10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended February 28, 2015 

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: 000-52831

Nate’s Foods Co.

(Exact name of registrant as specified in its charter)

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

 312 S. Beverly Drive, #3401, Beverly Hills, CA 90212

(Address of principal executive offices) (zip code)

(949) 381-1834

(Registrant’s telephone number, including area code)

(714) 902-2051

(Registrant’s fax number, including area code)

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

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

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

Large accelerated filer	¨	Non-accelerated filer	¨
Accelerated filer	¨	Smaller reporting company	x

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

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

Title of Each Class	Outstanding as of April 14, 2015
Common stock, par value $0.0001 per share Class A Preferred Stock, par value $0.0001 per share Class B Preferred Stock, par value $0.0001 per share Class C Preferred Stock, par value $1.00 per share	77,250,000 1,940,103 148,115 26,394

NATE’S FOOD CO.

FORM 10-Q

February 28, 2015

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 4.	Control and Procedures	13

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Mine Safety Disclosures	16
Item 5.	Other Information	16
Item 6.	Exhibits	16

2

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

Nate’s Foods Co.

Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	February 28, 2015
Cash flows from operating activities
Net loss	$	(1,053,080	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for compensation		857,000
Changes in assets and liabilities:
Deferred Revenue – Related Party		29,250
Accounts payable		120,727
Net cash used in operating activities		(46,103	)
Cash flows from financing activities
Proceeds from Series C Preferred Stock		27,000
Loan from related party		20,281
Net cash provided by financing activities		47,281
Net change in cash	$	1,178
Cash balance, beginning of period	$	150
Cash balance, end of period	$	1,328
Noncash investing and financing activities:
Deemed dividend beneficial conversion feature on convertible Series C Preferred stock		27,000
Accounts payable paid on behalf of the Company through a related party note payable	$	117,727
Reclass of note payable to related party note payable	$	3,500

See accompanying notes to unaudited financial statements

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Nate’s Foods Co.

Balance Sheets

(Unaudited)

	February 28, 2015			May 31, 2014
ASSETS
Current assets:
Cash	$	1,328		$	150
Total assets	$	1,328		$	150
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities:
Accounts payable	$	3,000		$	-
Note payable - related party	$	141,508		$	-
Deferred revenue – related party		29,250
Note payable		-			3,500
Total liabilities	$	173,758		$	3,500
Stockholders’ Deficit:
Series A Preferred Stock, Par Value $.0001, 2,000,000 shares authorized, 1,940,103 issued and outstanding, respectively		194			194
Series B Preferred Stock, Par Value $.0001, 150,000 shares authorized, 149,365 issued and outstanding, respectively		15			15
Series C Preferred Stock, Par Value $1.00, 250,000 shares authorized, 26,394 and none issued and outstanding, respectively		26,394			-
Common Stock, Par Value $.0001, 300,000,000 shares authorized, 71,300,000 and 61,800,000 issued and outstanding, respectively		7,720			6,180
Additional paid in capital		849,827			(6,239	)
Accumulated deficit		(1,056,580	)		(3,500	)
Total stockholders’ deficit		(172,430	)		(3,350	)
Total liabilities and stockholders’ deficit	$	1,328		$	150

See accompanying notes to unaudited financial statements

4

Nate’s Foods Co.

Statement of Operations

(Unaudited)

	Three Months			Nine Months
	Ended			Ended
	February 28, 2015			February 28, 2015
Sales-related party, net	$	750		$	1,496
Gross Profit		750			1,496
Operating Expenses
Selling, general and administrative		360,325			949,344
Food Development/Research		23,693			105,232
Total operating expenses		384,018			1,054,576
Net Loss	$	(383,268	)	$	(1,080,080	)
Deemed dividend on Series C convertible preferred stock		-			(27,000	)
Net income (loss) attributable to common stockholders		(383,268	)		(1,186,080	)
Net loss per share, basic and diluted	$	(0.01	)	$	(0.02	)
Weighted average number of shares outstanding, basic and diluted		66,514,286			64,144,262

See accompanying notes to unaudited financial statements

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NATE’S FOOD CO. 

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The accompanying unaudited financial statements of Nate’s Food Co. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's registration statement filed with the SEC on Form 10.     In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2014 as reported in Form 10, have been omitted. 

The company pursues opportunities to realize revenues from the sale of its products. It is the company’s policy that revenues and gains will be recognized in accordance with ASC Topic 605-10-25, “Revenue Recognition.” Net sales are recognized upon transfer of ownership, including passage of title to the customer and transfer of risk of loss related to those goods. Transfer of title and risk of loss are based upon shipment under free on board shipping point for most goods or upon receipt by the customer depending on the country of the sale and the agreement with the customer. We may also ship product directly from our supplier to the customer and recognize revenue when the product is delivered to and accepted by the customer. License and other revenues, if any, are primarily recognized based upon shipment of licensed products sold by our licensees. Sales taxes imposed, if any, on our revenues from product sales are presented on a net basis on the consolidated statements of income and therefore do not impact net revenues or costs of goods sold. Any amounts collected from a customer prior to transfer of title and transfer of risk of loss shall be presented as a liability under Deferred Revenue and only presented as revenue once the passage of title to the customer and transfer of risk of loss related to those goods occurs.  

Note 2 – Going Concern

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

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

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

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

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Note 3 – Related Party Transaction

During the nine months, the Company borrowed $80,976 from our officer, related to the food development and research and working capital. Of this amount, $67,195 was paid directly to vendors for expenses related to the food research. The total amount owed is $80,976 as of February 28, 2015. The loan is at 0% interest and is to be repaid by December 31, 2015.

During the nine months, the Company borrowed $60,532 from WB Partners (Joseph Wade), related to the food development and research and working capital. Of this amount, $50,532 was paid directly to vendors for expenses related to the food research. The total amount owed is $60,532 as of February 28, 2015. The loan is at 0% interest and is to be repaid by December 31, 2015.

The Company sold product to Torrent Energy and received $30,000 prior to shipment and delivery of the goods. Torrent Energy is developing various gourmet food products such as the development of compound butter and pancake and waffle syrup. The Company delivered partial shipment on February 28, 2015 to allow Torrent to begin testing different shipping methods related to the product. Torrent Energy is owned by WB Partners.      

Note 4 – Equity Transaction

The Company issued 15,000,000 shares of Common Stock and booked an expense related to this stock issuance of $857,000 that represented the fair value of the stock issued. The stock was issued to WB Partners for consulting services rendered to the Company.

The Company issued 26,394 shares of its Series C Preferred Stock in exchange for $27,000 in cash that was used for food development and research and working capital. The Preferred Stock can be converted to common stock, at a conversion rate of 66 common shares for each preferred stock. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it contained a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was determined to be $27,000. The beneficial conversion feature was fully amortized and recorded as a deemed dividend.

Note 5 – Subsequent Events

On March 27, 2015, the Company received financing in the amount of $110,000 from Vista Capital. The Company expects to pay off the amount within 90 days from its receipt bearing 10% interest, mature in two years, at any time on or after the issuance date, the holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non assessable shares of Common Stock. The Company can repay the note within 90 days with no prepayment penalty an within 180 days with a prepayment penalty equal to 10% of the balance. Conversion price is 65% of the lowest trade occurring during the 20 consecutive trading days immediately preceding the conversion date.

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

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

· our future operating results;

· our business prospects;

· our contractual arrangements and relationships with third parties;

· the dependence of our future success on the general economy;

· our possible financings; and

· the adequacy of our cash resources and working capital.

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

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

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto, included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this report, particularly in the “Risk Factors” section.

Critical Accounting Policies and Estimates. 

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

8

Business Of The Registrant

Nate’s Foods Co., Inc. was incorporated under the laws of the State of Colorado on January 12, 2000. On May 19, 2014, the Company completed a reverse merger between with Nate’s Pancakes, Inc., an Indiana Company. Nate’s Pancakes was the surviving Company. In May 2014, the Company changed its name from Capital Resource Alliance to Nate’s Foods Co. 

In May 2014, the Company executed a licensing agreement to market and sell the product Nate’s Pancakes. Our license agreement is exclusive throughout the world. The product is currently sold under the name “Nate’s Homemade.” 

Product

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

License Agreement

Term

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

Payments/Royalty

The Company shall pay a royalty equal to Three Percent (3%) of the Gross Revenue from the licensed products. Gross revenue is defined as total revenue minus discounts and allowances. The license requires that the Company pay a minimum monthly fee of $7,500 beginning twelve (12) months from the execution of the license agreement which is against the 3% royalty. Thereby the fee shall begin on June 1, 2015. 

Product Ordering

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

Buy-Out

The Company also has the option, at its election, to the purchase the intellectual property associated to the license agreement. The buy-out amount is equal to revenue for the 12 months immediately prior to the buy-out however such price shall not be less than $5,000,000.

9

Sales and Marketing

The Company will begin to market its product through 3 phases:

Phase 1: Infomercials aired on television and radio. 

Phase 2: Selling product on QVC

Phase 3: Placement of products in retail and club stores (such as Wal-Mart and Costco) 

The Company is currently finalizing the installation of the initial equipment necessary to begin producing products at its facility in Fairfield, California. Once the installation of the initial is completed the Company will begin producing product for sale through its online broker. The Company will install additional equipment that will increase the Company’s manufacturing capacity. The Company, in conjunction with its online broker, has completed lab reports that provide for shipping the product refrigerated in a cost effective manner.

Operations

The Company is currently forecasting to sell 3,200,000 cans of product over the initial 18 months. The Company uses this forecast model to estimate cash flow needs and manufacturing expectations. As the Company receives purchase orders from clients it will modify the forecast accordingly. 

The Company is currently operating with an overhead of approximately $8,000 per month. The Company’s fix costs are not expected to increase significantly. The Company replaced most of its costs from a fix basis to a variable basis that will be based on a per-can sold model. The Company’s variable model is based on a net profit of 10% per-can sold. This reflects that after all variable per-can costs are paid the Company will make 10% net profit. The Company currently forecasts a break-even point of 300,000 can sold per year.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

10

Under the JOBS Act, we will remain an “emerging growth company” until the earliest of:

· the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;

· the last day of the fiscal year following the fifth anniversary of the completion of this offering;

· the date on which we have, during the previous three-year period, issued more than $1 billion in non- convertible debt; and

· the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, or the Exchange Act.

We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.

The Section 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. Please refer to a discussion on page 13 under “Risk Factors” of the effect on our financial statements of such election.

RESULTS OF OPERATIONS

Operating Expenses

Revenue

The Company generated $1,496 in revenue for the six months ending February 28, 2015. The Company has deferred revenue of $29,250 resulting from monies collected prior to shipment and delivery of the goods. 

Operating Expenses

For the period ending February 28, 2015, the Company had $1,054,576 in Operating Expenses. The Company had $105,232 in operating expenses related to food development and research and $949,344 is stock expenses related to share issuances to 3^rd party consultants.

Liquidity and Capital Resources

As of February 28, 2015, the Company had $1,328 in cash and a total of $1,328 in assets. In management’s opinion, the Company’s cash position is insufficient to maintain its operations at the current level for the next 12 months. Any expansion may cause the Company to require additional capital until such expansion began generating revenue. It is anticipated that the raise of additional funds will principally be through the sales of our securities. As of the date of this report, additional funding has not been secured and no assurance may be given that we will be able to raise additional funds.

As of February 28, 2015, our total liabilities were $173,758, which consists of $141,508 in loans from our shareholder,$3,000 in accounts payable and $29,250 in deferred revenue from a related party. 

11

Critical Accounting Policies

Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the notes to our audited financial statements included in this Form 10-Q. We have consistently applied these policies in all material respects. Below are some of the critical accounting policies:

Revenue Recognition

The company pursues opportunities to realize revenues from the sale of its products. It is the company’s policy that revenues and gains will be recognized in accordance with ASC Topic 605-10-25, “Revenue Recognition.” Net sales are recognized upon transfer of ownership, including passage of title to the customer and transfer of risk of loss related to those goods. Transfer of title and risk of loss are based upon shipment under free on board shipping point for most goods or upon receipt by the customer depending on the country of the sale and the agreement with the customer. We may also ship product directly from our supplier to the customer and recognize revenue when the product is delivered to and accepted by the customer. License and other revenues, if any, are primarily recognized based upon shipment of licensed products sold by our licensees. Sales taxes imposed, if any, on our revenues from product sales are presented on a net basis on the consolidated statements of income and therefore do not impact net revenues or costs of goods sold. Any amounts collected from a customer prior to transfer of title and transfer of risk of loss shall be presented as a liability under Deferred Revenue and only presented as revenue once the passage of title to the customer and transfer of risk of loss related to those goods occurs.  

Emerging Growth Company Status

We are an “emerging growth company” as defined under the Jumpstart Our Business Startups Act, commonly referred to as the JOBS Act. We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

As an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:

· not being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act (we also will not be subject to the auditor attestation requirements of Section 404(b) as long as we are a “smaller reporting company,” which includes issuers that had a public float of less than $ 75 million as of the last business day of their most recently completed second fiscal quarter);

· reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

· exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

12

In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Under this provision, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. In other words, an “emerging growth company” can delay the adoption of such accounting standards until those standards would otherwise apply to private companies until the first to occur of the date the subject company (i) is no longer an “emerging growth company” or (ii) affirmatively and irrevocably opts out of the extended transition period provided in Securities Act Section 7(a) (2) (B). The Company has elected to take advantage of this extended transition period and, as a result, our financial statements may not be comparable to the financial statements of other public companies. Accordingly, until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a) (2) (B), upon the issuance of a new or revised accounting standard that applies to your financial statements and has a different effective date for public and private companies, clarify that we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.

Accounting and Audit Plan

In the next twelve months, we anticipate spending approximately $15,000 - $20,000 to pay for our accounting and audit requirements.

Off-balance sheet arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Our Website. 

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

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our principal executive and principal financial officers have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

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The reason we believe our disclosure controls and procedures are not effective is because:

1.	No independent directors;
2.	No segregation of duties;
3.	No audit committee; and
4.	Ineffective controls over financial reporting.

As of February 28, 2015, the Company has not taken any remediation actions to address these weaknesses in our controls even though they were identified in April 2014. The Company’s management expects, once it is in the financial position to do so, to hire additional staff in its accounting department to be able to segregate the duties. The Company expects that the expense will be approximately $60,000 per year which would allow the Company to hire 2 new staff members.

This 10-Q does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to Rule 308(b) of Regulation S-K.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting 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. Our internal control over financial reporting includes those policies and procedures that:

1. Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

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.

Management assessed the effectiveness of our internal control over financial reporting as of February 28, 2015. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a result of the identified material weakness in our internal control over financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.

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Identified Material Weakness

A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.

Management identified the following material weakness during its assessment of internal controls over financial reporting as of February 28, 2015:

Independent Directors: The Company intends to obtain at least 2 independent directors at its 2016 annual shareholder meeting. The cost associated to the addition in minimal and not deemed material.

No Segregation of Duties/Ineffective controls over financial reporting: The Company intends to hire additional staff members, either as employees or consultants, prior to December 31, 2014. These additional staff members will be responsible for making sure that information required to be disclosed in our reports filed and submitted under the Exchange Act is recorded, processed, summarized and reported as and when required and will the staff members will have segregated responsibilities with regard to these responsibilities. The costs associated with the hiring the additional staff members will increase the Company's Sales, General and Administration (SG&A) Expense. It is anticipated the cost of the new staff members will be approximately $60,000 per year.

No audit committee: After the election of the independent directors at the 2015 annual shareholder meeting, the Company expects that an Audit Committee will be established. The cost associated to the addition an audit committee are minimal and not deemed material.

Resources: As of February 28, 2015, we have no full-time employees with the requisite expertise in the key functional areas of finance and accounting. As a result, there is a lack of proper segregation of duties necessary to insure that all transactions are accounted for accurately and in a timely manner.

Written Policies & Procedures: We need to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions, and prepare, review and submit SEC filings in a timely manner.

Management’s Remediation Initiatives

As our resources allow, we will add financial personnel to our management team. We plan to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions. We will also create an audit committee made up of our independent directors.

As of February 28, 2015, the Company has not taken any remediation actions to address these weaknesses in our controls even though they were identified during the year ending May 31 2014. The Company’s management expects, once it is in the financial position to do so, to hire additional staff in its accounting department to be able to segregate the duties. The Company expects that the expense will be approximately $60,000 per year which would allow the Company to hire 2 new staff members.

(b) Changes In Internal Control Over Financial Reporting

We need to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions, and prepare, review and submit SEC filings in a timely manner.

15

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

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

The above statement notwithstanding, shareholders and prospective investors should be aware that certain risks exist with respect to the Company and its business, including those risk factors contained in our most recent Registration Statements on Form S-1 and Form 10, as amended. These risks include, among others: limited assets, lack of significant revenues and only losses since inception, industry risks, dependence on third party manufacturers/suppliers and the need for additional capital. The Company’s management is aware of these risks and has established the minimum controls and procedures to insure adequate risk assessment and execution to reduce loss exposure.

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

No unregistered securities where issued during the three months ending February 28, 2015.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. Mine Safety Disclosures.

Not Applicable.

ITEM 5. OTHER INFORMATION

There was no other information during the quarter ended February 28, 2015 that was not previously disclosed in our filings during that period.

ITEM 6. EXHIBITS

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

16

SIGNATURES

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

	NATE’S FOOD CO.
Date: April 14, 2015	By:	/s/ Nate Steck
		Nate Steck
		Director Chief Executive Officer
Date: April 14, 2015	By:	/s/ Marc Kassoff
		Marc Kassoff
		Director, Financial Officer

17

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Nate Steck, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Nate’s Food Co;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or person performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 14, 2015	By:	/s/ Nate Steck
		Nate Steck
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Marc Kassoff, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Marc Kassoff.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or person performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 14, 2015	By:	/s/ Marc Kassoff
		Marc Kassoff
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO RULE 13b — 14(b) OF THE SECURITIES EXCHANGE ACT AND 18 U.S.C.

SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Nate’s Food Co. (the “Company”) on Form 10-Q for the period ended February 28, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nate Steck, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 14, 2015	By:	/s/ Nate Steck
		Nate Steck
		Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO RULE 13b — 14(b) OF THE SECURITIES EXCHANGE ACT AND 18 U.S.C.

SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Nate’s Food Co. (the “Company”) on Form 10-Q for the period ended February 28, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marc Kassoff, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 14, 2015	By:	/s/ Marc Kassoff
		Marc Kassoff
		Chief Financial Officer

XML

Equity Transaction (USD $)

9 Months Ended

Feb. 28, 2015

Notes to Financial Statements

Note 4 - Equity Transaction

The Company issued 15,000,000 shares of Common Stock and booked an expense related to this stock issuance of $857,000 that represented the fair value of the stock issued. The stock was issued to WB Partners for consulting services rendered to the Company.

The Company issued 26,394 shares of its Series C Preferred Stock in exchange for $27,000 in cash that was used for food development and research and working capital. The Preferred Stock can be converted to common stock, at a conversion rate of 66 common shares for each preferred stock. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it contained a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was determined to be $27,000. The beneficial conversion feature was fully amortized and recorded as a deemed dividend.

XML

Related Party Transaction

9 Months Ended

Feb. 28, 2015

Notes to Financial Statements

Note 3 - Related Party Transaction

During the nine months, the Company borrowed $80,976 from our officer, related to the food development and research and working capital. Of this amount, $67,195 was paid directly to vendors for expenses related to the food research. The total amount owed is $80,976 as of February 28, 2015. The loan is at 0% interest and is to be repaid by December 31, 2015.

During the nine months, the Company borrowed $60,532 from WB Partners (Joseph Wade), related to the food development and research and working capital. Of this amount, $50,532 was paid directly to vendors for expenses related to the food research. The total amount owed is $60,532 as of February 28, 2015. The loan is at 0% interest and is to be repaid by December 31, 2015.

The Company sold product to Torrent Energy and received $30,000 prior to shipment and delivery of the goods. Torrent Energy is developing various gourmet food products such as the development of compound butter and pancake and waffle syrup. The Company delivered partial shipment on February 28, 2015 to allow Torrent to begin testing different shipping methods related to the product. Torrent Energy is owned by WB Partners.

XML

Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Feb. 28, 2015
Cash flows from operating activities
Net loss	$ 1,080,080
Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for compensation	857,000
Changes in assets and liabilities:
Deferred Revenue - Related Party	29,250
Accounts payable	120,727
Net cash used in operating activities	(46,103)
Cash flows from financing activities
Proceeds from Series C Preferred Stock	27,000
Loan from related party	20,281
Net cash provided by financing activities	47,281
Net change in cash	1,178
Cash balance, beginning of period	150
Cash balance, end of period	1,328
Noncash investing and financing activities:
Deemed dividend beneficial conversion feature on convertible Series C Preferred stock	27,000
Accounts payable paid on behalf of the Company through a related party note payable	117,727
Reclass of note payable to related party note payable	$ 3,500

XML

Basis of Presentation

9 Months Ended

Feb. 28, 2015

Notes to Financial Statements

Note 1 - Basis of Presentation

The accompanying unaudited financial statements of Nate’s Food Co. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's registration statement filed with the SEC on Form 10.In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2014 as reported in Form 10, have been omitted. 

The company pursues opportunities to realize revenues from the sale of its products. It is the company’s policy that revenues and gains will be recognized in accordance with ASC Topic 605-10-25, “Revenue Recognition.” Net sales are recognized upon transfer of ownership, including passage of title to the customer and transfer of risk of loss related to those goods. Transfer of title and risk of loss are based upon shipment under free on board shipping point for most goods or upon receipt by the customer depending on the country of the sale and the agreement with the customer. We may also ship product directly from our supplier to the customer and recognize revenue when the product is delivered to and accepted by the customer. License and other revenues, if any, are primarily recognized based upon shipment of licensed products sold by our licensees. Sales taxes imposed, if any, on our revenues from product sales are presented on a net basis on the consolidated statements of income and therefore do not impact net revenues or costs of goods sold. Any amounts collected from a customer prior to transfer of title and transfer of risk of loss shall be presented as a liability under Deferred Revenue and only presented as revenue once the passage of title to the customer and transfer of risk of loss related to those goods occurs.

XML

Going Concern

9 Months Ended

Feb. 28, 2015

Notes to Financial Statements

Note 2 - Going Concern

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

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

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

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

XML

Balance Sheet (USD $)	Feb. 28, 2015	May 31, 2014
Current assets:
Cash	$ 1,328	$ 150
Total assets	1,328	150
Liabilities:
Accounts payable	3,000
Note payable - related party	141,508
Deferred revenue - related party	29,250
Note payable		3,500
Total liabilities	173,758	3,500
Stockholders' Deficit:
Series A Preferred Stock, Par Value $.0001, 2,000,000 shares authorized,1,940,103 issued and outstanding, respectively	194	194
Series B Preferred Stock, Par Value $.0001, 150,000 shares authorized, 149,365 issued and outstanding	15	15
Series C Preferred Stock, Par Value $1.00, 250,000 shares authorized, 26,394 and none issued and outstanding, respectively	26,394
Common Stock, Par Value $.0001, 300,000,000 shares authorized, 71,300,000 and 61,800,000 issued and outstanding	7,720	6,180
Additional paid in capital	849,827	(6,239)
Accumulated deficit	(1,056,580)	(3,500)
Total stockholders' deficit	(172,430)	(3,350)
Total liabilities and stockholders' deficit	$ 1,328	$ 150

XML

Document and Entity Information	9 Months Ended
	Feb. 28, 2015	Apr. 14, 2015
Document And Entity Information
Entity Registrant Name	Nate's Food Co.
Entity Central Index Key	0001409446
Document Type	10-Q
Document Period End Date	Feb. 28, 2015
Amendment Flag	false
Current Fiscal Year End Date	--05-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		77,250,000
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2015

XML

Balance Sheet (Parenthetical) (USD $)	Feb. 28, 2015	May 31, 2014
Balance Sheet Parenthetical
Series A Preferred Stock, par value	$ 0.0001	$ 0.0001
Series A Preferred Stock, shares authorized	2,000,000	2,000,000
Series A Preferred Stock, shares issued	1,940,103	1,940,103
Series A Preferred Stock, shares outstanding	1,940,103	1,940,103
Series B Preferred Stock, par value	$ 0.0001	$ 0.0001
Series B Preferred Stock, shares authorized	150,000	150,000
Series B Preferred Stock, shares issued	149,365	149,365
Series B Preferred Stock, shares outstanding	149,365	149,365
Series C Preferred Stock, par value	$ 1.00	$ 1.00
Series C Preferred Stock, shares authorized	250,000	250,000
Series C Preferred Stock, shares issued	26,394	0
Series C Preferred Stock, shares outstanding	26,394	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	71,300,000	61,800,000
Common stock, shares outstanding	71,300,000	61,800,000

XML

Related Party Transaction (Details Narrative) (USD $)	9 Months Ended
	Feb. 28, 2015
Interest on loan	0.00%
Loan repaid	Dec. 31, 2015
Officer [Member]
Total amount owed	80,976
WB Partners [Member]
Total amount owed	60,532

XML

Statements of Operations (Unaudited) (USD $)	3 Months Ended	9 Months Ended
	Feb. 28, 2015	Feb. 28, 2015
Statements Of Operations
Sales – related party, net	$ 750	$ 1,496
Gross Profit	750	1,496
Operating Expenses
Selling, general and administrative	360,325	949,344
Food Development/Research	23,693	105,232
Total operating expenses	384,018	1,054,576
Net Loss	(383,268)	1,080,080
Deemed dividend on Series C convertible preferred stock		(27,000)
Net income (loss) attributable to common stockholders	$ (383,268)	$ (1,186,080)
Net loss per share, basic and diluted	$ (0.01)	$ (0.02)
Weighted average number of shares outstanding, basic and diluted	66,514,286	64,144,262

XML

Subsequent Events

9 Months Ended

Feb. 28, 2015

Notes to Financial Statements

Note 5 - Subsequent Events

On March 27, 2015, the Company received financing in the amount of $110,000 from Vista Capital. The Company expects to pay off the amount within 90 days from its receipt bearing 10% interest, mature in two years, at any time on or after the issuance date, the holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non assessable shares of Common Stock. The Company can repay the note within 90 days with no prepayment penalty an within 180 days with a prepayment penalty equal to 10% of the balance. Conversion price is 65% of the lowest trade occurring during the 20 consecutive trading days immediately preceding the conversion date.