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EXCEL - IDEA: XBRL DOCUMENT - Eternelle Skincare Products Inc.Financial_Report.xls
EX-31 - Eternelle Skincare Products Inc.ex31-1.txt
EX-31 - Eternelle Skincare Products Inc.ex31-2.txt
EX-32 - Eternelle Skincare Products Inc.ex32-1.txt
EX-32 - Eternelle Skincare Products Inc.ex32-2.txt

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

                For the quarterly period ended February 28, 2014

                                       OR

[ ]


                    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 333-133347

                           PEPTIDE TECHNOLOGIES, INC.
              ---------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Nevada                                              98-0479983
--------------------------------                            --------------------
State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization                                Identification No.)

    601 Union Street, Two Union Square, 42nd Floor, Seattle, Washington 98101
    -------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (206) 236-9555

Indicate by check mark whether the registrant (1) filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the past 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 (ss.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     No [X]

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

Larger accelerated filer [ ]                               Accelerated filer [ ]
Non-accelerated filer [ ]                          Smaller reporting company [X]


                                       1

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No [X] Number of shares issued and outstanding of the registrant's class of common stock as of April 8, 2014: 151,158,000 shares of common stock The Company recognized $nil revenues during the quarter ended February 28, 2014. 2
PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Page ---- Consolidated Interim Balance Sheets F-6 Consolidated Interim Statements of Loss and Comprehensive Loss F-7 Consolidated Interim Statements of Cash Flows F-8 Consolidated Interim Statement of Changes in Stockholders' Deficiency F-9 Notes to Interim Financial Statements F-10 to F-24 Item 2. Management's Discussion and Analysis or Plan of Operations 25 Item 3 Quantitative and Qualitative Disclosure about Market Risk 35 Item 4 Controls and Procedures 35-36 PART II - OTHER INFORMATION Item 1 Legal Proceedings 36 Item 1A. Risk Factors - Not Applicable Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36 Item 3. Defaults upon Senior Securities - Not Applicable 36 Item 4. Mine Safety Disclosures - Not Applicable 36 Item 5. Other Information 36 Item 6. Exhibits 36 SIGNATURES 37 3
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PEPTIDE TECHNOLOGIES, INC. (A Development Stage Company) INTERIM FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (Unaudited) FEBRUARY 28, 2014 Financial Statements Page Interim Consolidated Balance Sheets F-6 Interim Consolidated Statements of Loss and Comprehensive Loss F-7 Interim Consolidated Statements of Cash Flows F-8 Interim Consolidated Statement of Changes in Stockholders' Deficiency F-9 Notes to Interim Consolidated Financial Statements F-10 to F-24 F-4
Peptide Technologies, Inc. (A Development Stage Company) Interim Consolidated Financial Statements (Expressed in U.S. dollars) (Unaudited) 28 February 2014 F-5
Peptide Technologies, Inc. (A Development Stage Company) Interim Consolidated Balance Sheets (Unaudited) ------------------------------------------------------------------------------------------------------------------ (Expressed in U.S. dollars) As at 30 As at 28 November 2013 February 2014 (Audited) Notes $ $ -------------------------------------------------------------------- ---------- ---------------- ------------------ ASSETS Current assets Cash and cash equivalents 868 157 Intangible assets and intellectual property 7 45,000 45,000 Website 3 5,000 5,833 -------------------------------------------------------------------- ---------- ---------------- ------------------ Total assets 50,868 50,990 -------------------------------------------------------------------- ---------- ---------------- ------------------ STOCKHOLDERS' DEFICIENCY AND LIABILITIES Current liabilities Accounts payable and accrued liabilities 4, 6 1,826,692 1,662,272 Notes payable 5 86,025 88,850 -------------------------------------------------------------------- ---------- ---------------- ------------------ Total liabilities 1,912,717 1,751,122 -------------------------------------------------------------------- ---------- ---------------- ------------------ Stockholders' deficiency Capital stock 8 Authorized: 675,000,000 common shares, par value $0.001 Issued and outstanding: 28 February 2014 - 151,133,000 common shares 30 November 2013 - 151,123,000 common shares 151,133 151,123 Additional paid-in capital 158,269 148,279 Accumulated deficit (105,837) (105,837) Accumulated deficit during development stage (2,065,414) (1,893,697) -------------------------------------------------------------------- ---------- ---------------- ------------------ Total stockholders' deficiency (1,861,849) (1,700,132) -------------------------------------------------------------------- ---------- ---------------- ------------------ Total stockholders' deficiency and liabilities 50,868 50,990 -------------------------------------------------------------------- ---------- ---------------- ------------------ Nature and Continuance of Operations (Note 1), Commitments and Contingency (Note 11) and Subsequent Events (Note 13) The accompanying notes are an integral part of these interim consolidated financial statements. F-6
Peptide Technologies, Inc. (A Development Stage Company) Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited) ------------------------------------------------------------------------------------------------------------------- (Expressed in U.S. dollars) Cumulative from re-entering of For the development For the three month stage on three month period ended 26 June 2010 period ended 28 28 February to 28 February February 2014 2013 2014 Notes $ $ $ ------------------------------------------------------- --------- ----------------- ---------------- ----------------- Expenses Consulting 6, 8 - 75,000 552,975 Salaries and bonus 4, 6 157,940 159,000 1,228,024 General and administration 9 3,070 1,940 56,095 Professional fees 5,750 8,633 157,493 Supplies and materials 7,782 - 68,014 ------------------------------------------------------- --------- ----------------- ---------------- ----------------- Net loss before other items (174,542) (244,573) (2,062,601) ------------------------------------------------------- --------- ----------------- ---------------- ----------------- Other items Foreign exchange gain 3,711 1,136 5,825 Interest expense 5 (886) (927) (8,638) ------------------------------------------------------- --------- ----------------- ---------------- ----------------- Net loss for the period (171,717) (244,364) (2,065,414) ------------------------------------------------------- --------- ----------------- ---------------- ----------------- Other comprehensive loss Foreign currency translation adjustment - - (333) ------------------------------------------------------- --------- ----------------- ---------------- ----------------- Total comprehensive loss for the period (171,717) (244,364) (2,065,747) ------------------------------------------------------- --------- ----------------- ---------------- ----------------- Basic and diluted comprehensive loss per common share (0.001) (0.002) Weighted average number of shares outstanding 151,132,444 149,078,000 ------------------------------------------------------- --------- ----------------- ---------------- ----------------- The accompanying notes are an integral part of these interim consolidated financial statements. F-7
Peptide Technologies, Inc. (A Development Stage Company) Interim Consolidated Statements of Cash Flows (Unaudited) ------------------------------------------------------------------------------------------------------------------- (Expressed in U.S. dollars) Cumulative from For the For the re-entering of three month three month development stage period ended period ended on 28 February 28 February 26 June 2010 2014 2013 to 28 February 2014 Notes $ $ $ ------------------------------------------------------------- -------- -------------- -------------- ----------------------- OPERATING ACTIVITIES Net loss for the period (171,717) (244,364) (2,065,414) Adjustments to reconcile net loss to cash used by operating Accrued interest 5 886 927 8,638 Amortization 3 833 834 5,000 Foreign exchange gain (3,711) (1,136) (5,825) Non-cash consulting expense 8 - - 2,000 Share-based payment - - 8,000 Changes in operating assets and liabilities Decrease in prepaid expenses - 3,494 2,709 Increase in accounts payable and accrued liabilities 4, 6 164,420 237,245 1,825,943 ------------------------------------------------------------- -------- -------------- -------------- ----------------------- Cash used in operating activities (9,289) (3,000) (218,949) ------------------------------------------------------------- -------- -------------- -------------- ----------------------- INVESTING ACTIVITIES Purchase of website 3 - - (10,000) ------------------------------------------------------------- -------- -------------- -------------- ----------------------- Cash used in investing activities - - (10,000) ------------------------------------------------------------- -------- -------------- -------------- ----------------------- FINANCING ACTIVITIES Proceeds from issuance of common shares, net of share issuance costs 8 10,000 - 131,114 Increase (decrease) in notes payable 5 - - 67,212 Contribution by related party - - 27,288 ------------------------------------------------------------- -------- -------------- -------------- ----------------------- Cash from (used in) financing activities 10,000 - 225,614 ------------------------------------------------------------- -------- -------------- -------------- ----------------------- Effect of foreign exchange rate changes on cash - - (333) ------------------------------------------------------------- -------- -------------- -------------- ----------------------- Increase (decrease) in cash and cash equivalents 711 (3,000) (3,668) Cash and cash equivalents, beginning of period 157 7,780 4,536 ------------------------------------------------------------- -------- -------------- -------------- ----------------------- Cash and cash equivalents, end of period 868 4,780 868 ------------------------------------------------------------- -------- -------------- -------------- ----------------------- Supplemental cash flow information (Note 12) The accompanying notes are an integral part of these interim consolidated financial statements. F-8
Peptide Technologies, Inc. (A Development Stage Company) Interim Consolidated Statements of Changes in Stockholders' Deficiency (Unaudited) ------------------------------------------------------------------------------------------------------------------- (Expressed in U.S. dollars) Accumulated Additional deficit during paid-in Accumulated development Number of Capital stock capital deficit stage Total shares $ $ $ $ $ --------------------------------------- -------------- --------------- ------------- ------------- ----------------- --------------- Balances, 30 November 2012 149,078,000 149,078 105,324 (105,837) (898,221) (749,656) Shares issued for Cash, net of share issuance costs 45,000 45 42,955 - - 43,000 Contractor services 2,000,000 2,000 - - - 2,000 Net loss for the year - - - - (995,476) (995,476) --------------------------------------- -------------- --------------- ------------- ------------- ----------------- --------------- Balances, 30 November 2013 151,123,000 151,123 148,279 (105,837) (1,893,697) (1,700,132) --------------------------------------- -------------- --------------- ------------- ------------- ----------------- --------------- Shares issued for cash 10,000 10 9,990 - - 10,000 Net loss for the period - - - - (171,717) (171,717) --------------------------------------- -------------- --------------- ------------- ------------- ----------------- --------------- Balances, 28 February 2014 151,133,000 151,133 158,269 (105,837) (2,065,414) (1,861,849) --------------------------------------- -------------- --------------- ------------- ------------- ----------------- --------------- The accompanying notes are an integral part of these interim consolidated financial statements. F-9
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 1. NATURE AND CONTINUENCE OF OPERATIONS 1.1 Organization Peptide Technologies, Inc. (the "Company") was incorporated in the State of Nevada, United States of America, on 18 November 2005. On 29 July 2010, the Company's name was changed from Online Originals, Inc. to CREEnergy Corporation. Effective 12 October 2011, the Company's name was changed from CREEnergy Corporation to Peptide Technologies, Inc. The Company's year-end is 30 November. The Company is currently a development stage Company. On 5 August 2013, the Company incorporated Pept Peptide Technologies Inc. ("Pept Peptide"), a wholly-owned subsidiary, under the laws of British Columbia. Pept Peptide Technologies, Inc. currently does not have any transactions from the date of incorporation on 5 August 2013 to 28 February 2014. 1.2 Nature of Operations and Change in Business Upon inception on 18 November 2005, the Company's business plan was to develop a membership-based website art gallery/auction house specifically focused on displaying and selling original artwork. The Company changed its status from a development stage company to an operating company on 30 November 2009. Management realized that the results of operations from the sale of artwork lacks luster and decided to change the Company's business focus and plan for other strategic opportunities. Effective 26 June 2010, the Company became a development stage company focusing on a new business. On 23 August 2011, the Company entered into an agreement (the "Asset Purchase Agreement") in which the Company, in exchange for 75,000,000 shares of the Company's restricted common stock, received all rights and title to proprietary technologies and formulas involving the application of specialty Peptides. The Company has changed its business focus to the manufacturing and distribution of natural peptide solutions to combat the economic burden of bio-fouling. On 14 December 2011, the Company amended the Asset Purchase Agreement. As a result of the amendment, the purchase price of the assets was reduced from 75,000,000 shares to 45,000,000 shares, and 30,000,000 shares were returned to treasury (Note 7). The Company's business activities focus is on the development of all-natural, sustainable solutions to the increasing problem of bio-fouling and the development of safe "green" organic-based fouling prevention products used to combat the rapidly growing problems caused by the attachment of hard fouling agents in marine and freshwater environments. This approach emphasizes minimizing the attachment of hard fouling agents (mussels, barnacles, etc.) and preventing the build-up of any bio-film layer as well. F-10
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 1.3 Basis of Going Concern The accompanying interim consolidated financial statements as at 28 February 2014 and for the three month period then ended have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company has had a net loss of $171,717 for the three month period ended 28 February 2014 (28 February 2013 - $244,364; cumulative - $2,065,414 and has a working capital deficit of $1,911,849 at 28 February 2014 (30 November 2013 - $1,750,965). Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Management believes that the Company's capital resources should be adequate to continue operating and maintaining its business strategy during the fiscal year ended 30 November 2014. However, if the Company is unable to raise additional capital in the near future or met financing requirements, due to the Company's liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. Management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the Company's ability to continue as a going concern. These interim consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Although management is actively seeking to add new products and/or services in order to show profitability, and is seeking additional sources of equity or debt financing, there is no assurance that these activities will be successful. The Company has not yet been able to find products and services that would contribute to their business due to the continued economic condition. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 1.4 Unaudited Statements While the information presented in the accompanying interim consolidated financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Except as disclosed below, these interim consolidated financial statements follow the same accounting policies and methods of their application as the Company's audited 30 November 2013 annual consolidated financial statements. It is suggested that these interim consolidated financial statements be read in conjunction with the Company's audited consolidated financial statements for the year ended 30 November 2013, included in the annual report previously filed with the Securities and Exchange Commission on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. The information as of 30 November 2013, is taken from the audited consolidated financial statements as of that date. F-11
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies is presented to assist in understanding the Company's interim consolidated financial statements. The interim consolidated financial statements and notes are representations of management who is responsible for their integrity and objectivity. These accounting policies have been consistently applied in the preparation of the interim consolidated financial statements. 2.1 Basis of Presentation These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") applicable for a development stage company for financial information and are expressed in U.S. dollars. 2.2 Principles of Consolidation These interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Pept Peptide Technologies, Inc., a company incorporated in the province of British Columbia on 5 August 2013. All significant inter-company balances and transactions have been eliminated upon consolidation. 2.3 Organizational and Start-up Costs Costs of start-up activities, including organizational costs, are expensed as incurred in accordance with Accounting Standards Codification ("ASC") 720-15, "Start-Up Costs". 2.4 Development-Stage Company During the year ended 30 November 2010, the Company abandoned its previous business of sale of original artwork and re-entered the development stage with its intended new business, which currently has no revenues. Management expects to sustain losses from operations until such time it can generate sufficient revenues to meet its anticipated cost structure. The Company is considered a development-stage company in accordance with the ASC 915, "Accounting and Reporting by Development-Stage Enterprises". A development-stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from. 2.5 Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with original maturities of three months or less. F-12
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 2.6 Website In accordance with ASC 350-50, "Website Development Costs", expenditures during the planning and operating stages of the Company's website are expensed as incurred. Expenditures incurred during the website application and infrastructure development stage are capitalized and amortized to expense over the website's estimated useful life of 3 years. 2.7 Intangible Assets Intangible assets include the cost of acquiring the intellectual property. In accordance with ASC 350-30 "General Intangibles Other Than Goodwill", an intangible asset that is acquired either individually or with a group of other assets shall be recognized. Costs of internally developing, maintaining, or restoring intangible assets that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as whole, shall be recognized as an expense when incurred. The intellectual property is determined to have an indefinite useful life and is not subject to amortization. The useful life of the intangible asset is reassessed at each reporting period. 2.8 Impairment of Long-Lived Assets Long-lived assets include the website and intangible assets and intellectual property. Long-lived assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset. There has been no impairment as of 28 February 2014. 2.9 Research and Development Research and development expenses are charged to operations as incurred. 2.10 Income Taxes The Company adopted the ASC 740, "Accounting for Income Taxes". ASC 740 requires the use of the asset and liability method of accounting of income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the interim consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. F-13
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 2.11 Basic and Diluted Income (Loss) per Share In accordance with ASC 260, "Earnings per Share", the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings per share are not shown for periods in which the Company incurs a loss because it would be anti-dilutive. At 28 February 2014, the Company had no stock equivalents that were anti-dilutive and excluded in the earnings per share computation. 2.12 Estimated fair value of financial instruments The carrying value of the Company's interim consolidated financial instruments, consisting of cash, accounts payable and notes payable approximate their fair value due to the short-term maturity of these instruments. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or currency risks arising from these financial statements. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. At 28 February 2014, all cash and cash equivalents were insured by agencies of the U.S. Government. 2.13 Foreign Currency Translation The interim consolidated financial statements are presented in U.S. dollars. In accordance with ASC 830 "Foreign Currency Matters", foreign denominated monetary assets and liabilities are translated to their U.S. dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the period. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. 2.14 Comprehensive Income (Loss) The Company adopted ASC 220, "Reporting Comprehensive Income". ASC 220 requires that the components and total amounts of comprehensive income be displayed in the interim consolidated financial statements beginning in 1998. Comprehensive income includes net income and all changes in equity during a period that arises from non-owner sources, such as foreign currency items and unrealized gains and losses on certain investments in equity securities. F-14
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 2.15 Use of Estimates The preparation of the Company's interim consolidated financial statements are in conformity with U.S. GAAP which requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 2.16 Changes in Accounting Policy Effective 1 December 2013, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2013-02, "Comprehensive Income". This update requires an entity to present information about amounts reclassified out of accumulated other comprehensive income and their corresponding effect on the respective line items in net income in one place, and in some cases, cross-references to related footnote disclosures. The update applies to public companies for all reporting periods presented, including interim periods, and to nonpublic entities for annual reporting periods. ASU No. 2013-02 will be effective for fiscal years, and interim periods within those years, beginning after 15 December 2012 for public companies, with early adoption permitted. The adoption of this update did not have a material effect on the Company's interim consolidated financial statements 2.17 Recent Accounting Pronouncements In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists", which is intended to eliminate the diversity that is in practice with regard to the financial statement presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 is effective for fiscal years and interim periods within those years, beginning after 15 December 2014, with early adoption permissible. The adoption of this update is not expected to have a material impact on the Company's interim consolidated financial statements. 2.18 Reclassifications Certain amounts reported in previous periods have been reclassified to conform to the current presentation. 2.19 Other The Company consists of one reportable business segment. The Company paid no dividends during the periods presented. F-15
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 3. WEBSITE -------------------------------------------- -------------------------------------------- As at: 30 November 2013 28 February 2014 (Audited) ----------- ----------------- -------------- ----------- ----------------- -------------- Accumulated Net book Accumulated Net book Cost amortization value Cost amortization value $ $ $ $ $ $ ----------- ----------------- -------------- ----------- ----------------- -------------- Website 10,000 5,000 5,000 10,000 4,167 5,833 -------------------------- ----------- ----------------- -------------- ----------- ----------------- -------------- Total 10,000 5,000 5,000 10,000 4,167 5,833 -------------------------- ----------- ----------------- -------------- ----------- ----------------- -------------- The Company purchased a website during October 2012 for $10,000. This website has a useful life of three 3 years, and the cost is being amortized over the life of the asset. During the three month period ended 28 February 2014, the Company recognized amortization expense of $833 (28 February 2013 - $834; cumulative - $5,000) (Note 9). 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES As at: 28 February 30 November 2013 2014 (Audited) $ $ -------------------------------------------------- ---------------------- --------------------- Accounts payable 590,668 574,188 Accrued liabilities 17,000 27,000 Payroll taxes payable 22,024 17,084 Salaries and benefits payable (Notes 6 and 11) 1,197,000 1,044,000 -------------------------------------------------- ---------------------- --------------------- Total accounts payable and accrued liabilities 1,826,692 1,662,272 -------------------------------------------------- ---------------------- --------------------- Trades payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year. Included in salaries and benefits payable, are $300,000 (30 November 2013 - $300,000) of bonuses payable to the Chief Executive Officer ("CEO") of the Company as at 28 February 2014 (Note 6). Included in accounts payable and accrued liabilities is $545,000 (30 November 2013 - $545,000) payable to a related party of the Company as at 28 February 2014 (Notes 6 and 11). The Company is in the process of completing and resolving issues related to its income tax filings and has accrued $10,000 during the year ended 30 November 2013 related to potential penalties associated with these filings. However, there is no assurance that additional interest and penalties will not be assessed (Notes 9, 10 and 11). F-16
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 5. NOTES PAYABLE AND ACCRUED INTEREST As at: 30 November 2013 28 February 2014 (Audited) $ $ -------------------------------------------------------------------- ----------------- ------------------ During the year ended 30 November 2010, Fotoview Inc. ("Fotoview") issued a loan of $16,000 to a former director of the Company to purchase 4,000,000 restricted common shares of the Company. Upon the director's resignation, the 4,000,000 common shares were cancelled and the Company assumed the loan payable to Fotoview. The loan is unsecured, bears no interest, and has no fixed terms of repayment. 16,000 16,000 On 21 September 2011, PSI Services ("PSI") issued a loan of $500 to the Company. The loan is unsecured, bears no interest and has no fixed terms of repayment. 500 500 On 13 November 2011, PSI issued a loan of CAD$45,000 to the Company. 45,982 47,961 The loan is unsecured and bears no interest at a rate of 6% per annum. Principal and accrued interest is due on 30 November 2014. During the three month period ended 28 February 2014, the Company accrued interest expense of $613 (28 February 2013 - $642) (Note 12). The loan payable to PSI as at 28 February 2014 consists of principal and accrued interest of $40,415 (30 November 2013 - $42,710) and $5,567 (30 November 2013 - $5,251), respectfully. On 1 June 2012, PSI issued a loan of CAD$20,000 to the Company. The loan is unsecured and bears interest at a rate of 6% per annum. Principal and accrued interest is due on 30 November 2014. During the three months ended 28 February 2014, the Company accrued interest expense of $273 (28 February 2013 - $285) (Note 12). The loan payable to PSI as at 28 February 2014 consists of principal and accrued interest of $17,962 (30 November 2013 -$18,982) and $1,881 (30 November 2013 - $1,707), respectively. 19,843 20,689 On 22 October 2013, PSI issued a loan of USD$3,700 to the Company. The loan is unsecured, bears no interest, and has no fixed terms of repayment. 3,700 3,700 -------------------------------------------------------------------- ----------------- ------------------ Total notes payable and accrued interest 86,025 88,850 -------------------------------------------------------------------- ----------------- ------------------ F-17
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 6. RELATED PARTY TRANSACTIONS As at 28 February 2014, the amount due to related parties includes $1,197,000 payable to directors and employees of the Company in relation to salaries and benefits earned (30 November 2013 - $1,044,000). Of the amount due to related parties, $300,000 relates to bonuses payable to the CEO of the Company (30 November 2013 - $300,000) (Note 4). During the three month period ended 28 February 2014, the Company accrued salaries and benefits of $153,000 to officers and employees of the Company (28 February 2013 - $153,000; cumulative - $1,206,000) (Note 11). Included in salaries and benefits, are bonuses of $Nil accrued to the CEO of the Company during the three month period ended 28 February 2014 (28 February 2013 - $Nil; cumulative - $300,000). Effective 1 December 2013, the Company and a former related party consultant mutually terminated an Advisory Agreement entered into on 1 November 2012. The Company accrued $Nil of consulting fees to the consultant (28 February 2013 - $75,000; cumulative - $545,000) during the three month period ended 28 February 2014. As at 28 February 2014 there is $545,000 (30 November 2013 - $545,000) outstanding and payable to the consultant for consulting services received (Notes 4 and 11). During the year ended 30 November 2013, the Board approved a commission payment program (the "Program") equal to 30% of gross sales of fouling prevention coatings. Under this program, the CEO will receive compensation equal to 20% of gross sales of anti-fouling paint, as recognition of his work in developing the formulas; and an external consultant will receive 10% of gross sales of anti-fouling paint as compensation for sales development. On 28 February 2014, the Board amended the Program to reduce the CEO's compensation from 20% to 10% of gross sales of anti-fouling paint (Notes 7 and 11). During the three month period ended 28 February 2014, directors and shareholders of the Company made cash contributions in the amount of $Nil (28 February 2013 - $Nil, cumulative - $27,288). 7. INTANGIBLE ASSETS AND INTELLECTUAL PROPERTY On 23 August 2011, the Company entered into an Asset Purchase Agreement to acquire intangible assets and intellectual property known as the Platforms in exchange for 75,000,000 restricted common shares of the Company (issued on 23 August 2011) (Note 1). On 14 December 2011, the Company entered into an Amended Asset Purchase Agreement and, as a result, a total of 30,000,000 restricted common shares of the Company were returned to treasury and cancelled in exchange for payment of half of one percent of all gross monies received by the Company in relation to revenue earned from products derived from the use of all the formulae listed in the Assets Purchase Agreement. In addition, a monthly stipend of CAD $15,000 per month is to be paid commencing on the receipt of monies from the first contract signed to purchase products derived from the use of the formulae for a period of five years from the date of the Amended Asset Purchase Agreement. The cancellation of 30,000,000 common shares has been recorded as a recovery of intangible assets and intellectual property (Notes 1 and 11). F-18
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- On 20 January 2013, the Board approved a commission payment program equal to 30% of gross sales of fouling prevention coatings. Under this program, the CEO will receive compensation equal to 20% of gross sales of anti-fouling paint, as recognition of his work in developing the formulas; and an external consultant will receive 10% of gross sales of anti-fouling paint as compensation for sales development. On 28 February 2014, the Board amended the Program to reduce the CEO's compensation from 20% to 10% of gross sales of anti-fouling paint (Notes 6 and 11). 8. CAPITAL STOCK 8.1 Authorized common stock The Company's authorized common stock consists of 675,000,000 shares of common stock with a par value of $0.001 per share. On 10 August 2010, the Company increased the number of authorized share capital from 75,000,000 shares of common stock to 675,000,000 shares of common stock with the same par value of $0.001 per share. 8.2 Issued and outstanding On 2 June 2010, and effective 10 August 2010, the directors of the Company approved a forward split of the common stock of the Company on a basis of 30 new common shares for 1 old common share. As a result of the forward stock split, 208,800,000 additional shares were issued. Capital and additional paid-in capital have been adjusted accordingly. When adjusted retroactively, there was a $119,501 shortage of additional paid-in capital; thus an adjustment to accumulated deficit of $104,000 was recorded on 20 May 2010 (the date of issuance of 120,000,000 shares) and $15,501 to the beginning balance. The interim consolidated financial statements contained herein reflect the appropriate values for capital stock and accumulated deficit. Unless otherwise noted, all references in the accompanying interim consolidated financial statements to the number of common shares and per share amounts have been retroactively restated to reflect the forward stock split. The total issued and outstanding capital stock is 151,133,000 common shares with a par value of $0.001 per common share. The Company's common stock issuances to date are as follows: a) On 10 April 2013, the Company issued 20,000 shares of the Company's restricted common stock for cash proceeds of $20,000. The Company paid $2,000 in share issuance costs. b) On 26 April 2013, the Company issued 2,000,000 shares of the Company's restricted common stock at a par value of $0.001 per share to a third party for marketing assistance with the development of the international markets in the South Pacific quadrant for the Company. As a result, the Company recorded consulting expense of $2,000 when the stock was issued (Note 12). c) On 18 July 2013, the Company issued 25,000 shares of the Company's restricted common stock for cash proceeds of $25,000. d) On 3 December 2013, the Company issued 10,000 shares of the Company's restricted common for cash proceeds of $10,000. F-19
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 9. GENERAL AND ADMINISTRATION EXPENSES Cumulative from re-entering of development stage on Three month Three month 26 June 2010 period ended 28 period ended 28 to 28 February February 2014 February 2013 2014 $ $ $ ---------------------------------------------------- ------------------- ------------------ ------------------ Administration - - 20 Amortization (Note 3) 833 834 5,000 Bank charges 83 72 1,367 Dues and subscription - - 575 Filing fees 721 25 12,191 Meals and entertainment - - 254 Office 69 197 6,792 Penalties - - 10,000 Transfer agent 295 150 3,796 Rent 269 193 1,502 Share-based payment - - 8,000 Telecommunication 800 61 3,793 Travel - 408 2,656 Website - - 149 ---------------------------------------------------- ------------------- ------------------ ------------------ Total general and administration expenses 3,070 1,940 56,095 ---------------------------------------------------- ------------------- ------------------ ------------------ F-20
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 10. INCOME TAXES 10.1 Provision for income taxes Income tax expense differs from the amount that would result from applying the federal income tax rate to earnings before income taxes. During the three month periods ended 28 February 2014 and 2013, these differences result from the following items: For the Three For the Three Month Period Month Period Ended 28 Ended 28 February 2014 February 2013 $ $ -------------------------------------------------------- ----------------- ----------------- Loss before income taxes 171,171 244,364 Federal income tax rates 35.00% 35.00% -------------------------------------------------------- ----------------- ----------------- Income tax recovery based on the above rates (60,101) (85,527) Non-deductible items - - Change in valuation allowance 60,101 85,527 -------------------------------------------------------- ----------------- ----------------- Income tax expense - - -------------------------------------------------------- ----------------- ----------------- 10.2 Deferred tax balances The composition of the Company's deferred tax assets as at 28 February 2014 and 30 November 2013 are as follows: As at: 28 February 30 November 2013 2014 (Audited) $ $ ------------------------------------------------------------------- ---------------- -------------------- Net income tax operating loss carry-forward 2,147,624 1,975,908 ------------------------------------------------------------------- ---------------- -------------------- Deferred tax assets 751,669 691,568 Valuation allowance (751,669) (691,568) ------------------------------------------------------------------- ---------------- -------------------- Deferred tax assets (liabilities) - - ------------------------------------------------------------------- ---------------- -------------------- F-21
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- As at 28 February 2014, the Company has a total non-capital loss carryforward balance of $2,147,624 (30 November 2013 - 1,975,908), which has expiry dates between the years of 2025 to 2034. The Company's recognized and unrecognized deferred tax assets related to the unused tax losses. A full valuation allowance has been recorded against the potential deferred tax assets associated with all the loss carry-forwards as their utilization is not considered more likely than not at this time. The Company is in the process of completing and resolving issues related to its income tax filings and has accrued $10,000 during the year ended 30 November 2013 related to potential penalties associated with these filings. However, there is no assurance that additional interest and penalties will not be assessed (Notes 4, 9 and 11). 11. COMMITMENTS AND CONTINGENCY a) The Company is committed to paying one-half of one percent of all gross monies received by the Company from revenue produced from products derived from the use of all the formula listed in the Assets Purchase Agreement. In addition, a monthly stipend of CAD $15,000 per month is to be paid commencing from receipt of monies from the first contract signed to purchase products derived from the use of the formula for a period of five years from the date of the Amended Asset Purchase Agreement (Note 7). b) On 20 January 2013, the Board approved a commission payment program equal to 30% of gross sales of fouling prevention coatings. Under this program, the CEO will receive compensation equal to 20% of gross sales of anti-fouling paint, as recognition of his work in developing the formulas; and an external consultant will receive 10% of gross sales of anti-fouling paint as compensation for sales development. On 28 February 2014, the Board amended the Program to reduce the CEO's compensation from 20% to 10% of gross sales of anti-fouling paint (Notes 6 and 7). c) On 1 November 2012, the Company entered into an advisory agreement with a consultant. The commitment is for a term of five years, with the Company being able to terminate the agreement with 30 days written notice. Effective 1 December 2013, the Company and the consultant mutually terminated and Advisory Agreement. As at 28 February 2014 there is $545,000 (30 November 2013 - $545,000) outstanding and payable to the consultant in relation to consulting services received (Notes 4 and 6). d) Effective 1 September 2012, the Company is committed to paying monthly salaries of $25,000 to the CEO, $20,000 to the Chief Financial Officer ("CFO"), and $6,000 to the Vice President of Operations & Communication ("VP of Operations & Communications") (Notes 4 and 6). e) On 11 December 2012, the Company formerly engaged BB&T Capital Markets ("BB&TCM") to act as the Company's exclusive financial advisor and agent in connection with developing strategic alternatives for the Company regarding debt financings, licensing of intellectual properties developed by the Company, equity raises, sale of intellectual properties, or other capital markets transactions that may develop over the course of a 24 month agreement. The Company is to pay BB&TCM an advisory fee of three percent of the face amount of the financial transactions advised upon during the course of the engagement, due and payable at closing of any contemplated transactions under the engagement. F-22
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- Additionally, the Company is to defend, indemnify and hold BB&TCM, its parent company, subsidiaries and affiliates and its and their directors, officers, employees, agents and successors and assigns harmless from and against any losses, suits, actions, claims, damages, costs and or other liabilities which any indemnified person may incur as a result of acting on behalf of the Company in connection with this engagement. f) The Company is in the process of completing certain of its income tax filings and has accrued $10,000 during the year ended 30 November 2013 related to potential penalties associated with these filings. However, there is no assurance that additional interest and penalties will be assessed (Notes 4, 9 and 10). 12. SUPPLEMENTAL CASH FLOW INFORMATION The Company made the following cash payments for interest and income taxes: Three month Three month period ended period ended 28 28 February February 2014 2013 $ $ --------------------------------------- ------------------ ---------------- Interest paid - - Taxes paid - - --------------------------------------- ------------------ ---------------- Total cash payments - - --------------------------------------- ------------------ ---------------- On 26 April 2013, the Company issued 2,000,000 fully vested shares of the Company's restricted common stock at a par value of $0.001 per share to a third party for marketing assistance with the development of the international markets in the South Pacific quadrant for the Company. As a result, the Company recorded consulting expense of $2,000 when the stock was issued (Note 8). During the three month period ended 28 February 2014, the Company accrued interest expense of $613 (28 February 2013 - $642) in relation to a loan of CAD$45,000 issued by PSI on 13 November 2011. The loan is unsecured and bears interest at a rate of 6% per annum (Note 5). During the three month period ended 28 February 2014, the Company accrued interest expense of $273 in relation to a loan of CAD$20,000 issued by PSI on 1 June 2012. The loan is unsecured and bears interest at a rate of 6% per annum (Note 5). F-23
Peptide Technologies, Inc. (A Development Stage Company) Notes to the Interim Consolidated Financial Statements (Unaudited) (Expressed in U.S. dollars) -------------------------------------------------------------------------------- 13. SUBSEQUENT EVENTS The following reportable events occurred during the period from the three month period ended 28 February 2014 to the date the interim consolidated financial statements were available to be issued on 8 April 2014. a) On 3 March 2014, the Company issued 10,000 shares of the Company's restricted common shares for cash proceeds of $10,000. b) On 11 March 2014, the Company issued 5,000 shares of the Company's restricted common shares for cash proceeds of $5,000. F-24
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The following discussion should be read in conjunction with our unaudited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic, and competitive, uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by or on our behalf. We disclaim any obligation to update forward-looking statements. The following discussion of the plan of operation, financial condition, results of operations, cash flows and changes in financial position of our Company should be read in conjunction with our most recent financial statements and notes appearing elsewhere in this Quarterly Report on Form 10-Q, and our Annual Report on Form 10-K filed on February 28, 2014. The independent registered public accounting firms' reports on the Company's financial statements as of November 30, 2013, and for the year then ended, include a "going concern" explanatory paragraph that describes substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to the factors prompting the explanatory paragraph are discussed below and also in Note 1 to the unaudited quarterly financial statements. Discontinued Operations and New Developments Since inception, the Company's business plan was to develop a membership based website art gallery/auction house specifically focused on displaying and selling original artwork. The Company changed its status from a development stage company to an operating company on November 30, 2009. Management realized that the results of operations from the sale of artwork was lack-luster, and it was decided to change the Company's business focus and plan for other strategic opportunities and discontinued the sale of artwork to be effective June 25, 2010. Effective June 26, 2010, the Company started to focus on a new business development. On July 29, 2010, the Company's name changed from Online Originals, Inc. to Creenergy Corporation. The name change was intended to convey a sense of the Company's new business focus as it looked to pursue other opportunities. Specifically, the Company intended to obtain leases for the exploration and production of oil and gas in northern Canada and the United States. These objectives have not been realized and the Company has abandoned its efforts in this area. On August 23, 2011, the Company entered into an agreement (the "Asset Purchase Agreement") in which the Company issued a total of 75,000,000 shares of its restricted common stock in exchange for intangible assets and intellectual property referred to as the Peptide Technology Platforms. 60,000,000 of these restricted shares were issued equally; 30,000,000 shares to William Campbell and 30,000,000 shares to Scott McKinley. The balance of 15,000,000 restricted shares was issued equally; 7,500,000 shares to Deborah Fortescue-Merrin and 7,500,000 shares to Richard Fortescue. Upon their resignations, Deborah Fortescue-Merrin and Richard Fortescue each relinquished 6,500,000 shares of common stock to Scott McKinley upon his acceptance of Chief Executive Officer for the Company. The assets that were purchased were set aside and new formulations were developed by the company. On December 14, 2011, the Peptide Technologies, Inc. agreed to amend the Asset Purchase Agreement dated August 23, 11. As a result of the amendment, 30,000,000 restricted common shares of the Company issued to William Campbell were returned to the treasury in exchange for payment of half of the one percent of all gross monies received by the company from revenue produced from products derived from the use of all the formulae listed in the Asset Purchase Agreement. In addition a monthly stipend of CDN $15,000 per month is to be paid commencing from receipt of monies from the first contract signed to purchase products derived from the use of the formulae for a period of five years from the date of the amended agreement. 25
Business of Issuer Peptide Technologies, Inc. has developed the first all-natural sustainable solution for the economic and environmental burden of bio-fouling to prevent the attachment of organic matter on ship hulls and marine assets to improve vessel fuel efficiency, decrease maintenance costs, reduce emissions and prevent toxic materials in our oceans, lakes and valuable water sources. Our product line offers safe organic-based fouling prevention coatings used to combat the rapidly growing problems caused by the attachment of hard fouling agents in the marine and freshwater environments. Peptide Technologies' patent protected approach not only significantly minimizes the attachment of hard fouling agents such as mussels, barnacles, etc. but is also highly effective in preventing the build-up of any bio-film layer as well. Our products offer an industry first "30 MINUTE" curing phase to significantly lower maintenance dry dock downtime. Our organic-based solutions are highly effective in both marine and freshwaters and are the first non-dangerous, non-hazardous and therefore environmentally friendly products available to the aquatic and industrial market. Our fouling prevention coatings adhere to both stationary and flexible substrates (i.e. netting) and are available in a variety of colors. There are many benefits to applying our fouling prevention coatings in enclosed systems as well as open surfaces such as ship hulls, fish nets, intake screens, canal gates where the application of paint containing biocides, bio-pesticides or copper products and/or chemical based is not appropriate. Targeted applications for our products are: o Hydro-electric facilities and dams (i.e., water in-take pipes, valves); o Ship hulls (i.e., barnacle covered hulls can increase fuel usage by more than 40%); o Commercial fish nets; o Pearling and Aquaculture industry; o Drinking water treatment facilities; o Farm irrigation water; o Navigation locks; o Oil rigs (FPSO); o Other cement and/or steel substrates; and o Concrete residential and commercial buildings Unlike any other anti-fouling paint in the world, Peptide Technologies' fouling prevention coatings are the only ones in the world to receive a non-hazardous and non-dangerous rating by Risk Management Technology firm ChemAlert of Australia with a documented Government sanctioned certification. More information can be found here: http://peptidetechnologiesinc.com/about-us/certifications/ ---------------------------------------------------------- OUR PRODUCT LINE ---------------- Peptide Technologies is pleased to introduce four products designed to prevent the attachment of fouling organisms to a variety of substrates: >> AquaNatural Industrial Coating- customized formulation to provide effective protection from fouling organisms onto fixed assets for 10 years. >> AquaCrete Natural Coating- customized solution to provide effective protection to concrete surfaces from fouling organisms for 10 years. 26
>> AquaCulture Natural Coating- designed for flexible substrates such as netting to allow for expansion and contraction without compromising integrity of the coating for 2 years. >> AquaNatural Marine Coating- customizable friction reduction formula for assets while stationary or mobile for 5 years resulting in a potential 5-6% fuel cost savings. Together, these coatings will prevent attachment of fouling organisms to bare wood, carbon steel, galvanized steel, stainless steel, concrete, gel coats, underwater cable coverings and polypropylene netting. Coatings are non-hazardous and do not kill fouling agents. Coatings are designed to simply prevent organisms such as algae and other hard organisms (i.e. barnacles, mussels) from attaching to the substrate. In addition, coatings can be formulated to provide protection from fouling organisms onto fixed assets for 10 years (AquaNatural Industrial and AquaCrete Natural Coatings). Furthermore, the incorporation of silicone into our coatings has been carefully tuned to not interfere with the slow release of the active ingredients. Indeed, the silicone provides a hydrophobic environment at the coated substrate/water interface. Empirical data obtained from a laboratory designed flume suggests a reduction in drag of >5%. As a result, our coating will contribute to an overall savings in fuel costs for mobile assets for a period of 5 years (AquaNatural Marine Coating). AquaCulture Natural Coating has been designed to expand and contract without compromising the integrity of the coating. Open net-pens, anchor ropes and other substrates influenced by the action of water currents can be coated and protected from fouling by the flexible nature of this coating. The coating is designed to provide effective substrate coating protection for 2 years. OUR PROVEN RESULTS ------------------ Peptide Technologies products are the world's first coating to be classified as a non-hazardous and non-dangerous good (Chem Alert - Australia) of all of the registered fouling prevention paints for both fresh and marine environments. The effectiveness of the coating at preventing the attachment of fouling organisms has been examined and independently monitored at locations around the globe including: Darwin, Australia, Niagara Falls, Canada, Colorado River, USA, Trondheim, Norway and Vancouver, Canada. Results from all these locations showed the coatings significantly prevented fouling attachment for periods up to 8 months. Our coatings contain no biocides, are non-dangerous, non-hazardous and free of any regulated active ingredients (DSL and TSCA). The absence of copper from any of our coatings allows for application of our products to include spraying without contamination to neighboring waters. http://www.environment.nsw.gov.au/resources/sustainbus/2007108_mbs_sheet4.pdf. Our products can be produced in multiple colors including clear and white. Furthermore the 30 minute quick curing time will reduce down time for mobile assets representing significant cost savings to owners. Peptide Technologies has developed proven products that have successfully integrated fouling prevention with environmental safety with fouling prevention in the aquatic ecosystem. All of the coatings simply prevent the attachment of fouling organisms and does not affect the welfare of other aquatic life. Indeed, our coatings have been applied to oyster shells to prevent fouling and subsequently shown not to affect the well-being of the animal. One of our products, AquaCrete Natural coating has also been shown to be also effective outside the aquatic environment in preventing algal attachment on concrete and thereby prevent algal fouling of walk ways or buildings located in humid or moist environments. Peptide Technologies coatings offer a unique solution to environmental fouling for a variety of substrates. The coatings effectiveness, ease and speed of application and its non-hazardous nature will ensure the protections of industrial assets and as well be compliant with environmental legislation. Our patent-protected fouling prevention coatings (AquaNatural Industrial, AquaCrete Natural, AquaCulture Natural, AquaNatural Marine) are based on proprietary organic formulations developed over the past 18 years. After the past two years of conclusive product testing and formula improvements, we have 27
launched a perfected product line offering the industry safe and sustainable fouling prevention coatings used to combat the rapidly growing problems caused by the attachment of hard fouling agents in the marine and fresh water environments. Our paint is unique globally and represents the ultimate in a green approach to fouling of mobile and fixed assets. OUR ADVANTAGES (a) The products are an Earth friendly organic solution and non-hazardous to aquatic life; (b) They can be applied to both stationary and moving substrates; (c) All of our coatings have a Quick 30 minute cure time; (d) Our products have been proven to be effective in both fresh and marine waters; (e) Our coatings can be applied as a paint or spray; (f) We offer several COLOR options to suit the end-users application; as well as a completely CLEAR coating, and, (g) Our non-dangerous and non-hazardous coatings work by simply preventing attachment by hard fouling agents and bio-film without harming aquatic life OUR OUTLOOK ----------- The International Marine coatings market currently generates revenues of $5 Billion annually and is projected to reach $10 Billion within 4 years according to Frost & Sullivan. Several factors will lead to the doubling of the global market in such a short time frame. Such factors include the introduction of an eco-friendly solution such as Peptide Technologies' products. The availability of these products will facilitate painting of the ships and marine assets globally and not just in traditional unregulated shipping zones. Peptide Technologies is positioned to provide the entire marine coatings industry with several solutions to meet the change in environmental regulations, reduction in fuel consumption and lowering dry dock costs with its innovative product line. Our commitment to the Earth and Oceanic sustainability will drive our growth to enable a new generation of fouling prevention coatings. Background Bio-Fouling ----------- Bio-fouling is the development of organic layers, created by the settlement of organisms and their metabolic products (primarily caused by a variety of organisms including: bacteria, algae and hard agents (mussels, barnacles etc.)). Fouling produces several problems for equipment and aquatic structures, deteriorating their performance and limiting their useful life. Typically fouling begins with the formation of bio-films which develop and affect the interaction between the substrate surface and the environment. In most instances, bio-film developments compromise the substrate's integrity and facilitate the subsequent production of algal growth and the attachment of other hard agents. Bio-films are predominately aggregates of bacterial cells, which attach to and grow on a substrate, which are often resistant to disinfection. Bacterial bio-films cause serious problems for industrial fluid processing operations including: mechanical blockage interference in heat transfer process and microbial-induced corrosion. In engineered systems such as cooling water systems, food processing and other industrial applications, bio-film is a risk to public health. Product spoilage and souring are consequences of bio-film-mediated contamination. Overall, bio-fouling represents a significant economic cost to a variety of man-made structures and facilities including: desalination plants, piers, and pylons, buoys, boilers, steam generators, cooling towers, evaporators, distillation units, heat exchangers, engine jackets and valves. In addition, bio-fouling generally increases fuel consumption, reduces efficiency, and greatly increases corrosion rates. AquaNatural Industrial, AquaCrete Natural, AquaCulture Natural and AquaNatural Marine products are the only non-hazardous, non-toxic, safe, user-friendly, fouling prevention coatings. These four products prevent bio-film adherence and 28
subsequent attachment by other hard fouling agents. Our Fouling Prevention coatings are the only four environmentally-safe paints for preventing the attachment of bio-films and hard fouling agents. Other key attributes of our four fouling prevention, products include: o Our protective coating paints are available in several colors including white and clear; o Our products do not kill fouling agents, simply prevent them from attaching to our coated surfaces; o Our products can be applied to netting material, rope, fiberglass, cement and a variety of metal substrates; and, o Of all the registered anti-fouling paints, Peptide Technologies, Inc.'s fouling prevention coatings are the only coatings registered non-hazardous, non-toxic paint coatings, and therefore rated as non-dangerous goods. Zebra and Quagga Mussels ------------------------ The zebra mussel (Dreissena polymorpha) and its cousin, the quagga mussel (Dreissena rostriformis bugensis), are small bivalve mollusks with two matching half shells, having an average life span of 3 to 5 years. Zebra mussels are native to the Black, Caspian, and Azov Seas, dating back to 1769. By the late 18th and early 19th centuries, zebra mussels had spread to most all major drainages of Europe because of widespread construction of canal systems. They first appeared in Great Britain in 1824, where they are now well established. Since then, zebra mussels have expanded their range into Denmark, Sweden, Finland, Ireland, Italy, and the rest of Western Europe. Zebra mussels were first discovered in North America in 1988 in the Great Lakes. The first account of an established population came from Canadian waters of Lake St. Clair, a water body connecting Lake Huron and Lake Erie. By 1990, zebra mussels had been found in all the Great Lakes. The following year, zebra mussels escaped the Great Lakes basin and found their way into the Illinois and Hudson rivers. The Illinois River was the key to their introduction into the Mississippi River drainage which covers over 1.2 million square miles. Since its introduction, the zebra mussel has spread to 23 states in America and two Canadian provinces. The quagga mussel is indigenous to the Dneiper River drainage of Ukraine and Ponto-Caspian Sea. It was discovered in the Bug River in 1890 by Andrusov, who named the species in 1897. The quagga mussel was first sighted in the Great Lakes in September 1989, when one was found near Port Colborne, Lake Erie, though the recognition of the quagga type as a distinct species was not until 1991. In August 1991, a mussel with a different genotype was found in a random zebra mussel sample from the Erie Canal near Palmyra, New York, and after confirmation that this mussel was not a variety of Dreissena polymorpha, the new species was named "quagga mussel" after the "quagga", an extinct African relative of the zebra. The first sighting of quagga mussels outside the Great Lakes basin was made in the Mississippi River between St. Louis, Missouri and Alton, Illinois in 1995. In January 2007, populations of quagga mussels were discovered in Lake Mead near Boulder City, Nevada, and in Lake Havasu and Lake Mohave on the California/Arizona border. The quagga mussel is a prolific breeder, possibly contributing to its spread and abundance. Dreissena are dioecious (either male or female) with external fertilization. A fully mature female mussel is capable of producing up to one million eggs per year. After fertilization, pelagic microscopic larvae, or veligers, develop within a few days and these veligers soon acquire minute bivalve shells. Free-swimming veligers drift with the currents for three to four weeks feeding by their hair-like cilia while trying to locate suitable substrata to settle and secure byssal threads. Zebra and quagga mussels accumulate organic pollutants within their tissues to levels more than 300,000 times greater than concentrations in the environment and these pollutants are found in their pseudofeces, which can be passed up the food chain, therefore increasing wildlife exposure to organic pollutants (Snyder et al., 1997). Another major threat involves the fouling of native freshwater mussels. Since quaggas were discovered in Lake Michigan in 1998, plankton rings formed by the passage of storms have been eaten away by the quagga mussels, threatening the local ecosystem. Numerous pipelines, filter screens, hydroelectric turbines and pumping stations, irrigation tunnels, canals and aqueducts are becoming clogged with quagga and zebra mussels, and this proliferation and dispersion of mussel populations threatens to impact reclamation operations and multiple dams across North America, resulting in the interruption of hydropower and water delivery at significant economic costs. Of particular concern is the blockage of water lines designed to cool the hydropower turbines at dams like Hoover. The quagga mussels, which grow to about 1.5 inches, are clogging water lines that are used to cool the 17 massive hydropower turbines at Hoover Dam and have 29
already forced dam operators to temporarily shut down turbines that supply electricity to 1.6 million people in southern Nevada, Arizona and California. The mussels have caused similar problems at the downstream Davis Dam in Lake Mohave and Parker Dam in Lake Havasu, both of which provide electricity for thousands of people in Arizona and California. The mussels have also threatened to clog water intake lines in Lake Mead operated by the Southern Nevada Water System that supply water to more than 2 million people in the Las Vegas area. What took decades to unfold in the Great Lakes has played out in a matter of months in Lake Mead. Quaggas can lay eggs six or seven times a year in the warmer water, compared with once or twice a year in the Great Lakes. If you drained Lake Mead above Hoover Dam, says National Park Service biologist Bryan Moore, it would reveal that brown canyon walls that were mussel-free just two years ago are now black with quaggas at densities of up to 55,000 per square meter. The Bureau of Reclamation, which operates the Hoover, Davis and Parker dams, has employed divers with high-pressure water hoses to blow mussels out of pipelines and filter gates, and the agency retains the option of using chlorine treatments on the mussels if necessary. But those treatments are expensive, temporary and, in the case of chlorine, can have negative environmental effects. Colonization of the Columbia River Basin (CRB)in the Pacific Northwest by zebra and quagga mussel could affect all submerged components and conduits of the Federal Columbia River Power System (FCRPS) including trash racks, raw water distribution systems (headers), turbine bearing cooling systems, diffuser plates, service and fire-water systems, and fish passage facilities. Despite the uncertainty about zebra and quagga mussel tolerance to water velocity, irregularities such as cracks and crevices and scaling in older pipes and flanges can provide lower velocity refugia where zebra and quagga mussel settlement can occur. The attached mussels, in turn, then produce additional low flow refuges, allowing colonization in otherwise inhospitable flow environments. Settlement can also occur when water flow is reduced during generation down-time as conditions become more conducive to attachment. Zebra and quagga mussel densities within the CRB could vary widely depending on water chemistry, food availability, and breeding population. After their initial introduction, zebra mussel populations can rapidly increase by orders of magnitude, and then similarly decrease. Under ideal conditions in the Laurentian Great Lakes zebra mussel densities reach 700,000 - 800,000 per square meter (Kovalak et al, 1993). In the lower Mississippi River, where the zebra mussel has been introduced, densities of 400,000 per square meter have been reported (Kraft, 1995). The Mississippi has an ideal environment for zebra and quagga mussels, in part because food resources are abundant (Kraft, 1995). While Columbia River water quality parameters are favorable to zebra and quagga mussel colonization (Athearn 1999), the Columbia River's lower plankton densities in comparison to the Mississippi or Great Lakes, may limit zebra and quagga mussel population densities. Densities of zebra and quagga mussels in the Pacific Northwest will determine the severity of impacts on hydropower, navigation, and fish passage facilities. Zebra mussel densities in powerhouses will depend on the configuration of the water systems and water conduit materials. The potential economic impacts of zebra and quagga mussels on hydropower generation facilities in the Columbia River will be determined by a number of factors including density, growth rate, and maintenance costs. While density and growth are affected by environmental factors as noted above, maintenance costs will also be driven by the difficulty in accessing fouled areas, the methods available for removal and control, and the amount of time available for maintenance activities. They prefer to cling to flat, stainless steel structures where water flows less than 6 feet per second. The muscles infestation sets in and begins to clog hydroelectric power cooling pipes and other hardware in the dams' operations with quagga colonies. Not only do they pose a threat to the cooling pipe system for hydroelectric turbines, but also to the network that supplies domestic water for workers and visitors at the dams. Economic Impacts o Hydroelectric Dams and Nuclear Power Plants There are more than 85,000 dams in the United States alone, of which approximately 11% are federally owned and operated. The major concern is the 30
blockage of water lines designed to cool the hydropower turbines at dams like Hoover. This problem has already caused a "significant increase in the frequency of high temperature alarms in cooling systems, requiring shutdowns" so that the mussels could be removed. Quagga The quagga mussels, which grow to about 1.5 inches, are clogging water lines that are used to cool the 17 massive hydropower turbines at Hoover Dam and have already forced dam operators to temporarily shut down turbines that supply electricity to 1.6 million people in southern Nevada, Arizona and California. The mussels have caused similar problems at the downstream Davis Dam in Lake Mohave and Parker Dam in Lake Havasu, both of which provide electricity for thousands of people in Arizona and California. The mussels have also threatened to clog water intake lines in Lake Mead operated by the Southern Nevada Water System that supply water to more than 2 million people in the Las Vegas area. Maintenance costs will also be driven by the difficulty in accessing fouled areas, the methods available for removal and control, and the amount of time available for maintenance activities. It has been estimated that hundreds of millions of dollars is spent annually to combat the mussel infestation at hydroelectric dams alone, and it is expected that this amount will increase exponentially once the infestation has spread to the West. Virtually any submerged area with a moderate flow rate that draws water from an infested water source is vulnerable to colonization. This is especially true of areas that offer protection to small mussels, such as crevices or seams. Intake screens, for example, are common settlement areas and are often coated with clumps or druses of mussels. The presence of dislodged shells in the discharge of a facility's raw well or forbay is a common first indicator of the presence of zebra mussels in the raw water main. Facilities may also experience a noticeable decrease in head pressure. Most facilities have numerous components subject to severe bio-fouling, o Shipping Industry The shipping industry worldwide spends huge amounts every year combating the effects of "fouling". Every year or two, ocean going vessels must dry-dock in order to undergo extensive work over two or more weeks to remove barnacles that have attached to the hull. Prior to dry-docking, ships gradually undergo rapid increases in additional fuel costs due to increased drag from fouling. The mechanism involved in fouling occurs in a series of three steps. Within one week, the hull surface is coated with a slimy deposit. Following this, various micro-organisms (bacteria) attach. Barnacles attach to this slimy/bacterial coating and become attached to the ship's hull using a bio-cement generated by a series of three proteins that undergo a conformational change, within the organism. This cement is one of, if not the strongest cement known to date of anything produced naturally. The current anti-fouling paint applied to ship hulls contains toxic chemicals and heavy metals. However, as the international shipping community has been issuing legislation prohibiting the use of these environmentally hazardous substances - the need for alternatives is pressing. o Recreational Boating Industry In contrast, Lake Mead Marina predicts the costs to the West's recreational boating industry alone will be immense in the coming few years. Mussels are smothering everything under the waterline at marinas, making simple maintenance on boats and floating docks expensive and time consuming, not to mention dangerous due to the razor-sharp shells being plucked from the water. The United States Park Service, which figures the mussels have been in Lake Mead since 2005, is trying to protect the rest of the West's waters by requiring boats that have been docked in a slip to be decontaminated with jets of scalding water before departing Lake Mead. A killer hot wash costs about $40 for a small boat and up to $200 for a houseboat. o Ecological Damage The infestation of zebra and quagga mussels are wreaking havoc on the native species indigenous to the waterways they inhabit. These mussels attach to other mussel species and crustaceans making it almost impossible for them to eat and survive. While the zebra and quagga do have predator enemies, there are not enough to consume the rapidly growing infestation. 31
This is more than an ecological concern. The federal government plans to spend over a billion dollars in the coming years to help these species recover, and zebra and quagga mussels have a history of ravaging native species in the waters they invade. In Lake Michigan, for example, prey fish numbers are less than 10% of what they were before the invasive mussels arrived. Zebra mussels are also believed to be the source of deadly avian botulism poisoning that has killed tens of thousands of birds in the Great Lakes since the late 1990s. Zebra and quagga mussels accumulate organic pollutants within their tissues to levels more than 300,000 times greater than concentrations in the environment and these pollutants are found in their pseudofeces, which can be passed up the food chain, therefore increasing wildlife exposure to organic pollutants. Another major threat involves the fouling of native freshwater mussels. Since quaggas were discovered in Lake Michigan in 1998, plankton rings formed by the passage of storms have been eaten away by the quagga mussels, threatening the local ecosystem. Other zebra and quagga mussel infested applications include: o Drinking water treatment facilities; o Fish hatcheries and aquaculture facilities; o Golf courses; o Impoundments and reservoirs; o Institutions (hospitals, colleges, etc.); o National scenic river ways; o Navigation locks; o Public agencies; and o Farm irrigation water. Facilities and Properties We do not own our own facilities and are presently renting an identity office in Seattle, Washington. Employees Our officers, directors, and employees are responsible for planning, developing and operational duties and will continue to do so throughout the early stages of our growth. Management's Discussion and Analysis of Financial Condition and Results of Operations Material Changes in Financial Condition At February 28, 2014, our cash balance was $868. Cash on hand is currently our only source of liquidity. We do not have any lending arrangements in place with banking or financial institutions and we do not anticipate that we will be able to secure these funding arrangements in the near future. At February 28, 2014, we had a working capital deficit of $1,911,849 compared to a working capital deficit of $1,750,965 at November 30, 2013. At February 28, 2014, our total assets consisted of cash of $868, a website with a net carrying value of $5,000, and intangible assets and intellectual property of $45,000. This compares with total assets at November 30, 2013, which consisted of cash of $157, a website with a net carrying value of $5,833 and intangible assets and intellectual property of $45,000. At February 28, 2014, our total current liabilities increased to $1,912,717 from $1,751,122 at November 30, 2013. During the three months ended February 28, 2014, accounts payable and accrued liabilities increased by $164,420. We believe our existing cash balances will not be sufficient to carry our normal operations over the next three (3) months. Our short and long-term survival is 32
dependent on sales of securities as necessary or from shareholder loans, and thus, to the extent that we require additional funds to support our operations or the expansion of our business, we will attempt to sell additional equity shares or issue debt. Any sale of additional equity securities will result in dilution to our stockholders. Continuing events in worldwide capital markets may make it more difficult for us to raise additional equity or capital. There can be no assurance that additional financing, if required, will be available to us or on acceptable terms. Result of Operations For The Three Months Ended February 28, 2014 Compared To The Three Months Ended February 28, 2013. We recognized nil revenues from operational sales during the three months ending February 28, 2014. During the three months ended February 28, 2014, operating expenses were $174,542 compared to $244,573 for the three months ended February 28, 2013. The decrease of $70,031 was due to a decrease in consulting fees of $75,000 due to the mutual termination of that contract on November 30, 2013; and an increase in supplies expense of $7,782 required for product testing. Operating expenses during the three months ended February 28, 2014, consisted of salaries expense of $157,940, professional fees of $5,750, general and administrative expenses of $3,070, and supplies and materials expense of $7,782 compared to salaries expense of $159,000, consulting fees of $75,000, professional fees of $8,633, and general and administration fees of $1,940 incurred for the three months ended February 28, 2013. We recognized a net loss of $171,717 for the three months ended February 28, 2014, compared to a net loss of $244,364 for the three months ended February 28, 2013. Off-Balance Sheet Arrangements We currently do not have any off-balance sheet arrangements. Critical Accounting Policies and Estimates The preparation of the Company's interim consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The following is a summary of the significant accounting policies and related estimates that affect the Company's financial disclosures: Principles of Consolidation These interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Pept Peptide Technologies, Inc., a company incorporated in the province of British Columbia on August 5, 2013. All significant inter-company balances and transactions have been eliminated upon consolidation. Organizational and Start-up Costs Costs of start-up activities, including organizational costs, are expensed as incurred in accordance with Accounting Standards Codification ("ASC") 720-15, "Start-Up Costs". Development-Stage Company During the year ended November 30, 2010, the Company abandoned its previous business of sale of original artwork and re-entered the development stage with its intended new business, which currently has no revenues. Management expects 33
to sustain losses from operations until such time it can generate sufficient revenues to meet its anticipated cost structure. The Company is considered a development-stage company in accordance with the ASC 915, "Accounting and Reporting by Development-Stage Enterprises". A development-stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with original maturities of three months or less. Website In accordance with ASC 350-50, "Website Development Costs", expenditures during the planning and operating stages of the Company's website are expensed as incurred. Expenditures incurred during the website application and infrastructure development stage are capitalized and amortized to expense over the website's estimated useful life of 3 years. Intangible Assets Intangible assets include the cost of acquiring the intellectual property. In accordance with ASC 350-30 "General Intangibles Other Than Goodwill", an intangible asset that is acquired either individually or with a group of other assets shall be recognized. Costs of internally developing, maintaining, or restoring intangible assets that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as whole, shall be recognized as an expense when incurred. The intellectual property is determined to have an indefinite useful life and is not subject to amortization. The useful lives of intangible assets are reassessed at each reporting period. Impairment of Long-Lived Assets Long-lived assets include the website and intangible assets and intellectual property. Long-lived assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset. There has been no impairment as of February 28, 2014. Research and Development Research and development expenses are charged to operations as incurred. Income Taxes The Company adopted the ASC 740, "Accounting for Income Taxes". ASC 740 requires the use of the asset and liability method of accounting of income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the interim consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. Basic and Diluted Income (Loss) per Share In accordance with ASC 260, "Earnings per Share", the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and 34
if the additional common shares were dilutive. Diluted earnings per share are not shown for periods in which the Company incurs a loss because it would be anti-dilutive. At February 28, 2014, the Company had no stock equivalents that were anti-dilutive and excluded in the earnings per share computation. Estimated fair value of financial instruments The carrying value of the Company's interim consolidated financial instruments, consisting of cash, accounts payable, and notes payable approximate their fair value due to the short-term maturity of these instruments. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or currency risks arising from these financial statements. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. At February 28, 2014, all cash and cash equivalents were insured by agencies of the U.S. Government. Foreign Currency Translation The interim consolidated financial statements are presented in U.S. dollars. In accordance with ASC 830 "Foreign Currency Matters", foreign denominated monetary assets and liabilities are translated to their U.S. dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the period. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. Comprehensive Income (Loss) The Company adopted ASC 220, "Reporting Comprehensive Income". ASC 220 requires that the components and total amounts of comprehensive income be displayed in the interim consolidated financial statements beginning in 1998. Comprehensive income includes net income and all changes in equity during a period that arises from non-owner sources, such as foreign currency items and unrealized gains and losses on certain investments in equity securities. Use of Estimates The preparation of the Company's interim consolidated financial statements are in conformity with U.S. GAAP which requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from those estimates. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We believe our market risk exposures arise primarily from exposures to fluctuations in interest rates and exchange rates. We presently only transact business in Canadian and U.S. Dollars. We believe that the exchange rate risk surrounding the future transactions of the Company will not materially or adversely affect our future earnings. We do not believe that we are subject to any seasonal trends. We do not use derivative financial instruments to manage risks or for speculative or trading purposes. ITEM 4. CONTROLS AND PROCEDURES As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act). Based on this evaluation, the Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. 35
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management's assessment of the effectiveness of the small business issuer's internal control over financial reporting is as of the quarter ended February 28, 2014. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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. There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended February 28, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 1A. RISK FACTORS Not applicable. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURE Not Applicable. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS Exhibit Number Description 31.1 Section 302 Certification - Chief Executive Officer. 31.2 Section 302 Certification - Chief Financial Officer. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer. 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer. 36
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 8th day of April, 2014. PEPTIDE TECHNOLOGIES, INC. Date: April 8, 2014 By: /s/ Scott McKinley ------------------ Name: Scott McKinley Title: Chief Executive Officer Date: April 8, 2014 By: /s/ Erik Odeen -------------- Name: Erik Odeen Title: Chief Financial Officer 3