FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements. Such
forward-looking statements contained herein involve risks and uncertainties,
including statements as to:
· our future operating results;
· our business prospects;
· our contractual arrangements and relationships with third parties;
· the dependence of our future success on the general economy;
· our possible financings; and
· the adequacy of our cash resources and working capital.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as we “believe,” “anticipate,”
“expect,” “estimate” or words of similar meaning. Similarly, statements that
describe our future plans, objectives or goals are also forward-looking
statements. Such forward-looking statements are subject to certain risks and
uncertainties which are described in close proximity to such statements, and
which could cause actual results to differ materially from those anticipated as
of the date of this report. Shareholders, potential investors and other readers
are urged to consider these factors in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements included herein are only made as of
the date of this report, and we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
General Overview
We were incorporated under the laws of the
2000
development stage company in the business of mining and exploration. On
2014
we changed our name from
In connection with the reverse merger, we became a food manufacturing and
product company, and in
Pancakes to market and sell “Nate’s Homemade,” exclusively throughout the world.
Our Current Business
The Company is engaged in “Bitcoin Mining” – i.e. the process by which Bitcoins
are created resulting in new blocks being added to the blockchain and new
Bitcoins being issued to the miners. The Company has purchase and maintain ASIC
(application-specific integrated circuit) computers – computers specifically
designed for cryptocurrency mining – that are used for Bitcoin Mining. We have
placed this Bitcoin Mining equipment with a 3rd party datacenter or farms (often
referred as a “Co-Location”) that powers and operates our Bitcoin Mining
equipment for a fee. We currently generate revenues through receiving Bitcoin
from our Bitcoin Mining equipment.
Bitcoin Miners engage in a set of prescribed complex mathematical calculations
in order to add a block to the blockchain and thereby confirm cryptocurrency
transactions included in that block’s data. Miners that are successful in adding
a block to the blockchain are automatically awarded a fixed number of Bitcoins
for their effort. The Company will only mine Bitcoin. The Company has executed
two 270 days and 200 days lease agreements for Bitmain’s S-17s and T-17s for
Bitcoin Mining Equipment. The Company is actively in discussions with
manufactures and resellers to acquire additional bitcoin mining equipment and
capacity. The Company’s initial goal is to acquire 25,000 terrahash in mining
capacity in the next 12 months. Terahashes are the unit used to measure speed of
the mining hardware mining cryptocurrencies, with a TH/s equalling one trillion
hash calculations computed in one second. Open-source calculators are available,
such as NovaBlock, that allow for the calculation of expected revenue based on
TH/s.
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Our food development division licenses, develops and manufactures food products.
The Company’s Board of Directors has voted to cease product manufacturing and
development of new products for its food development division. We are, however,
continually exploring options to license our developed product, a ready-to-use,
pre-mixed pancake and waffle batter delivered in a pressurized can. We are also
exploring options on monetizing our proprietary blend of pancake and waffle dry
mix. Our current product line consists of the original flavor of pancake and
waffle mix and three additional flavors, Banana, Blueberry and Strawberry. The
flavors can be found at www.natesfoodco.com. and www.sh-mallow.com.
Results of Operations
The following summary of our results of operations should be read in conjunction
with our unaudited condensed financial statements for the three and six months
ended
Our operating results for the three and six months ended
2021, and the changes between those periods for the respective items are
summarized as follows
Three Months EndedNovember 30, 2022 , compared to the Three Months EndedNovember 30, 2021 . Three Months Ended November 30, 2022 2021 Change % Revenue$ 2,881 $ 21,204 $ (18,323 ) (86 %) Cost of revenue 7,646 44,660 (37,014 ) (83 %) Gross loss (4,765 ) (23,456 ) 18,691 80 % Operating expenses (57,823 ) (36,920 ) (20,903 ) (57 %) Change in fair market value of (515 derivative (47,000 ) 11,333 (58,333 ) %) Interest expense (30,146 ) (24,546 ) (5,600 ) 23 % Gain on disposal of digital currency 3,438 - 3,438 100 % Impairment loss on digital currency (4.231 ) (976 ) (3,255 ) (333 %) Net Loss$ (140,527 ) $ (74,565 ) $ (65,962 ) (88 %) Revenue
Our Company generated
for the three months ended
commenced the mining of Bitcoin in
Cost of Revenue
The cost of digital currency mining revenue was
months ended
of electricity and other co-location hosting fees, which are remitted in Bitcoin
and cash payments for equipment leases.
Operating Expenses
During the three months ended
administrative expenses of
months ended
predominantly from professional and other fees related to our reporting
requirements and general administrative expenses.
Other income (expense)
During the three months ended
market value of derivatives of
sale of digital currency of
impairment loss on digital currency
the three months ended
30,2022
related to first quarter (
currency.
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Six Months Ended
30, 2021
Our operating results for the six months endedNovember 30, 2022 and 2021, and the changes between those periods for the respective items are summarized as follows: Six Months Ended November 30, 2022 2021 Change % Revenue$ 8,084 $ 21,204 $ (13,120 ) (62 %) Cost of revenue 24,037 44,660 (20,623 ) (46 %) Gross loss (15,953 ) (23,456 ) 7,503 (32 %) Operating expenses (86,301 ) (45,965 ) (40,336 ) 88 % Change in fair market value of (104 derivative (17,080 ) 415,795 (432,875 ) %) Interest expense (73,935 ) (29,599 ) 44,336 150 % Loss on disposal of digital currency (2,304 ) - (2,304 ) -
Impairment loss on digital currency (6,191 ) (976 ) (5,215 ) 534 %
Net Income (Loss)
$ (201,764 ) $ 315,799 $ (517,563 ) (164 %) Revenue
Our Company generated
for the six months ended
commenced the mining of Bitcoin in
Cost of Revenue
The cost of digital currency mining revenue was
months ended
of electricity and other co-location hosting fees, which are remitted in Bitcoin
and cash payments for equipment leases.
Operating Expenses
During the six months ended
administrative expenses of
months ended
predominantly from professional and other fees related to our reporting
requirements and general administrative expenses.
Other income (expense)
During the six months ended
market value of derivatives of
sale of digital currency of
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Liquidity and Capital Resources
Working Capital
November 30, May 31,
2022 2022 Change %
Cash $ 300 $ 13,788 $ (13,488 ) (98 %)
Total Assets $ 51,249 $ 57,490 $ (6,241 ) (11 %)
Total Liabilities $ 1,118,071 $ 970,348 $ 147,723 15 %
Stockholders' Deficit $ 1,066,822 $ 912,858 $ 153,964 17 %
Cash Flows
Six Months Ended
November 30,
2022 2021 Change
Cash Flows Used in Operating Activities
Cash Flows Used in Investing Activities
- - $ -
Cash Flows Provided by Financing Activities 4,755 254,023
Net change in Cash During Period
$ (13,488 ) $ 25,555 $ (39,043 )
As of
our Company’s cash position is insufficient to maintain our operations at the
current level for the next 12 months. Any expansion may cause our company to
require additional capital until such expansion begins generating revenue. It is
anticipated that the raising of additional funds will principally be through the
sales of our securities.
As of
consisted of
fees – related party,
accrued interest,
and accrued liabilities and
2022
derivative liability,
interest-related party,
and accrued liabilities and
Operating Activities
Net cash used in operating activities was
2022
of license of
on digital currency of
For the six months ended
activities consisted of a net income of
fair value of derivative liability of
discount on convertible note of
currency, and reduced by a net change in working capital of (
Investing Activities
Our Company did not have any investing activities during the six months ended
Financing Activities
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During the six months ended
activities were
period in 2021.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact on our business
operations and any associated risks related to these policies are discussed
throughout Management’s Discussion and Analysis of Financial Condition and
Results of Operations when such policies affect our reported or expected
financial results.
In the ordinary course of business, we have made a number of estimates and
assumptions relating to the reporting of results of operations and financial
condition in the preparation of our financial statements in conformity with
accounting principles generally accepted in
our estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances. The results form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results could differ
significantly from those estimates under different assumptions and conditions.
We believe that the following discussion addresses our most critical accounting
policies, which are those that are most important to the portrayal of our
financial condition and results of operations and require our most difficult,
subjective, and complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain.
The material estimates for our Company are that of derivative liabilities and
income tax valuation allowance recorded for deferred tax assets. The estimated
sensitivity to change is related to the various variables of the Black-Scholes
option pricing model stated below. The specific quantitative variables are
included in the notes to the consolidated financial statements. The estimated
fair value of options is recognized as expense on the straight-line basis over
the options’ vesting periods. The fair value of each option granted is estimated
on the date of grant using the Black-Scholes option pricing model with the
expected life, dividend yield, expected volatility, and risk-free interest rate
weighted-average assumptions used for options and warrants granted. Expected
volatility for 2022 and 2021 was estimated using our common stock for
convertible notes and warrants. The risk-free rate for periods within the
contractual life of the option is based on the
effect at the grant date. The expected life of options is based on the life of
the instrument on grant date.
Digital Currencies
Digital currencies consist of Bitcoin and are included in intangible assets in
the balance sheet. Digital currencies are recorded at cost less impairment. The
Company compares the book value of digital currencies held to the prevailing
market price at each reporting period. An intangible asset with an indefinite
useful life is not amortized but assessed for impairment annually, or more
frequently, when events or changes in circumstances occur indicating that it is
more likely than not that the indefinite-lived asset is impaired. Impairment
exists when the carrying amount exceeds its fair value. In testing for
impairment, the Company has the option to first perform a qualitative assessment
to determine whether it is more likely than not that an impairment exists. If it
is determined that it is not more likely than not that an impairment exists, a
quantitative impairment test is not necessary. If the Company concludes
otherwise, it is required to perform a quantitative impairment test. To the
extent an impairment loss is recognized, the loss establishes the new cost basis
of the asset. Subsequent reversal of impairment losses is not permitted.
Realized gains or losses on the sale of digital currencies are included in other
income (expense) in the statements of operations.
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Derivative Financial Instruments
The fair value of an embedded conversion option that is convertible into a
variable amount of shares and warrants that include price protection reset
provision features are deemed to be “down-round protection” and, therefore, do
not meet the scope exception for treatment as a derivative under ASC 815
“Derivatives and Hedging”, since “down-round protection” is not an input into
the calculation of the fair value of the conversion option and warrants and
cannot be considered “indexed to the Company’s own stock” which is a requirement
for the scope exception as outlined under ASC 815.
The accounting treatment of derivative financial instruments requires that the
Company record the embedded conversion option and warrants at their fair values
as of the inception date of the agreement and at fair value as of each
subsequent balance sheet date. Any change in fair value is recorded as
non-operating, non-cash income or expense for each reporting period at each
balance sheet date. The Company reassesses the classification of its derivative
instruments at each balance sheet date. If the classification changes as a
result of events during the period, the contract is reclassified as of the date
of the event that caused the reclassification.
The Black-Scholes option valuation model was used to estimate the fair value of
the conversion options. The model includes subjective input assumptions that can
materially affect the fair value estimates. The expected volatility is estimated
based on the most recent historical period of time, of other comparative
securities, equal to the weighted average life of the options.
Conversion options are recorded as debt discount and are amortized as interest
expense over the life of the underlying debt instrument.
Also, refer to Note 1 – Significant Accounting Policies and Note 6 – Derivative
Liabilities in the unaudited condensed financial statements that are included in
this Report.
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