NATE'S FOOD CO. 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.
General Overview
We were incorporated under the laws of the
In connection with the reverse merger, we became a food manufacturing and
product company, and in
Our Current 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 intends to purchase and maintain ASIC (application-specific integrated circuit) computers - computers specifically designed for cryptocurrency mining - that will be used for Bitcoin Mining. We plan to initially place 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 plan to generate revenues through receiving Bitcoin from our Bitcoin Mining equipment.
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. The Company has executed two 270 days and 200 days lease agreements for Bitmain's S-17s and T-17s for Bitcoin Mining Equipment. The Company is actively in discussions with manufactures and resellers to acquire additional bitcoin mining equipment and capacity. The Company's initial goal is to acquire 25,000 terrahash in mining capacity in the next 12 months. Terahashes are the unit used to measure speed of the mining hardware mining cryptocurrencies, with a TH/s equaling one trillion hash calculations computed in one second. Open-source calculators are available, such as NovaBlock, that allow for the calculation of expected revenue based on TH/s.
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Our food development division licenses, develops and manufactures food products. The Company's Board of Directors has voted to cease product manufacturing and development of new products for its food development division. We are, however, continually exploring options to license our developed product, 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.
Results of Operations Three Months EndedNovember 30, 2021 Compared to the Three Months EndedNovember 30, 2020 Three Months Ended November 30, 2021 2020 Change % Digital currency mining revenue$ 21,204 $ -$ 21,204 - Cost of revenue 44,660 - 44,660 - Selling, general and administrative 36,920 5,832 31,088 533 % Operating expenses (36,920 ) (5,832 ) (31,088 ) 533 % Gain on change in fair market value of derivative 11,333 480,896 (469,563 ) (98 )% Interest and discount amortization expense (24,546 ) (5,033 ) (19,513 ) 388 % Impairment loss on digital currency (976 ) - (976 ) - Net Income (Loss)$ (74,565 ) $ 470,031 $ (544,596 ) (116 )% Revenue
Our Company generated
Cost of Revenue
The cost of digital currency mining revenue was
Operating Expenses
During the three months ended
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Other income (expense)
During the three months ended
Six Months EndedNovember 30, 2021 Compared to the Six Months EndedNovember 30, 2020 Six Months Ended November 30, 2021 2020 Change % Digital currency mining revenue$ 21,204 -$ 21,204 - Cost of revenue 44,660 - 44,660 - General and administrative 45,965 7,147 38,818 543 % Operating expenses (45,965 ) (7,147 ) (38,818 ) 543 % Gain on change in fair market value of derivative 415,795 1,007,333 (591,538 ) (59 )% Interest and discount amortization expense (29,599 ) (10,086 ) (19,513 ) 193 % Impairment loss on digital currency (976 ) - (976 ) - Net Income (Loss)$ 315,799 $ 990,100 $ (674,301 ) (68 )% Revenue
Our Company generated
Cost of Revenue
The cost of digital currency mining revenue was
Operating Expenses
During the six months ended
Other income (expense)
During the six months ended
Liquidity and Capital Resources
Working Capital
November 30, May 31,
2021 2021 Change %
Current Assets $ 178,151 $ 615 $ 177,536 28,868 %
Current Liabilities $ 1,130,672 $ 1,344,749 $ (214,077 ) (16 )%
Working Capital Deficiency $ (952,521 ) $ (1,344,134 ) $ 391,613 (29 )%
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Cash Flows
Six Months Ended
November 30,
2021 2020 Change
Cash Flows Used in Operating Activities
$ 25,555 $ 378 $ 25,177
As of
As of
Operating Activities
Net cash used in operating activities was
Investing Activities
Our Company did not have any investing activities during the six months ended
Financing Activities
During the six months ended
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.
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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 material estimates for our Company are that 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 2021 and 2020 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
Convertible Notes
Convertible notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized as additional paid-in capital and included in equity, net of income tax effects, and is not subsequently remeasured. After initial measurement, they are carried at amortized cost using the effective interest method.
Digital Currencies
Digital currencies consists of Bitcoin and are included in intangible assets in the balance sheets. 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.
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.
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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.
Also, refer to Note 1 - Significant Accounting Policies and Note 6 - Derivative Liabilities in the unaudited financial statements that are included in this Report.
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