Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - PEPTIDE TECHNOLOGIES, INC. | Financial_Report.xls |
| EX-32.2 - CERTIFICATION - PEPTIDE TECHNOLOGIES, INC. | exhibit32-2.htm |
| EX-32.1 - CERTIFICATION - PEPTIDE TECHNOLOGIES, INC. | exhibit32-1.htm |
| EX-31.1 - CERTIFICATION - PEPTIDE TECHNOLOGIES, INC. | exhibit31-1.htm |
| EX-31.2 - CERTIFICATION - PEPTIDE TECHNOLOGIES, INC. | exhibit31-2.htm |
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 31 August 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 000-53230
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) 452-3995
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 (§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.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
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 20 October 2014: 156,412,660 shares of common stock.
The Company recognized $9,239 in revenues during the quarter ended 31 August 2014.
1
PART I – FINANCIAL INFORMATION
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEPTIDE TECHNOLOGIES, INC.
(A Development Stage Company)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
(Unaudited)
AUGUST 31, 2014
Financial Statements
F-3
PEPTIDE
TECHNOLOGIES, INC.
(A Development Stage Company)
Interim
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
August
31, 2014
F-4
PEPTIDE
TECHNOLOGIES, INC.
(A Development Stage Company)
INTERIM CONSOLIDATED BALANCE SHEETS
|
August 31, 2014 |
November 30, 2013 |
|||||
| (Unaudited) | (Audited) | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash and cash equivalents | $ | 11,560 | $ | 157 | ||
| Total Current Assets | 11,560 | 157 | ||||
| Website (net of accumulated amortization of $6,667 and $4,167, respectively) (Note 3) | 3,333 | 5,833 | ||||
| Intangible assets and intellectual property (Note 7) | - | 45,000 | ||||
| TOTAL ASSETS | $ | 14,893 | $ | 50,990 | ||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||
| LIABILITIES | ||||||
| Current Liabilities | ||||||
| Accounts payable and accrued liabilities (Note 4) | $ | 651,968 | $ | 1,662,272 | ||
| Notes payable and accrued interest (Note 5) | 105,631 | 88,850 | ||||
| Total Current Liabilities | 757,599 | 1,751,122 | ||||
| STOCKHOLDERS’ DEFICIENCY | ||||||
| Capital Stock (Note 8) | ||||||
| Authorized: | ||||||
| 675,000,000 common shares, par value $0.001 per share | ||||||
| Common shares issued and outstanding: | ||||||
| 156,412,660 and 151,123,000 at August 31, 2014 and November 30, 2013, respectively | 156,413 | 151,123 | ||||
| Additional paid-in capital | 187,899 | 148,279 | ||||
| Accumulated deficit | (105,837 | ) | (105,837 | ) | ||
| Accumulated deficit during development stage | (981,181 | ) | (1,893,697 | ) | ||
| Total Stockholders’ Deficiency | (742,706 | ) | (1,700,132 | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | 14,893 | $ | 50,990 |
The accompanying notes are an integral part of these interim consolidated financial statements.
F-5
PEPTIDE
TECHNOLOGIES, INC.
(A Development Stage Company)
INTERIM
CONSOLIDATED
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)
| For the three-month period ended August 31, 2014 | For the three-month period ended August 31, 2013 | For the nine-month period ended August 31, 2014 | For the nine-month period ended August 31, 2013 | Cumulative from re-entering of development stage on June 26, 2010 to August 31, 2014 | |||||||||||
| Revenue | |||||||||||||||
| Revenue | $ | 9,239 | $ | - | $ | 9,239 | $ | - | $ | 9,239 | |||||
| Expenses | |||||||||||||||
| Consulting | - | 75,000 | - | 227,000 | 552,975 | ||||||||||
| Salaries and bonus (Note 4) | 49,224 | 159,000 | 364,568 | 477,000 | 1,434,652 | ||||||||||
| Office and administration | 4,185 | 5,419 | 15,563 | 13,963 | 68,588 | ||||||||||
| Professional fees | 13,494 | 5,412 | 23,255 | 19,117 | 174,998 | ||||||||||
| Supplies and materials | 1,909 | 1,101 | 9,903 | 1,101 | 70,135 | ||||||||||
| 68,812 | 245,932 | 413,289 | 738,181 | 2,301,348 | |||||||||||
| Net Loss before Other Items | (59,573 | ) | (245,932 | ) | (404,050 | ) | (738,181 | ) | (2,292,109 | ) | |||||
| Other Items | |||||||||||||||
| Write down of intangible assets (Note 7) | - | - | (45,000 | ) | - | (45,000 | ) | ||||||||
| Forgiveness of debt (Note 6) | - | - | 1,361,000 | - | 1,361,000 | ||||||||||
| Foreign exchange gain (loss) | 1,523 | (1,274 | ) | 3,252 | 2,898 | 5,366 | |||||||||
| Interest expense (Note 5) | (1,087 | ) | (1,097 | ) | (2,686 | ) | (2,909 | ) | (10,438 | ) | |||||
| Net Profit (Loss) for the Period | (59,137 | ) | (248,303 | ) | 912,516 | (738,192 | ) | (981,181 | ) | ||||||
| Other Comprehensive Loss | |||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | (333 | ) | |||||||||
| Comprehensive Profit (Loss) for the Period | $ | (59,137 | ) | $ | (248,303 | ) | $ | 912,516 | $ | (738,192 | ) | $ | (981,514 | ) | |
| Profit (Loss) per share from operations – Basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | 0.01 | $ | (0.00 | ) | ||||
| Weighted Average Number of Shares Outstanding | 153,143,767 | 151,107,016 | 152,154,135 | 150,022,908 |
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 CASH
FLOWS
(Unaudited)
|
For the three-month period ended August 31, 2014 |
For the three-month period ended August 31, 2013 |
For the nine-month period ended August 31, 2014 |
For the nine-month period ended August 31, 2013 |
Cumulative from re-entering of development stage on June 26, 2010 to August 31, 2014 |
|||||||||||
| OPERATING ACTIVITIES | |||||||||||||||
| Net profit (loss) | $ | (59,137 | ) | $ | (248,303 | ) | $ | 912,516 | $ | (738,192 | ) | $ | (981,181 | ) | |
| Adjustments for non-cash items: | |||||||||||||||
| Accrued interest | 1,087 | 1,097 | 2,686 | 2,909 | 10,438 | ||||||||||
| Amortization | 833 | 833 | 2,500 | 2,500 | 6,667 | ||||||||||
| Foreign exchange gain (loss) | (1,523 | ) | 1,275 | (3,252 | ) | (2,898 | ) | (5,366 | ) | ||||||
| Forgiveness of debt (Note 6) | - | - | (1,361,000 | ) | - | (1,361,000 | ) | ||||||||
| Non-cash consulting expense | - | - | - | - | 2,000 | ||||||||||
| Share-based payment | 5,250 | - | 5,250 | - | 13,250 | ||||||||||
| Write down of intangible assets and intellectual property (Note 7) | - | - | 45,000 | - | 45,000 | ||||||||||
| Changes in operating assets and liabilities | |||||||||||||||
| Decrease in prepaid expenses | - | - | - | 3,494 | 2,710 | ||||||||||
| Increase in accounts payable and accrued liabilities | 49,360 | 225,000 | 350,696 | 684,678 | 2,012,218 | ||||||||||
| Cash used in operating activities | (4,130 | ) | (20,098 | ) | (45,604 | ) | (47,509 | ) | (255,264 | ) | |||||
| INVESTING ACTIVITIES | |||||||||||||||
| Purchase of website | - | - | - | - | (10,000 | ) | |||||||||
| Cash used in investing activities | - | - | - | - | (10,000 | ) | |||||||||
| FINANCING ACTIVITIES | |||||||||||||||
| Proceeds from issuance of common shares, net of share issuance costs | 4,660 | 25,000 | 39,660 | 45,000 | 160,774 | ||||||||||
| Increase in notes payable | 9,500 | - | 17,347 | - | 84,559 | ||||||||||
| Contribution by related party | - | - | - | - | 27,288 | ||||||||||
| Cash from financing activities | 14,007 | 25,000 | 57,007 | 45,000 | 272,621 | ||||||||||
| Effect of foreign exchange rate changes on cash | - | - | - | - | (333 | ) | |||||||||
| Increase (decrease) in cash and cash equivalents | 9,877 | 4,902 | 11,403 | (2,509 | ) | 7,024 | |||||||||
| Cash and cash equivalents, beginning of period | 1,683 | 369 | 157 | 7,780 | 4,536 | ||||||||||
| Cash and cash equivalents, end of period | $ | 11,560 | $ | 5,271 | $ | 11,560 | $ | 5,271 | $ | 11,560 | |||||
| Supplemental Disclosure of Cash Flow Information (Note 12) |
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
STOCKHOLDERS’ DEFICIENCY
For the Period from November 30, 2013 through August
31, 2014
(Unaudited)
| CAPITAL STOCK | ACCUMULATED | |||||||||||||||||
| ADDITIONAL | DEFICIT DURING | |||||||||||||||||
| PAID-IN | ACCUMULATED | DEVELOPMENT | ||||||||||||||||
| SHARES | AMOUNT | CAPITAL | DEFICIT | STAGE | TOTAL | |||||||||||||
| 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 (Note 8) | 45,000 | 45 | 42,955 | - | - | 43,000 | ||||||||||||
| Contractor services (Note 8) | 2,000,000 | 2,000 | - | - | - | 2,000 | ||||||||||||
| Net loss for the year | - | - | - | - | (995,477 | ) | (995,477 | ) | ||||||||||
| Balance, 30 November 2013 | 151,123,000 | 151,123 | 148,279 | (105,837 | ) | (1,893,698 | ) | (1,700,132 | ) | |||||||||
| Shares issued for | ||||||||||||||||||
| Cash, net of share issuance costs (Note 8) | 39,660 | 40 | 39,620 | - | - | 39,660 | ||||||||||||
| Related party services | 5,250,000 | 5,250 | - | - | - | 5,250 | ||||||||||||
| Net profit (loss) for the period | - | - | - | - | 912,516 | 912,516 | ||||||||||||
| Balances, 31 August 2014 | 156,412,660 | $ | 156,413 | $ | 187,899 | $ | (105,837 | ) | $ | (981,182 | ) | $ | (742,706 | ) | ||||
The accompanying notes are an integral part of these interim consolidated financial statements.
F-8
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 1. | NATURE AND CONTINUANCE 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 currently does not have any transactions from the date of incorporation on 5 August 2013 to 31 August 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 (the “First Amendment”). As a result of the First 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). |
| On 1 May 2014, the Company entered into an agreement whereby the Asset Purchase Agreement and the First Amendment were deemed null and void and the platforms were returned to the original vendor (Note 7). |
| On 26 May 2014, the Company entered into an exclusive global distribution agreement for its AquaNatural Marine coating with All-Sea Coatings Ltd. (a division of All-Sea Enterprises) of North Vancouver, Canada. This agreement has been replaced with an Asset Purchase Agreement date 14 August 2014. |
| On 14 August 2014, the Company entered into an Asset Purchase Agreement with All-Sea Coatings Ltd. All-Sea Coatings Ltd has acquired from the Company the non-commercialized re-formulated assets that were developed by the Company. The Company business is to realize a 3% Royalty of all Gross Sales & Revenue, to be paid to the Company derived from All-Sea Coatings Ltd. |
F-9
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 1.3 | Basis of Going Concern |
| The accompanying interim consolidated financial statements as at 31 August 2014 and for the nine 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 net profit of $912,516 for the nine month period ended 31 August 2014 (31 August 2013 – loss of $738,192; cumulative loss - $981,514) and has a working capital deficit of $746,039 at 31 August 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-10
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 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, 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 significant 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. |
| 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. |
F-11
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 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. During the nine month period ended 31 August 2014, the Company recorded a write down of $45,000 related to its intangible assets and intellectual property (Notes 7 and 12). |
| 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 31 August 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. |
| 2.11 | Basic and Diluted Income (Loss) per Share |
| In accordance with ASC 260, “Earnings per Share," the basic income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted income (loss) per common share is computed similar to basic income (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 31 August 2014, the Company had no stock equivalents that were anti-dilutive and excluded in the earnings (loss) per share computation. |
F-12
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 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 instruments. |
| Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. At 31 August 2014, cash and cash equivalents of $310 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 (loss) be displayed in the interim consolidated financial statements beginning in 1998. Comprehensive income (loss) includes net income (loss) 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. |
| 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 interim 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. |
F-13
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 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. |
| In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers," which provides a five-step approach to be applied to all contracts with customers. ASU No. 2014-09 also requires expanded disclosures about revenue recognition. ASU No. 2014-09 is effective for annual reporting periods beginning after 15 December 2016, including interim periods. Early adoption is not permitted. The adoption of this update is not expected to have a material impact on the Company’s interim consolidated financial statements. |
| In June 2014, the FASB issued ASU No. 2014-10, “Development Stage Entities," which intends to remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the update eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. ASU No. 2014-10 is effective for fiscal years and interim periods 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-14
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 3. | WEBSITE |
| As at: |
31 August 2014 |
30 November 2013 (Audited) |
||||
|
Cost $ |
Accumulated amortization $ |
Net book value $ |
Cost $ |
Accumulated amortization $ |
Net book value $ |
|
| Website | 10,000 | 6,667 | 3,333 | 10,000 | 4,167 | 5,833 |
| Total | 10,000 | 6,667 | 3,333 | 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 years, and the cost is being amortized over the life of the asset. During the nine month period ended 31 August 2014, the Company recognized amortization expense of $2,500 (31 August 2013 - $2,500; cumulative - $6,667) (Note 9). |
| 4. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
| As at: |
31 August 2014 $ |
30 November 2013 (Audited) $ |
| Accounts payable | 38,317 | 574,188 |
| Accrued liabilities | 4,000 | 27,000 |
| Payroll taxes payable | 29,652 | 17,084 |
| Salaries and benefits payable (Note 6) | 580,000 | 1,044,000 |
| Total accounts payable and accrued liabilities | 651,969 | 1,662,272 |
| Trades payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year. |
| On 27 May 2014, the Chief Executive Officer (“CEO”) requested that his salary be suspended until further notice. Additionally, he forgave the entire balance of his accrued salary in the amount of $516,000 and accrued bonus in the amount of $300,000 as at 31 August 2014 (Notes 6 and 12). |
| On 27 May 2014, a consultant forgave all outstanding fees payable in relation to consulting services rendered in the amount of $545,000 (Notes 6 and 12). |
F-15
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 5. | NOTES PAYABLE |
| As at: |
31 August 2014 $ |
30 November 2013 (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. The loan is unsecured and bears interest at a rate of 6% per annum. Principal and accrued interest are due on 30 November 2014. The loan payable to PSI as at 31 August 2014 consists of principal and accrued interest of $41,445 (30 November 2013 – $42,710) and $6,963 (30 November 2013 – $5,251), respectively (Note 12). | 48,408 | 47,961 |
| 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.. The loan payable to PSI as at 31 August 2014 consists of principal and accrued interest of $18,420 (30 November 2013 – $18,982) and $2,486 (30 November 2013 – $1,707), respectively (Note 12). | 20,906 | 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 |
| On 21 April 2014, PSI Issued a loan of CAD $8,000 to the Company. The loan is unsecured, bears no interest, and has no fixed terms of repayment. | 7,368 | - |
| On 14 August 2014, PSI issued a loan of CAD $9,500 to the Company. The loan is unsecured, bears no interest, and has no fixed terms of repayment. | 8,749 | - |
| Total notes payable | 105,631 | 88,850 |
| 6. | RELATED PARTY TRANSACTIONS |
| As at 31 August 2014, the amount due to related parties includes $580,000 (30 November 2013 - $1,044,000) payable to past directors and employees of the Company in relation to salaries and benefits earned, and $Nil (30 November 2013 - $730) payable to the Chief Financial Officer (“CFO”) of the Company in relation to expense reimbursements. Of the amount due to related parties, $Nil relates to bonuses payable to the CEO of the Company (30 November 2013 - $300,000) (Note 4). |
| During the nine month period ended 31 August 2014, the Company accrued salaries and benefits of $364,568 to officers and employees of the Company (31 August 2013 - $477,000; cumulative - $1,434,562). |
F-16
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| On 27 May 2014, the CEO requested that his salary be suspended until further notice. Additionally, he forgave the entire balance of his accrued salary in the amount of $516,000 and accrued bonus in the amount of $300,000 as at 31 May 2014. As at 31 August 2014, included in salaries and benefits are bonuses of $Nil accrued to the CEO of the Company during the nine month period ended 31 August 2014 (31 August 2013 - $Nil; cumulative - $Nil) (Notes 4 and 12). |
| 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 (31 August 2013 - $227,000; cumulative - $Nil) during the nine month period ended 31 August 2014. |
| On 27 May 2014, a formerly related party consultant forgave all outstanding fees payable in relation to consulting services rendered in the amount of $545,000. As at 31 August 2014 there is $Nil (30 November 2013 - $545,000) outstanding and payable to the consultant for consulting services received (Notes 4 and 12). |
| 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. On 27 May 2014, the Program was eliminated by mutual agreement from both parties affected. As a result, no commissions will be earned by either the CEO or the applicable consultant on gross sales of fouling prevention coatings. As at 31 August 2014, there were $Nil commissions earned (Note 7). |
| During the nine month period ended 31 August 2014, directors and shareholders of the Company made cash contributions in the amount of $Nil (31 August 2013 - $Nil, cumulative – $27,288). |
| On 15 July 2014, the Company issued 4,660 shares of the Company’s restricted common stock for cash proceeds of $5,660 (Note 8). |
| On 28 July 2014, the Company issued 5,250,000 fully vested shares of the Company’s restricted common stock at a par value of $0.001 per share to two directors of the Company for consulting services rendered. As a result, the Company recorded professional fees of $5,250 when the stock was issued (Note 8). |
| 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 the First Amendment 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 Asset 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 First Amendment. The cancellation of 30,000,000 common shares has been recorded as a recovery of intangible assets and intellectual property (Note 1). |
F-17
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| On 1 May 2014, the Company entered into an agreement whereby the Asset Purchase Agreement and the First Amendment were deemed null and void and the platforms were returned to the original vendor (Note 1). |
| During the nine month period ended 31 August 2014, the Company recorded a write down of $45,000 (31 August 2013 - $Nil; cumulative - $45,000) related to its intangible assets and intellectual property (Note 12). |
| On 20 January 2013, the Board approved 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. On 27 May 2014, the Program was eliminated by mutual agreement from both parties affected. As a result, no commissions will be earned by either the CEO or the applicable consultant on gross sales of fouling prevention coatings. As of 31 August 2014, there were $Nil commissions earned (Note 6). |
| 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 an $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 156,412,660 common shares with a par value of $0.001 per common share. The Company’s common stock issuances to date are as follows: |
| o | 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. |
| o | 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 of 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). |
| o | On 18 July 2013, the Company issued 25,000 shares of the Company’s restricted common stock for cash proceeds of $25,000. |
| o | On 3 December 2013, the Company issued 10,000 shares of the Company’s restricted common stock for cash proceeds of $10,000. |
F-18
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| o | On 3 March 2014, the Company issued 10,000 shares of the Company’s restricted common shares for cash proceeds of $10,000. |
| o | On 11 March 2014, the Company issued 5,000 shares of the Company’s restricted common shares for cash proceeds of $5,000. |
| o | On 3 April 2014, the Company issued 10,000 shares of the Company’s restricted common stock for cash proceeds of $10,000. |
| o | On 15 July 2014, the Company issued 4,660 shares of the Company’s restricted common stock for cash proceeds of $4,660 (Note 6). |
| o | On 28 July 2014, the Company issued 5,250,000 fully vested shares of the Company’s restricted common stock at a par value of $0.001 per share to two directors of the Company for consulting services rendered. As a result, the Company recorded professional fees of $5,250 when the stock was issued (Note 6). |
| 9. | GENERAL AND ADMINISTRATIVE EXPENSES |
|
Three month period ended 31 August 2014 $ |
Nine month period ended 31 August 2014 $ |
Three month period ended 31 August 2013 $ |
Nine month period ended 31 August 2013 $ |
Cumulative from re-entering of development stage on 26
June 2010 to 31 August 2014 $ |
|
| Administration | - | - | - | - | 20 |
| Amortization (Note 3) | 833 | 2,500 | 834 | 2,500 | 6,667 |
| Bank charges | 64 | 198 | 16 | 170 | 1,482 |
| Dues and subscription | - | - | - | - | 575 |
| Filing fees | 1,419 | 7,397 | 100 | 3,328 | 18,867 |
| Meals and entertainment | - | - | 254 | 254 | 254 |
| Office | 825 | 1,325 | 1,755 | 2,084 | 8,048 |
| Penalties | - | - | - | - | 10,000 |
| Transfer agent | 100 | 650 | 160 | 400 | 4,151 |
| Rent | 147 | 638 | 363 | 1,101 | 1,871 |
| Share-based payment | - | - | - | - | 8,000 |
| Telecommunication | 726 | 2,783 | 786 | 1,469 | 5,777 |
| Travel | - | - | 1,151 | 2,657 | 2,656 |
| Website | 72 | 72 | - | - | 221 |
| Total general and administration expenses | 4,185 | 15,563 | 5,419 | 13,963 | 68,588 |
F-19
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 10. | INCOME TAXES |
| 10.1.1 | 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 nine month periods ended 31 August 2014 and 2013, these differences result from the following items: |
|
For the nine month period ended 31 August 2014 $ |
For the nine month period ended 31 August
2013 $ |
|
| Income (loss) before income taxes | 912,516 | (738,192) |
| Federal income tax rates | 35.00% | 35.00% |
| Income tax expense (recovery) based on the above rates | 319,381 | (258,367) |
| Non–deductible items | 15,750 | - |
| Change in valuation allowance | (335,131) | (258,367) |
| Income tax expense | - | - |
| 10.2 | Deferred tax balances |
| The composition of the Company’s deferred tax assets as at 31 August 2014 and 30 November 2013 are as follows: |
| As at: |
31 August 2014 $ |
30 November 2013 (Audited) $ |
| Net income tax operating loss carry-forward | 1,018,391 | 1,975,908 |
| Deferred tax assets | 356,437 | 691,568 |
| Valuation allowance | (356,437) | (691,568) |
| Deferred tax assets (liabilities) | - | - |
| As at 31 August 2014, the Company has a total non-capital loss carry forward balance of $1,018,391 (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 (Note 11). |
F-20
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 11. | COMMITMENTS AND CONTINGENCY |
| o | 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 “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. |
| 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. |
| On 19 May 2014, the Company renewed/extended the Agreement with BB&TCM. The extension runs from 1 May 2014 through 1 May 2016 (24 months). All other provisions of the Agreement remain unchanged. |
| o | On 1 May 2014, the Company entered into an agreement whereby the Asset Purchase Agreement and the First Amendment were deemed null and void and the platforms were returned to the original vendor. |
| o | On 26 May 2014, the Company entered into an exclusive global distribution agreement with All-Sea Coatings Ltd. (a division of All-Sea Enterprises) of North Vancouver, Canada. This agreement has been replaced with an Asset Purchase Agreement date August 14, 2014. |
| o | On 14 August 2014, Peptide Technologies, Inc. ("the Company") entered into an Asset Purchase Agreement with All-Sea Coatings Ltd. All-Sea Coatings Ltd has acquired from Peptide Technologies Inc. the non-commercialized re-formulated assets that were developed by the Company. |
| o | 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 and 10). |
| o | The Company is committed to making payments related to its notes payable (Note 5). |
| 12. | SUPPLEMENTAL CASH FLOW INFORMATION |
| The Company made the following cash payments for interest and income taxes: |
|
Three month period ended 31 August 2014 $ |
Six month period ended 31 August 2014 $ |
Three month period ended 31 August 2013 $ |
Six month period ended 31 August 2013 $ |
|
| Interest paid | - | - | - | - |
| Taxes paid | - | - | - | - |
| Total cash payments | - | - | - | - |
F-21
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
31 August, 2014
(Unaudited)
| 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 nine month period ended 31 August 2014, the Company accrued interest expense of $1,743 (31 August 2013 - $2,014) 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 nine month period ended 31 August 2014, the Company accrued interest expense of $774 (31 August 2013 - $895) 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). |
| During the nine month period ended 31August 2014, the Company recorded a write down of $45,000 (31 August 2013 - $Nil; cumulative - $45,000) related to its intangible assets and intellectual property (Note 7). |
| On 27 May 2014, the CEO requested that his salary be suspended until further notice. Additionally, he forgave the entire balance of his accrued salary in the amount of $516,000 and accrued bonus in the amount of $300,000 as at 31 May 2014 (Notes 4 and 6). |
| On 27 May 2014, a former related party consultant forgave all outstanding fees payable in relation to consulting services rendered in the amount of $545,000 (Notes 4 and 6). |
| On 15 July 2014, the Company issued 4,660 shares of the Company’s restricted common stock for cash proceeds of $5,660 (Notes 6 and 8). |
| On 28 July 2014, the Company issued 5,250,000 fully vested shares of the Company’s restricted common stock at a par value of $0,001 per share to two directors of the Company for consulting services rendered. As a result, the Company recorded professional fees of $5,250 when the stock was issued (Notes 6 and 8). |
| 13. | SUBSEQUENT EVENTS |
| There have been no reportable events which have occurred during the period from the nine month period ended 31 August 2014 to the date the interim consolidated financial statements were available to be issued on 20 October 2014. |
F-22
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 interim consolidated financial statements and notes appearing elsewhere in this Quarterly Report, on Form 10-Q filed April 11, 2014, on Form 10Q/A filed July 23, 2014, 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 Asset Purchase Agreement in which the Company, in exchange for 75,000,000 shares of the Company’s restricted common stock, will receive all rights and title to proprietary technologies and formulas involving the application of specialty peptides. On December 21, 2011 the Asset Purchase Agreement was amended and 30,000,000 of the 75,000,000 shares issued were returned to treasury and cancelled. Having done this, the Company has changed its business focus from obtaining leases for the exploration and production of oil and gas in areas of northern Alberta, Canada, to the manufacturing and distribution of natural peptide solutions to combat the economic burden caused by the zebra and quagga mussels to the hydropower electricity industry.
On December 14, 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 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 Asset 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.
22
On May 1, 2014, the Company entered into an agreement whereby the Asset Purchase Agreement and the First Amendment were deemed null and void and the platforms were returned to the original vendor.
On May 26, 2014, Peptide Technologies, Inc. entered into an exclusive global distribution agreement for its AquaNatural Marine coating with All-Sea Coatings Ltd. (a division of All-Sea Enterprises) of North Vancouver, Canada. This agreement has been replaced with an Asset Purhcase Agreement date August 14, 2014.
On August 14, 2014, Peptide Technologies, Inc. ("the Company") entered into an Asset Purchase Agreement with All-Sea Coatings Ltd. All-Sea Coatings Ltd has acquired from Peptide Technologies Inc. the non-commercialized re-formulated assets, that were developed by the Company, in consideration of $10,000, (ten thousand dollars) and a 3% Royalty of all Gross Sales & Revenue, to be paid to Peptide Technologies Inc., derived from All-Sea Coatings Ltd, until such a time should occur that Formulas and or All-Sea Coatings Ltd (the company) is sold. All-Sea Coatings Ltd shall cover all costs, expenses and capital, including all monies for additional research and development etc., required to commercialize all of the coatings. All-Sea Coatings Ltd shall pay 10% of the gross sale to Peptide Technologies Inc. derived from any formula sold, out right, and or, if All-Sea Coatings (the Company) is purchased, 10% of the gross sale of All-Sea Coatings Ltd will be paid to Peptide Technologies Inc.
Business of Issuer
The Company business is to realize a 3% Royalty of all Gross Sales & Revenue, to be paid to Peptide Technologies Inc. derived from All-Sea Coatings Ltd, until such a time should occur that Formulas and or All-Sea Coatings Ltd (the company) is sold.
The Company has developed a non-commercialized, incomplete, re-formulated anti-fouling coating formula which has been sold to All-Sea Coatings Ltd. All-Sea Coatings Ltd. shall cover all costs, expenses and capital, including all monies for additional research and development etc., required to commercialize all of the various coatings that will be produced.
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 31 August 2014, our cash balance was $11,560. 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 31 August 2014, we had a working capital deficit of $746,039 compared to a working capital deficit of $1,750,965 at 30 November 2013. The reduction of our working capital deficit was caused by a $1.36 million dollar adjustment resulting from the forgiveness of wages and fees due to the CEO and an external consultant, and a $45,000 write down of intangible assets. (See Notes 4, 6 and 7 within the financial statement section of this report for additional detail). At 31 August 2014, our total assets consisted of cash of $11,560 and a website with a net carrying value of $3,333. 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.
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At 31 August 2014, our total liabilities decreased to $757,599 from $1,751,122 at November 30, 2013. During the nine months ended 31 August 2014, accounts payable and accrued liabilities decreased by $993,523. The decrease was primarily caused by the forgiveness of accrued wages, bonus, and consulting fees by our CEO and an external consultant.
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 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 31 August 2014 Compared To The Three Months Ended 31 August 2013.
We recognized $9,239 revenues from operational sales during the three months ending August 31, 2014.
During the three months ended 31 August 2014, operating expenses were $68,812 compared to $245,932 for the three months ended 31 August 2013. The decrease of $177,120 was due to a decrease in consulting fees of $75,000 due to the mutual termination of that contract on 30 November 2013, and a decrease in salaries of $110,000. Operating expenses during the three months ended August 31, 2014, consisted of salaries expense of $49,224, professional fees of $13,494, general and administrative expenses of $4,185, and supplies expense of $1,909, compared to salaries expense of $159,000, consulting fees of $75,000, professional fees of $5,412, general and administrative expenses of $5,419, and supplies expense of $1,101 incurred for the three months ended 31 August 2013.
We recognized net loss of $59,137 for the three months ended 31 August 2014, compared to a net loss of $248,303 for the three months ended 31 August 2013. The difference of $189,166 was a result of a reduction in accrued wages and a decrease in consulting expenses of $75,000 due to the cancellation of that agreement on 30 November 2013.
For The Nine Months Ended 31 August 2014 Compared To The Nine Months Ended 31 August 2013.
We recognized 9,239 revenues from operational sales during the nine months ending 31 August 2014.
During the nine months ended 31 August 2014, operating expenses were $413,289 compared to $738,181 for the nine months ended August 31, 2013. The decrease of $324,892 was due primarily to a decrease in consulting fees of $227,000 due to the mutual termination of that contract on November 30, 2013 and a reduction in accrued salaries of 112,432. Operating expenses during the nine months ended 31 August 2014, consisted of salaries expense of $364,568, professional fees of $23,265, general and administrative expenses of $15,563, and supplies and materials expense of $9,903, compared to salaries expense of $477,000, professional fees of $19,117, general and administrative expenses of $13,963, and supplies and materials expense of $1,101, incurred for the nine months ended 31 August 2013.
We recognized a net income of $912,516 for the nine months ended 31 August 2014, compared to a net loss of $738,192 for the nine months ended 31 August 2013. The difference of $1,650,708 was a result a result of the write-off adjustment of $1,361,000 of accrued wages and consulting fees, and the decrease in consulting expenses of $150,000 due to the cancellation of that agreement on 30 November 2013 offset with the write-down of $45,000 for intangible assets.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
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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 ("U.S. GAAP") 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 5 August 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 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.
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. During the nine month period ended 31 August 2014, the Company recorded a write down of $45,000 related to its intangible asset and intellectual property.
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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 31 August 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 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 August 31, 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 instruments.
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. At 31 August 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.
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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 interim consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
ITEM 3. QUANTATIVE 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.
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 31 August 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 August 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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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
On July 15, 2014, 4,660 shares of the Company’s common stock were issued for cash proceeds of $4,660.
Exemption From Registration Claimed
The above sale by the Company of its unregistered securities was made by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"). All of the individual and/or entity that purchased the unregistered securities was known to the Company and its management, through pre-existing business relationships, as long standing business associates . All purchasers were provided access to all material information, which they requested, and all information necessary to verify such information and were afforded access to management of the Company in connection with their purchases. All purchasers of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to the Company. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration in any further resale or disposition.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE.
Not Applicable.
ITEM 5. OTHER INFORMATION
All information required to be reported in a report on Form 8-K during the third quarter covered by this Form 10-Q has been reported.
ITEM 6. EXHIBITS
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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 20th day of October, 2014.
| PEPTIDE TECHNOLOGIES, INC. | ||
| Date: 20 October 2014 | By: | /s/ Dennis Cox |
| Name: | Dennis Cox | |
| Title: | President | |
| Date: 20 October 2014 | By: | /s/ Baxter Koehn |
| Name: | Baxter Koehn | |
| Title: | Chief Financial Officer | |
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