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 August 31, 2013
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ______________
Commission File Number 333-133347
PEPTIDE TECHNOLOGIES, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Nevada 98-0479983
------------------------------------- ------------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
601 Union Street, Two Union Square, 42nd Floor, Seattle, Washington 98101
-------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 236-9555
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Larger accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [x]
Indicate by check mark whether registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes [ ] No [ ]
1
Number of shares issued and outstanding of the registrant's class of common
stock as of September 30, 2013: 151,123,000 shares of common stock.
The Company recognized $nil revenues during the quarter ended August 31, 2013.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Interim Consolidated Balance Sheets F-6
Interim Consolidated Statements of Loss and Comprehensive Loss F-7
Interim Consolidated Statements of Cash Flows F-8
Interim Consolidated Statement of Changes in Stockholders' Deficiency F-9
Notes to Interim Consolidated Financial Statements F-10 to F-17
Item 2. Management's Discussion and Analysis or Plan of Operations 18
Item 3 Quantitative and Qualitative Disclosure about Market Risk 26
Item 4 Controls and Procedures 26
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 26
Item 1A. Risk Factors - Not Applicable 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
Item 3. Defaults upon Senior Securities - Not Applicable 27
Item 4. Mine Safety Disclosures - Not Applicable 27
Item 5. Other Information 27
Item 6. Exhibits 27
SIGNATURES 28
3
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, 2013
Financial Statements
Page
Interim Consolidated Balance Sheets F-6
Interim Consolidated Statements of Loss and Comprehensive Loss F-7
Interim Consolidated Statements of Cash Flows F-8
Interim Consolidated Statement of Changes in Stockholders' Deficiency F-9
Notes to Interim Consolidated Financial Statements F-10 to F-17
F-4
PEPTIDE TECHNOLOGIES, INC.
(A Development Stage Company)
Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
August 31, 2013
F-5
PEPTIDE TECHNOLOGIES, INC.
(A Development Stage Company)
INTERIM CONSOLIDATED BALANCE SHEETS
August 31, November 30,
2013 2012
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $ 5,271 7,780
Prepaid expenses - 3,494
--------------------------------------
Total Current Assets 5,271 11,274
Website (net of accumulated amortization of $3,333 and $833, respectively) 6,667 9,167
Intangible assets and intellectual property (Note 7) 45,000 45,000
--------------------------------------
TOTAL ASSETS $ 56,938 65,441
======================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities (Note 4) $ 1,415,395 730,717
Notes payable and accrued interest (Note 5) 84,391 84,380
--------------------------------------
Total Current Liabilities 1,499,786 815,097
--------------------------------------
STOCKHOLDERS' DEFICIENCY
Capital Stock (Note 8)
Authorized:
675,000,000 common shares, par value $0.001 per share
Common shares issued and outstanding:
151,123,000 and 149,078,000 at August 31, 2013 and November 30,
30, 2012, respectively 151,123 149,078
Additional paid-in capital 148,279 105,324
Accumulated deficit (105,837) (105,837)
Accumulated deficit during development stage (1,636,413) (898,221)
--------------------------------------
Total Stockholders' Deficiency (1,442,848) (749,656)
--------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 56,938 65,441
======================================
The accompanying notes are an integral part of these interim consolidated financial statements.
F-6
PEPTIDE TECHNOLOGIES, INC.
(A Development Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)
Cumulative Amounts
For the For the For the For the from re-entering of
three-month three-month period nine-month nine-month development stage on
period ended ended August 31, period ended period ended June 26, 2010 to
August 31, 2013 2012 August 31, 2013 August 31, 2012 August 31, 2013
-----------------------------------------------------------------------------------------------
Expenses
Consulting $ 75,000 $ 5,000 $ 227,000 $ 125,000 $ 477,975
Salaries and bonus (Note 4 & 6) 159,000 - 477,000 - 924,000
Office and administration 5,419 3,277 13,963 5,346 36,638
Professional fees 5,412 2,468 19,117 32,093 132,690
Supplies and materials 1,101 - 1,101 - 60,231
-----------------------------------------------------------------------------------------------
245,932 10,745 738,181 162,439 1,631,534
-----------------------------------------------------------------------------------------------
Net Loss before Other Item (245,932) (10,745) (738,181) (162,439) (1,631,534)
-----------------------------------------------------------------------------------------------
Other Item
Foreign exchange gain (loss) (1,274) (2,730) 2,898 (2,285) 1,404
Interest expense (Note 5) (1,097) (946) (2,909) (2,299) (6,283)
-----------------------------------------------------------------------------------------------
Net Loss For The Period (248,303) (14,421) (738,192) (167,023) (1,636,413)
===============================================================================================
Other Comprehensive Loss
Foreign currency translation
adjustment - - - (694) (333)
-----------------------------------------------------------------------------------------------
Comprehensive Loss For the Period $ (248,303) $ (14,421) $ (738,192) $ (167,717) $ (1,636,746)
===============================================================================================
Loss per share from operations
- Basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
=========================================================================
Weighted Average Number of Shares
Outstanding 151,107,016 141,050,802 150,022,908 143,334,090
=========================================================================
The accompanying notes are an integral part of these interim consolidated financial statements.
F-7
PEPTIDE TECHNOLOGIES, INC.
(A Development Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative from
For the For the re-entering of
For the three-month three-month nine-month For the nine-month development stage on
period ended period ended period ended period ended June 26, 2010 to
August 31, 2013 August 31, 2012 August 31, 2013 August 31, 2012 August 31, 2013
-----------------------------------------------------------------------------------------------
Cash Flows used in Operating
Activities
Net loss $ (248,303) $ (14,421) $ (738,192) $ (167,023) $ (1,636,413)
Adjustments for non-cash items:
Accrued interest 1,097 946 2,909 2,299 6,283
Foreign exchange (gain) loss 1,275 - (2,898) - (2,898)
Amortization expense 833 - 2,500 - 3,333
Stock compensation for services - 5,000 2,000 5,000 10,000
Changes in operating assets and
liabilities
Prepaid expenses - 31 3,494 62 2,710
Accounts payable and accrued
liabilities 225,000 (19,949) 684,678 107,550 1,414,645
----------------------------------------------------------------------------------
Net Cash Used in Operating Activities (20,098) (28,393) (45,509) (52,112) (202,340)
==================================================================================
Cash Flows From Investing Activities
Website - - - - (10,000)
----------------------------------------------------------------------------------
Net Cash Used by Investing Activities - - - - (10,000)
==================================================================================
Cash Flows From Financing Activities
Issuance of common shares 25,000 5,000 43,000 30,000 121,114
Increase in note payable - 25,336 - 25,336 65,006
Contribution by related party - - - - 27,288
----------------------------------------------------------------------------------
Net Cash Provided by Financing
Activities 25,000 30,336 43,000 55,336 213,408
==================================================================================
Increase (decrease) in Cash during
the Period 4,902 1,943 (2,509) 3,224 1,068
Effect of Exchange Rate Changes on
Cash - (196) - (694) (333)
Cash, Beginning of Period 369 2,439 7,780 1,656 4,536
----------------------------------------------------------------------------------
Cash, End of Period $ 5,271 $ 4,186 $ 5,271 $ 4,186 $ 5,271
==================================================================================
Supplemental Disclosure of Cash Flow
Information (Note 11)
Cash paid for:
Interest $ - $ - $ $ - $ -
Income taxes $ - $ - $ $ - $ -
The accompanying notes are an integral part of these interim consolidated financial statements.
F-8
PEPTIDE TECHNOLOGIES, INC.
(A Development Stage Company)
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
For the Period from November 30, 2011 through August 31, 2013
(Unaudited)
CAPITAL STOCK ACCUMULATED
---------------------------------------------
ADDITIONAL DEFICIT DURING ACCUMULATED
PAID-IN ACCUMULATED DEVELOPMENT COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT STAGE INCOME (LOSS) TOTAL
--------------------------------------------------------------------------------------------------------
November 30, 2011
Balance 171,023,000 $ 171,023 $ 50,265 $ (105,837) $ (238,485) $ 694 $ (122,340)
Common shares issued
for cash (Note 8) 55,000 55 55,059 - - - 55,114
Common shares cancelled 30,000,000) (30,000) - - - - (30,000)
Common shares issued
for related party services
(Notes 6 and 8) 5,000,000 5,000 - - - - 5,000
Common shares issued for
contractor services
(Note 8) 3,000,000 3,000 - - - - 3,000
Foreign currency
translation adjustment - - - - - (694) (694)
Net loss for the year - - - - (659,736) - (659,736)
------------------------------------------------------------------------------------------------------------------------------------
November 30, 2012 Balance 149,078,000 $ 149,078 $ 105,324 $ (105,837) $ (898,221) $ - $ (749,656)
------------------------------------------------------------------------------------------------------------------------------------
Common shares issued for
cash (Note 8) 45,000 45 42,955 - - - 43,000
Common shares issued for
contractor services (Note 8) 2,000,000 2,000 - - - - 2,000
Net loss for the period - - - - (738,192) - (738,192)
------------------------------------------------------------------------------------------------------------------------------------
August 31, 2013 Balance 151,123,000 151,123 148,279 (105,837) (1,636,413) - (1,442,848)
------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these interim consolidated financial statements.
F-9
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2013
(Unaudited)
1. NATURE AND CONTINUANCE OF OPERATIONS
a) Organization
PEPTIDE TECHNOLOGIES, INC. (the "Company") was incorporated in the
State of Nevada, United States of America, on November 18, 2005. On
July 29, 2010, the Company's name was changed from Online Originals,
Inc. to CREEnergy Corporation. Effective October 12, 2011, the
Company's name was changed from CREEnergy Corporation to Peptide
Technologies, Inc. The Company's year-end is November 30.
On August 5, 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 August 5 to August 31,
2013.
b) Nature of Operations and Change in Business
Since the date of inception on November 18, 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 November 30, 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 and discontinued the sale of artwork
with effect from June 25, 2010. Effective June 26, 2010, the Company
became a development stage company focusing on a new business.
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, 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 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.
Peptide Technologies, Inc. has developed the first all-natural,
sustainable solution to the increasing problem of bio-fouling. Our
solutions are safe "green" organic-based anti-fouling products used to
combat the rapidly growing problems caused by the attachment of hard
fouling agents in the marine and freshwater environments. Peptide
Technologies' patent-protected approach not only significantly
minimizes the attachment of hard fouling agents (mussels, barnacles
etc.) but is also highly effective in preventing the build-up of any
bio-film layer as well.
Our organic-based solutions are effective in both the marine and
freshwaters, and are environmentally friendly and non-toxic to water
users and all aquatic life. Additionally, our anti-fouling paints will
adhere to both stationary (concrete, steel) and flexible substrates
(netting, etc.). Our paints and protective coatings are available in a
number of colors and can be tailored to coat flexible or fixed
substrates.
Targeted applications for our products are:
o Hydro-electric facilities and dams (i.e., water in-take pipes,
valves);
o Ship hulls (i.e., barnacle covered hulls can increase fuel usage
by more than 40%);
o Commercial fish nets;
o Pearling and Aquaculture industry;
o Drinking water treatment facilities;
o Farm irrigation water;
o Navigation locks;
o Oil rigs (FPSO); and
o Other cement and/or steel substrates.
F-10
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2013
(Unaudited)
Unlike other anti-fouling paints, Peptide Technologies' anti-fouling paints are
the only ones to receive a non-hazardous and non-toxic grade by Risk Management
Technology ChemAlert, Australia - a Government sanctioned certification.
c) 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 November 30, 2012 annual financial statements. It is suggested
that these interim consolidated financial statements be read in
conjunction with the Company's audited financial statements for the
year ended November 30, 2012, 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 November 30, 2012, is taken from the audited
financial statements as of that date.
d) Basis of Presentation
The accompanying interim consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
in the United States of America, which contemplates the continuation
of the Company as a going concern. However, the Company has negative
working capital at August 31, 2013, and has losses to date of
approximately $1,636,413. These matters raise substantial doubt about
its ability to continue as a going concern. In view of these matters,
realization of certain of the assets in the accompanying interim
consolidated balance sheet is dependent upon its ability to meet its
financing requirements, raise additional capital, and the success of
its future operations. There is no assurance that future capital
raising plans will be successful in obtaining sufficient funds to
assure its eventual profitability. Management is actively seeking to
add new products and/or services in order to show profitability. To
date, due to the continued economic conditions, they have not yet been
able to find products and services that would contribute to their
business. We believe that actions planned and presently being taken to
revise its operating and financial requirements will provide the
opportunity for the Company to continue as a going concern. The
interim consolidated financial statements do not include any
adjustments that might result from these uncertainties.
e) Principle of Consolidation
These interim consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary Pept Peptide
Technologies Inc. ("Pept Peptide"), a company incorporated in the
province of British Columbia on August 5, 2013. Any significant
inter-company balances and transactions have been eliminated upon
consolidation.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In February 2013, the Financial Accounting Standards Board ("FASB")
issued 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
December 15, 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-11
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2013
(Unaudited)
In July 2012, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2012-02, "Intangibles -
Goodwill and Other." This update presents an entity with the option to
first to assess qualitative factors to determine whether it is more
likely than not that an indefinite-lived intangible asset is impaired
as a basis for determining whether it is necessary to perform the
quantitative impairment test in accordance with Subtopic 350-30,
"Intangibles - Goodwill and Other - General Intangibles Other than
Goodwill." The more-likely-than-not threshold is defined as having a
likelihood of more than fifty percent. ASU No. 2012-02 will be
effective for annual and interim impairment tests performed for fiscal
years beginning after September 15, 2012, with early adoption
permitted. The adoption of this update will not have a material effect
on the Company's interim consolidated financial statements.
In December 2011, FASB issued ASU No. 2011-12, "Comprehensive Income."
This update amends certain pending paragraphs in ASU No. 2011-05
"Presentation of Comprehensive Income," to effectively defer only those
changes that relate to the presentation of reclassification adjustments
out of accumulated other comprehensive income for annual and interim
consolidated financial statements for public, private, and non-profit
entities. ASU No. 2011-12 will be effective for fiscal years, and
interim periods within those years, beginning after December 15, 2011.
As ASU No. 2011-12 relates only to the presentation of comprehensive
income, adoption of this update will not have a material effect on the
Company's interim consolidated financial statements.
3. WEBSITE
The Company purchased a website during October 2012 for $10,000. This
website has a useful life of three (3) years, and the cost is being
amortized over the life of the asset. As of August 31, 2013,
accumulated amortization was $3,333 (November 30, 2012: $833).
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of August 31, As of November 30,
2013 2012
---------------------- ----------------------
Accounts Payable $ 27,895 $ 29,217
Accrued Liabilities 472,500 254,500
Accrued Payroll and Payroll Taxes 615,000 147,000
Accrued Bonus 300,000 300,000
---------------------- ----------------------
Total Accounts Payable and Accrued Liabilities $ 1,415,395 $ 730,717
====================== ======================
Accounts payable and accrued liabilities are non-interest bearing,
unsecured and have settlement dates within one year.
Total wages accrued as of August 31, 2013, was $591,000 (November 30,
2012: $141,000). Total accrued payroll taxes as of August 31, 2013,
are $24,000 (November 30, 2012: $6,000) (Note 6).
During the year ended November 30, 2012, the Board approved salaries
for the Company's three (3) employees. Effective September 1, 2012,
monthly salaries of $25,000 and $20,000 started to be accrued for the
CEO and CFO, respectively. Effective November 1, 2012, a monthly salary
of $6,000 started to be accrued for the Vice President of Operations &
Communication (Note 6).
Effective October 1, 2012, the Board approved a $300,000 bonus for the
CEO to recognize the CEO's contributions toward the Company's
successful start-up. This bonus was earned in-full and accrued for as
of August 31, 2013 (Note 6).
F-12
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2013
(Unaudited)
5. NOTES PAYABLE AND ACCRUED INTEREST
August 31, November 30,
2013 2012
-------------- ----------------
During the year ended November 30, 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 September 21, 2011, PSI Services ("PSI") issued a loan of $500 to the
Company. The loan is unsecured, bears no interest, and has not fixed
terms of repayment. 500 500
On November 13, 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 is due November 13, 2013. The loan payable to PSI as
at August 31, 2013, consists of princiapl and accrued interest of
USD$42,642 (November 30, 2012 - USD$44,650) and USD$4,813 (November 30,
2012 - USD$2,815), respectively. 47,455 47,465
On June 1, 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 May 31, 2014. The loan payable to PSI, as at
August 31, 2013, consists of principal and accrued interest of USD$18,952
(November 30, 2012 - $19,856) and USD$1,484 (November 30, 2012 - $559),
respectively. 20,436 20,415
--------------------------------------
Balance as of August 31, 2013 $ 84,391 $ 84,380
======================================
6. RELATED PARTY TRANSACTIONS
As at August 31 2013, the amount due to related parties includes
$615,000 payable to directors and employees of the Company (November
30, 2012 - $141,000). (Note 4)
During the quarter ended August 31, 2013, directors and shareholders of
the Company made cash contributions in the amount of $Nil (during the
year ended November 30, 2012 - $Nil, Cumulative - $27,288).
During the quarter ended August 31, 2013, the Company accrued salaries
and benefits of $450,000 to officers and employees of the Company
(during the year ended November 30, 2012 - $441,000; cumulative -
$891,000). (Note 4)
During the year ended November 30, 2012, the Company issued 5,000,000
fully vested shares of the Company's restricted common stock at a par
value of $0.001 per share to a director of the Company for consulting
services rendered (Notes 8 and 11).
F-13
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2013
(Unaudited)
7. INTANGIBLE ASSETS AND INTELLECTUAL PROPERTY
On August 23, 2011, the Company entered into an agreement (the "Asset
Purchase Agreement") with unrelated parties that subsequently became
directors of the Company to acquire intangible assets and intellectual
property known as the Peptide Technology Platforms (the "Platforms") in
exchange for 75,000,000 common shares of the Company (issued on August
23, 2011) (Notes 8 and 11).
On December 14, 2011 the Company entered into an amended agreement
amending the Asset Purchase Agreement dated August 23, 2011 (the
"Amended Asset Purchase Agreement") and, as a result, a total of
30,000,000 common shares were returned to treasury and cancelled (Notes
8 and 11) in exchange for payment of half of one percent of all gross
monies received by the Company from revenue produced from products
derived from the use of all the formula listed in the Assets Purchase
Agreement. In addition, a monthly stipend of CAD $15,000 per month is
to be paid commencing from receipt of monies from the first contract
signed to purchase products derived from the use of the formulae for a
period of five years from the date of the Amended Asset Purchase
Agreement (Note 10). This transaction has been recorded as a reduction
of intangible assets and intellectual property and a reduction in share
capital equal to $30,000.
The Platforms includes but are not limited to the following:
i. Proteomic research platforms which include proprietary solid
phase media side-chain protected peptide array synthesis;
ii. Peptide libraries;
iii. Combination design techniques;
iv. Peptide molecule modifications;
v. A proprietary genetic algorithm that designs peptides for
goodness to fit to a target; and
vi. Proprietary and patented application platforms, including a viral
vector gene therapy and epitode-mapping based vaccine
development.
8. CAPITAL STOCK
Authorized
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 August 10, 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.
Issued and outstanding
On June 2, 2010, and effective August 10, 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 May 21, 2010 (the date of issuance of
120,000,000 shares) and $15,501 to the beginning balance. The interim
consolidated financial statements contained herein reflect the
appropriate values for capital stock and accumulated deficit. Unless
otherwise noted, all references in the accompanying interim
consolidated financial statements to the number of common shares and
per share amounts have been retroactively restated to reflect the
forward stock split.
The total issued and outstanding capital stock is 151,123,000 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 January 5, 2012, 5,000 shares of the Company's common stock
were issued for cash proceeds of $4,936 (CAD $5,000).
o On January 6, 2012, 5,000 shares of the Company's common stock
were issued for cash proceeds of $4,921 (CAD $5,000).
F-14
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2013
(Unaudited)
o On January 15, 2012, 5,000 shares of the Company's common stock
were issued for cash proceeds of $4,884 (CAD $5,000).
o On January 24, 2012, 5,000 shares of the Company's common stock
were issued for cash proceeds of $4,943 (CAD $5,000).
o On April 20, 2012, 5,000 shares of the Company's common stock
were issued for cash proceeds of $5,041 (CAD $5,000).
o On July 11, 2012, 5,000 shares of the Company's common stock were
issued for cash proceeds of $4,902 (CAD $5,000).
o On August 29, 2012, the Asset Purchase Agreement was amended a
second time. Upon their resignations, Deborah Fortescue-Merrin
and Richard Fortescue agreed to reduce their Founder's shares to
1,000,000 each (from 7,500,000 each initially). Hence, they each
relinquished 6,500,000 shares of common stock to Scott McKinley
upon his acceptance of Chief Executive Officer for the Company.
The assets that were purchased were set aside and new
formulations were developed by the Company.
o On August 31, 2012, the Company issued 5,000,000 fully vested
shares of the Company's restricted common stock at a par value of
$0.001 per share to a director of the Company for accepting the
positions of Chief Financial Officer and director on the Board,
also understanding that salaries would be accrued and not paid
until the Company was further developed. (Notes 6 and 11). As a
result, the Company recorded stock compensation expense of $5,000
when the stock was issued.
o On September 28, 2012, 5,000 shares of the Company's common stock
were issued for cash proceeds of $5,086 (CAD $5,000).
o On October 15, 2012, 20,000 shares of the Company's common stock
were issued for cash proceeds of $20,402 (CAD $20,000).
o On November 28, 2012, the Company issued 3,000,000 fully vested
shares of the Company's restricted common stock at a par value of
$0.001 per share to a third party for technical services
rendered. As a result, the Company recorded stock compensation
expense of $3,000 when the stock was issued (Note 11).
o On April 10, 2013, 20,000 shares of the Company's common stock
were issued for cash proceeds of $20,000. The Company paid $2,000
in commissions.
o On April 21, 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 stock
compensation expense of $2,000 when the stock was issued (Note
11).
o On July 15, 2013, 25,000 shares of the Company's common stock
were issued for cash proceeds of $25,000.
9. INCOME TAXES
The Company is subject to foreign and domestic income taxes. The
Company has had no income, and therefore has paid no income tax.
Deferred income taxes arise from temporary timing differences in the
recognition of income and expenses for financial reporting and tax
purposes. The Company's deferred tax assets consist entirely of the
benefit from net operating loss (NOL) carry-forwards. The NOL carry
forwards expire in various years through 2033. The Company's deferred
tax assets are offset by a valuation allowance due to the uncertainty
of the realization of the NOL carry-forwards. NOL carry-forwards may be
further limited by a change in company ownership and other provisions
of the tax laws.
F-15
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2013
(Unaudited)
The Company's deferred tax assets, valuation allowance, and change in
valuation allowance are as follows:
Estimated NOL Estimated
Period Ending Carry-forward NOL Tax Benefit Valuation
Expires from NOL Allowance Net Tax Benefit
--------------------------------------------------------------------------------------------------------
November 30, 2010 116,675 2030 40,836 (40,836) -
November 30, 2011 328,821 2031 115,087 (115,087) -
November 30, 2012 980,558 2032 343,195 (343,195) -
August 31, 2013 1,718,750 2033 601,563 (601,563) -
Income taxes at the statutory rate are reconciled to the Company's actual
income taxes as follows:
August 31, November 30,
2013 2012
------------------ ------------------
Income tax benefit at statutory rate
resulting from net
operating loss carry forward (35%) (35%)
Deferred income tax valuation allowance 35% 35%
------------------ ------------------
Actual tax rate 0% 0%
================== ==================
As at August 31, 2013, the Company is in arrears on filing its
statutory corporate income tax returns and the amounts presented above
are based on estimates. The actual losses available could differ from
these estimates.
10. COMMITMENTS
o The Company is committed to paying one-half of one percent of all
gross monies received by the Company from revenue produced from
products derived from the use of all the formula listed in the Assets
Purchase Agreement. In addition, a monthly stipend of CAD $15,000 per
month is to be paid commencing from receipt of monies from the first
contract signed to purchase products derived from the use of the
formula for a period of five years from the date of the Amended Asset
Purchase Agreement (Note 7).
Additionally, the Board approved a commission payment program equal to
30% of gross sales of anti-fouling paint. Under this program, the
Chief Executive Officer 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.
o Effective November 1, 2012, the Company entered into an advisory
agreement with a consultant. The Company is committed to paying a
monthly stipend of $25,000 per month for consulting services provided;
additionally, the Company will issue restricted shares or cash payment
equal to 10% of the amount of common shares issued by the Company for
equity financing or debt financing received through the efforts of
this consultant. The commitment is for a term of five years, with the
Company being able to terminate the agreement with 30 days written
notice.
o During the year ended November 30, 2012, the Board approved salaries
for the Company's three (3) employees. Effective September 1, 2012,
the Company is committed to paying monthly salaries of $25,000 to the
CEO, $20,000 to the CFO, and $6,000 to the Vice President of
Operations & Communication (Note 4).
F-16
PEPTIDE TECHNOLOGIES, INC.
(A Development stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2013
(Unaudited)
o On December 11, 2012, the Company formerly engaged BB&T Capital
Markets ("BB&TCM") to act as the Company's exclusive financial advisor
and agent in connection with developing strategic alternatives for the
Company regarding debt financings, licensing of intellectual
properties developed by the Company, equity raises, sale of
intellectual properties, or other capital markets transactions that
may develop over the course of a 24 month agreement.
The Company is to pay BB&TCM an advisory fee of three percent of the
face amount of the financial transactions advised upon during the
course of the engagement, due and payable at closing of any
contemplated transactions under the engagement.
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.
11. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
On August 23, 2011, 75,000,000 shares of the Company's restricted
common stock, valued at $75,000, were issued in exchange for intangible
assets and intellectual property. On December 21, 2011, 30,000,000
shares of the Company's restricted common stock were returned to
treasury and cancelled (Notes 7 and 8).
On August 31, 2012, the Company issued 5,000,000 fully vested shares of
the Company's restricted common stock at a par value of $0.001 per
share to a director of the Company for accepting the positions of Chief
Financial Officer and director on the Board, also understanding that
salaries would be accrued and not paid until the Company was further
developed. (Notes 6 and 8). As a result, the Company recorded stock
compensation expense of $5,000 when the stock was issued.
On November 28, 2012, the Company issued 3,000,000 fully vested shares
of the Company's restricted common stock at a par value of $0.001 per
share to a third party for technical services rendered. As a result,
the Company recorded stock compensation expense of $3,000 when the
stock was issued (Note 8).
On April 21, 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 stock compensation expense
of $2,000 when the stock was issued (Note 8).
12. SUBSEQUENT EVENTS
There are no reportable events during the period from the nine month
period ended August 31, 2013 to the date the interim consolidated
financial statements are available to be issued on September 30, 2013.
F-17
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results, or other developments.
Forward-looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic, and competitive,
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward-looking
statements made by or on our behalf. We disclaim any obligation to update
forward-looking statements.
The following discussion of the plan of operation, financial condition, results
of operations, cash flows and changes in financial position of our Company
should be read in conjunction with our most recent financial statements and
notes appearing elsewhere in this Quarterly Report on Form 10-Q, and our Annual
Report on Form 10-K filed on November 30, 2012.
The independent registered public accounting firms' reports on the Company's
financial statements as of November 30, 2012, 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, Peptide Technologies, Inc. agreed to amend the Asset
Purchase Agreement dated August 23, 2011. As a result of the amendment
30,000,000 restricted common shares of the Company were returned to treasury in
exchange for payment of half of one percent of all gross monies received by the
company from revenue produced from products derived from the use of all the
formulae listed in the Assets Purchase Agreement. In addition a monthly stipend
of CDN $15,000 per month is to be paid commencing from receipt of monies from
the first contract signed to purchase products derived from the use of the
formula for a period of five years from the date of the amended agreement.
18
Business of Issuer
With the future and environmental responsibility in mind, Peptide Technologies,
Inc. has developed the first all-natural, sustainable solution to the economic
burden of bio-fouling. Our solutions are safe "green" organic-based anti-fouling
products used to combat the rapidly growing problems caused by the attachment of
hard fouling agents in the marine and freshwater environments. Peptide
Technologies' patent protected approach not only significantly minimizes the
attachment of hard fouling agents (mussels, barnacles etc.) but is also highly
effective in preventing the build-up of any bio-film layer as well.
Our organic-based solutions are effective in both the marine and freshwaters,
and are environmentally friendly and non-toxic to water users and all aquatic
life. Additionally, our anti-fouling paints will adhere to both stationary
(concrete, steel) and flexible substrates (netting, etc.) Our paints and
coatings are available in a number of colors and can be tailored to coat
flexible or fixed substrates.
Targeted applications for our products are:
o Hydro-electric facilities and dams (i.e., water in-take pipes, valves);
o Ship hulls (i.e., barnacle covered hulls can increase fuel usage by
more than 40%);
o Commercial fish nets;
o Pearling and Aquaculture industry;
o Drinking water treatment facilities;
o Farm irrigation water;
o Navigation locks;
o Oil rigs (FPSO); and
o Other cement and/or steel substrates
Unlike other anti-fouling paints, Peptide Technologies' anti-fouling paints are
the only ones to receive a non-hazardous and non-toxic grade by Risk Management
Technology ChemAlert, Australia. Government sanctioned certification.
http://peptidetechnologiesinc.com/about-us/certifications/
Our patent-protected anti-fouling paints (Aquanatural and Aquaculture Natural)
are based on proprietary organic formulations developed over the past 15 years.
Our paint is unique globally and represents the ultimate in a green approach.
Some specific advantages of our anti-fouling paint:
o The paint is a "green" organic solution, non-toxic to aquatic life;
o Can be applied to both stationary and moving substrates;
o Effective in both fresh and marine waters;
o Can be applied as a paint or spray;
o Can be applied while underwater; (In development)
o Many color options to suit the end-users application; and,
o Our paint simply prevents attachment by hard fouling agents and
bio-film.
Our anti-fouling paints have undergone intensive evaluations by independent
parties around the globe. These include the Canada - Great Lakes; USA - Colorado
River; Darwin, Australia; and Trondheim, Norway.
In March 2013, ASI Group Ltd., on behalf of Ontario Power Generation Niagara
Plant Group, has completed its 6 month evaluation report of its patent-protected
proprietary organic anti-fouling coatings formula to prevent the attachment of
hard fouling agents of treated structures in the Great Lakes area. ASI showed
that the Company's coatings showed significantly fewer settlement stage mussels
during the 2012 reproductive season and were successful in preventing settlement
on treated plate surfaces. Testing was conducted from June 6, 2012 - December 8,
2012 in Lake Moodie, Ontario, Canada. Peptide Technologies organic paint coating
was applied to a rack system and submerged for a period of 6 months. During the
trial, treated and control panels were periodically pulled up out of the water
and examined for the presence of zebra/quagga mussels. ASI Group Ltd. concluded
that Aquanatural showed considerable promise as an anti-fouling paint in
preventing the attachment of mussels in the freshwater environment. Peptide
Technologies' coatings are deemed to be non-hazardous and non-toxic and as a
result are classified as a non-dangerous good. More information and detailed
photographs about this study can be found at
www.peptidetechnologiesinc.com/test-site-results/great-lakes/.
19
ASI Group Ltd. was founded in 1987 as Aquatic Sciences Inc. by a small team of
industry professionals committed to providing integrated engineering, ecological
and marine services to clients worldwide. In the late 1980's, ASI gained a
global reputation for their proactive response to the zebra mussel infestation
of the Great Lakes. ASI has the distinction of being the first to perform a
chlorination treatment for zebra mussels in North America.
Also in March 2013, they received perfect performance rating from Multi Pump
Innovation (MPI) of Norway for its Proprietary Underwater Organic Anti-Fouling
Coating. MPI is a supplier of professional cleaning equipment for shipping,
offshore and fish farms. Multi Pump Innovation (MPI) of Norway conducted trials
using Peptide's Aquaculture Natural anti-fouling paint and found that it
prevented the attachment of any hard fouling agents onto open net pen mesh
material. The netting material was submerged underwater for a total of 75 days
in waters off the coast of the city of Trondheim, Norway. Peptides Technologies'
formulation, Aquaculture Natural was formulated to ensure the integrity of the
paint when applied to netting material. Results were dramatic; no fouling agents
attached to areas coated with Aquaculture Natural, compared to other sections of
the net coated with a leading competitor's anti-fouling paint. The growth of
hard fouling agents (i.e. barnacles, mussels, etc.) was monitored daily. Peptide
Technologies' coatings are non-hazardous and non-toxic and as a result are
classified as a non-dangerous good. More information and detailed photographs
about this study can be found at
http://peptidetechnologiesinc.com/test-siteresults/north-atlantic-ocean
-norwegian-sea.
Background
Bio-Fouling
Bio-fouling is the development of organic layers, created by the settlement of
organisms and their metabolic products (primarily caused by a variety of
organisms including: bacteria, algae and hard agents (mussels, barnacles etc.)).
Fouling produces several problems for equipment and aquatic structures,
deteriorating their performance and limiting their useful life.
Typically fouling begins with the formation of bio-films which develop and
affect the interaction between the substrate surface and the environment. In
most instances, bio-film developments compromise the substrate's integrity and
facilitate the subsequent production of algal growth and the attachment of other
hard agents.
Bio-films are predominately aggregates of bacterial cells, which attach to and
grow on a substrate, which are often resistant to disinfection. Bacterial
bio-films cause serious problems for industrial fluid processing operations
including: mechanical blockage interference in heat transfer process and
microbial-induced corrosion. In engineered systems such as cooling water
systems, food processing and other industrial applications, bio-film is a risk
to public health. Product spoilage and souring are consequences of
bio-film-mediated contamination.
Overall, bio-fouling represents a significant economic cost to a variety of
man-made structures and facilities including: desalination plants, piers, and
pylons, buoys, boilers, steam generators, cooling towers, evaporators,
distillation units, heat exchangers, engine jackets and valves. In addition,
bio-fouling generally increases fuel consumption, reduces efficiency, and
greatly increases corrosion rates.
Aquanatural & Aquaculture Natural products are the world's only non-hazardous,
non-toxic, safe, user-friendly, anti-fouling paints. These two products prevent
bio-film adherence and subsequent attachment by other hard fouling agents.
Aquanatural & Aquaculture Natural anti-fouling coatings are the only two
environmentally safe paints for preventing the attachment of bio-films and hard
fouling agents.
Other key attributes of our two anti-fouling paint products include:
o Our protective coating paints are available in several colors
including white;
o Our products do not kill fouling agents, simply prevent them from
attaching to our coated surfaces;
o Our products can be applied to netting material, rope, fiberglass,
cement and a variety of metal substrates; and,
o Of all the registered anti-fouling paints, Peptide Technologies,
Inc.'s paints, Aquanatural and Aquaculture Natural, are the only two
registered non-hazardous, non-toxic paint coatings, and therefore
rated as non-dangerous goods.
20
Zebra and Quagga Mussels
------------------------
The zebra mussel (Dreissena polymorpha) and its cousin, the quagga mussel
(Dreissena rostriformis bugensis), are small bivalve mollusks with two matching
half shells, having an average life span of 3 to 5 years. Zebra mussels are
native to the Black, Caspian, and Azov Seas, dating back to 1769. By the late
18th and early 19th centuries, zebra mussels had spread to most all major
drainages of Europe because of widespread construction of canal systems. They
first appeared in Great Britain in 1824, where they are now well established.
Since then, zebra mussels have expanded their range into Denmark, Sweden,
Finland, Ireland, Italy, and the rest of Western Europe. Zebra mussels were
first discovered in North America in 1988 in the Great Lakes. The first account
of an established population came from Canadian waters of Lake St. Clair, a
water body connecting Lake Huron and Lake Erie. By 1990, zebra mussels had been
found in all the Great Lakes. The following year, zebra mussels escaped the
Great Lakes basin and found their way into the Illinois and Hudson rivers. The
Illinois River was the key to their introduction into the Mississippi River
drainage which covers over 1.2 million square miles. Since its introduction, the
zebra mussel has spread to 23 states in America and two Canadian provinces.
The quagga mussel is indigenous to the Dneiper River drainage of Ukraine and
Ponto-Caspian Sea. It was discovered in the Bug River in 1890 by Andrusov, who
named the species in 1897. The quagga mussel was first sighted in the Great
Lakes in September 1989, when one was found near Port Colborne, Lake Erie,
though the recognition of the quagga type as a distinct species was not until
1991. In August 1991, a mussel with a different genotype was found in a random
zebra mussel sample from the Erie Canal near Palmyra, New York, and after
confirmation that this mussel was not a variety of Dreissena polymorpha, the new
species was named "quagga mussel" after the "quagga," an extinct African
relative of the zebra. The first sighting of quagga mussels outside the Great
Lakes basin was made in the Mississippi River between St. Louis, Missouri and
Alton, Illinois in 1995. In January 2007, populations of quagga mussels were
discovered in Lake Mead near Boulder City, Nevada, and in Lake Havasu and Lake
Mohave on the California/Arizona border.
The quagga mussel is a prolific breeder, possibly contributing to its spread and
abundance. Dreissena are dioecious (either male or female) with external
fertilization. A fully mature female mussel is capable of producing up to one
million eggs per year. After fertilization, pelagic microscopic larvae, or
veligers, develop within a few days and these veligers soon acquire minute
bivalve shells. Free-swimming veligers drift with the currents for three to four
weeks feeding by their hair-like cilia while trying to locate suitable substrata
to settle and secure byssal threads. Zebra and quagga mussels accumulate organic
pollutants within their tissues to levels more than 300,000 times greater than
concentrations in the environment and these pollutants are found in their
pseudofeces, which can be passed up the food chain, therefore increasing
wildlife exposure to organic pollutants (Snyder et al., 1997). Another major
threat involves the fouling of native freshwater mussels. Since quaggas were
discovered in Lake Michigan in 1998, plankton rings formed by the passage of
storms have been eaten away by the quagga mussels, threatening the local
ecosystem.
Numerous pipelines, filter screens, hydroelectric turbines and pumping stations,
irrigation tunnels, canals and aqueducts are becoming clogged with quagga and
zebra mussels, and this proliferation and dispersion of mussel populations
threatens to impact reclamation operations and multiple dams across North
America, resulting in the interruption of hydropower and water delivery at
significant economic costs. Of particular concern is the blockage of water lines
designed to cool the hydropower turbines at dams like Hoover.
The quagga mussels, which grow to about 1.5 inches, are clogging water lines
that are used to cool the 17 massive hydropower turbines at Hoover Dam and have
already forced dam operators to temporarily shut down turbines that supply
electricity to 1.6 million people in southern Nevada, Arizona and California.
The mussels have caused similar problems at the downstream Davis Dam in Lake
Mohave and Parker Dam in Lake Havasu, both of which provide electricity for
thousands of people in Arizona and California. The mussels have also threatened
to clog water intake lines in Lake Mead operated by the Southern Nevada Water
System that supply water to more than 2 million people in the Las Vegas area.
What took decades to unfold in the Great Lakes has played out in a matter of
months in Lake Mead. Quaggas can lay eggs six or seven times a year in the
warmer water, compared with once or twice a year in the Great Lakes.
21
If you drained Lake Mead above Hoover Dam, says National Park Service biologist
Bryan Moore, it would reveal that brown canyon walls that were mussel-free just
two years ago are now black with quaggas at densities of up to 55,000 per square
meter. The Bureau of Reclamation, which operates the Hoover, Davis and Parker
dams, has employed divers with high-pressure water hoses to blow mussels out of
pipelines and filter gates, and the agency retains the option of using chlorine
treatments on the mussels if necessary. But those treatments are expensive,
temporary and, in the case of chlorine, can have negative environmental effects.
Colonization of the Columbia River Basin (CRB)in the Pacific Northwest by zebra
and quagga mussel could affect all submerged components and conduits of the
Federal Columbia River Power System (FCRPS) including trash racks, raw water
distribution systems (headers), turbine bearing cooling systems, diffuser
plates, service and fire-water systems, and fish passage facilities.
Despite the uncertainty about zebra and quagga mussel tolerance to water
velocity, irregularities such as cracks and crevices and scaling in older pipes
and flanges can provide lower velocity refugia where zebra and quagga mussel
settlement can occur. The attached mussels, in turn, then produce additional low
flow refuges, allowing colonization in otherwise inhospitable flow environments.
Settlement can also occur when water flow is reduced during generation down-time
as conditions become more conducive to attachment.
Zebra and quagga mussel densities within the CRB could vary widely depending on
water chemistry, food availability, and breeding population. After their initial
introduction, zebra mussel populations can rapidly increase by orders of
magnitude, and then similarly decrease. Under ideal conditions in the Laurentian
Great Lakes zebra mussel densities reach 700,000 - 800,000 per square meter
(Kovalak et al, 1993). In the lower Mississippi River, where the zebra mussel
has been introduced, densities of 400,000 per square meter have been reported
(Kraft, 1995). The Mississippi has an ideal environment for zebra and quagga
mussels, in part because food resources are abundant (Kraft, 1995). While
Columbia River water quality parameters are favorable to zebra and quagga mussel
colonization (Athearn 1999), the Columbia River's lower plankton densities in
comparison to the Mississippi or Great Lakes, may limit zebra and quagga mussel
population densities.
Densities of zebra and quagga mussels in the Pacific Northwest will determine
the severity of impacts on hydropower, navigation, and fish passage facilities.
Zebra mussel densities in powerhouses will depend on the configuration of the
water systems and water conduit materials. The potential economic impacts of
zebra and quagga mussels on hydropower generation facilities in the Columbia
River will be determined by a number of factors including density, growth rate,
and maintenance costs. While density and growth are affected by environmental
factors as noted above, maintenance costs will also be driven by the difficulty
in accessing fouled areas, the methods available for removal and control, and
the amount of time available for maintenance activities. They prefer to cling to
flat, stainless steel structures where water flows less than 6 feet per second.
The muscles infestation sets in and begins to clog hydroelectric power cooling
pipes and other hardware in the dams' operations with quagga colonies. Not only
do they pose a threat to the cooling pipe system for hydroelectric turbines, but
also to the network that supplies domestic water for workers and visitors at the
dams.
Economic Impacts
o Hydroelectric Dams and Nuclear Power Plants
There are more than 85,000 dams in the United States alone, of which
approximately 11% are federally owned and operated. The major concern is the
blockage of water lines designed to cool the hydropower turbines at dams like
Hoover. This problem has already caused a "significant increase in the frequency
of high temperature alarms in cooling systems, requiring shutdowns" so that the
mussels could be removed.
Quagga
The quagga mussels, which grow to about 1.5 inches, are clogging water lines
that are used to cool the 17 massive hydropower turbines at Hoover Dam and have
already forced dam operators to temporarily shut down turbines that supply
electricity to 1.6 million people in southern Nevada, Arizona and California.
The mussels have caused similar problems at the downstream Davis Dam in Lake
Mohave and Parker Dam in Lake Havasu, both of which provide electricity for
thousands of people in Arizona and California. The mussels have also threatened
to clog water intake lines in Lake Mead operated by the Southern Nevada Water
System that supply water to more than 2 million people in the Las Vegas area.
22
Maintenance costs will also be driven by the difficulty in accessing fouled
areas, the methods available for removal and control, and the amount of time
available for maintenance activities. It has been estimated that hundreds of
millions of dollars is spent annually to combat the mussel infestation at
hydroelectric dams alone, and it is expected that this amount will increase
exponentially once the infestation has spread to the West.
Virtually any submerged area with a moderate flow rate that draws water from an
infested water source is vulnerable to colonization. This is especially true of
areas that offer protection to small mussels, such as crevices or seams. Intake
screens, for example, are common settlement areas and are often coated with
clumps or druses of mussels. The presence of dislodged shells in the discharge
of a facility's raw well or forbay is a common first indicator of the presence
of zebra mussels in the raw water main. Facilities may also experience a
noticeable decrease in head pressure. Most facilities have numerous components
subject to severe bio-fouling.
o Shipping Industry
The shipping industry worldwide spends huge amounts every year combating the
effects of "fouling." Every year or two, ocean going vessels must dry-dock in
order to undergo extensive work over two or more weeks to remove barnacles that
have attached to the hull. Prior to dry-docking, ships gradually undergo rapid
increases in additional fuel costs due to increased drag from fouling. The
mechanism involved in fouling occurs in a series of three steps. Within one
week, the hull surface is coated with a slimy deposit. Following this, various
micro-organisms (bacteria) attach. Barnacles attach to this slimy/bacterial
coating and become attached to the ship's hull using a bio-cement generated by a
series of three proteins that undergo a conformational change, within the
organism. This cement is one of, if not the strongest cement known to date of
anything produced naturally.
The current anti-fouling paint applied to ship hulls contains toxic chemicals
and heavy metals. However, as the international shipping community has been
issuing legislation prohibiting the use of these environmentally hazardous
substances - the need for alternatives is pressing.
o Recreational Boating Industry
In contrast, Lake Mead Marina predicts the costs to the West's recreational
boating industry alone will be immense in the coming few years. Mussels are
smothering everything under the waterline at marinas, making simple maintenance
on boats and floating docks expensive and time consuming, not to mention
dangerous due to the razor-sharp shells being plucked from the water.
The United States Park Service, which figures the mussels have been in Lake Mead
since 2005, is trying to protect the rest of the West's waters by requiring
boats that have been docked in a slip to be decontaminated with jets of scalding
water before departing Lake Mead. A killer hot wash costs about $40 for a small
boat and up to $200 for a houseboat.
o Ecological Damage
The infestation of zebra and quagga mussels are wreaking havoc on the native
species indigenous to the waterways they inhabit. These mussels attach to other
mussel species and crustaceans making it almost impossible for them to eat and
survive. While the zebra and quagga do have predator enemies, there are not
enough to consume the rapidly growing infestation.
This is more than an ecological concern. The federal government plans to spend
over a billion dollars in the coming years to help these species recover, and
zebra and quagga mussels have a history of ravaging native species in the waters
they invade. In Lake Michigan, for example, prey fish numbers are less than 10%
of what they were before the invasive mussels arrived.
Zebra mussels are also believed to be the source of deadly avian botulism
poisoning that has killed tens of thousands of birds in the Great Lakes since
the late 1990s.
Zebra and quagga mussels accumulate organic pollutants within their tissues to
levels more than 300,000 times greater than concentrations in the environment
and these pollutants are found in their pseudofeces, which can be passed up the
food chain, therefore increasing wildlife exposure to organic pollutants.
Another major threat involves the fouling of native freshwater mussels. Since
quaggas were discovered in Lake Michigan in 1998, plankton rings formed by the
passage of storms have been eaten away by the quagga mussels, threatening the
local ecosystem.
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Other zebra and quagga mussel infested applications include:
o Drinking water treatment facilities
o Fish hatcheries and aquaculture facilities
o Golf courses
o Impoundments and reservoirs
o Institutions (hospitals, colleges, etc.)
o National scenic river ways
o Navigation locks
o Public agencies
o Farm irrigation water
Research and Development Activities and Costs
We have not incurred any costs to date relating to research and development and
have no plans to undertake any research and development activities within the
next twelve months.
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 August 31, 2013, our cash balance was $5,271. 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 August 31, 2013, we had a working capital deficit of $1,494,515 compared to a
working capital deficit of $803,823 at November 30, 2012. At August 31, 2013,
our total assets consisted of cash of $5,271, a website for $6,667, and
Intangible Asset and Intellectual Property of $45,000. This compares with total
assets at November 30, 2012, which consisted of cash of $7,780, prepaid expenses
of $3,494, website of $9,167 and intangible assets and intellectual property of
$45,000.
At August 31, 2013, our total current liabilities increased to $1,499,786 from
$815,097 at November 30, 2012. During the nine months ended August 31, 2013,
accounts payable and accrued liabilities increased by $684,689, due primarily to
accrued payroll and consulting fees during the current year.
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.
24
Result of Operations
For The Three Months Ended August 31, 2013 Compared To The Three Months Ended
August 31, 2012.
We recognized $nil revenues from operational sales during the three months
ending August 31, 2013.
During the three months ended August 31, 2013, operating expenses were $245,932
compared to $10,745 for the three months ended August 31, 2012. The increase of
$235,187 was due primarily to consulting fees of $75,000 and payroll expense of
$159,000 - due to our pursuit of business opportunities related to the peptide
technology.
We recognized a net loss of $248,303 for the three months ended August 31, 2013,
compared to a net loss of $14,421 for the three months ended August 31, 2012.
The increase of $233,882 was a direct result of the increase in operating
expenses, as discussed above.
For The Nine Months Ended August 31, 2013 Compared To The Nine Months Ended
August 31, 2012.
During the nine months ended August 31, 2013, operating expenses were $738,181
compared to $162,439 for the nine months ended August 31, 2012. The increase of
$575,742 was due to an increase in consulting fees of $102,000 and payroll
expense of $477,000 due to our pursuit of business opportunities related to the
peptide technology. Operating expenses during the nine months ended August 31,
2013, consisted of consulting fees of $227,000; payroll expense of $477,000;
professional fees of $19,117; office and administration costs of $13,963 and
supplies costs of $1,101. This is compared to consulting fees of $125,000;
professional fees of $32,093 and office and administration fees of $5,346
incurred for the nine months ended August 31, 2012.
We recognized a net loss of $738,193 for the nine months ended August 31, 2013,
compared to a net loss of $167,023 for the nine months ended August 31, 2012.
The increase of $571,170 was a direct result of the increase in operating
expenses, as discussed above.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make assumptions and estimates that affect the reported amounts of
assets, liabilities, revenues and expenses as well as the disclosure of
contingent assets and liabilities at the date of the 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.
Foreign Currency Translations
The financial statements are presented in U.S. dollars. 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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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 August 31,
2013.
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.
Attestation report of the registered public accounting firm
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the company to provide only management's
report in this annual report.
Changes in Internal Controls
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended August 31, 2013, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
ITEM 1A. RISK FACTORS
Not applicable.
26
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 15, 2013, 25,000 shares of the Company's common stock were issued for
cash proceeds of $25,000.
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
None.
Item 6. Exhibits
Exhibit
Number Description
31.1 Section 302 Certification - Chief Executive Officer.
31.2 Section 302 Certification - Chief Financial Officer.
32.1 Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 - Chief Executive Officer.
32.2 Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 - Chief Financial Officer.
27
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 30th day of
September, 2013.
PEPTIDE TECHNOLOGIES, INC.
Date: October 2, 2013 By: /s/ Scott McKinley
------------------------------------------------
Name: Scott McKinley
Title: Chief Executive Officer (Principal
Executive Officer)
Date: October 2, 2013 By: /s/ Erik Odeen
------------------------------------------------
Name: Erik Odeen
Title: Chief Financial Officer (Principal
Accounting Officer)
28