Item 1. Business
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.
On April 6, 2017, our board of directors and a majority of our shareholders approved the filing of Restated Articles of Incorporation to increase the authorized shares of common stock of our company from Five Hundred Million (500,000,000) to One Billion Five Hundred Million 1,500,000,000. The Restated Articles of Incorporation to effect the increase of common stock was filed with the Secretary of State for the State of Colorado on July 26, 2017.
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.
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:
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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, 2017and 2016, accrued fees are $103,500 and $34,000, respectively, and is included in accounts payable and accrued liabilities in the accompanying financial statements.
Product Ordering
Our company is able to purchase raw materials directly from 3rd 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 and have begun development on a brownie batter. 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 at www.nateshomemade.com.
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.
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.
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.
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 $1,532 and $1,850 in research and development expenditures during the years ended May 31, 2017 and 2016, respectively.
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.
WHERE YOU CAN FIND MORE INFORMATION
You are advised to read this Form 10-K in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.
Item 1A.
Item 1A. Risk Factors
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.
Item 1B. Unresolved Staff Comments
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 2.
Item 2. Properties
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.
Item 3.
Item 3. Legal Proceedings
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.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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.
On December 15, 2017, the shareholders’ list showed 32 registered shareholders with 507,669,616 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
We do not have any equity compensation plans.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
During the quarter ended May 31, 2017, we issued 17,806,592 shares for conversion of debt totaling $12,242.
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, 2017.
Item 6.
Item 6. Selected Financial Data
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 7.
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 8 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
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 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, 2017 and 2016
The following summary of our results of operations should be read in conjunction with our financial statements for the years ended May 31, 2017 and 2016, which are included herein.
Our operating results for the years ended May 31, 2017 and 2016 and the changes between those periods for the respective items are summarized as follows:
Revenue
Our company generated $4,486 in revenue with a gross profit of $4,486 or 100%, for the year ended May 31, 2017 as compared to $29,250 in revenue with a gross profit of $13,559, or 46%, for the year ended May 31, 2016.
Operating expenses
Our operating expenses for the year ended May 31, 2017 were $801,912 compared to $341,123 as of May 31, 2016. The increase in operating expenses was primarily as a result of an increase in selling, general and administrative, from an increase in stock based compensation by $45,060 during the 2017 fiscal year and impairment loss on equipment.
Our financial statements report a net income of $518,607 for the year ended May 31, 2017 compared to a net loss of $2,910,446 for the year ended May 31, 2016. Our income have increased by $3,429,053 primarily as a result of an increase in gain on derivative.
Liquidity and Financial Condition
Working Capital
Cash Flows
Our total current liabilities as of May 31, 2017 were $525,698 as compared to total current liabilities of $2,631,118 as of May 31, 2016. The decrease was primarily due to a decrease in derivative liabilities of $1,948,193 and convertible notes of $130,900.
Operating Activities
Net cash used in operating activities was $217,923 for the year ended May 31, 2017 compared with net cash used in operating activities of $121,605 in the same period in 2016.
Investing Activities
Net cash used in investing activities was $0 for the year ended May 31, 2017 compared to net cash used in investing activities of $132,479 in the same period in 2016, due to increased expenditures on fixed assets during 2017.
Financing Activities
Net cash from financing activities was $218,125 for the year ended May 31, 2017 compared to $254,500 provided from financing activities in the same period in 2016, primarily due to a decrease in proceeds from convertible notes offset by an increase in proceeds from preferred stock and payment of convertible notes during 2017.
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.
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.
During the year ended May 31, 2017 and 2016, impairment of equipment was $355,675 and $0, respectively
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.
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.
Item 8.
Item 8. Financial Statements and Supplementary Data
NATE’S FOOD CO.
FORM 10-K
May 31, 2017 and 2016
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, 2017 and 2016, and the related statements of operations, changes in stockholders' deficit and cash flows 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 audits 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 Nate’s Food Co. as of May 31, 2017 and 2016, and the results of its operations and its cash flows 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
December 22, 2017
Nate’s Food Co.
Balance Sheets
The accompanying notes are an integral part of these financial statements.
Nate’s Food Co.
Statements of Operations
The accompanying notes are an integral part of these financial statements.
Nate’s Food Co.
Statements of Changes in Stockholders' (Deficit) Equity
The accompanying notes are an integral part of these financial statements.
Nate’s Food Co.
Statements of Cash Flow
The accompanying notes are an integral part of these financial statements.
NATE’S FOOD CO.
NOTES TO THE FINANCIAL STATEMENTS
Note 1 - Organization and Summary of Significant Accounting Policies
Organization and Nature of Business
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 marketable 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 over the estimated service period (generally the vesting period) on the straight-line method. 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. The measurement date for the fair value of the equity instruments issued to non-employees is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete.
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. For the years ended May 31, 2017, and 2016, the Company has generated $4,486 and $0 in revenue from third parties and $0 and 29,250 in revenue from a related party, respectively.
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 $1,532 and $1,850 in fiscal 2017 and 2016, 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:
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.
We completed an impairment evaluation of equipment at May 31, 2017, and recognized an impairment loss of $355,675 and $0 during the years ended May 31, 2017 and 2016, respectively.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash, accounts payable and accrued liabilities, accrued expenses, convertible notes and notes 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, 2017, and 2016, measured at fair value on a recurring basis:
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 for outstanding warrants and options and using the if-converted method for convertible debt and convertible preferred stock. 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.
For the years ended May 31, 2017 and 2016, respectively, the following warrants, convertible notes and convertible preferred stock were potentially dilutive.
The following represents a reconciliation of the numerators and denominators of the basic and diluted earnings per share computation for the year ended May 31, 2017:
For the year ended May 31, 2016, the warrants, convertible notes and convertible preferred stock that were potentially dilutive, were excluded from the computation of diluted net loss per shares as the result of the computation was anti-dilutive:
Recently Issued Accounting Pronouncements
In September 2017, the FASB has issued Accounting Standards Update (ASU) No. 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.” The amendments in ASU No. 2017-13 amends the early adoption date option for certain companies related to the adoption of ASU No. 2014-09 and ASU No. 2016-02. Both of the below entities may still adopt using the public company adoption guidance in the related ASUs, as amended. The effective date is the same as the effective date and transition requirements for the amendments for ASU 2014-09 and ASU 2016-02.
In May 2014, the FASB issued an accounting standards update which modifies the requirements for identifying, allocating, and recognizing revenue related to the achievement of performance conditions under contracts with customers. This update also requires additional disclosure related to the nature, amount, timing, and uncertainty of revenue that is recognized under contracts with customers. This guidance is effective for fiscal and interim periods beginning after December 15, 2017 and is required to be applied retrospectively to all revenue arrangements. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.
In December 2016, the FASB has issued Accounting Standards Update (ASU) No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” The amendments affect narrow aspects of the guidance issued in ASU 2014-09 including Loan Guarantee Fees, Contract Costs, Provisions for Losses on Construction-Type and Production-Type Contracts, Disclosure of Remaining Performance Obligations, Disclosure of Prior Period Performance Obligations, Contract Modifications, Contract Asset vs. Receivable, Refund Liability, Advertising Costs, Fixed Odds Wagering Contracts in the Casino Industry, and Costs Capitalized for Advisors to Private Funds and Public Funds. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for FASB Accounting Standards Codification Topic 606. Public entities should apply Topic 606 (and related amendments) for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein.
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 plans described in the succeeding paragraphs 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.
Notes Payable - Related Parties
Notes payable - related parties consist of:
During the year ended May 31, 2017, the Company borrowed $57,500 from our officer for working capital and converted an existing accounts payable to him of $26,952 to a note payable. As at May 31, 2017, the total amount owed to this officer was $199,428. Of this amount, $57,500 of the loan is at 10% interest and to be repaid by June 28, 2017 and currently is in default. $71,902 of the loan is at 10% interest, and $70,026 of the loan is at 0% interest. Both of the loans were to be repaid by December 31, 2016 and are currently in default. 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 year ended May 31, 2017, the amount the Company borrowed and repaid $0 to WB Partners. The loan is at 0% interest and was to be repaid by December 31, 2016. As agreed by and between the Company and WB Partners on May 9, 2017, the note payable to WB Partners was cancelled and the Company recorded $60,532 as additional paid in capital.
On October 20, 2015, the Company issued a Promissory Note (the “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%. The Company recognized interest expense of $15,036 and amortization expense related to the deferred financing cost of $15,459 for the year ended May 31, 2017. As agreed by and between the Company and Southcorp Capital on May 9, 2017, the note payable to SouthCorp Capital of $200,000 and accrued interest of 25,522 was cancelled and the Company recorded $225,522 as additional paid in capital.
Note 4 - Note Payable
The Company had the following note payable at May 31, 2017 and 2016.
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%. On August 9, 2016, the Company entered into the new agreement in which the Company issued a convertible note of $53,630 for payment of the Note of $50,000 and accrued interest of $3,630.
Note 5 - Convertible Notes
The Company had the following convertible notes payable outstanding as of May 31, 2017 and 2016:
Typenex Co
On July 24, 2015, the Company received financing in the amount of $93,000 from Typenex Co-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. 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 6 for details) and the discount is being amortized over the life of the note using the effective interest method. On July 8, 2016, the Company made a payment of 50% of the balance then due in the amount of $57,000. The payment of $57,000 was applied to an interest penalty and accrued interest. The Company entered into a Forbearance Agreement with Typenex regarding conversion of the balance of $57,000 debt into shares of common stock at an agreed upon discount and frequency of conversions. During the year ended May 31, 2017, the note and accrued interest of $63,754 were converted into 46,799,635 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 $1,085 of interest expense for the year ended May 31, 2017. 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 lesser of the 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 6 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $7,164 of interest expense for the year ended May 31, 2017. On June 21, 2016, the Company paid off the full balance due including interest and retired this debt entirely for the sum of $74,382.
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. The $68,250 bears 10% interest and matured 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 6 for details) and the discount is being amortized over the life of the note using the effective interest method. During the year ended May 31, 2017, a portion of the note of $8,352 was converted into 11,600,000 shares of common stock. On June 24, 2016, the Company paid off the full balance due including interest and retired this debt entirely for the sum of $75,000.
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. 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. During the year ended May 31, 2017, the remaining note balance and accrued interest of $21,536 was fully converted into 3,500,000 shares of common stock.
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 $952 of interest expense for the year ended May 31, 2017. 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 note 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 note at any time upon seven days written notice to the holder. The note was discounted for a derivative (see note 6 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $13,095 of interest expense for the year ended May 31, 2017. On June 16, 2016, the Company paid off the full balance due including interest and retired this debt entirely for the sum of $75,000.
Tarpon Bay
On August 9, 2016, the Company issued a convertible note of $53,630 to Tarpon Bay to repay note payable of $50,000 and interest expense of $3,630. The $53,630 bears 10% interest and matures on December 31, 2016. The holder is entitled at any time 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 90% of the lowest closing price for 15 trading days ending on the trading days. Notwithstanding the above, holder agrees to convert only that portion of the principal and accrued interest of this note that converts into no greater than 1,000,000 shares of common stock for any single notice of conversion. The note was discounted for a derivative (see note 6 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $53,630 of interest expense for the year ended May 31, 2017. During the year ended May 31, 2017, the note and accrued interest of $61,776 were converted into 12,513,330 shares of common stock.
JSJ Investments
On October 13, 2016, the Company received financing in the amount of $85,500 from JSJ Investments with $5,000 original issue discount and incurred $8,000 financing costs. The original issue discount and financing costs are being amortized over the life of the note using the effective interest method. The $85,500 bears 10% interest and matures on July 13, 2017. The note is currently in default. 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 45% discount to the lowest traded price during the previous 20 trading days to the date of a conversion notice. The Company may redeem the note at rates ranging from 125% to 150% depending on the redemption date. The note was discounted for a derivative (see note 6 for details) and the discount is being amortized over the life of the note using the effective interest method. The Company amortized discount and financing costs of $73,961 for the year ended May 31, 2017. During the year ended May 31, 2017, the note of $12,242 was converted into 17,806,592 shares of common stock.
Note 6 - Derivative Liability
The Company analyzed the conversion options on the convertible notes for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the embedded conversion option 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. The Company accounts for warrants as a derivative liability due to there being no explicit limit to the number of shares to be delivered upon settlement of all conversion options.
The following table summarizes the derivative liabilities included in the balance sheets at May 31, 2017 and 2016:
The following table summarizes the loss on derivative liability included in the statements of operations for the years ended May 31, 2017 and 2016, respectively.
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:
Note 7 - 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.
On March 10, 2017, the Company issued 50 shares of Series A Preferred Stock to our officers as compensation for a value of $0.
As of May 31, 2017, and 2016, 1,940,153 and 1,940,103 shares of series A Preferred Stock were issued and outstanding, respectively.
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 Stock converts into common stock at a ratio of 1:1,000. However, the Series B Preferred Stock may not be converted for a period of 12 months. 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 March 10, 2017, the Company issued 23,430 shares of Series B Preferred Stock to our officers as compensation for a value of $42,172.
During the year ended May 31, 2017, 17,078 shares of Series B Preferred Stock were converted at rate of 1 preferred share to 1,000 common shares, resulting in the issuance of 17,078,000 shares of common stock, for a value of $1,708, of which $1,523 was recorded as a deemed dividend.
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 the shares issued and outstanding.
As of May 31, 2017, and 2016, 148,322 and 141,970 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.
During the year ended May 31, 2016, the Company adjusted 380 shares of Series C Preferred Stock, to correct the shares 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.
As of May 31, 2017, and 2016, 58,774 shares of Series C Preferred Stock were issued and outstanding.
Series D Convertible Preferred Stock
On June 13, 2016, pursuant to its Articles of Incorporation and Bylaws, the Board of Directors of the Company, unanimously approved the designation of a new series of preferred stock, “Series D Convertible Preferred Stock.
The Company is authorized to issue 10,000,000 shares of Series D Preferred Stock at a par value of $0.0001.
Beginning January 1, 2017, each holder of shares of Series D Preferred Stock may, at any time and from time to time, convert each of its shares of Series D Preferred Stock into a 15 of fully paid and nonassessable shares of common 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 contained a beneficial conversion feature of $293,750.
During the year ended May 31, 2017, the Company issued 2,350,000 shares of Series D Preferred Stock for cash of $235,000.
On March 10, 2017, the Company issued 4,000,000 shares of Series D Preferred Stock to our officers as compensation for a value of $108,000.
As of May 31, 2017, and 2016, 6,350,000 and 0 shares of Series D 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.
During the year ended May 31, 2017, 9,000 shares of Series E Preferred Stock were cancelled by a holder and the Company credited additional paid in capital and reversed Series E Preferred Stock at par value.
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, 2017, and 2016, 10,216,000 and 10,225,000 shares of Series E Preferred Stock were issued and outstanding, respectively.
Common stock
On July 26, 2017, the Company filed amended Articles of Incorporation to increase the authorized capital from 500,000,000 shares of common stock to 1,500,000,000 shares of Common Stock and to change the par value to $0.001 per share. The Company is authorized to issue 1,500,000,000 shares of common stock at a par value of $0.001.
During the year ended May 31, 2017, the Company issued common shares, as follows:
·
17,078 shares of Series B Preferred Stock were converted at rate of 1 preferred share to 1,000 common shares, resulting in the issuance of 17,078,000 shares of common stock, for a value of $1,708, of which $1,523 was recorded as a deemed dividend.
·
92,219,557 common shares were issued for the conversion of debt and accrued interest of $167,660
·
20,000,000 common shares were issued to our officers as compensation for a value of $50,000
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 the shares issued and outstanding.
As of May 31, 2017, and 2016, 381,206,448 and 251,908,891 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 during the year ended May 31, 2016 of which 20,644,258 were exercised during the same year. During the year ended May 31, 2017, the exercise price on the remaining warrants further reset and as a result, the warrants became exercisable into 15,388,761 shares of common stock at $0.00066 per share.
The following table summarizes information relating to outstanding and exercisable warrants as of May 31, 2017:
The following table summarizes warrant activity for the years ended May 31, 2017 and 2016:
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 warrants at May 31, 2017, for those warrants for which the quoted market price was in excess of the exercise price ("in-the-money" warrants). As of May 31, 2017, the aggregate intrinsic value of warrants outstanding was approximately $8,310 based on the closing market price of $0.0012 on May 31, 2017.
The Company determined that the warrants qualify for derivative accounting (see note 6).
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 May 31, 2017 and 2016 as 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:
Changes in the net deferred tax assets consist of the following:
A reconciliation of income taxes computed at the statutory rate is as follows:
Note 9 - Subsequent Events
Subsequent to May 31, 2017 through December 22, 2017, the Company issued an aggregate of 126,463,168 common shares for the conversion of debt, accrued interest and associated fees of $36,440.
Item 9.
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.
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, 2017, 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, our 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, 2017. 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, 2017, 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, 2017:
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, 2018. The cost associated to the addition is 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, 2018. 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, 2017, 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 is 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, 2017, 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.
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, 2017 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
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:
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.
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
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
1. been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
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;
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;
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;
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
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, 2017, 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:
____________
(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.
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, 2017. 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, 2017, 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.
Item 11. Executive Compensation
The particulars of the compensation paid to the following persons:
(a) our principal executive officer;
(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, 2017 and 2016; and
(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, 2017 and 2016, 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:
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, 2017 we did not grant any stock options.
Option Exercises and Stock Vested
During our fiscal year ended May 31, 2017 there were no options exercised by our named officers.
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.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of December 15, 2017, certain information with respect to the beneficial ownership of our common and preferred shares by each shareholder known by us to be the beneficial owner of more than 5% of our common and preferred 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 and preferred stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common and preferred stock, except as otherwise indicated.
_________________
*represents an amount less than 1%
(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 December 15, 2017. As of December 15, 2017 there were 507,669,616 shares of our company’s common stock issued and outstanding.
(2)
Our company is authorized to issue 2,000,000 shares of Series A Preferred Stock, par value $0.0001. As of December 15, 2017 there were 1,940,153 shares of our company’s Series A Preferred Stock issued and outstanding.
(3)
Our company is authorized to issue 150,000 shares of Series B Preferred Stock, par value $0.0001. As of December 15, 2017 there were 148,322 shares of our company’s Series B Preferred Stock issued and outstanding.
(4)
Our company is authorized to issue 250,000 shares of Series C Preferred Stock, par value $1.00. As of December 15, 2017 there were 58,774 shares of our company’s Series C Preferred Stock issued and outstanding.
(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 December 15, 2017 there were 6,350,000 shares of our company’s Series D Preferred Stock issued and outstanding. Of the Series D Preferred Stock outstanding, 3,000,000 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.
(6)
Our company is authorized to issue 15,000,000 shares of Series E Preferred Stock, par value $0.0001. As of December 15, 2017 there were 10,216,000 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.
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, 2017, 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.
During the year ended May 31, 2017, the Company borrowed $57,500 from our officer for working capital and converted an existing accounts payable to him of $26,952 to a note payable. As at May 31, 2017, the total amount owed to this officer was $199,428. Of this amount, $57,500 of the loan is at 10% interest and to be repaid by June 28, 2017 and currently is in default. $71,902 of the loan is at 10% interest, and $70,026 of the loan is at 0% interest.
During the year ended May 31, 2017, the amount the Company borrowed and repaid $0 to WB Partners. The loan is at 0% interest and was to be repaid by December 31, 2016. As agreed by and between the Company and WB Partners on May 9, 2017, the note payable to WB Partners was cancelled and the Company recorded $60,532 as additional paid in capital.
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.
Item 14.
Item 14. Principal Accounting Fees and Services
The aggregate fees billed for the most recently completed fiscal year ended May 31, 2017 and for fiscal year ended May 31, 2016 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:
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.
Item 15. Exhibits, Financial Statement Schedules
(a) Financial Statements
(1) Financial statements for our company are listed in the index under Item 8 of this document.
(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.
(b) Exhibits
___________
* Filed herewith.
** Furnished herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
NATE'S FOOD CO.
(Registrant)
Dated: December 22, 2017
/s/ Nate Steck
Nate Steck
President, Chief Executive Officer and Director
(Principal Executive Officer)
Dated: December 22, 2017
/s/ Marc Kassoff
Marc Kassoff
Vice-President, Chief Financial Officer and Director
(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: December 22, 2017
/s/ Nate Steck
Nate Steck
President, Chief Executive Officer and Director
(Principal Executive Officer)
Dated: December 22, 2017
/s/ Marc Kassoff
Marc Kassoff
Vice-President, Chief Financial Officer and Director
(Principal Financial Officer and Principal Accounting Officer)
Dated: December 22, 2017
/s/ Timothy Denton
Timothy Denton
Secretary and Director