Nate's Food Co. - FORM 10-Q

Attached files

file	filename
EX-32.2 - EX 32.2 - Nate's Food Co.	ex-32_2.htm
EX-32.1 - EX 32.1 - Nate's Food Co.	ex-32_1.htm
EX-31.2 - EX 31.2 - Nate's Food Co.	ex-31_2.htm
EX-31.1 - EX 31.1 - Nate's Food Co.	ex-31_1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended February 29, 2016

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

For the transition period from _____________ to _____________ .

Commission File Number: 000-52831

Nate’s Food Co.

(Exact name of registrant as specified in its charter)

Colorado		2040		46-3403755
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(IRS Employer Identification No.)

15151 Springdale Street, Huntington Beach, CA 92649

(Address of principal executive offices) (zip code)

(949) 381-1384

(Registrant’s telephone number, including area code)

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 past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ☐

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

Large accelerated filer	☐	Non-accelerated filer	☐
Accelerated filer	☐	Smaller reporting company	☒

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of Each Class		Outstanding as of May 31, 2016
Common stock, par value $0.0001 per share		240,408,891

NATE’S FOOD CO.

FORM 10-Q

February 29, 2016

TABLE OF CONTENTS

PART I -- FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Control and Procedures	20

PART II -- OTHER INFORMATION

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22

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PART I -- FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

Nate’s Food Co.

Balance Sheets

(Unaudited)

	February 29,			May 31,
	2016			2015
ASSETS
Current assets:
Cash	$	2,723		$	109
Prepaid expense		20,000			-
Deferred financing cost, net of $21,420 accumulated amortization		25,368			-
Total current assets		48,091			109

Non-current assets:
Equipment, net		395,195			85,004
Total non-current assets		395,195			85,004
TOTAL ASSETS	$	443,286		$	85,113

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities:
Current liabilities:
Accounts payable and accrued liabilities	$	86,220		$	3,000
Accrued expense		32,404			11,083
Note payable		110,532			-
Note payable - related party		95,476			141,508
Deferred revenue – related party		-			29,250
Convertible notes, net of $78,982 and $0 debt discount as of February 29, 2016 and May 31, 2015, respectively		184,100			-
Derivative liability		549,495			221,040
Total current liabilities		1,058,227			405,881

Note payable - long term		200,000			-
Convertible note, net of $0 and $100,205 debt discount as of February 29, 2016 and May 31, 2015, respectively		-			9,795
Total liabilities		1,258,227			415,676

Stockholders’ Deficit:
Series A Preferred Stock, Par Value $.0001, 2,000,000 shares authorized, 1,940,103 issued and outstanding, respectively		194			194
Series B Preferred Stock, Par Value $.0001, 150,000 shares authorized, 141,970 and 149,970 issued and outstanding, respectively		14			15
Series C Preferred Stock, Par Value $1.00, 250,000 shares authorized, 58,774 and 26,394 issued and outstanding, respectively		58,774			26,394
Series E Preferred Stock, Par Value $0.0001, 15,000,000 shares authorized, 7,725,000 and 0 issued and outstanding, respectively		773			-
Common Stock, Par Value $.0001, 500,000,000 shares authorized, 186,355,310 and 77,200,000 issued and outstanding, respectively		18,636			7,720
Additional paid in capital		1,485,400			849,827
Accumulated deficit		(2,378,732	)		(1,214,713	)
Total stockholders’ deficit		(814,941	)		(330,563	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	443,286		$	85,113

See accompanying notes to the unaudited financial statements

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Nate’s Food Co.

Statements of Operations

(Unaudited)

	Three Months Ended						Nine Months Ended
	February 29,			February 28,			February 29,			February 28,
	2016			2015			2016			2015

Sales from a related party	$	-		$	750		$	29,250		$	1,496
Cost of Goods Sold		-			-			17,600			-
Gross Profit		-			750			11,650			1,496

Operating Expenses
Selling, general and administrative	$	188,931		$	360,325		$	328,538		$	949,344
Food development/research		-			23,693			1,850			105,232
Total operating expenses		188,931			384,018			330,388			1,054,576

Operating Loss		(188,931	)		(383,268	)		(318,738	)		(1,053,080	)

Other (Income) Expense
Loss on derivative		359,753			-			458,774			-
Interest Expenses		159,901			-			368,937			-
Loss on settlement of debt		-			-			16,778			-
Total other expenses		519,654			-			844,489			-

Net Loss	$	(708,585	)	$	(383,268	)	$	(1,163,227	)	$	(1,053,080	)

Deemed dividend on Series B convertible preferred stock		-			-			(792	)		-
Deemed dividend on Series C convertible preferred stock		-			-			-			(27,000	)
Net loss attributable to common stockholders	$	(708,585	)	$	(383,268	)	$	(1,164,019	)	$	(1,080,080	)

Net loss per common share, basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.02	)
					-						-
Weighted average number of common shares outstanding, basic and diluted		127,049,874			66,514,286			95,149,826			64,144,262

See accompanying notes to the unaudited financial statements

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Nate’s Food Co.

Statements of Cash Flows

(Unaudited)

	Nine Months Ended			Nine Months Ended
	February 29,			February 28,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(1,163,227	)	$	(1,053,080	)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest on convertible note exchanged for warrants		12,222			-
Loss on settlement of debt		16,778			-
Amortization of debt discount		302,973			-
Loss on derivative liability		458,774			-
Stock issued for compensation		154,862			857,000
Amortization of deferred financing cost		21,420			-
Changes in assets and liabilities:
Prepaid expense		10,000			-
Accounts payable and accrued liabilities		83,220			120,727
Accrued expenses		32,321			-
Deferred revenue – related party		(29,250	)		29,250
Net cash used in operating activities		(99,907	)		(46,103	)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for purchase of fixed assets		(132,479	)		-
Net cash used in investing activities		(132,479	)		-

CASH FLOWS FROM FINANCING ACTIVITIES
Payment of deferred financing costs		(24,500	)		-
Proceeds from Series C Preferred Stock		-			27,000
Proceeds from convertible notes		255,000			-
Payment of convertible note		(10,000	)		-
Proceeds from loan from related party		14,500			20,281
Net cash provided by financing activities		235,000			47,281

Net cash increase (decrease) for the period		2,614			1,178
Cash at beginning of period		109			150
Cash at End of Period	$	2,723		$	1,328

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest and taxes paid in cash	$	12,140		$	-

NON CASH INVESTING AND FINANCING ACTIVITIES
Debt discount from derivative liability	$	255,000		$	-
Original Issue Discount on convertible notes	$	26,750		$	-
Derivative due to warrants issued to settle interest	$	29,000		$	-
Convertible note exchanged for accrued interest	$	11,000		$	-
Issued Series E Preferred stock as a dividend to Common shareholders	$	773		$	-
Deemed dividend beneficial conversion feature on convertible Series C Preferred stock	$	-		$	27,000
Accounts payable paid on behalf of the Company through note payable	$	-		$	117,727
Reclass of note payable to related party note payable	$	-		$	3,500
Conversion of Series B Preferred stock into common stock	$	800		$	-
Conversion of convertible notes into common stock	$	159,668		$	-
Common Shares issued for services	$	95,000		$	-
Conversion of warrants into common stock	$	1,304		$	-
Settlement of derivative liability to additional paid in capital	$	414,319		$	-
Issued convertible note for legal service	$	30,000		$	-
Issued note payable for equity purchase agreement	$	50,000		$	-
Issued note payable for purchase of equipment	$	200,000		$	-
Reclass from note payable - related party to note payable	$	60,532		$	-
Adjustment to Series C Preferred Stock	$	380		$	-
Adjustment to common stock	$	5		$	-

See accompanying notes to the unaudited financial statements

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NATE’S FOOD CO.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 – Basis of Presentation

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

The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report filed with the SEC on Form 10-K, on September 21, 2015. 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. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2015 as reported in Form 10-K, have been omitted.

Use of Estimates

The preparation of financial statements in accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on Nate’s Food Co. financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates. Nate’s Food Co.’s financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.

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Long-Lived Assets

Long-lived assets such as property and equipment are stated at their fair value acquisition cost and reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. Amortization of long-lived assets are calculated by the straight line method over their estimated useful lives. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.

As of February 29, 2016, equipment of $395,195 reflects acquisition costs. During the period ended February 29, 2016, depreciation is not being calculated as equipment is currently not in use.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, prepaid expense, deferred financing cost, accounts payable and accrued liabilities, accrued expenses, convertible notes and Note payable. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

The Company adopted ASC Topic 820, Fair Value Measurements ("ASC Topic 820"), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.

The three-level hierarchy for fair value measurements is defined as follows:

·	Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;

·	Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement

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The following table summarizes fair value measurements by level at February 29, 2016, and May 31, 2015, measured at fair value on a recurring basis:

February 29, 2016	Level 1	Level 2	Level 3	Total
Assets
None	-	-	-	-
Liabilities
Derivative liabilities	-	-	549,495	549,495

May 31, 2015	Level 1	Level 2	Level 3	Total
Assets
None	-	-	-	-
Liabilities
Derivative liabilities	-	-	221,040	221,040

Note 2 – Going Concern

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have an established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.

Historically, it has mostly relied upon internally generated funds such as shareholder loans and advances to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.

Note 3 – Related Party Transactions

During the nine month period ended February 29, 2016, the Company borrowed $14,500 from our officer for working capital. As at February 29, 2016, the total amount owed to this officer was $95,476. Of this amount, $71,902 of the loan is at 10% interest, and $23,574 of the loan is at 0% interest.

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Note 4 – Equity Transactions

During the period ended February 29, 2016, the Company granted 32,000 shares of Series C Preferred Stock to consultants for services. The shares were valued at $59,862. The Preferred Stock can be converted to common stock, at a conversion rate of 66 common shares for each preferred share. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it does not contain a beneficial conversion feature.

During the period ended February 29, 2015, 8,000 shares of Series B Preferred Stock were converted at rate of 1 preferred share to 1,000 common shares, resulting in the issuance of 8,000,000 shares of common stock, for a value of $800, of which $792 was recorded as a deemed dividend.

On September 21, 2015, as a stock dividend to the common shareholders, the Company issued (1) share of newly created Series E Preferred Stock for every ten (10) shares of common stock outstanding. The Company issued 7,725,000 shares of Series E Preferred Stock for a value of $773. Beginning October 1, 2016, each share of Series E Preferred Stock is convertible into ten (10) shares of common stock. From October 1, 2016 to October 1, 2018, holders of Series E Preferred Stock may at any time convert to shares of common stock, thereafter, the Company may elect to convert any outstanding stock at any time without notice to the shareholders. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it does not contain a beneficial conversion feature.

On September 29, 2015, the Company granted 1,000,000 warrants to Vista Capital Investments, LLC, in exchange for interest owed of $12,222, and recognized a loss on debt settlement of $16,778. Warrants are originally exercisable into 1,000,000 shares of common stock, for a period of five years from issuance, at a price of $0.05 per share, with multiple reset provisions when the share price is below $0.05. As a result of the reset features the warrants became exercisable into 31,929,349 shares of common stock at $0.0009 per share.

During the period ended February 29, 2016, the Company granted 28,000,000 shares, par value $0.0001 per share, to a related party, for consulting services. On February 5, 2016, the Company cancelled 3,500,000 of these shares. The Company recorded consulting expense of $95,000, for the 24,500,000 shares of common stock issued.

During the period ended February 29, 2016, 20,644,258 warrants were exercised, on a cashless basis, resulting in 13,400,000 common shares being issued.

The following table summarizes information relating to outstanding and exercisable warrants as of February 29, 2016:

Warrants Outstanding			Warrants Exercisable

Number of Shares	Weighted Average Remaining Contractual life (in years)	Weighted Average Exercise Price	Number of Shares	Weighted Average Exercise Price
11,285,091	4.59 years	$0.0009	11,285,091	$0.0009

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The following table summarizes warrant activity for the nine months ended February 29, 2016:

	Number	Weighted Average Exercise Price	Weighted Average Life (years)
Outstanding, May 31, 2015	-	-
Granted	31,929,349	$0.0128	5 years
Forfeited	-	-
Exercised	20,644,258	$0.00193	4.66 years
Outstanding, February 29, 2016	11,285,091	$0.0009	4.59 years

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company's stock exceeded the exercise price of the stock options at February 29, 2016, for those stock options for which the quoted market price was in excess of the exercise price ("in-the-money options"). As of February 29, 2016, the aggregate intrinsic value of options outstanding was approximately $32,000 based on the closing market price of $0.0028 on February 29, 2016.

Note 5 – Notes Payable

The Company had the following notes payable at February 29, 2016, and May 31, 2015.

Notes payable	February 29, 2016			May 31, 2015

Note payable to WB Partners		$	60,532		$	-
Note payable to Tarpon Bay partners			50,000			-
Note payable to SouthCorp Capital			200,000			-
		$	310,532		$	-

	February 29, 2016			May 31, 2015
Current		$	110,532		$	-
Long term			200,000			-
Total		$	310,532		$	-

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Note payable to WB Partners

During the period ended February 29, 2016, the amount the Company borrowed and repaid to WB Partners (Joseph Wade) is nil. The total amount owed was $60,532 as at February 29, 2016. The loan is at 0% interest and is to be repaid by December 31, 2015 and is currently in default. .

Note payable to Tarpon Bay partners

On October 8, 2015, the Company issued a Promissory Note (the “Note”) to Tarpon Bay Partners LLC, for $50,000, due April 30, 2016. The Note carries an annual interest rate of 10%. As of February 29, 2016, the Company owes $52,118, of which $2,118 is accrued interest. The Company recorded $50,000 to additional paid in capital, as the Note is to secure equity financing. The note is currently in maturity default.

Note payable to SouthCorp Capital

On October 20, 2015, the Company issued a Promissory Note to SouthCorp Capital, for $200,000, due October 20, 2017 for a payment for purchase of equipment of $177,712 and financing cost of $22,288 related to the purchase of the equipment. The Note carries an annual interest rate of 8%. As of February 29, 2016, the Company owes $207,009, of which $6,114 is accrued interest. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $4,025 of interest expense for the nine months ended February 29, 2016.

Note 6 – Convertible Debt

On March 27, 2015, the Company received financing in the amount of $110,000 from Vista Capital Investments, LLC, sold to BOU Trust on September 29, 2015. The Company expected to pay off the amount within 90 days from its receipt bearing 10% interest, mature in two years, at any time on or after the issuance date, the holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. The Company could repay the note within 90 days with no prepayment penalty and within 180 days with a prepayment penalty equal to 10% of the balance. Conversion price was 65% of the lowest trade occurring during the 20 consecutive trading days immediately preceding the conversion date. On September 29, 2015, the Company entered into the agreement of exchange notes with Vista and BOU trust. BOU trust purchased $121,000 of principal amount and accrued interest and the reminder of note of $12,222 was exchanged for warrant for Vista. As a result of this agreement, the conversion price was amended to 60% of the lowest traded price for 20 trading days prior to conversion. On October 20, 2015, the Company entered into the agreement of exchange notes with BOU trust and RDW Capital, LLC. RDW Capital, LLC purchased $35,600 of a portion of $121,000 convertible note. During the nine months ended February 29, 2016, the notes of $121,000 were converted into 21,061,957 shares of common stock. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $100,205 of interest expense for the nine months ended February 29, 2016.

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On July 24, 2015, the Company received financing in the amount of $93,000 from TypenexCo-Investment, LLC with $13,000 cash discount to the lender and incurred $8,000 financing costs to third parties. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $6,686 of interest expense for the nine months ended February 29, 2016. The $93,000 bears an 8% interest and matures in nine months. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is 50% of the average of the three lowest closing bid prices for the 15 previous consecutive trading days prior to the payment date. The Company may prepay the note at any time at an amount equal to 120% of the outstanding principal and the accrued and unpaid interest. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $80,933 of interest expense for the nine months ended February 29, 2016. During the nine months ended February 29, 2016, the notes of $34,081 were converted into 24,300,000 shares of common stock.

On August 14, 2015, the Company received financing in the amount of $65,500 from EMA Financial, LLC with $5,500 cash discount to the lender and incurred $6,000 financing costs to third parties. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $3,403 of interest expense for nine months ended February 29, 2016. The $65,500 bears 10% interest and matures in twelve months. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is the less of closing sale price of $0.035 and 60% of the lowest trade occurring during the 15 consecutive trading days immediately preceding the conversion date. The Company may prepay the note at any time during the first 120 days, at an amount equal to 125% of the outstanding principal and the accrued and unpaid interest, but no prepayment permitted thereafter. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $39,590 of interest expense for the nine months ended February 29, 2016. During the nine months ended February 29, 2016, the notes of $4,587 were converted into 6,370,890 shares of common stock.

On September 25, 2015, the Company received financing in the amount of $68,250 from BOU Trust with $3,250 cash discount to the lender and incurred $6,500 financing costs to third parties. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $5,607 of interest expense for the nine months ended February 29, 2016. The $68,250 bears 10% interest and matures on March 25, 2016. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is the 60% of the lowest traded price, determined on the then current trading market for the Company’s common stock, for the 20 trading days prior to conversion. The Company may prepay any portion of the principal amount at 130% of such amount along with any accrued interest of this note at any time upon send days written notice to the holder. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $58,875 of interest expense for the nine months ended February 29, 2016.

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On November 5, 2015, the Company issued convertible note of $30,000 to Lucosky Brookman, LLC. The Company repays in advance $5,000 per month. The $30,000 bears 0% interest and matures on March 20, 2016. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is the 60% of average of the lowest for 10 trading days prior to conversion at the option of the Holder, in whole at any time and from time to time. During the nine months ended February 29, 2016, the notes of $10,000 were repaid. Upon the later of the Maturity Date or that date which is six months following the date hereof, this Note shall be convertible into shares of the Company’s common stock.

On November 5, 2015, the Company received financing in the amount of $55,000 from Fourth Man, LLC, with $5,000 cash discount to the lender and incurred $4,000 financing costs to third parties. The deferred financing cost is being amortized over the life of the note using the effective interest method resulting in $1,700 of interest expense for the nine months end February 29, 2016. The $55,000 bears 10% interest and matures on August 4, 2016. The holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. Conversion price is the 53% of the lowest daily trading price, determined on the then current trading market for the Company’s common stock, for 10 trading days prior to conversion at the option of the Holder, in whole at any time and from time to time. During the first 90 days subsequent to the date of issuance, the company may prepay any portion of the principal amount at 130% of such amount along with any accrued interest of this debenture at any time upon seven days written notice to the holder. After the first 90 days subsequent to the date of issuance, the company may prepay any portion of the principal amount at 150% of such amount along with any accrued interest of this debenture at any time upon seven days written notice to the holder. The note was discounted for a derivative (see note 7 for details) and the discount is being amortized over the life of the note using the effective interest method resulting in $23,370 of interest expense for the nine months ended February 29, 2016.

Notes in Default

Subsequent to February 29, 2016, certain convertible notes held by the company are in default. The terms of default for each note are as follows:

TypenexCo-Investment, LLC: as of April 4, 2016, the TypanexCo-Investment, LLC convertible note was in filing default, and maturing default. As a result, additional penalties of approximately $20,000 have been incurred on the outstanding balance. The principal and interest outstanding are immediately payable.

EMA Financial, LLC: the convertible note is currently in filing default. The penalty on the convertible note is 150% of the principal amount outstanding which is approximately $30,000. The principal and interest outstanding are immediately payable.

BOU Trust: as of March 25, 2016, the note is in filing default, and maturity default. As a result, penalties of $1,000 per day are being accrued on the outstanding balance. Approximately $60,000 in late fees have been accrued through May 25, 2016. The principal and interest outstanding are immediately payable.

Lucosky Brookman, LLC: As of March 20, 2016, the Lucosky Brookman, LLC convertible note was in maturity default. Upon default of the note, the holder may declare all of the note, including any interest, immediately due. In addition, upon default of the note, interest on the principal is accrued at 18% per annum. The Company has pledged certain assets as part of the agreement.

Fourth Man, LLC: as of May, 2016, the note is currently in filing default. As a result, additional penalties of approximately $58,000 have been incurred on the outstanding principal and interest balances. The principal and interest outstanding are immediately payable.

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Note 7 – Derivative Liability

The Company analyzed the conversion options for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability when the conversion option becomes effective and there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

The following table summarizes the derivative liabilities included in the balance sheet at February 29, 2016:

	Vista Capital			Typenex Co			EMA Financial			BOU Trust		Fourth Man, LLC		Warrant			Total
Balance - May 31, 2015	$	221,040		$	-		$	-		$	-	$	-	$	-		$	221,040
Addition of new derivative as debt discount		-			80,000			60,000			65,000		50,000		-			255,000
Addition of new derivative due to warrant		-			-			-			-		-		29,000			29,000
Day one loss due to derivative		-			27,431			16,685			59,514		1,593		-			105,223
(Gain) loss on change in fair value of the derivative		27,729			80,416			67,326			12,523		80,462		85,095			353,551
Settled upon conversion of debt and warrants		(248,769	)		(67,750	)		(15,284	)		-		-		(82,516	)		(414,319	)
Balance - February 29, 2016		-			120,097			128,727			137,037		132,055		31,579			549,495

The following table summarizes the loss on derivative liability included in the income statements for the periods ended February 29, 2016, and February 28, 2015, respectively.

	Nine Months Ended
	February 29, 2016		February 28, 2015
Day one loss due to derivatives on convertible debt
Typenex Co	$	27,431	$	-
EMA Financial		16,685		-
BOU Trust		59,514		-
Fourth Man, LLC		1,593		-
(Gain) loss on change in fair value of the derivative
Vista Capital		27,729		-
Typenex Co		80,416		-
EMA Financial		67,326		-
BOU Trust		12,523		-
Fourth Man, LLC		80,462		-
Warrants		85,095
Net loss on derivative liability	$	458,774	$	-

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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:

	Nine Months Ended	Nine Months Ended
	February 29, 2016	February 28, 2015
Expected term	0.07 - 5 years	-
Expected average volatility	94.21% - 1,097.67%	-
Expected dividend yield	-	-
Risk-free interest rate	0.06%-1.65%	-

Note 8 – Subsequent Events

Between March 2 and April 16, 2016, a total of $38,001 convertible debt was converted, resulting in the issuance of 54,053,581 common shares.

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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained herein involve risks and uncertainties, including statements as to:

	·	our future operating results;
	·	our business prospects;
	·	our contractual arrangements and relationships with third parties;
	·	the dependence of our future success on the general economy;
	·	our possible financings; and
	·	the adequacy of our cash resources and working capital.

These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this report. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto, included elsewhere in this 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 those differences include those discussed below and elsewhere in this report, particularly in the “Risk Factors” section.

Going Concern

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Critical Accounting Policies and Estimates.

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.

Revenue Recognition

The Company pursues opportunities to realize revenues principally through the sale of Nate’s Homemade Pancake and Waffle Batter and related food products. It is the company’s policy that revenues and gains will be recognized in accordance with ASC Topic 605-10-25, “Revenue Recognition.” Under ASC Topic 605-10-25, revenue earning activities are recognized upon the sale and delivery of its products.

Business Of The Registrant

Nate’s Food Co., Inc. was incorporated under the laws of the State of Colorado on January 12, 2000. On May 19, 2014, the Company completed a reverse merger between with Nate’s Pancakes, Inc., an Indiana Company. 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 May 2014, the Company executed a licensing agreement to market and sell the product Nate’s Pancakes. Our license agreement is exclusive throughout the world. The product is currently sold under the name “Nate’s Homemade.”

Product

Nate’s Homemade sells a ready-to-use, pre-mixed pancake and waffle batter delivered in a pressurized can. The Company is currently developing additional flavors and products with the goal to have 10 products in development in 2015. Currently, the Company is developing 3 flavors for its pancake and waffle mix and a One-Minute Omelet and Guacamole. The Company will continue to expand into other bake goods and other non-breakfast areas.

License Agreement

Term

The license agreement is for a term of twenty (20) years. The Company has the right to renew the license agreement for successive ten (10) year period by paying $1,000,000 for each new term.

Payments/Royalty

The Company shall pay a royalty equal to three percent (3%) of the gross revenue from the licensed products. Gross revenue is defined as total revenue minus discounts and allowances. The license requires that the Company pay a minimum monthly fee of $5,500 beginning twelve (12) months from the execution of the license agreement which is against the 3% royalty.

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Product Ordering

The Company is able to purchase the raw materials directly from 3^rd party suppliers and manufacture the product and manufacture the product for sell. The Company may also develop and create additional flavors such as chocolate, blueberry, or strawberry.

Buy-Out

The Company also has the option, at its election, to the purchase the intellectual property associated to the license agreement. The buy-out amount is equal to revenue for the 12 months immediately prior to the buy-out.

RESULTS OF OPERATIONS

Three Months Ended February 29, 2016 compared to Three Months Ended February 28, 2015:

	Three Months Ended			Three Months Ended
	February 29, 2016			February 28, 2015			Change			%

Sales from a related party	$	-		$	750			(750	)		(100	%)
Gross profit		-			750			(750	)		(100	%)

Selling, general and administrative		188,931			360,325			(171,394	)		(48	%)
Food development/research		-			23,693			(23,693	)		(100	%)
Total operating expenses		188,931			384,018			(195,087	)		(51	%)

Loss on derivative		359,753			-			359,753			-
Interest Expenses		159,901			-			159,901			-
Loss on settlement of debt		-			-
Net Loss	$	(708,585	)	$	(383,268	)		(325,317	)		85	%

Revenue

The Company generated $0 in revenue from a related party for the three months ended February 29, 2016 as compared to revenue of $750, or 100%, for the three months ending February 28, 2015.

Operating Expenses

During the period ended February 29, 2016, we incurred general and administrative expenses of $188,931 compared to $360,325 incurred during the period ended February 28, 2015. The decrease was primarily the result of decreased stock-based compensation of $200,000 during the period ended February 29, 2016 as compared to stock-based compensation of $295,000 for the share issuances to third party consultants for their service during the period ended February 28, 2015.

During the period ended February 28, 2015, most of the original food development costs went into developing the recipe and industrial process of manufacturing product. After the process and recipe had been settled, the costs attributable to development have significantly declined for the period ended February 29, 2016. New flavors are still being investigated and processes refined but without the significant costs specifically required since the focus has been on getting the existing product into production and distribution.

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Nine Months Ended February 29, 2016 Compared to Nine Months Ended February 28, 2015:

	Nine Months Ended			Nine Months Ended
	February 29, 2016			February 28, 2015			Change			%

Sales from a related party	$	29,250		$	1,496			27,754			1855	%
Gross profit		11,650			1,496			10,154			679	%

Selling, general and administrative		328,538			949,344			(620,806	)		(65	%)
Food development/research		1,850			105,232			(103,382	)		(98	%)
Total operating expenses		330,388			1,054,576			(724,188	)		(69	%)

Loss on derivative		458,774			-			458,774			-
Interest Expenses		368,937			-			368,937			-
Loss on settlement of debt		16,778			-
Net Loss	$	(1,163,227	)	$	(1,053,080	)		(110,147	)		10	%

Revenue

The Company generated $29,250 in revenue from a related party, with a gross profit of $11,650, or 40%, for the nine months ended February 29, 2016 as compared to revenue of $1,496, or 100%, for the nine months ending February 28, 2015.

Operating Expenses

During the period ended February 29, 2016, we incurred general and administrative expenses of $328,538 compared to $949,344 incurred during the period ended February 28, 2015. The decrease was primarily the result of decreased stock-based compensation of $765,138 during the period ended February 29, 2016 as compared to stock-based compensation of $920,000 for the share issuances to third party consultants for their service during the period ended February 28, 2015.

During the period ended February 28, 2015, most of the original food development costs went into developing the recipe and industrial process of manufacturing product. After the process and recipe had been settled, the costs attributable to development have significantly declined for the period ended February 29, 2016. During the period ended February 29, 2016, operating expenses were primarily due costs to professionals for reporting as a public company and stock based compensation for consulting services. New flavors are still being investigated and processes refined but without the significant costs specifically required since the focus has been on getting the existing product into production and distribution.

Liquidity and Capital Resources

Balance Sheet Date	February 29, 2016			May 31, 2015			Change			%
Cash	$	2,723		$	109		$	2,614			2398	%
Total Assets	$	443,286		$	85,113		$	358,173			421	%
Total Liabilities	$	1,258,227		$	415,676		$	842,551			203	%
Stockholders' Deficit	$	(814,941	)	$	(330,563	)	$	(484,378	)		147	%

	February 29, 2016			May 31, 2015			Change		%

Current Assets	$	48,091		$	109		$	47,982		44020	%
Current Liabilities	$	1,058,227		$	405,881		$	652,346		161	%
Working Capital Deficiency	$	(1,010,136	)	$	(405,772	)	$	700,328		173	%

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As of February 29, 2016 the Company had $2,723 in cash, $20,000 in prepaid expense, $25,368 in deferred financing cost and $395,195 in equipment and a total of $443,286 in assets. In management’s opinion, the Company’s cash position is insufficient to maintain its operations at the current level for the next 12 months. Any expansion may cause the Company to require additional capital until such expansion began generating revenue. It is anticipated that the raise of additional funds will principally be through the sales of our securities. As of the date of this report, we will require additional funding and no assurance may be given that we will be able to raise additional funds.

As of February 29, 2016, our total current liabilities were $1,058,227 which primarily consisted of $549,495 in derivative liability, $110,532 in a notes payable, $184,100 in current portion of convertible notes and $95,476 due form a shareholder, as compared to May 31, 2015, with total current liabilities of $405,881, which primarily consisted of $221,040 in derivative liability and $141,508 due to a shareholder.

Off-balance sheet arrangements

We have no significant 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.

Our Website.

Our website can be found at www.natesfoodco.com.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company, as a smaller reporting company, as defined by Rule 229.10(f)(1), is not required to provide the information required by this Item.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of February 29, 2016, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and (ii) that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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Changes in Internal Controls Over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting that occurred during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

The above statement notwithstanding, shareholders and prospective investors should be aware that certain risks exist with respect to the Company and its business, including those risk factors contained in our most recent Annual Report on Form 10-K. These risks include, among others: limited assets, lack of significant revenues and only losses since inception, industry risks, dependence on third party manufacturers/suppliers and the need for additional capital. The Company’s management is aware of these risks and has established the minimum controls and procedures to insure adequate risk assessment and execution to reduce loss exposure.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION

There was no other information during the quarter ended February 29, 2016, that was not previously disclosed in our filings during that period.

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ITEM 6. EXHIBITS

31.1	Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002
31.2	Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1	Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002
32.2	Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

	NATE’S FOOD CO.

Date: June 28, 2016	By:	/s/ Nate Steck
		Nate Steck
		Director and Chief Executive Officer

Date: June 28, 2016	By:	/s/ Marc Kassoff
		Marc Kassoff
		Director and Chief Financial Officer

Nate's Food Co. - FORM 10-Q - June 28, 2016

Attached files

Nate's Food Co. Reports