UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the fiscal year ended May 31, 2023

 

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from [ ] to [ ]

 

Commission file number 000-52831

 

NATE’S FOOD CO.

(Exact name of registrant as specified in its charter)

 

Colorado

 

46-3403755

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

15151 Springdale StreetHuntington BeachCalifornia

 

92649

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (650222-5141

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of Each Exchange On Which Registered

N/A

 

N/A

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, $0.001 par value per share

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes ☐ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes ☐ No

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

 

 

Emerging Growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. 

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

The aggregate market value of Common Stock held by non-affiliates of the Registrant on November 30, 2022, was approximately $508 based on a $0.0011 average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

As of September 12, 2023, 3,208,024,616 shares of the registrant’s common stock were outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 

TABLE OF CONTENTS

 

 

PART I

 

 

 

 

 

 

 

 

Item 1.

Business

 

3

 

 

 

 

 

 

Item 1A.

Risk Factors

 

15

 

 

 

 

 

 

Item 1B.

Unresolved Staff Comments

 

15

 

 

 

 

 

 

Item 2.

Properties

 

15

 

 

 

 

 

 

Item 3.

Legal Proceedings

 

15

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

15

 

 

 

 

 

 

 

PART II

 

 

 

 

 

 

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

16

 

 

 

 

 

 

Item 6.

[Reserved]

 

17

 

 

 

 

 

 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

 

 

 

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

 

 

 

 

 

Item 8.

Financial Statements and Supplementary Data

 

23

 

 

 

 

 

 

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

24

 

 

 

 

 

 

Item 9A.

Controls and Procedures

 

24

 

 

 

 

 

 

Item 9B.

Other Information

 

25

 

 

 

 

 

 

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 

25

 

 

 

 

 

 

 

PART III

 

 

 

 

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

 

26

 

 

 

 

 

 

Item 11.

Executive Compensation

 

28

 

 

 

 

 

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

30

 

 

 

 

 

 

Item 13.

Certain Relationships and Related Transactions, and Director Independence

 

31

 

 

 

 

 

 

Item 14.

Principal Accounting Fees and Services

 

32

 

 

 

 

 

 

 

PART IV

 

 

 

 

 

 

 

 

Item 15.

Exhibits and Financial Statement Schedules

 

33

 

 

 

 

 

 

Item 16.

Form 10–K Summary

 

34

 

 

 
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Table of Contents

 

PART I

 

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 “Company,” “we,” “us,”, “our” and “our Company” mean Nate’s Food Co., unless otherwise indicated.

 

General Overview

 

We were 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. 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 Nate’s Pancakes, Inc and Capital Resource Alliance. Nate’s Pancakes was the surviving company. In May 2014, the Company changed its name from Capital Resource Alliance 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.

 

Since 2021, the Company has been engaged in “ Bitcoin Mining” – i.e., the process by which  Bitcoins are created resulting in new blocks being added to the blockchain and new  Bitcoins being issued to the miners. The Company has purchased ASIC (application-specific integrated circuit) computers - computers specifically designed for cryptocurrency mining - that is being used for  Bitcoin Mining. We have placed this  Bitcoin Mining equipment with 3rd party datacenters or farms (often referred as a “Co-Location”) that power and operate our  Bitcoin Mining equipment for a fee. We are currently generating revenues through receiving  Bitcoin from our  Bitcoin Mining equipment.

 

Our Current Business

 

In General. Historically, our food development division has licensed, developed and manufactured food products. Our Board of Directors determined that we cease product manufacturing and development of new products for our food development division. We are, however, continually exploring options to license our developed products, a ready-to-use, pre-mixed pancake and waffle batter delivered in a pressurized can. We are also exploring options on monetizing our proprietary blend of pancake and waffle dry mix. Our current product line consists of the original flavor of pancake and waffle mix and three additional flavors, Banana, Blueberry and Strawberry. The flavors can be found at www.natesfoodco.com/brands, however, are not currently for sale.

 

 
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The Company is engaged in “ Bitcoin Mining” – i.e. the process by which  Bitcoins are created resulting in new blocks being added to the blockchain and new  Bitcoins being issued to the miners.    Bitcoin Miners engage in a set of prescribed complex mathematical calculations in order to add a block to the blockchain and thereby confirm cryptocurrency transactions included in that block’s data. Miners that are successful in adding a block to the blockchain are automatically awarded a fixed number of  Bitcoins for their effort. The Company will only mine  Bitcoin.

 

Our Food Products

 

Our food products production has been halted and we are focused on licensing our developed products consisting of 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 and we have developed three flavors for our pancake and waffle mix. Once we have resumed production, we plan to continue to expand into other baked goods and other non-breakfast areas.

 

Food Manufacturing and Distribution

 

We have not entered into any agreements with a third-party manufacturer. We have not entered into any agreements with an outside distributor.

 

Seasonality

 

 We do not expect our sales of our food products to be seasonal in nature.

 

Our Food Product Customers

 

Our products were being sold across the United States to a variety of customers through our online store at www.nateshomemade.com. We are also exploring options on monetizing our proprietary blend of pancake and waffle dry mix.

 

We have previously delivered 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.

 

Competition

 

Competition is based on total computing power, known as hashing or hash rate. Groups of miners form pools that compete against each other. Miners share the revenue generated by their pool. Miners are cooperating in the pool and pools are competing against each other. This competition of hashing capacity and speed requires miners to continuously update mining equipment. Mining equipment obsolescence is a major operating expense. We cannot assure that it will be able to recover equipment costs fast enough to replace their earning capacity with newer mining equipment which would result in an operating loss.

 

Investopedia explains that “Anyone with access to the internet and suitable hardware can participate in mining.” It explains further: “How hard is it to mine  Bitcoins? Well that depends on how much effort is put into mining across the network. Following the protocol laid out in the software, the  Bitcoin Network automatically adjusts the difficulty of the mining every 2016 blocks, or roughly every two weeks. It adjusts itself with the aim of keeping the rate of block discovery constant. Thus, if more computational power is employed in mining, then the difficulty will adjust upwards to make mining harder. And if computational power is taken off the network, the opposite happens. The difficulty adjusts downward to make mining easier. The higher the difficulty level, the less profitable mining is for each participant. The total payout depends on the price of  Bitcoin, the block reward, and the size of the transaction fees, but the more people mining, the smaller the slice of that pie each person gets.”

 

 
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Food Business Competition. The food business is 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.

 

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.

 

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:

 

 

·

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;

 

·

specifies the standards of identity for certain foods, including many of the products we sell; and

 

·

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. During the time our products were in production we worked with our co-packer to ensure that all of our products were fully compliant with all relevant FDA regulations.

 

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.

 

 
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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 remained in full compliance with all relevant manufacturing and production safety rules and regulations until we suspended all production activities in 2018.

 

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.

 

Our  Bitcoin Mining Business

 

The Company is engaged in “ Bitcoin Mining” – i.e., the process by which  Bitcoins are created resulting in new blocks being added to the blockchain and new  Bitcoins being issued to the miners. The Company has acquired ASIC (application-specific integrated circuit) computers - computers specifically designed for cryptocurrency mining - that are currently mining  Bitcoin. The  Bitcoin Mining equipment is hosted by 3rd party datacenters or farms (often referred as a “Co-Location”) that power and operate our  Bitcoin Mining equipment for a fee. We generate revenues through receiving  Bitcoin from our  Bitcoin Mining equipment.

 

Current Status

 

We have determined to continue our  Bitcoin mining operations as a hedge against inflation and as a means to bolster our balance sheet through the accumulation of  Bitcoin funds in the coming financial periods. Our management hopes that the consistent additional cash inflows from conversion of mined  Bitcoin into fiat currency will permit our company to develop more products and expand our product line.

 

We currently own thirty-one   Bitcoin computers, or miners, in operation at a co-location facility located in the State of Kentucky. We pay electricity, hosting and maintenance charges billed to us by our co-location facility provider monthly, we receive earned   Bitcoin reports each day that we earn   Bitcoin from the mining operations of our   Bitcoin minders.  

 

Background Information Concerning  Bitcoin

 

This section provides a more detailed description of  Bitcoin, its historical development, how a person holds Bitcoin, how to use   Bitcoin in transactions, how to trade  Bitcoin, the “exchange” market where  Bitcoin can be bought, held and sold, the  Bitcoin market itself and  Bitcoin mining – our company is engaged in the  Bitcoin mining business, as described below.

 

 
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Bitcoin

 

Bitcoin is a digital asset that can be transferred among participants on the Bitcoin network on a peer-to-peer basis via the Internet. Unlike other means of electronic payments, Bitcoin can be transferred without the use of a central administrator or clearing agency. Because a central party is not necessary to administer Bitcoin transactions or maintain the Bitcoin ledger, the term decentralized is often used in descriptions of Bitcoin.

 

Bitcoin Network

 

Bitcoin was first described in a white paper released in 2008 and published under the name “Satoshi Nakamoto.” The protocol underlying Bitcoin was subsequently released in 2009 as open-source software and currently operates on a worldwide network of computers.

 

The first step in using Bitcoin for transactions is to download specialized software referred to as a “ Bitcoin wallet.” A user’s Bitcoin wallet can run on a computer or smartphone and can be used both to send and to receive Bitcoin. Within a Bitcoin wallet, a user can generate one or more unique “ Bitcoin addresses,” which are conceptually similar to bank account numbers on the Bitcoin Blockchain and are associated with a pair of public and private keys. After establishing a Bitcoin address, a user can send or receive Bitcoin from his or her Bitcoin address to another user’s address using the public and private keys. Sending Bitcoin from one Bitcoin address to another is similar in concept to sending a bank wire from one person’s bank account to another person’s bank account.

 

The amount of Bitcoin associated with each Bitcoin address is listed in a public ledger, referred to as a “blockchain.” Copies of the Bitcoin Blockchain exist on thousands of computers on the Bitcoin network throughout the Internet. A user’s Bitcoin wallet will either contain a copy of the Bitcoin Blockchain or be able to connect with another computer that holds a copy of the Bitcoin Blockchain.

 

When a Bitcoin user wishes to transfer Bitcoin to another user, the sender must first request a Bitcoin address from the recipient. The sender then uses its Bitcoin wallet software to create a data packet containing the proposed addition (often referred to as a “transaction”) to the Bitcoin Blockchain. The proposed transaction would reduce the sender’s address and increase the recipient’s address by the amount of Bitcoin desired to be transferred and is sent on a peer-to-peer basis to other computers participating in the Bitcoin network.

 

Bitcoin Protocol

 

Bitcoin is an open-source project with no official company or group that controls the Bitcoin network, and anyone can review the underlying code and suggest changes. There are, however, a number of individual developers that regularly contribute to a specific distribution of Bitcoin software known as the “ Bitcoin Core,” and who loosely oversee the development of its source code. There are many other compatible versions of Bitcoin software, but Bitcoin Core is the most widely adopted and currently provides the de facto standard for the Bitcoin protocol. The core developers are able to access, and can alter, the Bitcoin network source code and, as a result, they are responsible for quasi-official releases of updates and other changes to the Bitcoin network’s source code. However, because Bitcoin has no central authority, the release of updates to the Bitcoin network’s source code by the core developers does not guarantee that the updates will be automatically adopted by the other participants in the Bitcoin network. Users and miners must accept any changes made to the Bitcoin source code by downloading the proposed modification of the Bitcoin network’s source code. A modification of the Bitcoin network’s source code is effective only with respect to those Bitcoin users and miners who choose to download it. If a modification is accepted by only a percentage of users and miners, a division in the Bitcoin network will occur such that one network will run the pre-modification source code and the other network will run the modified source code. Such a division is known as a “fork.” Consequently, as a practical matter, a modification to the source code becomes part of the Bitcoin network only if accepted by participants collectively having most of the processing power on the Bitcoin network. In recent years, there have been several forks in the Bitcoin network, including, but not limited to, forks resulting in the creation of Bitcoin Cash (August 1, 2017), Bitcoin Gold (October 24, 2017) and Bitcoin SegWit2X (December 28, 2017), among others.

 

 
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Bitcoin Transactions

 

A  Bitcoin transaction is similar in concept to an irreversible digital check. The transaction contains the sender’s  Bitcoin address, the recipient’s  Bitcoin address, the amount of  Bitcoin to be sent, a transaction fee and the sender’s digital signature. The sender’s use of his or her digital signature enables participants on the  Bitcoin network to verify the authenticity of the  Bitcoin transaction.

 

A user’s digital signature is generated via usage of the user’s so-called “private key,” one of two numbers in a so-called cryptographic “key pair.” A key pair consists of a “public key” and its corresponding private key, both of which are lengthy alphanumeric codes, derived together and possessing a unique relationship. Public keys are associated with   Bitcoin addresses that are publicly known and can accept a   Bitcoin transfer. Private keys are used to sign transactions that initiate the transfer of  Bitcoin from a sender’s  Bitcoin address to a recipient’s  Bitcoin address. Only the holder of the private key associated with a particular  Bitcoin address can digitally sign a transaction proposing a transfer of  Bitcoin from that particular  Bitcoin address.

 

A user’s  Bitcoin address may be safely distributed, but a user’s private key must be kept in accordance with appropriate controls and procedures to ensure it is used only for legitimate and intended transactions. Only by using a private key can a  Bitcoin user create a digital signature to transfer  Bitcoin to another user. In addition, if an unauthorized third person learns of a user’s private key, that third person could forge the user’s digital signature and send the user’s  Bitcoin to any arbitrary  Bitcoin address, thereby stealing the user’s  Bitcoin.

 

The usage of key pairs is a cornerstone of the  Bitcoin network. This is because the use of a private key is the only mechanism by which a  Bitcoin transaction can be signed. If a private key is lost, the corresponding  Bitcoin is thereafter permanently non-transferable. Moreover, the theft of a private key enables the thief immediate and unfettered access to the corresponding  Bitcoin.  Bitcoin users must therefore understand that in this regard,  Bitcoin is a bearer asset, similar to cash: that is, the person or entity in control of the private key corresponding to a particular quantity of  Bitcoin has de facto control of the  Bitcoin. For large quantities of  Bitcoin, holders often employ sophisticated security measures.

 

The  Bitcoin network incorporates a system to prevent double spending of a single  Bitcoin. To prevent the possibility of double spending a single  Bitcoin, each validated transaction is recorded, time stamped and publicly displayed in a “block” in the  Bitcoin Blockchain, which is publicly available. Thus, the  Bitcoin network provides confirmation against double spending by memorializing every transaction in the  Bitcoin Blockchain, which is publicly accessible and downloaded in part or in whole by all users of the  Bitcoin network software program.

 

The process by which  Bitcoin is created and  Bitcoin transactions are verified is called mining. To begin mining, a user, or “miner,” can download and special mining software, which, like regular  Bitcoin network software programs, turns the user’s computer into a “node” on the  Bitcoin network, and also has the ability to validate transactions and add new blocks of transactions to the Blockchain.

 

Miners, through the use of the  Bitcoin software program, engage in a set of prescribed complex mathematical calculations imposed by the  Bitcoin network’s software protocol, called “proof of work”, in order to validate proposed transactions and bundle them into a data packet known as a “block”. The first miner who successfully solves the cryptographic puzzle imposed by the  Bitcoin network’s software protocol is permitted to add a block of transactions to the  Bitcoin Blockchain and is rewarded by a grant of newly issued  Bitcoin, known as the “block reward”.  Bitcoin is created and allocated by the  Bitcoin network protocol and distributed through a “mining” process subject to a strict, well-known issuance schedule. Block rewards for mining are the method by which new  Bitcoin is issued. The supply of  Bitcoin is limited to 21 million by the  Bitcoin network’s software protocol.

 

Confirmed and validated  Bitcoin transactions are recorded in blocks added to the  Bitcoin Blockchain. Each block contains the details of some or all of the most recent transactions that are not memorialized in prior blocks, as well as a record of the award of  Bitcoin to the miner who added the new block. Each unique block can only be solved and added to the  Bitcoin Blockchain by one miner; as a result, individual miners and mining pools on the  Bitcoin network engage in a competitive process of constantly increasing their computing power to improve their individual likelihood of solving new blocks. As more miners join the  Bitcoin network and its processing power increases, or if miners leave the  Bitcoin network and its processing power declines, the  Bitcoin network adjusts the complexity of a block-solving equation to maintain a predetermined pace of adding a new block to the  Bitcoin Blockchain approximately every ten minutes.

 

 
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Bitcoin Market and  Bitcoin Exchanges

 

 Bitcoin can be transferred in direct peer-to-peer transactions through the direct sending of  Bitcoin over the  Bitcoin Blockchain from one  Bitcoin address to another. Among end-users,   Bitcoin can be used to pay other members of the  Bitcoin network for goods and services under what resembles a barter system. Consumers can also pay merchants and other commercial businesses for goods or services through direct peer-to-peer transactions on the  Bitcoin Blockchain or through third-party service providers.

 

In addition to using   Bitcoin to engage in transactions, investors may purchase and sell   Bitcoin to speculate as to the value of   Bitcoin in the   Bitcoin market, or as a long-term investment to diversify their portfolio. The value of   Bitcoin within the market is determined, in part, by the supply of and demand for   Bitcoin in the global   Bitcoin market, market expectations for the adoption of   Bitcoin as a store of value, the number of merchants that accept   Bitcoin as a form of payment, and the volume of peer-to-peer transactions, among other factors.

 

A   Bitcoin exchange provides investors with a website that permits investors to open accounts with the exchange and then purchase and sell   Bitcoin. Prices for trades on   Bitcoin exchanges are typically reported publicly. An investor opening a trading account must deposit an accepted government-issued currency into their account with the exchange, or a previously acquired digital asset, before they can purchase or sell assets on the exchange. The process of establishing an account with a   Bitcoin exchange and trading   Bitcoin is different from, and should not be confused with, the process of users sending   Bitcoin from one   Bitcoin address to another   Bitcoin address on the   Bitcoin Blockchain. This latter process is an activity that occurs on the  Bitcoin network, while the former is an activity that occurs entirely on the private website operated by the exchange. The exchange typically records the investor’s ownership of  Bitcoin in its internal books and records, rather than on the  Bitcoin Blockchain. The exchange ordinarily does not transfer  Bitcoin to the investor on the  Bitcoin Blockchain unless the investor makes a request to the exchange to withdraw the  Bitcoin in their exchange account to an off-exchange  Bitcoin wallet.

 

Outside of exchanges,  Bitcoin can be traded OTC in transactions that are not publicly reported. The OTC market is largely institutional in nature, and OTC market participants generally consist of institutional entities, such as firms that offer two-sided liquidity for  Bitcoin, investment managers, proprietary trading firms, high-net-worth individuals that trade  Bitcoin on a proprietary basis, entities with sizeable  Bitcoin holdings, and family offices. The OTC market provides a relatively flexible market in terms of quotes, price, quantity, and other factors, although it tends to involve large blocks of  Bitcoin. The OTC market has no formal structure and no open-outcry meeting place. Parties engaging in OTC transactions will agree upon a price—often via phone or email—and then one of the two parties will then initiate the transaction. For example, a seller of  Bitcoin could initiate the transaction by sending the  Bitcoin to the buyer’s  Bitcoin address. The buyer would then wire U.S. dollars to the seller’s bank account. OTC trades are sometimes hedged and eventually settled with concomitant trades on  Bitcoin spot exchanges.

 

Although  Bitcoin was the first digital asset, in the ensuing years, the number of digital assets, market participants and companies in the space has increased dramatically. In addition to  Bitcoin, other well-known digital assets include Ethereum, XRP,  Bitcoin Cash, and Litecoin. The category and protocols are still being defined and evolving.

 

Regulation of  Bitcoin

 

As digital assets have grown in both popularity and market size, the U.S. Congress and a number of U.S. federal and state agencies (including FinCEN, SEC, CFTC, FINRA, the Consumer Financial Protection Bureau (“CFPB”), the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS and state financial institution regulators) have been examining the operations of digital asset networks, digital asset users and the digital asset exchange markets, with particular focus on the extent to which digital assets can be used to launder the proceeds of illegal activities or fund criminal or terrorist enterprises and the safety and soundness of exchanges or other service-providers that hold digital assets for users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed by digital assets to investors. In addition, federal and state agencies, and other countries have issued rules or guidance about the treatment of digital asset transactions or requirements for businesses engaged in digital asset activity.

 

As the regulatory and legal environment evolves, the Company may in its mining activities become subject to new laws, and further regulation by the SEC and other agencies. On November 16, 2018, the SEC issued a Statement on Digital Asset Securities Issuance and Trading, in which it emphasized that market participants must still adhere to the SEC’s well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies, such as blockchain.

 

 
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Blockchain and cryptocurrency regulations are in a nascent state with agencies investigating businesses and their practices, gathering information, and generally trying to understand the risks and uncertainties in order to protect investors in these businesses and in cryptocurrencies generally. Various bills have also been proposed in Congress for adoption related to our business which may be adopted and have an impact on us. The offer and sale of digital assets in initial coin offerings, which is not an activity we expect to pursue, has been a central focus of recent regulatory inquiries. On November 16, 2018 the SEC settled with two cryptocurrency startups, and reportedly has more than 100 investigations into cryptocurrency related ventures, according to a codirector of the SEC’s enforcement division (Wall Street Journal, November 17-18, 2018). An annual report by the SEC shows that digital currency scams are among the agency’s top enforcement priorities. The SEC is focused in particular on Initial Coin Offerings (ICOs), which involve the sale of digital tokens related to blockchain projects. Many such projects have failed to deliver on their promises or turned out to be outright scams. In the past year, the enforcement division has opened dozens of investigations involving ICOs and digital assets, many of which were ongoing at the close of FY 2018,” the SEC states in a section of the report titled “ICOs and Digital Assets.”

 

Background Concerning our  Bitcoin Operations

 

Our Company is a  Bitcoin miner; we do not intend to mine other cryptocurrencies.  Bitcoin, and other cryptocurrencies, are specialized applications of blockchain technology. Blockchains are encrypted distributed ledgers maintained on the internet. Mining is the process of validating the authenticity of encrypted blocks of transactions and updating the crypto currency’s blockchain ledger.  Bitcoin miners expend huge amounts of computer processing power - hash rate - to solve complicated mathematical problems required to validate the encrypted data block. The blockchain protocol rewards the first miner to solve the encryption and adds a new block of validated transactions to its blockchain ledger with newly issued crypto coins. Miners compete for those rewards and a share of transaction fees. This creates a competitive environment where miners are constantly seeking to increase their hashing capacity by expansion or deployment of new higher-capacity mining equipment. This work is primarily performed using specialized ASIC (“Application Specific Integrated Circuits”) computer equipment or other high-capacity Graphics Processing Unit (“GPU”) cards. In the process, mining consumes a lot of electricity and creates large amounts of heat and cooling fan noise.

 

Within our cryptocurrency-related operations, our sole product is  Bitcoins that are awarded as a result of our mining operations.  Bitcoin mining, like other cryptocurrency mining, is the process by which transactions are verified and added to the public ledger, known as the blockchain, and is also the means through which new  Bitcoin (or various other forms of cryptocurrency) are released.

 

Crypto Mining Process

 

Investopedia explains how  Bitcoin mining works. “In order to earn  Bitcoin, you need to meet two conditions. One is a matter of effort; one is a matter of luck. (1) You have to verify approx. 1MB worth of transactions. That is the easy part. (2) You have to be the first miner to arrive at the right answer to a numeric problem. This process is also known as a “proof of work.”

 

What is meant by “the right answer to a numeric problem?” The good news is that there is no advanced math or computation involved. You may have heard that miners are solving difficult mathematical problems-that’s not true at all. What they’re actually doing is trying to be the first miner to come up with a 64-digit hexadecimal number (a “hash”) that is less than or equal to the target hash. It’s basically guessed work. The bad news is that, because it’s guesswork, you need a lot of computing power in order to get there first. To mine successfully, you need to have a high “hash rate”, which is measured in terms of mega hashes per second (MH/s), giga hashes per second (GH/s), and tera hashes per second (TH/s).

 

 
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Bitcoin Strategy

 

Our only cryptocurrency-related operations will be the mining of  Bitcoins. Once  Bitcoins are mined by us, we intend to hold substantially all such  Bitcoins. Our management believes that this mine-and-hold strategy will serve to increase shareholder value, inasmuch as our management believes that  Bitcoin value will increase over time. There is no assurance that management’s strategy will prove to be successful, in this regard.

 

While it is our overall strategy to hold mined  Bitcoins, it is possible that we would utilize our  Bitcoins to procure needed equipment, facilities and/or services from persons and entities that accept  Bitcoins as payment in lieu of fiat currency. Additionally, it is possible that we would, where circumstances require, convert a portion of our  Bitcoins into fiat currency for the purpose of paying for needed equipment, facilities and/or services. However, no prediction in this regard can be made.

 

 Bitcoin Storage and Security

 

Because we will hold our  Bitcoins once mined for varying periods of time, it is important that we select a secure environment in which to do so. Currently, we hold our  Bitcoins in a “wallet” established at BitGo, a secure online platform for buying, selling, transferring and sorting digital currency. Our management believes that BitGo provides adequate security for our  Bitcoin holdings.

 

In the future, nevertheless, we may determine to place our  Bitcoins in one or more other environments that may have proven to be more secure and/or more flexible than BitGo. In particular, we may elect to place our  Bitcoins in “cold storage.” Cold storage methods include: (1) “paper wallet” (a way to safeguard against hackers or computer malfunction that involves printing the secret  Bitcoin keys on paper and securely handling such paper); (2) “hardware wallet (a storage device, like a USB drive, is used to keep the secret  Bitcoin keys); (3) “sound wallet” (this technology involves keeping the secret  Bitcoin keys in encrypted sound files in products such as compact discs and vinyl disks); and (4) “deep cold storage” (the security of a bank vault for securing the secret  Bitcoin keys of  Bitcoin wallets). As our operations proceed, our management will continually monitor the security of our  Bitcoins and, when appropriate, obtain additional and/or other environments in which to hold our  Bitcoins.

 

Keys to Success

 

We believe that the following factors will assist us in succeeding: (1) Accessing low cost electricity (reduced operating expenses); (2) Deployment of the most energy efficient mining equipment (increased operating margins), (3) Containerized mining pods that allows deployment into existing utility infrastructure (reduce specialized investments in high cost utility infrastructure), (4) Immersion cooling technology to control noise and facilitate waste heat recovery (reduce site acquisition and leasing costs), (5) Modular systems provide ability to scale in smaller increments (reduced initial capital cost per unit of expansion), and (6) Expansion capital raised through the sale of Offered Shares (reduce or eliminate debt overhead).

 

Inexpensive Power, Cooling and Noise

 

Operating a mining data center consumes huge quantities of electricity that is converted into waste heat. Electricity is the single largest expense and, therefore, the location of mining facilities is very much dependent upon access to affordable electricity. We will seek to secure facilities with access to inexpensive electrical power, initially, in the United States. We will also engage in a continuous quest for low cost and alternative electrical sources such as base loads, incentivized rates, new technologies, solar, natural gas co-generation, heat recovery cost offset agreements, and renewable hydroelectricity.

 

Interior

 

 The interior of a mining operation is a secure space with limited access by authorized persons, indeed simply a room (or rooms) full of shelves containing “miners” (the equipment used to perform the needed calculations and “mint” the  Bitcoin or other cryptocurrency), their power supplies and wiring. With air cooling, one wall consists of filters to allow airflow into the room and the other wall or roof has large exhaust fans to rapidly expel the hot air produced by the mining equipment. With immersion cooling, miners are housed in tanks of dielectric fluids that are circulated to exterior cooling manifolds.

 

 
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Hours of Operation

 

 Mining is a constant operation that operates automatically by computer programs. Control staff can be onsite or remote. Service and maintenance technicians can perform their work during normal business hours. There are no retail sales to the public and no storefront is required. Site security is done by electronic monitoring and on-site employees.

 

Challenges of Our  Bitcoin Business

 

Cooling

 

Cooling is an issue because crypto miners generate a lot of heat; in fact, higher temperatures degrade performance and can destroy mining equipment so, generally, sites in cooler climates are desirable. At a minimum, with ASIC (Application Specific Integrated Circuit) miners, powerful fans provided adequate airflow for cooling. We will employ various cooling strategies, such as site locations in cooler (even cold) locales, water cooling and dielectric immersion cooling technologies, for cost effectiveness.

 

Noise

 

Miners make a lot of noise, operating in the 78 to 100 decibel range. With air cooling, large exhaust fans also create additional noise. Sufficient space relative to neighbors is required to avoid noise pollution as miners operate at all times. Immersion cooling techniques allow removal of the noisy miner fans and size reduction of free cooler fans resulting in quieter operations.

 

Suppliers

 

Bitcoin and many other cryptocurrencies are mined using special ASIC-based mining computers. Bitmain is the manufacturer of the popular Antminer series with approximately 75% market share. ASIC-based miners have far greater speeds than GPU-based miners and some altcoins write specific algorithms to preclude use of ASIC miners. Every time an ASIC miner is developed, it quickly overpowers and makes obsolete any GPU based mining equipment. Within the ASIC supplier community, manufacturers are competing fiercely to develop faster and more efficient miners. Bitmain’s competitors include BitFury, Canaan Creative, Ebang, Innosilicon, MicroBt and other manufacturers. These manufacturers are constantly introducing faster and more energy-efficient mining equipment incorporating advanced ASIC 12nm, 10nm, 7nm and 5nm chips. There is intense competition in that each new miner introduced has the potential of causing economic obsolescence of existing mining equipment which will adversely affect our operations. We will evaluate various miners for cost effectiveness.

 

Services

 

Inherently, crypto mining is an automated online operation consisting of providing computing power and not a service industry. It is the application of software to perform online computations to validate transactions and maintain the blockchain ledgers. We do not intend to offer cloud mining services to the public. Our co-location provider will perform maintenance and repairs on our equipment, miners and facilities.

 

Financial Management

 

Revenue comes from the crypto coins earned by mining cryptocurrencies with specialized computers called miners. Revenue is a function of the computing power required to earn coins and market conditions to value those coins. Management must make speculative assumptions about the future value of coins when making decisions to invest in miners for that coin. Because Bitcoin maintains approximately 40% of the cryptocoin market valuation, has first mover and brand recognition status, has an active market, and is the “gold standard” against which other cryptocurrencies are measured and traded, we intend currently to focus exclusively on mining Bitcoin. Volatility of cryptocurrency market pricing (valuation) can negatively impact revenue, value of mining equipment, and the value of coins in inventory. We believe that quality blockchain and cryptocurrency projects will increase in value as they roll out applications and develop market adoption. We will focus on Bitcoin and those cryptocurrencies that we believe have the greatest potential for mass adoption, use and profit.

 

 
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Mining is a capital-intensive business with a large capex requirement due to miner obsolescence. This may result in financial losses even at a time in the future when our company could have substantial revenue. To maximize mining revenue, we will evaluate replacement miner capacity, energy efficiency and facility capacity to determine which miners to use as replacement upgrades and timing of replacements.

 

Growth/Acquisition Summary

 

We will use a portion of the proceeds from this offering to sequentially build infrastructure to distribute this electrical power on site, modifying the current building structure for mining use, and purchase and install miners, cooling systems and related infrastructure in a continuous growth process. Our growth strategy is to pursue acquisition and development of sites suitable for profitable crypto mining. Our strategy is to develop standardized mining modules that can be deployed in containers or buildings. This standardization will minimize initial investment per module and allow rapid scaling to any size facility.

 

Marketing

 

Mining is a function of operating a computer program. Because payment is made to those who validate, or” authorize,” transactions first, those with the greatest processing power are typically going to be the most successful. Therefore, miners have joined together into “pools” where they aggregate their “hashing” power (as described above) and split the rewards proportionately. This is the case with our miners being in a co-location environment. We do not intend to have any marketing costs associated with mining.

 

Competition is based on total computing power, known as hashing or hash rate. Groups of miners form pools that compete against each other. Miners share the revenue generated by their pool. Miners are cooperating in the pool and pools are competing against each other. This competition of hashing capacity and speed requires miners to continuously update mining equipment. Mining equipment obsolescence is a major operating expense. We cannot assure that it will be able to recover equipment costs fast enough to replace their earning capacity with newer mining equipment which would result in an operating loss.

 

Rising  Bitcoin difficulty level results in lower earnings per miner capacity, forcing higher cost producers out of the market. We believe that these market forces will transform mining into a “utility” type business requiring massive investments with relatively low, but potentially stable revenue. Until the mining industry reaches this equilibrium, market forces will require continual reinvestment in the latest high powered and efficient miners. Electricity costs will also be a limiting factor for profitability with many miners simply unable to generate a profit with their local energy expense. We cannot guarantee that it will be able to secure low-cost electricity sites, fund the acquisition of the most efficient new miners, and operate efficiently enough to be profitable.

 

Pricing

 

Pricing manifests itself in the market value of the cryptocurrency that is mined. This can vary wildly, especially for newer crypto coins. We will focus exclusively on  Bitcoin mining as it is the undisputed market leader in valuation, though with wide fluctuations in short term market pricing. We intend to maintain working capital and investments in mined coins to avoid forced selling during downtrends. We may not be able to fund operations through a downturn which would force the sale of mined coin inventories at low prices resulting in losses.

 

 
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Advertising and Promotion

 

As a  Bitcoin miner performing computer processing to the distributed ledger, there are no customers to advertise to or need for promotions.

 

Advertising and promotion are required as part of the capital raising process to promote our brand awareness. Consequently, we intend to use a combination of online forums, press releases, crowd funding portals, public advertising in blue-sky approved states, brokers and direct marketing campaigns to promote our company. We cannot be assured that we will be successful in raising the capital necessary to accomplish our growth and business plans.

 

Strategy and Implementation

 

Our strategy is to treat crypto mining as a no-frills utility that works behind the scenes to support existing blockchains. This focused approach avoids unnecessary and expensive overhead of supporting and developing new protocols, algorithms, blockchain use applications, and their related ICOs.

 

Our strategy allows us to focus on optimizing standardized modular mining systems to deploy to sites with low-cost electricity. We can scale up to the site capacity by deploying multiple systems either in containers or installed directly in buildings. Standardization of equipment and processes will allow us to attain economies of scale to minimize our overall costs. Our operations consist of the implementation of the following elements:

 

 

·

Acquisition of sites with access to low-cost electricity. These sites must be evaluated for the final delivered price per Kwh after factoring in land, transforming, electrical utility infrastructure, building or container, and other land development costs.

 

·

Standardized, modular mining systems capable of receiving and operating miners. These contain the electrical distribution panels, wiring, racks, fans, tanks, cooling, internet and security systems to house, operate and secure the miners. These modules may be installed in containers or buildings on site.

 

·

Acquisition and deployment of high performance, energy efficient mining equipment. Due to the wide range of mining equipment available, we will perform cost/benefit evaluations to determine which miners to acquire and deploy. Among the considerations used are:

 

·

our available capacity,

 

·

funding,

 

·

time frame,

 

·

availability,

 

·

new or used equipment,

 

·

hashing capacities,

 

·

energy consumption, and

 

·

anticipated economic life.

 

Seasonality

 

We do not expect any seasonality in our  Bitcoin mining business.

 

Intellectual Property

 

We currently have the exclusive license to all intellectual property held by IPC, Inc., which includes the patent filed by Nate Steck for delivery of pancake and waffle batter contained in an aerosol can, as well as 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.

 

 
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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. Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 1B. Unresolved Staff Comments

 

None.

 

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. 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. Mine Safety Disclosures

 

Not applicable.

 

 
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PART II

 

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:

 

Quarter Ended:

 

High

 

 

Low

 

May 31, 2023

 

$0.0004

 

 

$0.0001

 

February 28, 2023

 

 

0.0015

 

 

 

0.0002

 

November 30, 2022

 

 

0.0019

 

 

 

0.0008

 

August 31, 2022

 

 

0.0028

 

 

 

0.0010

 

May 31, 2022

 

 

0.0033

 

 

 

0.0012

 

February 28, 2022

 

 

0.0058

 

 

 

0.0017

 

November 30, 2021

 

 

0.0105

 

 

 

0.0015

 

August 31, 2021

 

$0.0087

 

 

$0.0010

 

 

 
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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.

 

As of May 31, 2023, the shareholders’ list showed 22 registered shareholders with 3,208,024,616 common shares outstanding.

 

Dividend Policy

 

On March 7, 2023, the Company’s Board of Directors approved a quarterly dividend payment to shareholders equal to $0.000025 per share from the Company’s  Bitcoin mining. The record date was March 31, 2023, with an expected date of April 15, 2023. On April 12, 2023, the Company paid dividend of $6,733 to shareholders. 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

 

We did not sell any equity securities which were not registered under the Securities Act during the year ended May 31, 2023, that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the year ended May 31, 2023.

 

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 fiscal years ended May 31, 2023 and 2022.

 

Item 6. [Reserved]

 

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.

 

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 Liquidity Requirements

 

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.

 

 
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Year Ended

 

 

 

 

 

 

 

 

 

 May 31,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

 Change

 

 

 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$25,168

 

 

$70,395

 

 

$(45,227)

 

(64%)

 

Cost of revenue

 

 

55,179

 

 

 

197,189

 

 

 

(142,010)

 

(72%)

 

Gross profit (loss)

 

 

(30,011)

 

 

(126,794)

 

 

96,783

 

 

 

76%

Operating expenses

 

 

112,283

 

 

 

71,480

 

 

 

40,803

 

 

 

57%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on change in fair market value of derivative liability

 

 

9,766

 

 

 

373,925

 

 

 

(364,159)

 

(97%)

 

Gain on settlement of debts

 

 

-

 

 

 

76,027

 

 

 

(76,027)

 

(100%)

 

Interest expense

 

 

(109,215)

 

 

(116,131)

 

 

(6,916)

 

(6%)

 

Loss on sale of digital currency

 

 

(2,717)

 

 

(9,793)

 

 

(7,076)

 

(72%)

 

Impairment loss on digital currency

 

 

(6,191)

 

 

(5,478)

 

 

713

 

 

 

13%

Net income (loss)

 

$(250,651)

 

$120,276

 

 

$(370,927)

 

(308%)

 

 

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 an event, we will be forced to scale down or perhaps even cease our operations.

 

Results of Operations

 

The following summary of our results of operations should be read in conjunction with our financial statements for the years ended May 31, 2023 and 2022, which are included herein.

 

Our operating results for the years ended May 31, 2023 and 2022, and the changes between those periods for the respective items are summarized as follows:

 

Revenue

 

Our Company generated $25,168 and $70,395 revenue from digital currency mining for the years ended May 31, 2023 and 2022, respectively. The Company commenced the mining of  Bitcoin in September 2021. Our Company generated $25,168 in  Bitcoin Mining revenue with a gross loss of $30,011 for the year ended May 31, 2023 compared to $70,395 in  Bitcoin Mining revenue with a gross loss of $126,794 for the year ended May 31, 2022..

 

Cost of Revenue

 

The cost of digital currency mining revenue was $55,179 and $197,189 for the years ended May 31, 2023 and 2022, respectively. The cost of digital currency mining revenue consists of electricity, amortization, and other co-location hosting fees, which are remitted in  Bitcoin and cash payments for equipment leases and hosting. The cost of revenues for May 31, 2023 was comprised of $11,242 for electricity, $18,805 for hosting and maintenance, $9,900 for equipment leases, $14,143 in equipment amortization and $1,089 for mining fees. This compared to cost of revenues for May 31, 2022, which comprised of $26,651 for electricity, $169,965 for equipment leases, $397 in equipment amortization and $176 for mining fees.

 

Operating Expenses

 

During the year ended May 31, 2023, we incurred general and administrative expenses of $112,283 compared to $71,480 incurred during the year ended May 31, 2022. The increase in operating expenses was predominantly from professional, and other fees related to our reporting requirements of $6,599, and general administrative expenses of $34,204.

 

 
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Other Income (Expense)

 

During the year ended May 31, 2023, we had a gain on change in fair market value of derivatives of $9,766, interest expense of $109,215, loss on sale of digital currency of $2,717, and impairment loss on digital currency of $6,191.

 

During the year ended May 31, 2022, we had a gain on change in fair market value of derivatives of $373,925, interest expense of $116,131, loss on sale of digital currency of $9,793, gain on settlement of debts of $76,027, and impairment loss on digital currency of $5,478.

 

Liquidity and Capital Resources

 

Working Capital

 

 

 

May 31,

 

 

May 31,

 

 

 

 

 

 

2023

 

 

2022

 

 

 Change

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

$930

 

 

$23,688

 

 

$(22,758)

Current Liabilities

 

$1,094,976

 

 

$970,348

 

 

$124,628

 

Working Capital Deficiency

 

$1,094,046

 

 

$946,660

 

 

$147,386

 

 

Cash Flows

 

 

 

Year Ended

 

 

 

 

 

 

May 31,

 

 

 

 

 

 

2023

 

 

2022

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

Cash Flows Used in Operating Activities

 

$(42,534

)

 

$(216,990

)

 

$174,456

Cash Flows Used in Investing Activities

 

 

-

 

 

 

(12,337

)

 

$12,337

Cash Flows Provided by Financing Activities

 

 

29,676

 

 

 

242,500

 

 

$(212,824)

Net change in Cash During Period

 

$(12,858)

 

$13,173

 

 

$(26,031)

 

As of May 31, 2023, our Company had $930 in cash. In the management’s opinion, our Company’s cash position is insufficient to maintain our operations at the current level for the next 12 months. Any expansion may cause our Company to require additional capital until such expansion begins generating revenue. It is anticipated that the raising of additional funds will principally be through the sales of our securities.

 

As of May 31, 2023, our total current liabilities were $1,094,976 which consisted of $397,935 in notes payable – related parties, $102,054 in accrued interest-related party, $153,849 in derivative liability, $943 in loan payable , $32,000 management fees payable -related party, $153,502 in accounts payable and accrued interest and $254,693 in convertible notes, net, as compared to May 31, 2022, our total current liabilities were $970,348 which consisted of $388,687 in notes payable – related parties, $89,164 in accrued interest-related party, $163,615 in derivative liability, $64,198 in accounts payable and accrued interest and $264,684 in convertible notes, net.

 

Operating Activities

 

Net cash used in operating activities was $42,534 for the year ended May 31, 2023, compared with net cash used in operating activities of $216,990 for the year ended May 31, 2022.

 

For the year ended May 31, 2023, net cash flows used in operating activities was $42,534, consisting of a net loss of $250,651, increased by a gain in change fair value of derivative liability of $9,766 and reduced by amortization of discount on convertible and promissory notes of $47,489, impairment loss on digital currency of $6,191, depreciation of digital currency equipment of $14,143, realized loss on sale of digital currency of $2,717, and net change in operating assets and liabilities of $147,343.

 

 
19

Table of Contents

 

For the year ended May 31, 2022, net cash flows used in operating activities was $216,990, consisting of a net income of $120,276, reduced by a gain in change fair value of derivative liability of $373,925, gain on settlement of debts of $76,027, and increased by amortization of discount on convertible notes  of $79,366, impairment loss on digital currency of $5,478, realized loss on sale of digital currency of $9,793, and net change in operating assets and liabilities of $18,049 .

 

Investing Activities

 

We did not have any cash flows from investing activities during the year ended May 31, 2023. The Company purchased digital mining equipment of $12,337 during the year ended May 31, 2022. 

 

Financing Activities

 

Net cash provided by financing activities was $29,676 for the year ended May 31, 2023, compared with net cash provided by financing activities of $242,500, for the year ended May 31, 2022.

 

During the year ended May 31, 2023, net cash provided by financing activities of $29,676, consisting of $33,813 from promissory notes, $17,338 from related party loans, $1,885 from loans payable and reduced by repayment of related party loan of $15,685, loan payable of $942 and dividend of $6,733.

 

During the year ended May 31, 2022, net cash provided by financing activities of $242,500 consisted of $240,500 from issuance convertible notes and $2,000 from related party loan. 

 

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 revenue 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.

 

 
20

Table of Contents

 

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

 

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact on our business operations and any associated risks related to these policies are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported or expected financial results.

 

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

 

The material estimates for our Company are those of derivative liabilities and income tax valuation allowance recorded for deferred tax assets. The estimated sensitivity to change is related to the various variables of the Black-Scholes option pricing model stated below. The specific quantitative variables are included in the notes to the consolidated financial statements. The estimated fair value of options is recognized as expense on the straight-line basis over the options’ vesting periods. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the expected life, dividend yield, expected volatility, and risk-free interest rate weighted-average assumptions used for options and warrants granted. Expected volatility for 2023 and 2022 was estimated using our common stock for convertible notes and warrants. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the grant date. The expected life of options is based on the life of the instrument on grant date. 

 

Digital Currencies

 

Digital currencies consist of  Bitcoin and are included in intangible assets in the balance sheet. Digital currencies are recorded at cost less impairment. The Company compares the book value of digital currencies held to the prevailing market price at each reporting period. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. Realized gains or losses on the sale of digital currencies are included in other income (expense) in the statements of operations.

 

 
21

Table of Contents

 

Derivative Financial Instruments

 

The fair value of an embedded conversion option that is convertible into a variable amount of shares and warrants that include price protection reset provision features are deemed to be “down-round protection” and, therefore, do not meet the scope exception for treatment as a derivative under ASC 815 “Derivatives and Hedging”, since “down-round protection” is not an input into the calculation of the fair value of the conversion option and warrants and cannot be considered “indexed to the Company’s own stock” which is a requirement for the scope exception as outlined under ASC 815.

 

The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

 

The Black-Scholes option valuation model was used to estimate the fair value of the conversion options. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time, of other comparative securities, equal to the weighted average life of the options.

 

Conversion options are recorded as debt discount and are amortized as interest expense over the life of the underlying debt instrument.

 

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.

 

Recent Accounting Pronouncements

 

Our Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

 Food Product Business

 

The food industry is highly competitive and includes many regional, national and international companies, some of which have achieved substantial market share. We compete primarily on the basis of product features, brand recognition, quality and price. The failure to remain competitive could adversely affect the results of operations and financial condition. Some of our competitors offer types of products that we do not sell, and some of our competitors are larger and have substantially greater financial and other resources than us.

 

Bitcoin Mining Business

 

The slowing or stopping of the development or acceptance of the  Bitcoin Network may adversely affect an investment in our company. Digital assets, such as  Bitcoins, that may be used to buy and sell goods and services, among other uses, are a new and rapidly evolving industry of which the  Bitcoin Network is a prominent, but not unique, part. The growth of the digital assets industry, in general, and the  Bitcoin Network, in particular, is subject to a high degree of uncertainty. The factors affecting the further development of the digital assets industry, as well as the  Bitcoin Network, include:

 

 

·

continued worldwide growth in the adoption and use of  Bitcoins and other digital assets;

 

·

government and quasi-government regulation of  Bitcoins and other digital assets and their use, or restrictions on or regulation of access to and operation of the  Bitcoin Network or similar digital assets systems;

 

·

the maintenance and development of the open-source software protocol of the  Bitcoin Network;

 

·

changes in consumer demographics and public tastes and preferences;

 

·

the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; and

 

·

general economic conditions and the regulatory environment relating to digital assets.

 

 
22

Table of Contents

 

Item 8. Financial Statements and Supplementary Data

 

NATE’S FOOD CO.

AUDITED FINANCIAL STATEMENTS

May 31, 2023 and 2022

 

TABLE OF CONTENTS

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID NO: 6117)

 

F-1

 

FINANCIAL STATEMENTS:

 

 

Balance Sheets

 

F-2

 

Statements of Operations

 

F-3

 

Statements of Changes in Stockholders’ Deficit

 

F-4

 

Statements of Cash Flows

 

F-5

 

Notes to the Financial Statements

 

F-6

 

 

 

23

Table of Contents

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders

Nate’s Food Co.

Huntington Beach, CA

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Nate’s Food Co. (the Company) as of May 31, 2023 and 2022, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Considerations

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses since inception, has a working capital deficit, and has not achieved profitable operations, which raise substantial doubt about its 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.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matter

 

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

Going Concern – Disclosure

 

The financial statements of the Company are prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations. As noted in “Going Concern Consideration” above, the Company has a history of recurring net losses, a significant accumulated deficit and currently has net working capital deficit. The Company has contractual obligations such as commitments for repayments of accounts and notes payable and accrued interest (collectively “obligations”). Currently management’s forecasts and related assumptions illustrate their judgments as to the Company’s ability to meet the obligations through planned increases in revenues, management of expenditures, obtaining additional loans from related and unrelated parties, and private placements of capital stock for additional funding to meet its operating needs. Should there be constraints on the ability to increase revenues and access financing through stock issuances, the Company will continue to manage cash outflows and meet the obligations through related and unrelated party loans.

 

We identified management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter. Management made judgments regarding the Company’s ability to effectively implement its plans to provide the necessary cash flows to fund the Company’s obligations as they become due. Specifically, the judgments with the highest degree of impact and subjectivity in determining the Company’s ability to effectively implement its plans include its ability to increase revenues, manage expenditures, access funding from the capital market, and obtain loans from related and unrelated parties. Auditing the judgments made by management required a high degree of auditor judgment and an increased extent of audit effort.

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included the following, among others, evaluating the Company’s ability to: (i) increase revenues, (ii) access funding from the capital markets, (iii) manage expenditures, and (iv) obtain loans from related and unrelated parties.

 

/s/ Pinnacle Accountancy Group of Utah

Pinnacle Accountancy Group of Utah a dba of Heaton & Company, PLLC

 

We have served as the Company’s auditor since 2018.

 

Pinnacle Accountancy Group of Utah

Farmington, Utah

September 13, 2023

 

 
F-1

Table of Contents

 

Nate’s Food Co.

Balance Sheets

 

 

 

 May 31,

 

 

 May 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$930

 

 

$13,788

 

Prepaid expenses

 

 

-

 

 

 

9,900

 

Total Current Assets

 

 

930

 

 

 

23,688

 

 

 

 

 

 

 

 

 

 

Digital currency

 

 

16,903

 

 

 

21,465

 

Equipment, net

 

 

123,194

 

 

 

12,337

 

TOTAL ASSETS

 

$141,027

 

 

$57,490

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$46,239

 

 

$5,763

 

Accrued interest

 

 

107,263

 

 

 

58,435

 

Accrued interest - related party

 

 

102,054

 

 

 

89,164

 

Accrued management fees - related party

 

 

32,000

 

 

 

-

 

Loans payable

 

 

943

 

 

 

-

 

Notes payable - related party

 

 

397,935

 

 

 

388,687

 

Convertible notes, net of discount

 

 

254,693

 

 

 

264,684

 

Derivative liability

 

 

153,849

 

 

 

163,615

 

Total Current liabilities

 

 

1,094,976

 

 

 

970,348

 

 

 

 

 

 

 

 

 

 

Promissory notes, net of discount

 

 

159,168

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

1,254,144

 

 

 

970,348

 

 

 

 

 

 

 

 

 

 

Commitments

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

Series A Preferred Stock, Par Value $0.0001, 2,000,000 shares authorized, 1,915,153 and 1,940,153 issued and outstanding, respectively

 

 

191

 

 

 

194

 

Series B Preferred Stock, Par Value $0.0001, 150,000 shares authorized, 150,000 issued and outstanding

 

 

15

 

 

 

15

 

Series C Preferred Stock, Par Value $1.00, 250,000 shares authorized, 250,000 issued and outstanding

 

 

250,000

 

 

 

250,000

 

Series D Preferred Stock, Par Value $0.0001, 10,000,000 shares authorized, 6,000,000 issued and outstanding

 

 

600

 

 

 

600

 

Series E Preferred Stock, Par Value $0.0001, 15,000,000 shares authorized, 14,989,500 issued and outstanding

 

 

1,499

 

 

 

1,499

 

Common Stock, Par Value $0.001, 6,500,000,000 shares authorized, 3,208,024,616 and 553,024,616 issued and outstanding, respectively

 

 

3,208,024

 

 

 

553,024

 

Additional paid-in capital

 

 

581,964

 

 

 

3,179,836

 

Accumulated deficit

 

 

(5,155,410)

 

 

(4,898,026)

Total stockholders’ deficit

 

$(1,113,117)

 

$(912,858)

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$141,027

 

 

$57,490

 

 

The accompanying notes are an integral part of these financial statements.

 

 
F-2

Table of Contents

 

Nate’s Food Co.

Statements of Operations

 

 

 

Year Ended

 

 

 

 May 31,

 

 

 

2023

 

 

2022

 

Revenue

 

 

 

 

 

 

Digital currency mining

 

$25,168

 

 

$70,395

 

Cost of revenue

 

 

55,179

 

 

 

197,189

 

Gross loss

 

 

(30,011)

 

 

(126,794)

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

General and administrative

 

 

112,283

 

 

 

71,480

 

Total operating expenses

 

 

112,283

 

 

 

71,480

 

 

 

 

 

 

 

 

 

 

Operating Loss

 

 

(142,294)

 

 

(198,274)

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

Gain on change in fair value of derivative liability

 

 

9,766

 

 

 

373,925

 

Loss on sale of digital currency

 

 

(2,717)

 

 

(9,793)

Interest expense

 

 

(109,215)

 

 

(116,131)

Gain on settlement of debt

 

 

-

 

 

 

76,027

 

Impairment loss on digital currency

 

 

(6,191)

 

 

(5,478)

Total other income (expenses)

 

 

(108,357)

 

 

318,550

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$(250,651)

 

$120,276

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

6,733

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) attributable to common shareholders

 

$(257,384)

 

$120,276

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

Basic

 

$(0.00)

 

$0.00

 

Diluted

 

$(0.00)

 

$0.00

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

1,386,493,109

 

 

 

544,193,109

 

Diluted

 

 

3,200,880,745

 

 

 

653,269,780

 

 

The accompanying notes are an integral part of these financial statements.

 

 
F-3

Table of Contents

 

Nate’s Food Co.

Statements of Changes in Stockholders’ Deficit

Years Ended May 31, 2023 and 2022

 

 

 

 Preferred Stock 

 

 

 

 

 

 

 Additional

 

 

 

 

 Total 

 

 

 

 Series A

 

 

 Series B

 

 

 Series C

 

 

 Series D

 

 

 Series E

 

 

 Common Stock

 

 

 Paid-in 

 

 

 Accumulated

 

 

 Stockholders'

 

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Capital

 

 

  Deficit

 

 

 Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances May 31, 2021

 

 

1,940,153

 

 

$194

 

 

 

150,000

 

 

$15

 

 

 

250,000

 

 

$250,000

 

 

 

6,350,000

 

 

$635

 

 

 

14,989,500

 

 

$1,499

 

 

 

537,774,616

 

 

$537,774

 

 

$2,884,051

 

 

$(5,018,302)

 

$(1,344,134)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series D Preferred Stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(350,000)

 

 

(35)

 

 

-

 

 

 

-

 

 

 

5,250,000

 

 

 

5,250

 

 

 

(5,215)

 

 

-

 

 

 

-

 

Issuance common stock in connection with convertible note

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,000,000

 

 

 

10,000

 

 

 

82,000

 

 

 

-

 

 

 

92,000

 

Forgiveness of related party accounts payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

219,000

 

 

 

-

 

 

 

219,000

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

120,276

 

 

 

120,276

 

Balances May 31, 2022

 

 

1,940,153

 

 

$194

 

 

 

150,000

 

 

$15

 

 

 

250,000

 

 

$250,000

 

 

 

6,000,000

 

 

$600

 

 

 

14,989,500

 

 

$1,499

 

 

 

553,024,616

 

 

$553,024

 

 

$3,179,836

 

 

$(4,898,026)

 

$(912,858)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend paid

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,733)

 

 

(6,733)

Issuance of common stock for conversion of convertible note

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,655,000,000

 

 

 

1,655,000

 

 

 

(1,597,875)

 

 

-

 

 

 

57,125

 

Conversion of Series A Preferred Stock

 

 

(25,000)

 

 

(3)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,000,000,000

 

 

 

1,000,000

 

 

 

(999,997)

 

 

 

 

 

 

-

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(250,651)

 

 

(250,651)

Balances May 31, 2023

 

 

1,915,153

 

 

$191

 

 

 

150,000

 

 

$15

 

 

 

250,000

 

 

$250,000

 

 

 

6,000,000

 

 

$600

 

 

 

14,989,500

 

 

$1,499

 

 

 

3,208,024,616

 

 

$3,208,024

 

 

$581,964

 

 

$(5,155,410)

 

$(1,113,117)

 

 The accompanying notes are an integral part of these financial statements.

 

 
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Table of Contents

 

Nate’s Food Co.

Statements of Cash Flows

 

 

 

 Year Ended

 

 

 

 May 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income (loss)

 

$(250,651)

 

$120,276

 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Gain on change in fair value of derivative liability

 

 

(9,766)

 

 

(373,925)

Amortization of discount on convertible note

 

 

47,134

 

 

 

79,366

 

Amortization of discount on promissory note

 

 

355

 

 

 

-

 

Depreciation of digital currency equipment

 

 

14,143

 

 

 

-

 

Impairment loss on digital currency

 

 

6,191

 

 

 

5,478

 

Gain on settlement of debts

 

 

-

 

 

 

(76,027)

Loss on sale of digital currency

 

 

2,717

 

 

 

9,793

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

9,900

 

 

 

(9,900)

Digital currency

 

 

(4,346)

 

 

(36,736)

Accounts payable and accrued liabilities

 

 

40,476

 

 

 

27,913

 

Operating expenses paid by related party

 

 

7,595

 

 

 

-

 

Accrued management fees - related party

 

 

32,000

 

 

 

-

 

Accrued interest - related party

 

 

12,890

 

 

 

12,883

 

Accrued interest

 

 

48,828

 

 

 

23,889

 

Net cash used in operating activities

 

 

(42,534)

 

 

(216,990)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchase of digital currency equipment

 

 

-

 

 

 

(12,337)

Net cash used in investing activities

 

 

-

 

 

 

(12,337)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from convertible notes payable

 

 

-

 

 

 

240,500

 

Proceeds from promissory notes payable

 

 

33,813

 

 

 

-

 

Proceeds from notes payable - related party

 

 

17,338

 

 

 

2,000

 

Repayment of notes payable - related party

 

 

(15,685)

 

 

-

 

Proceeds from loans payable

 

 

1,885

 

 

 

-

 

Repayment of loans payable

 

 

(942)

 

 

-

 

Dividend paid

 

 

(6,733)

 

 

-

 

Net cash provided by financing activities

 

 

29,676

 

 

 

242,500

 

 

 

 

 

 

 

 

 

 

Net cash increase (decrease) for the period

 

 

(12,858)

 

 

13,173

 

Cash at beginning of period

 

 

13,788

 

 

 

615

 

Cash at end of period

 

$930

 

 

$13,788

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Disclosures

 

 

 

 

 

 

 

 

Cash paid for interest

 

$-

 

 

$-

 

Cash paid for income taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Non-Cash Investing and Financing Activity:

 

 

 

 

 

 

 

 

Reclassification of accounts payable to notes payable - related party

 

$-

 

 

$25,612

 

Issuance of common stock for conversion of convertible note

 

$57,125

 

 

$-

 

Issuance of common stock as debt discount on convertible note payable

 

$-

 

 

$92,000

 

Conversion of Series A preferred stock to common stock

 

$1,000,000

 

 

$-

 

Conversion of Series D preferred stock to common stock

 

$-

 

 

$5,250

 

Purchase of digital currency equipment with promissory note

 

$125,000

 

 

$-

 

Forgiveness of related party accounts payable

 

$-

 

 

$219,000

 

 

The accompanying notes are an integral part of these financial statements.

 

 
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Table of Contents

 

NATE’S FOOD CO.

NOTES TO THE FINANCIAL STATEMENTS

May 31, 2023 AND 2022

 

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 Nate’s Pancakes, Inc and Capital Resource Alliance. Nate’s Pancakes was the surviving Company. In May 2014, the Company changed its name from Capital Resource Alliance to Nate’s Food Co.

 

The Company is engaged in “ Bitcoin Mining” – i.e., the process by which  Bitcoins are created resulting in new blocks being added to the blockchain and new  Bitcoins being issued to the miners. The Company has purchased ASIC (application-specific integrated circuit) computers - computers specifically designed for cryptocurrency mining - that are used for  Bitcoin Mining. We have placed this  Bitcoin Mining equipment with 3rd party datacenters or farms (often referred as a “Co-Location”) that will power and operate our  Bitcoin Mining equipment for a fee. We generate revenues through receiving  Bitcoin from our  Bitcoin Mining equipment.

 

Basis of Presentation

 

The accompanying audited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.

 

Use of Estimates

 

The preparation of financial statements with US GAAP 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.’s 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 the purposes of the statement of cash flows, the Company considers all short-term marketable securities purchased with an original maturity of three months or less to be cash equivalents.

 

Digital Currencies

 

We currently account for all digital currencies held as a result of these transactions as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. We have ownership of and control over our digital currencies and we may use third-party custodial services to secure it. The digital currencies are initially recorded at cost and are subsequently remeasured on the balance sheet at cost, net of any impairment losses incurred since acquisition.

 

 
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Table of Contents

 

We determine the fair value of our digital currencies on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that we have determined is the principal market for such assets (Level 1 inputs). We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital currencies are impaired. In determining if an impairment has occurred, we consider the lowest market price of one unit of digital currency quoted on the active exchange since acquiring the digital currency. If the then current carrying value of a digital currency exceeds the fair value so determined, an impairment loss has occurred with respect to those digital currencies in the amount equal to the difference between their carrying values and the price determined.

 

Impairment losses are recognized within other income (expense) on the statements of operations in the period in which the impairment is identified. The impaired digital currencies are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale(s), at which point they are presented net of any impairment losses for the same digital assets held within other income (expense). In determining the gain to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.

 

During the years ended May 31, 2023 and 2022, the market value of digital currencies was lower than the Company’s cost basis by $6,191 and $5,478, respectively, which amount is recorded as impairment loss on digital currency.

 

Fair Value of Financial Instruments

 

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are 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, 2023 and 2022, measured at fair value on a recurring basis:

 

May 31, 2023

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 Digital currency

 

$16,903

 

 

$-

 

 

$-

 

 

$16,903

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$153,849

 

 

$153,849

 

 

May 31, 2022

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 Digital currency

 

$21,465

 

 

$-

 

 

$-

 

 

$21,465

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$163,615

 

 

$163,615

 

 

 
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Table of Contents

 

Earnings per Share

 

The Company computes net income (loss) per share in accordance with 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, 2023 and 2022, the following warrants, convertible notes and convertible preferred stock were potentially dilutive.

 

 

 

Year ended

 

 

 

May 31,

 

 

 

2023

 

 

2022

 

 

 

(Shares)

 

 

(Shares)

 

Convertible notes payable

 

 

1,814,387,636

 

 

 

109,076,671

 

Series B convertible preferred stock

 

 

150,000,000

 

 

 

150,000,000

 

Series C convertible preferred stock

 

 

16,500,000

 

 

 

16,500,000

 

Series D convertible preferred stock

 

 

90,000,000

 

 

 

90,000,000

 

Series E convertible preferred stock

 

 

149,895,000

 

 

 

149,895,000

 

 

 

 

2,220,782,636

 

 

 

515,471,671

 

 

For the year ended May 31, 2023, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.

 

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, 2022:

 

 

 

Net Income (Loss)

 

 

Shares

 

 

Per Share

 

 

 

(Numerator)

 

 

(Denominator)

 

 

Amount

 

Basic EPS

 

$120,276

 

 

 

544,193,109

 

 

$0.00

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Convertible notes payable (gain on derivative liability)

 

 

(373,925 )

 

 

109,076,671

 

 

 

(0.00 )

Preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

Diluted EPS

 

$(253,649 )

 

 

653,269,780

 

 

$(0.00 )

 

Potential dilution from the convertible preferred stock was not included in the calculation of the dilutive earnings per share calculation for the year ended May 31, 2022, as the effect is anti-dilutive. 

 

Equipment

 

 Bitcoin mining equipment is stated at cost less accumulated depreciation.  Depreciation is computed using the straight-line method over the useful life of four years and is included in the cost of revenue.

 

Lease

 

The Company leases  Bitcoin equipment (Note 3), for the mining of  Bitcoin.

 

In accordance with ASC 842, Leases, we determine if an arrangement is a lease at inception.

 

The equipment lease meets the definition of a short-term lease because the lease term is 12 months or less. Consequently, consistent with the Company’s accounting policy election, the Company does not recognize the right-of-use assets and the lease liability arising from this lease.

 

 
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Table of Contents

 

Revenue Recognition

 

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.

 

Our revenues currently consist of cryptocurrency mining revenues, which we began generating in September 2021. The Company earns its cryptocurrency mining revenues by providing transaction verification services within the digital currency networks of cryptocurrencies, for  Bitcoin. The Company satisfies its performance obligation at the point in time that the Company is awarded a unit of digital currency through its participation in the applicable network and network participants benefit from the Company’s verification service. In consideration for these services, the Company receives  Bitcoin, net of applicable network fees, which are recorded as revenue using the closing U.S. dollar price of  Bitcoin on the date of receipt. Expenses associated with running the cryptocurrency mining operations, which are currently utilities, equipment lease and monitoring services are recorded as cost of revenues.  During the years ended May 31, 2023 and 2022, the Company generated  Bitcoin mining revenue of $25,168 and $70,395, respectively, with cost of revenue of $55,179 and $197,189, respectively.

 

There is currently no specific definitive guidance in GAAP or alternative accounting frameworks for the accounting for the production and mining of digital currencies and management has exercised significant judgment in determining appropriate accounting treatment for the recognition of revenue for mining of digital currencies. Management has examined various factors surrounding the substance of the Company’s operations and the guidance in ASC 606, including identifying the transaction price, when performance obligations are satisfied, and collectability is reasonably assured being the completion and addition of a block to a blockchain and the award of a unit of digital currency to the Company. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies which could result in a change in the Company’s financial statements.

 

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.

 

Recently Issued Accounting Pronouncements

 

The Company has determined that there are no applicable recently issued accounting pronouncements that are expected to have a material impact on these financial statements.

 

 
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Table of Contents

 

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 revenue 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 – Prepaid Expenses

 

On September 30, 2021 and October 22, 2021, the Company entered into two agreements to lease  Bitcoin equipment for a term of 270 days and 200 days, respectively, for total of $192,600. During the years ended May 31, 2023 and 2022, the Company recognized $9,900 and $169,968 in lease expenses, respectively.

 

As of May 31, 2023 and 2022, prepaid expenses were $0 and $9,900, respectively.

 

Note 4 – Related Party Transactions

 

Notes Payable – Related Party

 

As at May 31, 2023 and 2022, the total amount owed to an officer was $397,935 and $388,687, respectively. Of the total loan amount, $57,000 is at 10% interest and was to be repaid by June 28, 2017, and is in default.  As at May 31, 2023 and 2022, accrued interest of $39,479 and $33,779, respectively, has been recorded with respect to this loan. There is no additional interest charged on the note as a result of the default. Additionally, $71,902 of the loan is at 10% interest and was due on December 31, 2015, and is in default.  As at May 31, 2023 and 2022, accrued interest of $62,575 and $55,385, respectively, has been recorded with respect to this loan. There is no additional interest charged on the note as a result of the default. Additionally, $269,033 of the loan includes $175,571 and $181,711 that was reclassified from accounts payable as at May 31, 2023 and 2022, respectively. This amount is free interest, due on demand and unsecured. During the years ended May 31, 2023 and 2022, the Company received advances of $17,338 and $2,000, repaid advances of $15,685 and $0 and paid operating expenses of $7,595 and $0, respectively.

 

Management Fees

 

During the years ended May 31, 2023 and 2022, the Company recognized $36,000 and $0 management fees for the Company’s officer and paid management fees of $4,000 and $0, respectively. As of May 31, 2023 and 2022, the Company owed the Company’s officer for the amount of $32,000 and $0, respectively.  

 

 
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Table of Contents

 

Issuance of Common Stock

 

On December 19, 2022, the Company’s Board of Director approved the issuance of 1,000,000,000 shares of common stock to two its officers in exchange for 25,000 shares of Series A Preferred Stock.

 

Accounts Payable and Accruals – Related Party

 

During the year ended May 31, 2022, an accounts payable related party balance of $219,000 owed to a Company controlled by officers of the Company, was forgiven and recorded as an increase to additional paid in capital. 

 

Note 5 – Convertible Notes

 

The Company had the following convertible notes payable outstanding as of May 31, 2023 and 2022:

 

 

 

 May 31, 2023

 

 

 May 31, 2022

 

Convertible note payable

 

$311,818

 

 

$36,818

 

Additions

 

 

-

 

 

 

275,000

 

Conversion

 

 

(57,125)

 

 

-

 

 

 

 

254,693

 

 

 

311,818

 

 

 

 

 

 

 

 

 

 

Less: debt discount and deferred financing cost

 

 

-

 

 

 

(47,134)

 

 

 

254,693

 

 

 

264,684

 

 

 

 

 

 

 

 

 

 

Less: current portion of convertible notes payable

 

 

(254,693)

 

 

(264,684)

Long-term convertible notes payable

 

$-

 

 

$-

 

 

On October 13, 2016, the Company received financing from an unrelated party in the amount of $85,500 with $5,000 original issue discount and incurred $8,000 in financing costs. On December 29, 2017, the principal balance along with the related default penalties, accrued and unpaid interest, and the conversion rights were sold to another unrelated party. The original issue discount and financing costs were amortized over the original life of the note using the effective interest method. The $85,500 note bears 10% interest and matured on July 13, 2017. The note is currently in default and bears 18% interest rate while in default on the outstanding balance of $36,818 after $48,682 of conversions in prior years. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount into fully paid and non-assessable shares of common stock. The 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 derivative is revalued at each period end with gains or losses included in the statement of operations (see note 6 for details). During the year ended May 31, 2023 and 2022, the Company recognized interest expense of $6,627 and $6,627, respectively. As of May 31, 2023 and 2022, the Company had accrued interest of $47,799 and $41,172, respectively.

 

On October 14, 2021, the Company received financing from an unrelated party in the amount of $275,000 with $25,000 original issue discount and $9,500 in financing costs, for net proceeds to the Company of $240,500. The original issue discount and financing costs are being amortized over the original life of the note using the effective interest method. The $275,000 bears 10% interest and matured on October 14, 2022. The note is currently in default and bears 20% interest rate while in default on the outstanding balance of $217,875 after $57,125 of conversions in current year.  The conversion price is $0.002 per share (Fixed Conversion Price) at any time after 180 days from the issue date, if an event of default, the conversion price shall be $0.001 per share. On October 14, 2021, the Company agreed, in connection with the authorization and issuance of convertible note of $275,000, to issue an additional 10,000,000 shares of common stock in accordance with the securities purchase agreement dated October 14, 2021, to the convertible note holder. The Company determined the fair value of 10,000,000 shares of common stock of $92,000 (according to market price on October 14, 2021) and is amortizing this cost over the life of the convertible note.

 

On December 19, 2022, the Company’s Board of Directors approved the modification of the current conversion price from $0.002 to $0.000025 per share.

 

 
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Table of Contents

 

During the year ended May 31, 2023, the Company converted $17,500 principal into 70,000,000 shares of common stock at price of $0.00025 per share and $39,625 principal into 1,585,000,000 shares of common stock at price of $0.000025 per share.

 

During the years ended May 31, 2023 and 2022, the Company recognized interest expenses of $40,772 and $17,253, and $47,134 and $79,366 amortization of debt discount, respectively. As of May 31, 2023 and 2022, the Company had accrued interest of $58,025 and $17,253 and unamortized debt discount of $0 and $47,134, respectively.

 

Note 6 – Derivative Liability

 

The Company analyzed the variable discounted conversion options on its convertible note dated October 13, 2016, of $36,818 (Note 5) for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the embedded conversion option should be classified as a liability due to 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, 2023 and 2022:

 

Balance - May 31, 2021

 

$537,540

 

 

 

 

 

 

Gain on change in fair value of the derivative

 

 

(373,925)

Balance - May 31, 2022

 

$163,615

 

 

 

 

 

 

Gain on change in fair value of the derivative

 

 

(9,766)

Balance - May 31, 2023

 

$153,849

 

 

The Company also recorded a gain on change in fair value of the derivative of $9,766 and $373,925 during the years ended May 31, 2023 and 2022, respectively. As of May 31, 2023, the note was in default.  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, for the year ended May 31, 2022: 

 

 

May 31,

 

 

May 31,

 

 

 

2023

 

 

2022

 

Expected term

 

 

-

 

 

0.37 - 1.00 years

 

Expected average volatility

 

 

-

 

 

131% - 293%

 

Expected dividend yield

 

 

-

 

 

 

-

 

Risk-free interest rate

 

 

-

 

 

 

0.00%

 

Warrants

 

On July 8, 2022, the Company issued warrants in connection with a License Agreement (Note 11). The warrants were valued using the Black-Scholes pricing model. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement.

 

 
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The estimated fair values of the warrants were measured on the July 8, 2022 (license agreement execution date) using the following inputs:

 

Stock price

 

$0.0014

 

Exercise price

 

$0.00025

 

Expected term

 

20 years

 

Expected average volatility

 

 

279%

Expected dividend yield

 

 

0

 

Risk-free interest rate

 

 

3.31%

 

On January 2, 2023, the Company entered into a termination agreement with the warrant holder and both parties mutually terminated and cancelled the License Agreement date July 8, 2022, and released each other from any and all claims, causes of action, demands and liabilities and obligations.  As a result, the warrants were cancelled on the termination date.

 

A summary of activity during the year ended May 31, 2023 is as follows:

 

 

 

Warrants Outstanding

 

 

 

 

 

 

 

Weighted Average Remaining

 

 

 

Number of

warrants

 

 

Weighted Average

Exercise Price

 

 

Contractual life

(in years)

 

Outstanding, May 31, 2022

 

 

-

 

 

$-

 

 

 

-

 

Granted

 

 

27,000,000

 

 

 

0.00025

 

 

 

20.00

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited/cancelled

 

 

(27,000,000)

 

 

-

 

 

 

-

 

Outstanding, May 31, 2023

 

 

-

 

 

$-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable, May 31 2023

 

 

-

 

 

$-

 

 

 

-

 

 

Note 7 – Promissory Notes

 

The components of promissory notes payable as of May 31, 2023 were as follows:

 

Issuance date

 

Principal Amount

 

 

Maturity date

 

 

Interest rate

 

 

May31,2023

 

January 17, 2023

 

$5,000

 

 

January 17, 2025

 

 

 

2%

 

$

5,000

 

January 23, 2023

 

 

5,500

 

 

January 23, 2025

 

 

 

2%

 

 

5,500

 

January 23, 2023

 

 

125,000

 

 

January 23, 2025

 

 

 

2%

 

 

125,000

 

February 14, 2023

 

 

10,000

 

 

January 23, 2025

 

 

 

2%

 

 

10,000

 

April 7, 2023

 

 

18,125

 

 

April 7, 2025

 

 

 

10%

 

 

18,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total notes payable

 

 

 

 

 

 

 

 

 

 

 

 

 

163,625

 

Less: debt discount and deferred financing cost

 

 

 

 

 

 

 

 

 

 

 

 

(4,457

)

Total notes payable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

159,168

 

Current portion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Long-term portion

 

 

 

 

 

 

 

 

 

 

 

 

 

$159,168

 

 

During the year ended May 31, 2023, the Company entered into four promissory notes agreements with lenders for $20,500 cash received and settlement of $125,000 due related to purchase of digital equipment. According to the terms and conditions of the agreement, in the event of default the interest rate shall increase to 5% and lenders have the right a to convert the unpaid principal and interest into common stock at a conversion rate of $0.000025 per share.

 

 
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On April 7, 2023, the Company entered into a promissory note agreement with an investor for principal amount of $250,000, with net cash of $225,000 to be paid in one or more tranches. According to the terms and conditions of the agreement, in the event of default the interest rate shall increase to 24% and lenders have the right a to convert the unpaid principal and interest into common stock at a conversion rate of $0.000025 per share. During the year ended May 31, 2023, the Company received the amount of $18,125 with $1,812 original issue discount and $3,000 in financing costs for net proceeds to the Company of $13,313. The original issue discount and financing costs are being amortized over the original life of the note using the effective interest method.

 

During the year ended May 31, 2023, the Company recognized interest expense of $1,439 and amortization of debt discount of $355. As of May 21, 2023, the outstanding balances of promissory notes, accrued interest and debt discount were $163,625, $1,439 and $4,457, respectively.

 

Note 8 – Loans Payable

 

During the year ended May 31, 2023, the Company obtained an $1,885 loan, due on demand, free interest and unsecured, and repaid $942. As of May 31, 2023, the outstanding balance of the loan was $943.

 

Note 9 – Equity

 

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 shall have no liquidation preference over any other class of stock and there will be no dividends due or payable on the Series A Preferred Stock.  The Series A Preferred Stock initially had voting rights equal to 1,000 votes for each 1 share of common stock owned. On December 18, 2022, the Company’s Board of Directors approved an increase to the Series A voting rights equal to 20,000 votes for each 1 share of common stock owned and resolved that each Series A Preferred Stock cannot convert into Common Stock unless it is approved by the Board of Directors.

There were no issuances of the Series A Preferred Stock during the years ended May 31, 2023 and 2022.

 

On December 19, 2022, the Company’s Board of Director approved the issuance of 1,000,000,000 shares of common stock to two its officers in exchange for 25,000 shares of Series A Preferred Stock.

 

As of May 31, 2023 and 2022, 1,915,153 and 1,940,153 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 shall have no liquidation preference over any other class of stock and there will be no dividends due or payable on the Series B Preferred Stock. 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 from the date of issue.

 

There were no issuances of the Series B Preferred Stock during the years ended May 31, 2023 and 2022.

 

As of May 31, 2023 and 2022, 150,000 shares of Series B Preferred Stock were issued and outstanding.

 

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 Series C Preferred Stock shall have no liquidation preference over any other class of stock and there will be no dividends due or payable on the Series C Preferred Stock. The Preferred Stock can be converted to common stock at a conversion rate of 66 common shares for each preferred stock.

 

There were no issuances of the Series C Preferred Stock during the years ended May 31, 2023 and 2022.

 

 
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Table of Contents

 

As of May 31, 2023 and 2022, 250,000 shares of Series C Preferred Stock were issued and outstanding.

 

Series D Convertible Preferred Stock

 

The Company is authorized to issue 10,000,000 shares of Series D Convertible Preferred Stock at a par value of $0.0001The Series D Convertible Preferred Stock is convertible at a rate of 1 share of Series D Convertible Preferred Stock for 15 shares of common stock.

 

During the year ended May 31, 2022, 350,000 shares of Series D Preferred Stock were converted into 5,250,000 shares of common stock at a rate of 1 share of Series D Preferred Stock for 15 shares of common stock. 

 

There were no issuances of the Series D Convertible Preferred Stock during the years ended May 31, 2023 and 2022.

 

As of May 31, 2023 and 2022, 6,000,000 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. The Series E Preferred Stock shall have no liquidation preference over any other class of stock and there will be no dividends due or payable on the Series E Convertible Preferred Stock. 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.

 

There were no issuances of the Series E Preferred Stock during the years ended May 31, 2023 and 2022.

 

As of May 31, 2023 and 2022, 14,989,500 shares of Series E Preferred Stock were issued and outstanding, respectively.

 

Common stock

 

The Company is authorized to issue 6,500,000,000 shares of common stock at a par value of $0.001.

 

During the year ended May 31, 2022, in connection with issuance of $275,000 convertible note (Note 5), the Company issued 10,000,000 shares of common stock valued at $92,000.

 

During the year ended May 31,2022, the Company issued 5,250,000 shares on conversion of 350,000 shares of Series D Preferred Stock.

 

On December 19, 2022, the Company’s Board of Director approved the issuance of 1,000,000,000 shares of common stock to two its officers in exchange for 25,000 shares of Series A Preferred Stock.

 

During the year ended May 31, 2023, the Company issued 1,655,000,000 shares on conversion of $57,125 of principal of a convertible note. 

 

As of May 31, 2023 and 2022, 3,208,024,616 and 553,024,616 shares of common stock were issued and outstanding, respectively. 

 

Dividend

 

On March 7, 2023, the Company’s Board of Directors approved a quarterly dividend payment of $6,733 to its shareholders equal to $0.0000025 from the Company’s  Bitcoin mining.

 

 
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Table of Contents

 

Note 10 – Digital Currency

 

During the year ended May 31, 2023, the Company mined  Bitcoin with a total aggregate value of $25,168. The Company has accounted for these coins as indefinite life intangible assets. The Company recorded the mining of the coins as revenue from digital currency mining, along with cost of sales (electricity and other hosting fees) remitted to the co-location host in  Bitcoin, and equipment lease costs. During the years ended May 31, 2023 and 2022, the Company recognized $2,717 and $9,793 losses, respectively, on sales of digital currency. The Company’s digital currency consists of the following at May 31, 2023 and 2022:

 

 

 

 Year Ended

 

 

Year Ended

 

 

 

May 31,

 

 

May 31,

 

 Bitcoin Held

 

2023

 

 

2022

 

Opening balance

 

$21,465

 

 

$-

 

Additions earned

 

 

25,168

 

 

 

70,395

 

Sales

 

 

(13,261 )

 

 

(10,042)

Remittance as cost of sales

 

 

(10,278 )

 

 

(33,410)

Impairment

 

 

(6,191 )

 

 

(5,478)

Ending balance

 

$16,903

 

 

$21,465

 

 

Note 11 – Commitments

 

On July 8, 2022, the Company entered into an Exclusive Intellectual Property License Agreement (“License Agreement”) with Kenny B, LLC. (“Licensor”) for a period of 20 years and that may be extended for an additional 20 years at the mutual consent of both parties.

 

The Licensor is the exclusive owner of all the rights, title and interest in and to (i) the trademark of Sh’mallow (Serial Number 5302806), (ii) all rights in and to the name of Sh’mallow, and (iii) designs of Sh’mallow marshmallow topping product, and (iv) all common law and statuary rights in the foregoing (collectively, the “Property”). The Company obtained an exclusive license to use such Intellectual Property.

 

In conjunction with the License Agreement, the Company granted warrants to Licensor to acquire 27,000,000 shares of common stock of the Company at a price of $0.00025 per share for total value of $37,800 to be amortized over the life of the agreement on a straight-line basis, recorded as an intangible asset with the offset to additional paid in capital (Note 6). The Licensor had a right to exercise the warrants six months after the August 15, 2022, effective date of the License Agreement.

 

During the year ended May 31, 2023, the Company amortized $553 of license.

 

On January 2, 2023, the Company entered into a termination agreement with Licensor and both parties mutually terminated and cancelled the License Agreement date July 8, 2022 and released each other from any and all claims, causes of action, demands and liabilities and obligations effective December 30,2022.

 

Pursuant to the termination agreement, the Company reversed and cancelled warrants of 27,000,000 shares of common stock, licenses of $37,800, royalty payable of $17,500 and $553 amortization of License.

 

Note 12 – 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, 2023 and 2022 as applicable under 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.

 

 
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On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law including lowering the corporate tax rate from 35% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income we may have, the legislation affects the way we can use and carry forward net operating losses previously accumulated and results in a revaluation of deferred tax assets and liabilities recorded on our balance sheet. The Company has completed the accounting for the effects of the Act during the period ended May 31, 2023. Given that current deferred tax assets are offset by a full valuation allowance, these changes will have no impact on the balance sheet.

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences for the periods presented are as follows:

 

Income tax provision at the federal statutory rate

 

 

21%

Effect on operating losses

 

 

(21 )%

 

Changes in the net deferred tax assets consist of the following:

 

 

 

May 31, 2023

 

 

May 31, 2022

 

Net operating loss carry forward

 

$(206,737 )

 

$(248,171 )

Effective tax rate

 

 

21%

 

 

21%

Tax benefit of net operating loss carryforward

 

 

43,415

 

 

 

52,116

 

Increase in valuation allowance

 

 

(43,415 )

 

 

(52,116 )

Deferred income tax assets

 

$-

 

 

$-

 

 

A reconciliation of income taxes computed at the statutory rate is as follows:

 

 

 

May 31, 2023

 

 

May 31, 2022

 

Total deferred tax assets at statutory tax rate

 

$322,467

 

 

$279,052

 

Valuation allowance

 

 

(322,467 )

 

 

(279,052 )

Net deferred tax asset

 

$-

 

 

$-

 

 

Note 13 – Gain on Settlement of Debts

 

During the year ended May 31, 2022, pursuant to California Law, which legal action to recover an open book account must be taken within four years of the date the debt occurred (Code Civ. Proc., §337), the Company recognized gain on settlement of debts to four vendors in amount of $76,027.

 

Note 14 – Subsequent Events

 

Management has evaluated subsequent events through the date these financial statements were issued. Based on our evaluation no material events have occurred that require disclosure, except as follows:

 

In June 2023, the Company issued common stock pursuant to a notice of conversion related to certain convertible debt dated October 15, 2021, converting $12,500 for 500,000,000 common shares. On August 4, 2023, 500,000,000 shares of common stock owned by one director was cancelled.

 

In July 2023, the Company’s officers and directors agreed to cancel one billion shares of their own issued and outstanding common stock reducing the number of common shares outstanding. On August 4, 2023, 500,000,000 shares of common stock owned by one director was cancelled.

 

On July 11, 2023, the Company’s Board of Directors approved a quarterly dividend payment to its shareholders equal to $0.000002 from the Company’s Bitcoin mining. The record date is August 31, 2023, with an expected payment date of September 30, 2023. The dividend payment is subject to the Company’s corporation action being processed by FINRA.

 

 

 
F-17

Table of Contents

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

None.

 

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, 2023, 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 principal 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 principal 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, 2023. 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 - 2013. Our management has concluded that, as of May 31, 2023, our internal controls 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.

 

 
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Table of Contents

 

Management identified the following material weaknesses during its assessment of internal controls over financial reporting as of May 31, 2023:

 

 

·

No independent directors: Our Company does not have any independent directors.

 

 

 

 

·

No segregation of duties: Ineffective controls over financial reporting.

 

 

 

 

·

No audit committee: Our Company does not have an audit committee.

 

 

 

 

·

No written policies and 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, 2023, 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.

 

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, 2023 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

Item 9B. Other Information

 

None.

 

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 

Not applicable.

 

 
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Table of Contents

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

All directors of our Company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our Company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

 

Name

 

Position Held with the Company

 

Age

 

Date First Elected or Appointed

Nate Steck

 

President, Chief Executive Officer and Director

 

53

 

May 12, 2014

Marc Kassoff

 

Vice-President, Chief Financial Officer and Director

 

76

 

May 12, 2014

Timothy Denton

 

Secretary and Director

 

73

 

May 12, 2014

 

Business Experience

 

The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our Company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

 

Nate Steck – President, Chief Executive Officer and Director

 

Mr. Steck is an entrepreneur and trained French Chef and with over 20 years’ experience in Product Development and Food Production. He has developed over 30 successful products from concept to shelf with National distribution for consumer brands and private labels, cumulative sales of 175M. He is the Co-Founder of Batter Blaster, Co-Founder of Elena’s Food Specialties and Founder of Elite foods.

 

Our Company believes that Mr. Steck’s professional background experience gives him the qualifications and skills necessary to serve as a director and officer of our Company.

 

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 20 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 13 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.

 

Employment Agreements

 

We have no formal employment agreements with any of our directors or officers.

 

 
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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, 2023, 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:

 

 
27

Table of Contents

 

Name

 

Number of Late

Reports

 

 

Number of

Transactions Not

Reported on a Timely Basis

 

 

Failure to File

Requested Forms

 

Nate Steck

 

 

--

 

 

 

--

 

 

 

1

(1)

Marc Kassoff

 

 

--

 

 

 

--

 

 

 

1

(1)

Timothy Denton

 

 

--

 

 

 

--

 

 

 

1

(1)

____________

 

(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.

 

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, 2023. 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, 2023, 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 or as a financial expert.

 

Item 11. Executive Compensation

 

 
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Table of Contents

 

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, 2023 and 2022; 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, 2023 and 2022, 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:

 

SUMMARY COMPENSATION TABLE

Name and Principal Position

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards

($)

 

 

Option Awards

($)

 

 

Non-Equity Incentive Plan Compensation

($)

 

 

Change in Pension

Value and Nonqualified Deferred Compensation Earnings

($)

 

 

All

Other Compensation

($)

 

 

Total

($)

 

Nate Steck

 

2023

 

 

36,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

36,000

 

President, CEO and Director

 

2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Marc Kassoff

 

2023

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Vice-President, CFO and Director

 

2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Timothy Denton

 

2023

 

 

-