |
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$ | 3,996 |
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25,254 |
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632 | % |
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Gross profit |
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13,559 |
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3,996 |
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9,563 |
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239 | % |
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Selling, general and administrative |
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339,273 |
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978,059 |
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(638,786 | ) |
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(65 |
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Food development/research |
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1,850 |
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105,232 |
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(103,382 | ) |
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(98 |
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Total operating expenses |
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341,123 |
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1,083,291 |
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(742,168 | ) |
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(69 |
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Loss on derivative |
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2,022,262 |
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111,040 |
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1,911,222 |
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1721 | % |
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Interest Expenses |
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543,842 |
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20,878 |
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522,964 |
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2505 | % |
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Loss on settlement of debt |
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16,778 |
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16,778 |
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Net Loss |
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$ | (2,910,446 | ) |
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$ | (1,211,213 | ) |
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(1,699,233 | ) |
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140 | % |
Our financial statements report a net loss of $2,910,446 for the year ended May 31, 2016 compared to a net loss of $1,211,213 for the year ended May 31, 2015. Our losses have increased by $1,699,233, primarily as a result of an increase in loss on derivative and interest expenses from convertible notes.
Our operating expenses for the year ended May 31, 2016 were $341,123 compared to $1,083,291 as of May 31, 2015. The decrease in operating expenses was primarily as a result of a decrease in selling, general and administrative, from a reduction in stock based compensation by $701,888 during the 2016 fiscal year.
Liquidity and Financial Condition
Working Capital
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May 31, 2016 |
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May 31, 2015 |
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Change |
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Current Assets |
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$ | 18,021 |
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$ | 109 |
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$ | 17,912 |
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Current Liabilities |
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$ | 2,633,155 |
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$ | 405,881 |
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$ | 2,227,274 |
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Working Capital Deficiency |
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$ | (2,615,134 | ) |
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$ | (405,772 | ) |
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$ | (2,209,362 | ) |
Cash Flows
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Year Ended May 31, |
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2016 |
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2015 |
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Change |
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Cash Flows Used in Operating Activities |
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$ | (121,605 | ) |
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$ | (72,318 | ) |
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$ | (49,287 | ) |
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Cash Flows Used in Investing Activities |
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(132,479 | ) |
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(85,004 | ) |
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$ | (47,475 | ) |
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Cash Flows Provided by Financing Activities |
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254,500 |
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157,281 |
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$ | 97,219 |
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Net Change in Cash During Period |
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$ | 416 |
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$ | (41 | ) |
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$ | 457 |
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Our total current liabilities as of May 31, 2016 were $2,633,155 as compared to total current liabilities of $405,881 as of May 31, 2015. The increase was primarily due to an increase in convertible notes and derivative liability.
Operating Activities
Net cash used in operating activities was $121,605 for the year ended May 31, 2016 compared with net cash used in operating activities of $72,318 in the same period in 2015.
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Investing Activities
Net cash used in investing activities was $132,479 for the year ended May 31, 2016 compared to net cash used in investing activities of $85,004 in the same period in 2015, due to increased expenditures on fixed assets during 2016.
Financing Activities
Net cash from financing activities was $254,500 for the year ended May 31, 2016 compared to $157,281 provided from financing activities in the same period in 2015, primarily due to increased proceeds from convertible notes payable during 2016.
Contractual Obligations
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
Going Concern
Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, our company has negative working capital, recurring losses, and does not have an established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about our company’s ability to continue as a going concern.
The ability of our company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if our company is unable to continue as a going concern.
In the coming year, our company’s foreseeable cash requirements will relate to continual development of the operations of our business, maintaining our good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. Our company may experience a cash shortfall and be required to raise additional capital.
Historically, we have mostly relied upon internally generated funds such as shareholder loans and advances to finance our operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of our company’s stock or through loans from private investors, although there can be no assurance that we will be able to obtain such financing. Our company’s failure to do so could have a material and adverse effect upon us and our shareholders.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.
| 12 |
|
|
| Table of Contents |
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Long-Lived Assets
Long-lived assets such as property and equipment are stated at their fair value acquisition cost and reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. Amortization of long-lived assets are calculated by the straight line method over their estimated useful lives. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, our company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.
As of May 31, 2016, equipment of $395,195 reflects acquisition costs. During the year ended May 31, 2016, depreciation is not being calculated as equipment is currently not in use.
Recent Accounting Pronouncements
Our company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
| 13 |
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| Table of Contents |
Item 8. Financial Statements and Supplementary Data
NATE’S FOOD CO.
FORM 10-K
May 31, 2016 and 2015
|
|
F-1 |
|
|
FINANCIAL STATEMENTS: |
|
|
|
|
F-2 |
|
|
|
F-3 |
|
|
|
F-4 |
|
|
|
F-5 |
|
|
|
F-6 |
| 14 |
|
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| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Nate’s Food Co.
Huntington Beach, California
We have audited the accompanying balance sheets of Nate’s Food Co. (“the Company”), as of May 31, 2016 and 2015, and the related statements of operations, changes in stockholder’s deficit and cash flows for each of the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has negative working capital, recurring losses, and does not have an established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MALONEBAILEY, LLP
www.malonebailey.com
Houston, Texas
October 5, 2016
| F-1 |
|
|
| Table of Contents |
Nate’s Food Co.
|
|
|
May 31, |
|
|
May 31, |
|
||
|
|
|
2016 |
|
|
2015 |
|
||
|
ASSETS |
|
|
|
|
|
|
||
|
Current assets: |
|
|
|
|
|
|
||
|
Cash |
|
$ | 525 |
|
|
$ | 109 |
|
|
Deferred financing cost, net of $29,292 accumulated amortization |
|
|
17,496 |
|
|
|
- |
|
|
Total current assets |
|
|
18,021 |
|
|
|
109 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
|
|
|
|
|
Equipment, net |
|
|
395,195 |
|
|
|
85,004 |
|
|
Total non-current assets |
|
|
395,195 |
|
|
|
85,004 |
|
|
TOTAL ASSETS |
|
$ | 413,216 |
|
|
$ | 85,113 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ | 53,098 |
|
|
$ | 3,000 |
|
|
Accrued expense |
|
|
120,714 |
|
|
|
11,083 |
|
|
Notes payable |
|
|
50,000 |
|
|
|
- |
|
|
Notes payable - related parties |
|
|
175,508 |
|
|
|
141,508 |
|
|
Deferred revenue - related party |
|
|
- |
|
|
|
29,250 |
|
|
Convertible notes, net of $20,259 and $0 debt discount as of May 31, 2016 and 2015, respectively |
|
|
194,656 |
|
|
|
- |
|
|
Derivative liability |
|
|
2,039,179 |
|
|
|
221,040 |
|
|
Total current liabilities |
|
|
2,633,155 |
|
|
|
405,881 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
Notes payable - long term |
|
|
200,000 |
|
|
|
- |
|
|
Convertible notes, net of $0 and $100,205 debt discount as of May 31, 2016 and 2015, respectively |
|
|
- |
|
|
|
9,795 |
|
|
Total non-current liabilities |
|
|
200,000 |
|
|
|
9,795 |
|
|
Total liabilities |
|
|
2,833,155 |
|
|
|
415,676 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit: |
|
|
|
|
|
|
|
|
|
Series A Preferred Stock, Par Value $0.0001, 2,000,000 shares authorized, 1,940,103 and 1,940,103 issued and outstanding, respectively |
|
|
194 |
|
|
|
194 |
|
|
Series B Preferred Stock, Par Value $0.0001, 150,000 shares authorized, 141,970 and 149,365 issued and outstanding, respectively |
|
|
14 |
|
|
|
15 |
|
|
Series C Preferred Stock, Par Value $1.00, 250,000 shares authorized, 58,774 and 26,394 issued and outstanding, respectively |
|
|
58,774 |
|
|
|
26,394 |
|
|
Series E Preferred Stock, Par Value $0.0001, 15,000,000 shares authorized, 10,225,000 and 0 issued and outstanding, respectively |
|
|
1,022 |
|
|
|
- |
|
|
Common Stock, Par Value $0.0001, 500,000,000 shares authorized, 251,908,891 and 77,200,000 issued and outstanding, respectively |
|
|
25,191 |
|
|
|
7,720 |
|
|
Additional paid in capital |
|
|
1,620,817 |
|
|
|
849,827 |
|
|
Accumulated deficit |
|
|
(4,125,951 | ) |
|
|
(1,214,713 | ) |
|
Total stockholders’ deficit |
|
|
(2,419,939 | ) |
|
|
(330,563 | ) |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
$ | 413,216 |
|
|
$ | 85,113 |
|
The accompanying notes are an integral part of these financial statements.
| F-2 |
|
|
| Table of Contents |
Nate’s Food Co.
|
|
|
Year Ended May 31, |
|
|||||
|
|
|
2016 |
|
|
2015 |
|
||
|
|
|
|
|
|
|
|
||
|
Sales from a related party |
|
$ | 29,250 |
|
|
$ | 3,996 |
|
|
Cost of Goods Sold |
|
|
15,691 |
|
|
|
- |
|
|
Gross Profit |
|
|
13,559 |
|
|
|
3,996 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
$ | 339,273 |
|
|
$ | 978,059 |
|
|
Food development/research |
|
|
1,850 |
|
|
|
105,232 |
|
|
Total operating expenses |
|
|
341,123 |
|
|
|
1,083,291 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss |
|
|
(327,564 | ) |
|
|
(1,079,295 | ) |
|
|
|
|
|
|
|
|
|
|
|
Other (Income) Expense |
|
|
|
|
|
|
|
|
|
Loss on derivative |
|
|
2,022,262 |
|
|
|
111,040 |
|
|
Interest Expenses |
|
|
543,842 |
|
|
|
20,878 |
|
|
Loss on settlement of debt |
|
|
16,778 |
|
|
|
- |
|
|
Total other expenses |
|
|
2,582,882 |
|
|
|
131,918 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ | (2,910,446 | ) |
|
$ | (1,211,213 | ) |
|
|
|
|
|
|
|
|
|
|
|
Deemed dividend on Series B convertible preferred stock |
|
|
(792 | ) |
|
|
- |
|
|
Deemed dividend on Series C convertible preferred stock |
|
|
- |
|
|
|
(27,000 | ) |
|
Net loss attributable to common stockholders |
|
$ | (2,911,238 | ) |
|
$ | (1,238,213 | ) |
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted |
|
$ | (0.02 | ) |
|
$ | (0.02 | ) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and diluted |
|
|
130,632,676 |
|
|
|
70,292,055 |
|
The accompanying notes are an integral part of these financial statements.
| F-3 |
|
|
| Table of Contents |
Nate’s Food Co.
Statements of Changes in Stockholders' Deficit
|
|
|
Preferred Stock |
|
|
|
Additional |
|
|
|
Total |
|
|||||||||||||||||||||||||||||
|
|
|
Series A |
|
Seri es B |
|
Series C |
|
Series E |
|
Common Stock |
|
Paid-in |
|
Accumulated |
|
Stockholders' |
|
|||||||||||||||||||||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
deficit |
|
Deficit |
|
|||||||||||||
|
Balances May 31, 2014 |
|
|
1,940,103 |
|
$ | 194 |
|
|
149,365 |
|
$ | 15 |
|
|
- |
|
$ | - |
|
|
- |
|
$ | - |
|
|
61,800,000 |
|
$ | 6,180 |
|
$ | (6,239 | ) | $ | (3,500 | ) | $ | (3,350 | ) |
|
Stock based compensation |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
15,400,000 |
|
|
1,540 |
|
|
855,460 |
|
|
- |
|
|
857,000 |
|
|
Preferred C share for cash |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
26,394 |
|
|
26,394 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
606 |
|
|
- |
|
|
27,000 |
|
|
Beneficial Conversion feature on series C preferred stock |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
27,000 |
|
|
- |
|
|
27,000 |
|
|
Deem dividend on preferred stock |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(27,000 | ) |
|
- |
|
|
(27,000 | ) |
|
Net loss |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,211,213 | ) |
|
(1,211,213 | ) |
|
Balances May 31, 2015 |
|
|
1,940,103 |
|
|
194 |
|
|
149,365 |
|
|
15 |
|
|
26,394 |
|
|
26,394 |
|
|
- |
|
|
- |
|
|
77,200,000 |
|
|
7,720 |
|
|
849,827 |
|
|
(1,214,713 | ) |
|
(330,563 | ) |
|
Stock based compensation |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
32,000 |
|
|
32,000 |
|
|
2,500,000 |
|
|
250 |
|
|
24,500,000 |
|
|
2,450 |
|
|
120,412 |
|
|
- |
|
|
155,112 |
|
|
Issued Series E Preferred stock as a dividend to Common shareholders |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7,725,000 |
|
|
772 |
|
|
- |
|
|
- |
|
|
(772 | ) |
|
- |
|
|
- |
|
|
Beneficial Conversion feature on series B preferred stock |
|
|
- |
|
|
- |
|
|
(8,000 | ) |
|
(1 | ) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
8,000,000 |
|
|
800 |
|
|
(7 | ) |
|
(792 | ) |
|
- |
|
|
Conversion of Convertible note |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
128,758,891 |
|
|
12,876 |
|
|
194,958 |
|
|
- |
|
|
207,834 |
|
|
Common stock issued in exchange for warrants |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
13,400,000 |
|
|
1,340 |
|
|
(1,340 | ) |
|
- |
|
|
- |
|
|
Issued note payable for equity purchase agreement |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(50,000 | ) |
|
- |
|
|
(50,000 | ) |
|
Reclassification of derivative liability to APIC |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
508,124 |
|
|
- |
|
|
508,124 |
|
|
Adjustment to Series B and C Preferred Stock and common stock |
|
|
- |
|
|
- |
|
|
605 |
|
|
- |
|
|
380 |
|
|
380 |
|
|
- |
|
|
- |
|
|
50,000 |
|
|
5 |
|
|
(385 | ) |
|
- |
|
|
- |
|
|
Net loss |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(2,910,446 | ) |
|
(2,910,446 | ) |
|
Balances May 31, 2016 |
|
|
1,940,103 |
|
$ | 194 |
|
|
141,970 |
|
$ | 14 |
|
|
58,774 |
|
$ | 58,774 |
|
|
10,225,000 |
|
$ | 1,022 |
|
|
251,908,891 |
|
$ | 25,191 |
|
$ | 1,620,817 |
|
$ | (4,125,951 | ) | $ | (2,419,939 | ) |
The accompanying notes are an integral part of these financial statements.
| F-4 |
|
|
| Table of Contents |
Nate’s Food Co.
|
|
|
Year Ended May 31, |
|
|||||
|
|
|
2016 |
|
|
2015 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
|
Net Loss |
|
$ | (2,910,446 | ) |
|
$ | (1,211,213 | ) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
Interest on convertible note exchanged for warrants |
|
|
12,222 |
|
|
|
- |
|
|
Loss on settlement of debt |
|
|
16,778 |
|
|
|
- |
|
|
Amortization of debt discount |
|
|
381,696 |
|
|
|
9,795 |
|
|
Loss on derivative liability |
|
|
2,022,262 |
|
|
|
111,040 |
|
|
Stock issued for compensation |
|
|
155,112 |
|
|
|
857,000 |
|
|
Amortization of deferred financing cost |
|
|
29,292 |
|
|
|
- |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
30,000 |
|
|
|
- |
|
|
Accounts payable and accrued liabilities |
|
|
50,098 |
|
|
|
120,727 |
|
|
Accrued expenses |
|
|
120,631 |
|
|
|
11,083 |
|
|
Deferred revenue – related party |
|
|
(29,250 | ) |
|
|
29,250 |
|
|
Net cash used in operating activities |
|
|
(121,605 | ) |
|
|
(72,318 | ) |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Cash paid for purchase of fixed assets |
|
|
(132,479 | ) |
|
|
(85,004 | ) |
|
Net cash used in investing activities |
|
|
(132,479 | ) |
|
|
(85,004 | ) |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Payment of deferred financing costs |
|
|
(24,500 | ) |
|
|
- |
|
|
Proceeds from Series C Preferred Stock |
|
|
- |
|
|
|
27,000 |
|
|
Proceeds from convertible notes |
|
|
255,000 |
|
|
|
110,000 |
|
|
Payment of convertible note |
|
|
(10,000 | ) |
|
|
- |
|
|
Proceeds from loan from related party |
|
|
34,000 |
|
|
|
20,281 |
|
|
Net cash provided by financing activities |
|
|
254,500 |
|
|
|
157,281 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash increase (decrease) for the period |
|
|
416 |
|
|
|
(41 | ) |
|
Cash at beginning of period |
|
|
109 |
|
|
|
150 |
|
|
Cash at End of Period |
|
$ | 525 |
|
|
$ | 109 |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
|
Interest and taxes paid in cash |
|
$ | 12,140 |
|
|
$ | - |
|
|
|
|
|
|
|
|
|
|
|
|
NON CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Debt discount from derivative liability |
|
$ | 275,000 |
|
|
$ | 110,000 |
|
|
Original Issue Discount on convertible notes |
|
$ | 26,750 |
|
|
$ | - |
|
|
Derivative due to warrants issued to settle interest |
|
$ | 29,000 |
|
|
$ | - |
|
|
Convertible note exchanged for accrued interest |
|
$ | 11,000 |
|
|
$ | - |
|
|
Issued Series E Preferred stock as a dividend to Common shareholders |
|
$ | 772 |
|
|
$ | - |
|
|
Deemed dividend beneficial conversion feature on convertible Series C Preferred stock |
|
$ | - |
|
|
$ | 27,000 |
|
|
Accounts payable paid on behalf of the Company through note payable |
|
$ | - |
|
|
$ | 117,727 |
|
|
Conversion of Series B Preferred stock into common stock |
|
$ | 800 |
|
|
$ | - |
|
|
Conversion of convertible notes into common stock |
|
$ | 207,834 |
|
|
$ | - |
|
|
Conversion of warrants into common stock |
|
$ | 1,340 |
|
|
$ | - |
|
|
Settlement of derivative liability to additional paid in capital |
|
$ | 508,124 |
|
|
$ | - |
|
|
Issued convertible note for legal service |
|
$ | 30,000 |
|
|
$ | - |
|
|
Issued note payable for equity purchase agreement |
|
$ | 50,000 |
|
|
$ | - |
|
|
Issued note payable for purchase of equipment |
|
$ | 200,000 |
|
|
$ | - |
|
|
Adjustment to Series C Preferred Stock |
|
$ | 380 |
|
|
$ | - |
|
|
Adjustment to common stock |
|
$ | 5 |
|
|
$ | - |
|
The accompanying notes are an integral part of these financial statements.
| F-5 |
|
|
| Table of Contents |
NOTES TO THE FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies
Summary of significant accounting policies of Nate’s Food Co. (the “Company”) is presented to assist in understanding the Company’s financial statements. The accounting policies presented in these footnotes conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the accompanying financial statements. These financial statements and notes are representations of the Company’s management who are responsible for their integrity and objectivity.
Our Company
Nate’s Food Co. (“we”, “us”, “our”, the "Company" or the "Registrant") was incorporated in the state of Colorado on January 12, 2000. Nate’s Food Co. is domiciled in the state of Colorado, and its corporate headquarters are located in Huntington Beach, California. The Company selected May 31 as its fiscal year end. On May 12, 2014, Nate’s Pancakes Inc. was incorporated in the state of Indiana. On May 19, 2014, the Company completed a reverse merger between with Nate’s Pancakes, Inc. Nate’s Pancakes was the surviving Company. In May 2014, the Company changed its name from Capital Resource Alliance to Nate’s Food Co.
We sell a ready-to-use, pre-mixed pancake and waffle batter delivered in a pressurized can. Our current product is an original flavor of pancake and waffle batter. We are currently in the process of developing additional flavors and products with the goal to have 10 products in development in 2017. Currently, we have developed three flavors for our pancake and waffle mix. We plan to continue to expand into other baked goods and other non-breakfast areas.
Use of Estimates
The preparation of financial statements in accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on Nate’s Food Co. financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates. Nate’s Food Co.’s financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with maturity of three months or less to be cash equivalents.
Share-Based Compensation
The Company applies Topic 718 “Share-Based Payments” (“Topic 718”) to share-based compensation, which requires the measurement of the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized when the event occurs. The Black-Scholes option-pricing model is used to estimate the fair value of options granted.
The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
Revenue Recognition
It is the company’s policy that revenues and gains will be recognized in accordance with ASC Topic 605-10-25, “Revenue Recognition.” Under ASC Topic 605-10-25, revenue earning activities are recognized upon the sale and delivery of its products. As of May 31, 2016 and 2015, the Company has generated $29,250 and $3,996 in revenue. Consideration received prior to our delivery of the product is deferred until delivery. We had $0 and $29,250 in deferred revenue for a deposit from a related party as of May 31, 2016 and 2015, respectively. See footnote 3 for details.
| F-6 |
|
|
| Table of Contents |
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information. A liability (including interest and penalties, if applicable) is established to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.
Research and Development
We employ processes at our principal manufacturing locations that emphasize applied research and technical services directed at product improvement and quality control. In addition, we conduct research activities related to the development of new products. Research and development expense was $1,850 and $105,232 in fiscal 2016 and 2015, respectively.
Long-Lived Assets
Long-lived assets such as property and equipment are stated at their fair value acquisition cost and reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. Amortization of long-lived assets are calculated by the straight line method over their estimated useful lives. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.
Depreciation is computed for financial statement purposes on a straight-line basis over estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:
|
|
Estimated |
|
|
|
Useful Lives |
|
|
Equipment |
|
5-10 years |
For federal income tax purposes, depreciation is computed under the modified accelerated cost recovery system. For financial statements purposes, depreciation is computed under the straight-line method.
As of May 31, 2016, equipment of $395,195 reflects acquisition costs. During the year ended May 31, 2016, depreciation is not being calculated as equipment is currently not in use.
| F-7 |
|
|
| Table of Contents |
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash, prepaid expense, deferred financing cost, accounts payable and accrued liabilities, accrued expenses, convertible notes and Note payable. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.
The Company adopted ASC Topic 820, Fair Value Measurements ("ASC Topic 820"), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.
The three-level hierarchy for fair value measurements is defined as follows:
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement
The following table summarizes fair value measurements by level at May 31, 2016, and 2015, measured at fair value on a recurring basis:
|
May 31, 2016 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Derivative liabilities |
|
|
- |
|
|
|
- |
|
|
|
2,039,179 |
|
|
|
2,039,179 |
|
|
May 31, 2015 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Derivative liabilities |
|
|
- |
|
|
|
- |
|
|
|
221,040 |
|
|
|
221,040 |
|
Basic Earnings (Loss) Per Share
The Company computes net income (loss) per share in accordance with Accounting Standards Codification (“ASC”) 260, " Earnings per Share ". ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. There were 4,062,633 and 0 warrants and a convertible note for $2,039,179 and $230,835 secured by 165,558,975 and 2,825,222 shares of common stock issued by the Company during the year ended May 31, 2106 and 2015, respectively.
| F-8 |
|
|
| Table of Contents |
Recently Issued Accounting Pronouncements
In November 2015, the FASB issued (ASU) 2015-17, “Balance Sheet Classification of Deferred Taxes.” Currently deferred taxes for each tax jurisdiction are presented as a net current asset or liability and net noncurrent asset or liability on the balance sheet. To simplify the presentation, the new guidance requires that deferred tax liabilities and assets for all jurisdictions along with any related valuation allowances be classified as noncurrent in a classified statement of financial position. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016, and early adoption is permitted. The Company has adopted this guidance in the fourth quarter of the year ended December 31, 2015 on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows, and did not have any effect on prior periods due to the full valuation allowance against the Company’s net deferred tax assets.
Recent Accounting Pronouncements Issued But Not Adopted as of May 31, 2016
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The Company is currently in the process of evaluating the impact of the adoption on its financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance.
In January 2016, the FASB issued ASU 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.
In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement –Period Adjustments.” Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquiree recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquiree. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period they are determined. The new standard is effective for both public and private companies for periods beginning after December 15, 2015. The Company is currently evaluating the impact of adopting this guidance.
In August 2015, the FASB issued ASU No. 2015-14, Revenue From Contracts With Customers (Topic 606)." The amendments in this ASU defer the effective date of ASU 2014-09. Public business entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We are still evaluating the effect of the adoption of ASU 2014-09.
| F-9 |
|
|
| Table of Contents |
In April 2015, the FASB issued ASU 2015-05, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement," which provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance.
In April 2015, the FASB issued guidance related to a customer’s accounting for fees paid in a cloud computing arrangement. This standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015, and early adoption is permitted. The Company will adopt this guidance on January 1, 2016. The adoption of this guidance is not expected to have a material impact on its financial position, results of operations or cash flows.
In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, and amortization of those costs should be reported as interest expense. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016 and early adoption is permitted for financial statements that have not been previously issued. The new guidance should be applied on a retrospective basis for each period presented in the balance sheet. We are still evaluating the effect of the adoption of ASU 2015-03.
Note 2 – Going Concern
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have an established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.
Historically, it has mostly relied upon internally generated funds such as shareholder loans and advances to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.
Note 3 – Related Party Transactions
The Company sold products to 1PM Industries, whose CEO and major shareholder during the year ended 2015, was Joseph Wade a shareholder of Nate’s Food Co., and received $30,000 prior to shipment and delivery of the goods and as of May 31, 2015 had delivered goods of $750. 1PM Industries is developing various gourmet food products such as the development of compound butter and pancake and waffle syrup. The Company delivered partial shipment on February 28, 2015 to allow 1PM to begin testing different shipping methods related to the product. During the year ended May 31, 2016, the Company delivered the rest of goods and recognized revenue of $29,250.
| F-10 |
|
|
| Table of Contents |
Notes Payable – Related Parties
|
|
|
May 31, 2016 |
|
|
May 31, 2015 |
|
||
|
|
|
|
|
|
|
|
||
| Note payable to WB Partners (a company controlled by Joseph Wade) |
|
$ | 60,532 |
|
|
$ | 60,532 |
|
|
Note payable to corporate officer |
|
|
114,976 |
|
|
|
80,976 |
|
|
Total notes payable |
|
|
175,508 |
|
|
|
141,508 |
|
|
Less: current portion of notes payable |
|
|
175,508 |
|
|
|
141,508 |
|
|
Notes payable long-term |
|
$ | - |
|
|
$ | - |
|
During the year ended May 31, 2016, the Company borrowed $34,000 from our officer for working capital. As at May 31, 2016, the total amount owed to this officer was $114,976. Of this amount, $71,902 of the loan is at 10% interest, and $43,074 of the loan is at 0% interest. During the fiscal year 2015, the Company borrowed $80,976 from our officer, related to the food development and research and working capital. Of this amount, $67,195 was paid directly to vendors for expenses related to the food research. The total amount owed is $80,976 as of May 31, 2015. $71,902 of the loan is at 10% interest, and $9,074 of the loan is at 0% interest. Both of the loans are to be repaid by December 31, 2016.
During the year ended May 31, 2016, the amount the Company borrowed and repaid $0 to WB Partners. The total amount owing was $60,532 as at May 31, 2016. The loan is at 0% interest and is to be repaid by December 31, 2015 and is currently in default.
Note 4 – Equity Transaction
Preferred Stock
Series A Preferred Stock
The Company is authorized to issue 2,000,000 shares of series A Preferred Stock at a par value of $0.0001. The Series A Preferred Stock has voting rights equal to 1,000 votes for each 1 share of owned.
As of May 31, 2016 and 2015, 1,940,103 shares of series A Preferred Stock were issued and outstanding.
Series B Preferred Stock
The Company is authorized to issue 150,000 shares of Series B Preferred Stock at a par value of $0.0001. The Series B Preferred converts into Common Stock at a ratio of 1:1,000. However, the Series B may not be converted for a period of 12 months.
During the year ended May 31, 2016, 8,000 shares of Series B Preferred Stock were converted at rate of 1 preferred share to 1,000 common shares, resulting in the issuance of 8,000,000 shares of common stock, for a value of $800, of which $792 was recorded as a deemed dividend.
During the year ended May 31, 2016, the Company adjusted 605 shares of Series B Preferred Stock, to correct for issued and outstanding.
As of May 31, 2016 and 2015, 141,970 and 149,365 shares of Series B Preferred Stock were issued and outstanding, respectively.
Series C Preferred Stock
The Company is authorized to issue 250,000 shares of Series C Preferred Stock at a par value of $1. The Preferred Stock can be converted to common stock, at a conversion rate of 66 common shares for each preferred stock. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it does not contain a beneficial conversion feature.
| F-11 |
|
|
| Table of Contents |
During the year ended May 31, 2016, the Company adjusted 380 shares of Series C Preferred Stock, to correct for issued and outstanding.
During the year ended May 31, 2016, the Company granted 32,000 shares of Series C Preferred Stock to consultants for services. The shares were valued at $59,862.
During the year ended May 31, 2015, the Company issued 26,394 shares of its Series C Preferred Stock in exchange for $27,000 in cash that was used for food development and research and working capital. The intrinsic value of the beneficial conversion feature was determined to be $27,000. The beneficial conversion feature was fully amortized and recorded as a deemed dividend.
As of May 31, 2016 and 2015, 58,774 and 26,394 shares of Series C Preferred Stock were issued and outstanding, respectively.
Series E Preferred Stock
The Company is authorized to issue 15,000,000 shares of series E Preferred Stock at a par value of $0.0001. Beginning October 1, 2016, each share of Series E Preferred Stock is convertible into ten (10) shares of common stock. From October 1, 2016 to October 1, 2018, holders of Series E Preferred Stock may at any time convert to shares of common stock, thereafter, the Company may elect to convert any outstanding stock at any time without notice to the shareholders. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it does not contain a beneficial conversion feature.
On September 21, 2015, as a stock dividend to the common shareholders, the Company issued (1) share of newly created Series E Preferred Stock for every ten (10) shares of common stock outstanding. The Company issued 7,725,000 shares of Series E Preferred Stock for a value of $772.
On April 25, 2016, the Company issued 2,500,000 shares of Series E Preferred Stock with fair value of $250 for services.
As of May 31, 2016 and 2015, 10,225,000 and 0 shares of Series E Preferred Stock were issued and outstanding, respectively.
Common stock
The Company is authorized to issue 500,000,000 shares of common stock at a par value of $0.0001.
During the year ended May 31, 2016, the Company issued common shares, as follows:
| · | 128,758,891 shares of common stock were issued for the conversion of debt and accrued interest of $207,834. | |
|
|
|
|
| · | 8,000,000 shares of common stock were issued for the conversion of Series B Preferred Stock for a value of $800, of which $792 was recorded as a deemed dividend. | |
|
|
|
|
| · | 24,500,000 shares of common stock were issued to a related party for consulting services with a value of $95,000, of which 28,000,000 shares were issued for consulting services and 3,500,000 of these shares were cancelled. | |
|
|
|
|
| · | 13,400,000 common shares were issued in exchange for 20,644,258 warrants on a cashless basis. | |
|
|
|
|
| · | During the year ended May 31, 2016, the Company adjusted 50,000 shares of common stock to correct for issued and outstanding. |
| F-12 |
|
|
| Table of Contents |
During the year ended May 31, 2015, the Company issued 15,400,000 shares of Common Stock and booked an expense related to this stock issuance of $857,000 that represented the fair value of the stock issued. The stock was issued to WB Partners for consulting services rendered to the Company.
As of May 31, 2016 and 2015, 251,908,891 and 77,200,000 shares of common stock were issued and outstanding, respectively.
Warrant
On September 29, 2015, the Company granted 1,000,000 warrants to Vista Capital Investments, LLC, in exchange for interest owed of $12,222, and recognized a loss on debt settlement of $16,778. Warrants are originally exercisable into 1,000,000 shares of common stock, for a period of five years from issuance, at a price of $0.05 per share, with multiple reset provisions when the share price is below $0.05. As a result of the reset features the warrants became exercisable into 24,706,891 shares of common stock at $0.0025 per share.
The following table summarizes information relating to outstanding and exercisable warrants as of May 31, 2016:
|
Warrants Outstanding |
|
Warrants Exercisable |
||||||
|
Number of Shares |
|
Weighted Average Remaining Contractual life (in years) |
|
Weighted Average Exercise Price |
|
Number of Shares |
|
Weighted Average Exercise Price |
|
4,062,633 |
|
4.33 years |
|
$0.0025 |
|
4,062,633 |
|
$0.0025 |
The following table summarizes warrant activity for the year ended May 31, 2016:
|
|
|
Number |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Life (years) |
|||
|
Outstanding, May 31, 2015 |
|
|
- |
|
|
|
- |
|
|
|
|
|
Granted |
|
|
24,706,891 |
|
|
$ | 0.0128 |
|
|
5 years |
|
|
Forfeited |
|
|
- |
|
|
|
- |
|
|
|
|
|
Exercised |
|
|
20,644,258 |
|
|
$ | 0.00193 |
|
|
4.66 years |
|
|
Outstanding, May 31, 2016 |
|
|
4,062,633 |
|
|
$ | 0.0025 |
|
|
4.33 years |
|
Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company's stock exceeded the exercise price of the stock options at May 31, 2016, for those stock options for which the quoted market price was in excess of the exercise price ("in-the-money options"). As of May 31, 2016, the aggregate intrinsic value of options outstanding was approximately $42,000 based on the closing market price of $0.0128 on May 31, 2016.
Note 5 – Notes Payable
The Company had the following notes payable at May 31, 2016, and 2015.
|
|
|
May 31, 2016 |
|
|
May 31, 2015 |
|
||
|
|
|
|
|
|
|
|
||
|
Note payable to Tarpon Bay partners |
|
$ | 50,000 |
|
|
$ | - |
|
|
Note payable to SouthCorp Capital |
|
|
200,000 |
|
|
|
- |
|
|
Total notes payable |
|
|
250,000 |
|
|
|
- |
|
|
Less: current portion of notes payable |
|
|
50,000 |
|
|
|
- |
|
|
Long-term notes payable |
|
$ | 200,000 |
|
|
$ | - |
|
| F-13 |
|
|
| Table of Contents |
Note payable to Tarpon Bay partners
On October 8, 2015, the Company issued a Promissory Note (the “Note”) to Tarpon Bay Partners LLC, for $50,000, due April 30, 2016. The Note carries an annual interest rate of 10%. As of May 31, 2016, the Company owes $53,517, of which $3,517 is accrued interest. The Company recorded $50,000 to additional paid in capital, as the Note is to secure equity financing. The note is currently in maturity default.
Note payable to SouthCorp Capital
On October 20, 2015, the Company issued a Promissory Note to SouthCorp Capital, for $200,000, due October 20, 2017 for a payment for purchase of equipment of $177,712 and financing cost of $22,288 related to the purchase of the equipment. The Note carries an annual interest rate of 8%. As of May 31, 2016, the Company owes $210,486, of which $10,486 is accrued interest. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $6,830 of interest expense for the year ended May 31, 2016.
Note 6 – Convertible Notes
The Company had the following convertible notes payable outstanding as of May 31, 2016 and 2015:
|
|
|
May 31, 2016 |
|
|
May 31, 2015 |
|
||
|
Vista Capital |
|
$ | - |
|
|
$ | 110,000 |
|
|
Typenex Co |
|
|
39,688 |
|
|
|
- |
|
|
EMA Financial |
|
|
39,967 |
|
|
|
- |
|
|
BOU Trust |
|
|
60,260 |
|
|
|
- |
|
|
Fourth Man, LLC |
|
|
55,000 |
|
|
|
- |
|
|
Lucosky Brookman |
|
|
20,000 |
|
|
|
- |
|
|
|
|
|
214,915 |
|
|
|
110,000 |
|
|
Less: debt discount |
|
|
(20,259 | ) |
|
|
(100,205 | ) |
|
|
|
|
194,656 |
|
|
|
9,795 |
|
|
Less: current portion of convertible notes payable |
|
|
194,656 |
|
|
|
- |
|
|
Long-term convertible notes payable |
|
$ | - |
|
|
$ | 9,795 |
|
Vista Capital
On March 27, 2015, the Company received financing in the amount of $110,000 from Vista Capital Investments, LLC, sold to BOU Trust on September 29, 2015. The Company expected to pay off the amount within 90 days from its receipt bearing 10% interest, mature in two years, at any time on or after the issuance date, the holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. The Company could repay the note within 90 days with no prepayment penalty and within 180 days with a prepayment penalty equal to 10% of the balance. Conversion price was 65% of the lowest trade occurring during the 20 consecutive trading days immediately preceding the conversion date. On September 29, 2015, the Company entered into the agreement of exchange notes with Vista and BOU trust. BOU trust purchased $121,000 of principal amount and accrued interest and the reminder of note of $12,222 was exchanged for warrant for Vista. As a result of this agreement, the conversion price was amended to 60% of the lowest traded price for 20 trading days prior to conversion. On October 20, 2015, the Company entered into the agreement of exchange notes with BOU trust and RDW Capital, LLC. RDW Capital, LLC purchased $35,600 of a portion of $121,000 convertible note. During the year ended May, 2016, the notes of $121,000 were converted into 32,534,420 shares of common stock. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $100,205 of interest expense for the year ended May 31, 2016.
| F-14 |
|
|
| Table of Contents |
Typenex Co
On July 24, 2015, the Company received financing in the amount of $93,000 from TypenexCo-Investment, LLC with $13,000 cash discount to the lender and incurred $8,000 financing costs to third parties. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $8,000 of interest expense for the year ended May 31, 2016. The $93,000 bears an 8% interest and matures in nine months. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is 50% of the average of the three lowest closing bid prices for the 15 previous consecutive trading days prior to the payment date. The Company may prepay the note at any time at an amount equal to 120% of the outstanding principal and the accrued and unpaid interest. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $93,000 of interest expense for the year ended May 31, 2016. During the year ended May 31, 2016, the notes of $53,312 were converted into 48,150,000 shares of common stock.
EMA Financial
On August 14, 2015, the Company received financing in the amount of $65,500 from EMA Financial, LLC with $5,500 cash discount to the lender and incurred $6,000 financing costs to third parties. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $4,915 of interest expense for year ended May 31, 2016. The $65,500 bears 10% interest and matures in twelve months. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is the less of closing sale price of $0.035 and 60% of the lowest trade occurring during the 15 consecutive trading days immediately preceding the conversion date. The Company may prepay the note at any time during the first 120 days, at an amount equal to 125% of the outstanding principal and the accrued and unpaid interest, but no prepayment permitted thereafter. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $58,336 of interest expense for the year ended May 31, 2016. During the year ended May 31, 2016, the notes of $25,533 were converted into 36,976,671 shares of common stock.
BOU Trust
On September 25, 2015, the Company received financing in the amount of $68,250 from BOU Trust with $3,250 cash discount to the lender and incurred $6,500 financing costs to third parties. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $6,500 of interest expense for the year ended May 31, 2016. The $68,250 bears 10% interest and matures on March 25, 2016. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is the 60% of the lowest traded price, determined on the then current trading market for the Company’s common stock, for the 20 trading days prior to conversion. The Company may prepay any portion of the principal amount at 130% of such amount along with any accrued interest of this note at any time upon send days written notice to the holder. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $68,250 of interest expense for the year ended May 31, 2016. During the year ended May 31, 2016, the notes of $7,990 were converted into 11,097,800 shares of common stock.
Lucosky Brookman
On November 5, 2015, the Company issued convertible note of $30,000 to Lucosky Brookman, LLC. The Company repays in advance $5,000 per month. The $30,000 bears 0% interest and matures on March 20, 2016. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is the 60% of average of the lowest for 10 trading days prior to conversion at the option of the Holder, in whole at any time and from time to time. During the year ended May 31, 2016, the notes of $10,000 were repaid. Upon the later of the Maturity Date or that date which is six months following the date hereof, this Note shall be convertible into shares of the Company’s common stock. The note was discounted for a derivative (see note 7 for details) and the discount was amortized over the life of the note using the effective interest method resulting in $20,000 of interest expense for the year ended May 31, 2016.
| F-15 |
|
|
| Table of Contents |
Fourth Man, LLC
On November 5, 2015, the Company received financing in the amount of $55,000 from Fourth Man, LLC, with $5,000 cash discount to the lender and incurred $4,000 financing costs to third parties. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $3,048 of interest expense for the year end May 31, 2016. The $55,000 bears 10% interest and matures on August 4, 2016. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is the 53% of the lowest daily trading price, determined on the then current trading market for the Company’s common stock, for 10 trading days prior to conversion at the option of the Holder, in whole at any time and from time to time. During the first 90 days subsequent to the date of issuance, the company may prepay any portion of the principal amount at 130% of such amount along with any accrued interest of this debenture at any time upon seven days written notice to the holder. After the first 90 days subsequent to the date of issuance, the company may prepay any portion of the principal amount at 150% of such amount along with any accrued interest of this debenture at any time upon seven days written notice to the holder. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $41,905 of interest expense for the year ended May 31, 2016.
Notes in Default
Certain convertible notes held by the company are in default. The terms of default for each note are as follows:
| · | TypenexCo-Investment, LLC: as of April 4, 2016, the TypenexCo-Investment, LLC convertible note was in filing default, and maturing default. As a result, additional penalties of approximately $20,000 have been incurred on the outstanding balance. The principal and interest outstanding are immediately payable. | |
|
|
|
|
| · | EMA Financial, LLC: the convertible note is currently in filing default. The penalty on the convertible note is 150% of the principal amount outstanding which is approximately $30,000. The principal and interest outstanding are immediately payable. | |
|
|
|
|
| · | BOU Trust: as of March 25, 2016, the note is in filing default, and maturity default. As a result, penalties of $1,000 per day are being accrued on the outstanding balance. Approximately $10,000 in late fees have been accrued for the year ended May 31, 2016. The principal and interest outstanding are immediately payable. | |
|
|
|
|
| · | Lucosky Brookman, LLC: as of March 20, 2016, the Lucosky Brookman, LLC convertible note was in maturity default. Upon default of the note, the holder may declare all of the note, including any interest, immediately due. In addition, upon default of the note, interest on the principal is accrued at 18% per annum. The Company has pledged certain assets as part of the agreement. | |
|
|
|
|
| · | Fourth Man, LLC: as of May 2016, the note is currently in filing default. As a result, additional penalties of approximately $16,000 have been incurred on the outstanding principal and interest balances. The principal and interest outstanding are immediately payable. |
Note 7 – Derivative Liability
The Company analyzed the conversion options for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability when the conversion option becomes effective and there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.
| F-16 |
|
|
| Table of Contents |
The following table summarizes the derivative liabilities included in the balance sheet at May 31, 2016:
|
|
|
Vista Capital |
|
|
Typenex Co |
|
|
EMA Financial |
|
|
BOU Trust |
|
|
Fourth Man, LLC |
|
|
Lucosky Brookman |
|
|
Warrant |
|
|
Total |
|
||||||||
|
Balance - May 31, 2015 |
|
$ | 221,040 |
|
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
$ | 221,040 |
|
|
Addition of new derivative as debt discount |
|
|
- |
|
|
|
80,000 |
|
|
|
60,000 |
|
|
|
65,000 |
|
|
|
50,000 |
|
|
|
20,000 |
|
|
|
- |
|
|
|
275,000 |
|
|
Addition of new derivative due to warrant |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
29,000 |
|
|
|
29,000 |
|
|
Day one loss due to derivative |
|
|
- |
|
|
|
27,431 |
|
|
|
16,685 |
|
|
|
59,514 |
|
|
|
1,593 |
|
|
|
24,898 |
|
|
|
- |
|
|
|
130,121 |
|
|
(Gain) loss on change in fair value of the derivative |
|
|
27,729 |
|
|
|
308,094 |
|
|
|
252,566 |
|
|
|
884,414 |
|
|
|
265,358 |
|
|
|
48,488 |
|
|
|
105,492 |
|
|
|
1,892,141 |
|
|
Settled upon conversion of debt and warrants |
|
|
(248,769 | ) |
|
|
(97,771 | ) |
|
|
(64,640 | ) |
|
|
(14,427 | ) |
|
|
- |
|
|
|
- |
|
|
|
(82,516 | ) |
|
|
(508,123 | ) |
|
Balance - May 31, 2016 |
|
|
- |
|
|
|
317,754 |
|
|
|
264,611 |
|
|
|
994,501 |
|
|
|
316,951 |
|
|
|
93,386 |
|
|
|
51,976 |
|
|
|
2,039,179 |
|
The following table summarizes the loss on derivative liability included in the income statement for the financial year ended May 31, 2016 and 2015, respectively.
|
|
|
Year Ended May 31, |
|
|||||
|
|
|
2016 |
|
|
2015 |
|
||
|
Day one loss due to derivatives on convertible debt |
|
|
|
|
|
|
||
|
Vista Capital |
|
$ | - |
|
|
$ | 114,954 |
|
|
Typenex Co |
|
|
27,431 |
|
|
|
- |
|
|
EMA Financial |
|
|
16,685 |
|
|
|
- |
|
|
BOU Trust |
|
|
59,514 |
|
|
|
- |
|
|
Fourth Man, LLC |
|
|
1,593 |
|
|
|
- |
|
|
Lucosky Brookman |
|
|
24,898 |
|
|
|
- |
|
|
(Gain) loss on change in fair value of the derivative |
|
|
|
|
|
|
|
|
|
Vista Capital |
|
|
27,729 |
|
|
|
(3,914 | ) |
|
Typenex Co |
|
|
308,094 |
|
|
|
- |
|
|
EMA Financial |
|
|
252,566 |
|
|
|
- |
|
|
BOU Trust |
|
|
884,414 |
|
|
|
- |
|
|
Fourth Man, LLC |
|
|
265,358 |
|
|
|
- |
|
|
Lucosky Brookman |
|
|
48,488 |
|
|
|
- |
|
|
Warrants |
|
|
105,492 |
|
|
|
- |
|
|
Net loss on derivative liability |
|
$ | 2,022,262 |
|
|
$ | 111,040 |
|
| F-17 |
|
|
| Table of Contents |
The table below shows the Black-Scholes option-pricing model inputs used by the Company to value the derivative liability, as well as the determined value of the option liability at each measurement date:
|
|
|
Year Ended May 31, |
|
|||||
|
|
|
2016 |
|
|
2015 |
|
||
|
Expected term |
|
0.05 - 5 years |
|
|
2 years |
|
||
|
Expected average volatility |
|
94.21% - 1,097.67% |
|
|
362.9% - 366.84% |
|
||
|
Expected dividend yield |
|
|
- |
|
|
|
- |
|
|
Risk-free interest rate |
|
0.06%-1.65% |
|
|
|
0.58% | ||
Note 8 – Taxes
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended June 2012 applicable under FASB ASC 740. We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet. All tax returns for the Company remain open.
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences for the periods presented are as follows:
|
Income tax provision at the federal statutory rate |
|
35 |
% |
|
|
Effect on operating losses |
|
(35 |
%) |
|
|
|
- |
Changes in the net deferred tax assets consist of the following:
|
|
|
May 31, 2016 |
|
|
May 31, 2015 |
|
||
|
|
|
|
|
|
|
|
||
|
Net operating loss carry forward |
|
$ | 416,462 |
|
|
$ | 233,378 |
|
A reconciliation of income taxes computed at the statutory rate is as follows:
|
|
|
May 31, 2016 |
|
|
May 31, 2015 |
|
||
|
|
|
|
|
|
|
|
||
|
Total deferred tax assets at statutory tax rate of 35% |
|
$ | 145,762 |
|
|
$ | 81,682 |
|
|
Increase in valuation allowance |
|
|
(145,762 | ) |
|
|
(81,682 |
|
|
Net deferred tax asset |
|
$ | - |
|
|
$ | - |
|
Note 9 – Subsequent Events
Subsequent to May 31, 2016, a total of $47,980 convertible debt was converted, resulting in the issuance of 19,100,000 common shares.
Subsequent to May 31, 2016, 5,400 shares of Series B Preferred Stock were converted at rate of 1 preferred share to 1,000 common shares, resulting in the issuance of 5,400,000 shares of common stock, for a value of $540
Subsequent to May 31, 2016, the Company repaid note payable to Tarpon Bay partners of $50,000 by an issuance of 1,857,619 shares of common stock.
Subsequent to May 31, 2016, the Company issued 2,350,000 shares of Series D Preferred Stock.
On June 28, 2016, we issued a 10% promissory note in the amount of $57,000 to MSM Investments, a company related to Marc Kassoff, a director and officer of our company.
F-18
Table of Contents
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and interim periods.
Item 9A. Controls and Procedures
Management’s Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 , as amended, 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 our management, including our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.
As of May 31, 2016, the end of our fiscal year covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of May 31, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework . Our management has concluded that, as of May 31, 2016, our internal control over financial reporting are not effective. Our management reviewed the results of their assessment with our board of directors.
This annual report does not include an attestation report of our company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our company’s registered public accounting firm pursuant to temporary rules of the SEC that permit our company to provide only management’s report in this annual report.
Identified Material Weakness
A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.
Management identified the following material weakness during its assessment of internal controls over financial reporting as of May 31, 2016:
| 15 |
|
|
| Table of Contents |
Independent Directors : Our company does not have any independent directors. We intend to obtain at least two independent directors during the year ended May 31, 2017. The cost associated to the addition in minimal and not deemed material.
No Segregation of Duties : Ineffective controls over financial reporting: Our company intends to hire additional staff members, either as employees or consultants, prior to May 31, 2016. These additional staff members will be responsible for making sure that information required to be disclosed in our reports filed and submitted under the Exchange Act is recorded, processed, summarized and reported as and when required and will the staff members will have segregated responsibilities with regard to these responsibilities. The costs associated with the hiring the additional staff members will increase our company's Sales, General and Administration (SG&A) Expense. It is anticipated the cost of the new staff members will be approximately $60,000 per year. As of May 31, 2016, we have no full-time employees with the requisite expertise in the key functional areas of finance and accounting. As a result, there is a lack of proper segregation of duties necessary to insure that all transactions are accounted for accurately and in a timely manner.
No audit committee : Should at least two independent directors be appointed, our company expects that an Audit Committee will be established. The cost associated to the addition an audit committee are minimal and not deemed material.
Written Policies & Procedures : We need to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions, and prepare, review and submit SEC filings in a timely manner.
Management’s Remediation Initiatives
As our resources allow, we will add financial personnel to our management team. We plan to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions. We will also create an audit committee made up of our independent directors.
As of May 31, 2016, our company has not taken any remediation actions to address these weaknesses in our controls even though they were identified during the year. Our company’s management expects, once it is in the financial position to do so, to hire additional staff in our accounting department to be able to segregate the duties. Our company expects that the expense will be approximately $60,000 per year which would allow our company to hire two new staff members.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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.
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Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the year ended May 31, 2016 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:
|
Name and Address |
|
Position Held
|
|
Age |
|
|
Date First Elected or Appointed |
|
|
Nate Steck |
|
President, Chief Executive Officer and Director |
|
45 |
|
|
May 12, 2014 |
|
|
Marc Kassoff |
|
Vice-President, Chief Financial Officer and Director |
|
68 |
|
|
May 12, 2014 |
|
|
Timothy Denton |
|
Secretary and Director |
|
65 |
|
|
May 12, 2014 |
|
|
Jeremy Kaplan |
|
Vice-President of Marketing/Branding |
|
45 |
|
|
May 12, 2014 |
Business Experience
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Nate Steck – President, Chief Executive Officer and Director
Mr. Steck is an entrepreneur and trained French Chef and with over 20 years’ experience in Product Development and Food Production. He has developed over 30 successful products from concept to shelf with National distribution for consumer brands and private labels, cumulative sales of 175M. He is the Co-Founder of Batter Blaster, Co-Founder of Elena’s Food Specialties and Founder of Elite foods.
Our company believes that Mr. Steck’s professional background experience gives him the qualifications and skills necessary to serve as a director and officer of our company.
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Marc Kassoff – Vice-President, Chief Financial Officer and Director
Mr. Kassoff currently the President and CEO of Meyer, Christian and Associates, Inc. a healthcare subrogation firm. This has been his position for the last 17 years. Mr. Kassoff is also on the Board of the Effect and Encompass which serves the South Orange County community as a Drug and Alcohol Recovery Program.
Our company believes that Mr. Kassoff’s professional background experience gives him the qualifications and skills necessary to serve as a director and officer of our company.
Timothy Denton – Secretary and Director
Mr. Denton has practiced law in California since 1981, and during that time he has represented and assisted dozens of start-up companies and other businesses, handling both matters involving transactional business as well as civil litigation. For over 12 years he has been the Supervising Attorney at the firm of Meyer Christian & Associates, primarily representing hospitals and medical provider groups, working with his clients to ensure regulatory compliance with state and federal laws and agencies. He has continued to work with business development issues for a number of start-up businesses throughout this period, including assisting in the development of Nate's Food, Co.
Our company believes that Mr. Denton’s professional background experience gives him the qualifications and skills necessary to serve as an officer of our company.
Jeremy Kaplan – Vice-President, Marketing/Branding
Mr. Kaplan is a marketing executive and designer with over 17 years’ experience in retail marketing, branding and design. He has overseen marketing and creative projects that led to the rollout of new product and services for Bloomingdale’s, Ralph Lauren, Donna Karen, Acura, Samsung, Sun Microsystems and NapaStyle. Jeremy has managed marketing campaigns in support of store openings for Bloomingdale’s, and has held roles designing fixtures and furniture for Lexus, Philz Coffee, and Sessions snowboarding and outerwear.
Our company believes that Mr. Kaplan’s professional background experience gives him the qualifications and skills necessary to serve as an officer of our company.
Employment Agreements
We have no formal employment agreements with any of our directors or officers.
Family Relationships
There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.
Involvement in Certain Legal Proceedings
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To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
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1. | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
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2. | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
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3. | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
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4. | been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
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5. | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
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6. | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Compliance with Section 16(A) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our shares of common stock and other equity securities, on Forms 3, 4 and 5, respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file.
Based solely on our review of the copies of such forms received by our company, or written representations from certain reporting persons that no Form 5s were required for those persons, we believe that, during the fiscal year ended May 31, 2016, all filing requirements applicable to our officers, directors and greater than 10% beneficial owners as well as our officers, directors and greater than 10% beneficial owners of our subsidiaries were complied with, with the exception of the following:
|
Name |
Number of Late
|
Number of
|
Failure to File
|
|||
|
Nate Steck |
-- |
-- |
1 (1) |
|||
|
Marc Kassoff |
1 (2) |
1 |
N/A |
____________
|
|
(1) | The insider is late filing beneficial ownership forms. The required beneficial ownership forms are expected to be filed subsequent to the filing of this Form 10-K. |
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|
(2) | The insider was late filing a Form 4, Statement of Changes of Beneficial Ownership. |
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Code of Ethics
Our company’s board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, our company’s principal executive officer and our principal financial and accounting officer, as well as persons performing similar functions.
Our Code of Business Conduct and Ethics is attached as an exhibit to this Annual Report on Form 10-K;. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to: Nate’s Food Co., 15151 Springdale Street Huntington Beach, California 92649.
Board and Committee Meetings
Our board of directors held no formal meetings during the year ended May 31, 2016. All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Colorado Revised Statutes and our Bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
Nomination Process
As of May 31, 2016, we did not effect any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. Our board of directors does not have a policy with regards to the consideration of any director candidates recommended by our shareholders. Our board of directors has determined that it is in the best position to evaluate our company’s requirements as well as the qualifications of each candidate when the board considers a nominee for a position on our board of directors. If shareholders wish to recommend candidates directly to our board, they may do so by sending communications to the president of our company at the address on the cover of this annual report.
Audit Committee
Currently our audit committee consists of our entire board of directors. We do not have a standing audit committee as we currently have limited working capital and minimal revenues. Should we be able to raise sufficient funding to execute our business plan, we will form an audit, compensation committee and other applicable committees utilizing our directors’ expertise.
Audit Committee Financial Expert
Currently our audit committee consists of our entire board of directors. We do not currently have a director who is qualified to act as the head of the audit committee.
Item 11. Executive Compensation
The particulars of the compensation paid to the following persons:
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(a) | our principal executive officer; |
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(b) | each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended May 31, 2016 and 2015; and |
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(c) | up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended May 31, 2016 and 2015, who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year: |
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SUMMARY COMPENSATION TABLE |
|||||||||
|
Name
|
Year |
Salary
|
Bonus
|
Stock Awards
|
Option Awards
|
Non-Equity Incentive Plan Compensa-tion
|
Change in Pension
|
All
|
Total
|
|
Nate Steck
|
2016
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Marc Kassoff
|
2016
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Timothy Denton
|
2016
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Jeremy Kaplan
|
2016
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of directors.
Grants of Plan-Based Awards
During the fiscal year ended May 31, 2016 we did not grant any stock options.
Outstanding Equity Awards at Fiscal Year End
As at the year ended May 31, 2016, we did not have any outstanding equity awards.
Option Exercises and Stock Vested
During our fiscal year ended May 31, 2016 there were no options exercised by our named officers.
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Compensation of Directors
We do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Indebtedness of Directors, Senior Officers, Executive Officers and Other Management
None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
The following table sets forth, as of September 1, 2016, certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
|
Name and Address of Beneficial Owner |
Amount and Nature of
|
Percentage
|
|
Nate Steck
Huntington Beach, CA 92649 |
296,000 Common Stock / Direct
|
*
|
|
Marc Kassoff
Huntington Beach, CA 92649 |
1,164,887 Common Stock / Direct
|
*
|
|
Timothy Denton
Huntington Beach, CA 92649
|
63,600 Common Stock / Direct
|
*
10%
|
|
Jeremy Kaplan
Huntington Beach, CA 92649
|
15,000 Series B Preferred / Direct |
10% |
|
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||
|
Directors and Executive Officers as a Group
|
1,460,887 Common Stock
17,240 Series E Preferred |
0.52%
|
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_________________ *represents an amount less than 1% |
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(1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on September 1, 2016. As of September 1, 2016 there were 278,266,510 shares of our company’s common stock issued and outstanding. |
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(2) | Our company is authorized to issue 2,000,000 shares of Series A Preferred Stock, par value $0.0001. As of September 1, 2016 there were 1,940,102 shares of our company’s Series A Preferred Stock issued and outstanding. |
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(3) | Our company is authorized to issue 150,000 shares of Series B Preferred Stock, par value $0.0001. As of September 1, 2016 there were 130,500 shares of our company’s Series B Preferred Stock issued and outstanding. |
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(4) | Our company is authorized to issue 250,000 shares of Series C Preferred Stock, par value $1.00. As of September 1, 2016 there were 58,774 shares of our company’s Series C Preferred Stock issued and outstanding. |
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(5) | Our company is authorized to issue 10,000,000 shares of Series D Preferred Stock, par value $0.0001. The Series D Preferred Stock is convertible into shares of our common stock. As of September 1, 2016 there were 2,350,000 shares of our company’s Series D Preferred Stock issued and outstanding. Of the Series D Preferred Stock outstanding, none are held by our directors or officers and upon conversion, no current holder of the Series D Preferred Stock would be a beneficial owner of 5% or more of our common stock. |
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(6) |
Our company is authorized to issue 15,000,000 shares of Series E Preferred Stock, par value $0.0001. As of September 1, 2016 there were 10,225,000 shares of our company’s Series E Preferred Stock issued and outstanding. Of the Series E Preferred Stock outstanding, 17,240 are held by our directors and officers. Upon conversion no current holder of the Series E Preferred stock would be a beneficial owner of 5% or more of our common stock. |
Changes in Control
We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company. There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of our company.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended May 31, 2016, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last three completed fiscal years.
Director Independence
We currently act with three directors, consisting of Nate Steck, Marc Kassoff and Timothy Denton. We have determined that none of our directors is an independent director, as that term is used in Rule 4200(a)(15) of the Rules of National Association of Securities Dealers.
Currently our audit committee consists of our entire board of directors. We currently do not have nominating, compensation committees or committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.
From inception to present date, we believe that the members of our audit committee and the board of directors have been and are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.
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Item 14. Principal Accounting Fees and Services
The aggregate fees billed for the most recently completed fiscal year ended May 31, 2016 and for fiscal year ended May 31, 2015 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
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Year Ended |
|
|||||
|
|
|
May 31, 2016 |
|
|
May 31, 2015 |
|
||
|
Audit Fees |
|
$ | 18,520 |
|
|
$ | 13,000 |
|
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Audit Related Fees |
|
Nil |
|
|
Nil |
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||
|
Tax Fees |
|
Nil |
|
|
Nil |
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||
|
All Other Fees |
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Nil |
|
|
Nil |
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||
|
Total |
|
$ | 18,520 |
|
|
$ | 13,000 |
|
Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Financial Statements
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(1) | Financial statements for our company are listed in the index under Item 8 of this document. |
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(2) | All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto. |
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(b) Exhibits
|
Exhibit Number |
Description |
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|
(3) |
Articles of Incorporation and Bylaws |
|
|
3.1 |
Articles of Incorporation (Incorporated by reference to our Registration Statement on Form SB-2 filed on September 14, 2007) |
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3.2 |
Bylaws (Incorporated by reference to our Registration Statement on Form SB-2 filed on September 14, 2007) |
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3.3 |
Restated Articles of Incorporation (Incorporated by reference to our Registration Statement on Form 10 filed on July 29, 2014) |
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3.4* |
Restated Articles of Incorporation field with the Colorado Secretary of State on September 18, 2015 |
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3.5* |
Certificate of Designation, Preferences and Rights of Series D Preferred Stock filed with the Colorado Secretary of State on June 28, 2016 |
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(10) |
Material Contracts |
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10.1* |
Promissory Note dated June 28, 2016 with MSM Investments |
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(14) |
Code of Ethics |
|
|
14.1* |
Code of Ethics |
|
|
(31) |
Rule 13a-14 (d)/15d-14d) Certifications |
|
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31.1* |
Section 302 Certification by the Principal Executive Officer |
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31.2* |
Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer |
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(32) |
Section 1350 Certifications |
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32.1* |
Section 906 Certification by the Principal Executive Officer |
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32.2* |
Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer |
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101 * |
Interactive Data File |
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101.INS |
XBRL Instance Document |
|
|
101.SCH |
XBRL Taxonomy Extension Schema Document |
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101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
|
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
_______________
* Filed herewith.
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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, thereto duly authorized.
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NATE’S FOOD CO. |
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(Registrant) |
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| Dated: October 6, 2016 |
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/s/ Nate Steck |
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Nate Steck |
||
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President, Chief Executive Officer and Director |
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|
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(Principal Executive Officer) |
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| Dated: October 6, 2016 |
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/s/ Marc Kassoff |
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Marc Kassoff |
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Vice-President, Chief Financial Officer and Director |
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|
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(Principal Financial Officer and Principal Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Dated: October 6, 2016 |
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/s/ Nate Steck |
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Nate Steck |
||
|
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President, Chief Executive Officer and Director |
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|
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(Principal Executive Officer) |
||
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| Dated: October 6, 2016 |
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/s/ Marc Kassoff |
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Marc Kassoff |
||
|
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Vice-President, Chief Financial Officer and Director |
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|
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(Principal Financial Officer and Principal Accounting Officer) |
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| Dated: October 6, 2016 |
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/s/ Timothy Denton |
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Timothy Denton |
||
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Secretary and Director |
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EXHIBIT 3.4
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| 3 |
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5 |
EXHIBIT 3.5
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| 3 |
EXHIBIT 10.1
EXHIBIT 14
NATE’S FOOD CO.
(the “
Corporation
”)
CODE OF ETHICS AND BUSINESS CONDUCT
For DIRECTORS, SENIOR OFFICERS AND EMPLOYEES OF THE CORPORATION
(the “
Code
”)
This Code applies to the Chief Executive Officer, President, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Controller, any Presidents of business units/divisions, any Vice-Presidents, any Executive Vice-Presidents, and persons performing similar functions (collectively, the “ Senior Officers ”) along with all directors and employees within the Corporation and its subsidiaries (the Senior Officers, directors and employees are hereinafter collectively referred to as the “ Employees ”). This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all Employees of the Corporation. All Employees should conduct themselves accordingly and seek to avoid the appearance of improper behaviour in any way relating to the Corporation.
Any Employee who has any questions about the Code should consult with the Chief Executive Officer, the President, the Corporation’s board of directors (the “ Board ”) or the Corporation’s audit committee (the “ Audit Committee ”).
The Corporation has adopted the Code for the purpose of promoting:
| · | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest; | |
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| · | full, fair, accurate, timely and understandable disclosure in all reports and documents that the Corporation files with, or submits to, the Securities and Exchange Commission (“ SEC ”) and in other public communications made by the Corporation; | |
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| · | compliance with applicable governmental laws, rules and regulations; | |
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| · | the protection of Corporation assets, including corporate opportunities and confidential information; | |
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| · | fair dealing practices; | |
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| · | the prompt internal reporting of violations of the Code; and | |
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| · | accountability for adherence to the Code. |
All Employees are required to be familiar with the Code, comply with its provisions and report any suspected violations as described below.
HONEST AND ETHICAL CONDUCT
The Corporation’s policy is to promote high standards of integrity by conducting its affairs honestly and ethically.
Each Employee must act with integrity and observe the highest ethical standards of business conduct in his or her dealings with the Corporation’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom he or she has contact in the course of performing his or her job.
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A conflict of interest occurs when an individual's private interest (or the interest of a member of his or her family) interferes, or even appears to interfere, with the interests of the Corporation as a whole. A conflict of interest can arise when an Employee (or a member of his or her family) takes actions or has interests that may make it difficult to perform his or her work for the Corporation objectively and effectively. Conflicts of interest also arise when an Employee (or a member of his or her family) receives improper personal benefits as a result of his or her position in the Corporation.
Loans by the Corporation to, or guarantees by the Corporation of obligations of, Employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Corporation to, or guarantees by the Corporation of obligations of, any Senior Officer or their family members are expressly prohibited.
Specifically, each Employee must:
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1. | act with integrity, including being honest and candid while still maintaining the confidentiality of information when required or consistent with the Corporation’s policies; |
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2. | avoid violations of the Code, including actual or apparent conflicts of interest with the Corporation in personal and professional relationships; |
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3. | disclose to the Board or the Audit Committee any material transaction or relationship that could reasonably be expected to give rise to a breach of the Code, including actual or apparent conflicts of interest with the Corporation; |
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4. | obtain approval from the Board or Audit Committee before making any decisions or taking any action that could reasonably be expected to involve a conflict of interest or the appearance of a conflict of interest; |
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5. | observe both the form and spirit of laws and governmental rules and regulations, accounting standards and Corporation policies; |
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6. | maintain a high standard of accuracy and completeness in the Corporation’s financial records; |
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7. | ensure full, fair, timely, accurate and understandable disclosure in the Corporation’s periodic reports; |
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8. | report any violations of the Code to the Board or Audit Committee; |
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9. | proactively promote ethical behaviour among peers in his or her work environment; and |
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10. | maintain the skills appropriate and necessary for the performance of his or her duties. |
DISCLOSURE OF CORPORATION INFORMATION
As a result of the Corporation’s status as a public company, it is required to file periodic and other reports with the SEC. The Corporation takes its public disclosure responsibility seriously to ensure that these reports furnish the marketplace with full, fair, accurate, timely and understandable disclosure regarding the financial and business condition of the Corporation. All disclosures contained in reports and documents filed with or submitted to the SEC, or other government agencies, on behalf of the Corporation or contained in other public communications made by the Corporation must be complete and correct in all material respects and understandable to the intended recipient.
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The Senior Officers, in relation to his or her area of responsibility, must be committed to providing timely, consistent and accurate information, in compliance with all legal and regulatory requirements. It is imperative that this disclosure be accomplished consistently during both good times and bad and that all parties in the marketplace have equal or similar access to this information.
All of the Corporation’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Corporation’s transactions, and must conform both to applicable legal requirements and to the Corporation’s system of internal controls. Unrecorded or “off the book” funds, assets or liabilities should not be maintained unless permitted by applicable law or regulation. Senior Officers involved in the preparation of the Corporation’s financial statements must prepare those statements in accordance with generally accepted accounting principles, consistently applied, and any other applicable accounting standards and rules so that the financial statements materially, fairly and completely reflect the business transactions and financial statements and related condition of the Corporation. Further, it is important that financial statements and related disclosures be free of material errors.
Specifically, each Senior Officer must:
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be familiar and comply with the disclosure requirements generally applicable to the Corporation and the Corporation’s disclosure controls and procedures and its internal control over financial reporting;
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take all necessary steps to ensure that all filings with the SEC and all other public communications about the financial and business condition of the Corporation provide full, fair, accurate, timely and understandable disclosure;
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not knowingly misrepresent, or cause others to misrepresent, facts about the Corporation to others, including the Corporation’s independent auditors, governmental regulators, self-regulating organizations and other governmental officials;
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to the extent that he or she participates in the creation of the Corporation’s books and records, promote the accuracy, fairness and timeliness of those records; and
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in relation to his or her area of responsibility, properly review and critically analyse proposed disclosure for accuracy and completeness.
PROTECTION AND PROPER USE OF COMPANY ASSETS
All Employees should protect the Corporation’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Corporation’s profitability and are prohibited.
All Corporation assets should be used only for legitimate business purposes. Any suspected incident of fraud or theft should be reported for investigation immediately. The obligation to protect Corporation assets includes the Corporation’s proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks, and copyrights, as well as business and marketing plans, engineering and manufacturing ideas, designs, databases, records and any non-public financial data or reports. Unauthorized use or distribution of this information is prohibited and could also be illegal and result in civil or criminal penalties.
All Employees owe a duty to the Corporation to advance its interests when the opportunity arises. Employees are prohibited from taking for themselves personally (or for the benefit of friends or family members) opportunities that are discovered through the use of Corporation assets, property, information or position. Employees may not use Corporation assets, property, information or position for personal gain (including gain of friends or family members). In addition, no director, officer or employee may compete with the Corporation.
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CONFIDENTIAL INFORMATION
Employees must maintain the confidentiality of confidential information entrusted to them by the Corporation of its customers, suppliers, joint venture partners, or others with whom the Corporation is considering a business or other transaction except when disclosure is authorized by an executive officer or required or mandated by laws or regulations. Confidential information includes all non-public information that might be useful or helpful to competitors or harmful to the Corporation or its customers or suppliers, if disclosed. It also includes information that suppliers, customers and other parties have entrusted to the Corporation. The obligation to preserve confidential information continues even after employment ends.
Records containing personal data about employees or private information about customers and their employees are confidential. They are to be carefully safeguarded, kept current, relevant and accurate. They should be disclosed only to authorized personnel or as required by law.
All inquiries regarding the Corporation from non-employees, such as financial analysts and journalists, should be directed to the Board or the Audit Committee. The Corporation’s policy is to cooperate with every reasonable request of government investigators for information. At the same time, the Corporation is entitled to all the safeguards provided by law for the benefit of persons under investigation or accused of wrongdoing, including legal representation. If a representative of any government or government agency seeks an interview or requests access to data or documents for the purposes of an investigation, the Employee should refer the representative to the Board or the Audit Committee. Employees also should preserve all materials, including documents and e-mails that might relate to any pending or reasonably possible investigation.
COMPLIANCE WITH LAWS
The Employees must respect, obey and comply with all applicable foreign, federal, state and local laws, rules and regulations applicable to the business and operations of the Corporation.
Employees who have access to, or knowledge of, material nonpublic information from or about the Corporation are prohibited from buying, selling or otherwise trading in the Corporation’s stock or other securities. “Material nonpublic” information includes any information, positive or negative, that has not yet been made available or disclosed to the public and that might be of significance to an investor, as part of the total mix of information, in deciding whether to buy or sell stock or other securities.
Employees also are prohibited from giving “tips” on material nonpublic information, that is directly or indirectly disclosing such information to any other person, including family members, other relatives and friends, so that they may trade in the Corporation’s stock or other securities.
Furthermore, if, during the course of an Employee’s service with the Corporation, he or she acquires material nonpublic information about another company, such as one of our customers or suppliers, or you learn that the Corporation is planning a major transaction with another company (such as an acquisition), the Employee is restricted from trading in the securities of the other company.
REPORTING ACTUAL AND POTENTIAL VIOLATIONS OF THE CODE AND ACCOUNTABILITY FOR COMPLIANCE WITH THE CODE
The Corporation, through the Board or the Audit Committee, is responsible for applying this Code to specific situations in which questions may arise and has the authority to interpret this Code in any particular situation. This Code is not intended to provide a comprehensive guideline for Senior Officers in relation to their business activities with the Corporation. Any Employee may seek clarification on the application of this Code from the Board or the Audit Committee.
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Each Employee must:
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notify the Corporation of any existing or potential violation of this Code, and failure to do so is itself a breach of the Code; and |
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not retaliate, directly or indirectly, or encourage others to do so, against any Employee for reports, made in good faith, of any misconduct or violations of the Code solely because that Employee raised a legitimate ethical issue. |
The Board or the Audit Committee will take all action it considers appropriate to investigate any breach of the Code reported to it. All Employees are required to cooperate fully with any such investigations and to provide truthful and accurate information. If the Board or the Audit Committee determines that a breach has occurred, it will take or authorize disciplinary or preventative action as it deems appropriate, after consultation with the Corporation’s counsel if warranted, up to and including termination of employment. Where appropriate, the Corporation will not limit itself to disciplinary action but may pursue legal action against the offending Employee involved. In some cases, the Corporation may have a legal or ethical obligation to call violations to the attention of appropriate enforcement authorities.
Compliance with the Code may be monitored by audits performed by the Board, Audit Committee, the Corporation’s counsel and/or by the Corporation’s outside auditors. All Employees are required to cooperate fully with any such audits and to provide truthful and accurate information.
Any waiver of this Code for any Employee may be made only by the Board or the Audit Committee and will be promptly disclosed to stockholders and others, as required by applicable law. The Corporation must disclose changes to and waivers of the Code in accordance with applicable law.
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ACKNOWLEDGMENT OF RECEIPT AND REVIEW
To be signed and returned to the Chief Financial Officer.
I, _______________________, acknowledge that I have received and read a copy of the Nate’s Food Co. Code of Ethics and Business Conduct. I understand the contents of the Code and I agree to comply with the policies and procedures set out in the Code.
I understand that I should approach the Chief Financial Officer if I have any questions about the Code generally or any questions about reporting a suspected conflict of interest or other violation of the Code.
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[Name] |
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[Printed Name] |
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[Date] |
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Nate Steck, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Nate’s Food Co.; |
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| 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 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; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this 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; |
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| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our 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; |
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(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
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(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 |
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(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 (the registrant's fourth fiscal quarter in the case of an annual report) 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(s) 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 equivalent functions): |
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(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 information; and |
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(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: October 6, 2016
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/s/ Nate Steck |
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Nate Steck |
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President, Chief Executive Officer and Director (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Marc Kassoff, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Nate’s Food Co.; |
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| 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 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; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this 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; |
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| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our 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; |
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(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
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(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 |
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(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 (the registrant's fourth fiscal quarter in the case of an annual report) 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(s) 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 equivalent functions): |
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(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 information; and |
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(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: October 6, 2016
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/s/ Marc Kassoff |
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Marc Kassoff |
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Vice-President, Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Nate Steck, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Annual Report on Form 10-K of Nate’s Food Co. for the period ended May 31, 2016 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Nate’s Food Co. |
| Dated: October 6, 2016 |
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/s/ Nate Steck |
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Nate Steck |
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President, Chief Executive Officer and Director
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Nate’s Food Co. |
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A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Nate’s Food Co. and will be retained by Nate’s Food Co. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Marc Kassoff, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Annual Report on Form 10-K of Nate’s Food Co. for the period ended May 31, 2016 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Nate’s Food Co. |
| Dated: October 6, 2016 |
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/s/ Marc Kassoff |
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Marc Kassoff |
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Vice-President, Chief Financial Officer and Director
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Nate’s Food Co. |
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A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Nate’s Food Co. and will be retained by Nate’s Food Co. and furnished to the Securities and Exchange Commission or its staff upon request.