The Companys unaudited interim consolidated financial statements for the six month period ended July 31, 2013 form a part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
These financial statements should be read in conjunction with the audited financial statements and notes included thereto for the year ended January 31, 2013 on Form 10K, as filed with the Securities and Exchange Commission.
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 2013
NOTE 1: NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS
The accompanying unaudited interim consolidated financial statements of Eaton Scientific Systems, Inc. (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Item 210 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included thereto for the year ended January 31, 2013, on Form 10-K, as filed with the Securities and Exchange Commission on May 16, 2013,
as the interim disclosures generally do not repeat those in the annual statements.
The Company is a development stage company as defined by ASC 915-10, Accounting and Reporting by Development Stage Enterprises. A development stage enterprise is one in which planned principal operations have not commenced or, if its operations have commenced, there has been no significant revenues therefrom.
The Company was incorporated in the state of Nevada on December 8, 2009 under the name Pristine Solutions, Inc. The Companys wholly owned subsidiary, Pristine Solutions Limited, was incorporated under the laws of Jamaica. The Companys original business plan focused on developing a network of sales points for the sale and service of tankless water heaters in Jamaica, through Pristine Solutions Limited.
On August 23, 2012, the Company and its controlling stockholders entered into a Share Exchange Agreement (the Share Exchange) with Eaton Scientific Systems, Ltd., a Nevada corporation (ESSL) and the shareholders of ESSL (the ESSL Shareholders), whereby the Company acquired 25,000,000 shares of common stock (100%) of ESSL (the ESSL Stock) from the ESSL Shareholders. In exchange for the ESSL Stock, the Company issued 25,000,000 shares of its common stock to the ESSL Shareholders (the Share Exchange).
In conjunction with the Share Exchange and Common Stock Purchase Agreement, the total shares held by the ESSL Shareholders are 265,000,000, or approximately 59.8% of the issued and outstanding common stock of the Company as of October 30, 2012. In addition, certain ESSL shareholders owning a total of 135,779,375 shares of the Companys common stock, representing approximately 30.64% of the issued and outstanding common stock of the Company, entered into three (3) separate twenty-four (24) month Lock-Up Agreements.
As a result of the Share Exchange and Common Stock Purchase Agreement, (i) there was a change in control of the Company; (ii) ESSL became the Companys wholly owned subsidiary; and (iii) the Company intends to continue the ESSL operations as its primary business. In addition, on November 27, 2012, the Company changed its name to
Eaton Scientific Systems, Inc.
NOTE
: The following notes and any further reference made to the Company, "we", "us", "our" and "Eaton" shall mean Eaton Scientific Systems, Inc. (formerly Pristine Solutions, Inc.) and its wholly-owned subsidiary, Eaton Scientific Systems, Ltd., unless otherwise indicated.
Headquartered in Beverly Hills, California, the Company is engaged in biomedical product development in the area of womens health. The Companys mission is to provide solutions to womens health issues surrounding pre-menopausal, peri-menopausal and post-menopausal conditions. The Company intends to develop non-hormonal treatments, and address the specific need for a non-hormonal solution to Hot-Flashes, a common symptom experienced by many pre-menopausal and post-menopausal women.
The Company has recently finished its first Clinical Trial Protocol, and is prepared to conduct the Study. On May 14, 2013, the Company entered into a Clinical Trial/Study Agreement with the American Institute of Research (the CTS Agreement) to, among other things, conduct the Study. The purpose of the Study will be to demonstrate that Tropine 3, its novel new indication of Homatropine, and existing FDA Approved drug currently used to treat heavy coughing, has the ability to provide relief to pre-menopausal, menopausal and post-menopausal women suffering from hot flashes. The Companys technical mission is to prove its central thesis that Homatropine in an oral suspension formula can reduce hot flashes in pre-menopausal, menopausal and post-menopausal women through multiple clinical trial validations
Going Concern
These consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As at July 31, 2013, the Company had working capital deficit of $235,567, and an accumulated deficit of $1,527,911. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Companys ability to continue as a going concern.
The financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in understanding the Companys financial statements. These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.
Basis of Presentation
These consolidated financial statements and related notes are prepared in accordance with generally accepted accounting principles in the United States and are expressed in US dollars. The Companys fiscal year end is January 31.
Development Stage Company
The Company is a development stage company as defined by ASC 915-10-05, Development Stage Entity. The Company is still devoting substantially all of its efforts on establishing the business, and its planned principal operations have not commenced. All losses accumulated, since inception, have been considered as part of the Companys development stage activities.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Eaton Scientific Systems, Ltd. (ESSL). All significant inter-company accounts and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. A
ll adjustments necessary for a fair statement of the results for the interim periods have been made, and all adjustments are of a normal recurring nature.
The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of purchase to be cash equivalents. As of July 31, 2013 and January 31, 2013, the Company had no cash equivalents.
Property and Equipment
6
Property and equipment is comprised of office equipment, recorded at cost and depreciated using the straight-line method over the estimated useful lives of five to seven years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. During the six months ended July 31, 2013 and the year ended January 31, 2013, respectively, $10,763 and $1,668 were capitalized to property and equipment.
Intangible Assets
Intangible assets consist of legal and other costs incurred in connection with the development of pending patents, and are capitalized and amortized over the shorter of the economic or legal life of the patent. During the six months ended July 31, 2013 and the year ended January 31, 2013, respectively, $11,074 and $8,751 were capitalized to intangible assets.
Impairment of Long-Lived Assets
The Companys long-lived assets, including intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset.
Due to the Companys recurring losses, the costs related to its patents were evaluated for impairment and it was determined that future cash flows were sufficient for recoverability of the asset. There can be no assurance, however, that market conditions will not change or demand for the Companys products under development will continue. Either of these could result in future impairment of long-lived assets.
Financial Instruments
Pursuant to ASC 820,
Fair Value Measurements and Disclosures
and ASC 825,
Financial Instruments
, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Companys financial instruments consist principally of cash, accounts payable, and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 605,
Revenue Recognition
. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured. As of July 31, 2013 and January 31, 2013, no revenue has been recognized, as the Company has not commenced operations.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718,
Share-Based Payments
, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with ASC 260,
Earning per Share
. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
Comprehensive Loss
ASC 220,
Comprehensive Income,
establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at July 31, 2013 and January 31, 2013, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
Recent Accounting Pronouncements
T
he Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (FASB), the US
Securities and Exchange Commission (SEC), and the Emerging Issues Task Force (EITF), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted
:
Effective January 2012, the Company adopted ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Effective January 2012, the Company adopted ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Not Yet Adopted
:
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASBs deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect, if any, the adoption of ASU 2013-02 will have on its consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Top 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. We are evaluating the effect, if any, adoption of ASU No. 2013-07 will have on our consolidated financial statements.
7
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
NOTE 3: PREPAID EXPENSES
Prepaid expenses consist of certain consulting fees paid in advance of services rendered. As of July 31, 2013 and January 31, 2013, respectively, the Company had $0 and $5,000 in prepaid expenses.
NOTE 4: PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
|
|
|
|
|
|
|
|
July 31, 2013
|
|
January 31, 2013
|
|
Office equipment
|
$
|
5,474
|
|
$
|
1,668
|
|
Furniture and fixtures
|
|
6,958
|
|
|
|
|
Sub-total
|
|
12,432
|
|
|
1,668
|
|
Accumulated depreciation
|
|
(647
|
)
|
|
|
|
Property and equipment, net
|
$
|
11,785
|
|
$
|
1,668
|
|
Depreciation expense totaled $647 and $0 for the six months ended July 31, 2013 and 2012, respectively.
NOTE 5: INTANGIBLE ASSETS
Intangible assets consists of the following:
|
|
|
|
|
|
|
|
July 31, 2013
|
|
January 31, 2013
|
|
Product development costs
|
$
|
50,625
|
|
$
|
44,806
|
|
Software license
|
|
5,256
|
|
|
|
|
Sub-total
|
|
55,881
|
|
|
44,806
|
|
Accumulated amortization
|
|
(15,641
|
)
|
|
(13,749
|
)
|
Intangible assets, net
|
$
|
40,240
|
|
$
|
31,057
|
|
Amortization expense totaled $1,890 and $1,001 for the six months ended July 31, 2013 and 2012, respectively.
NOTE 6: RELATED PARTY TRANSACTIONS
Due to affiliates and related parties consists of the following:
|
|
|
|
|
|
|
|
July 31, 2013
|
|
January 31, 2013
|
|
Related party loans
|
|
|
|
|
|
|
Loans to the Company
|
$
|
61,370
|
|
$
|
194,824
|
|
Notes payable for accrued compensation
|
|
273,000
|
|
|
273,000
|
|
Total related party loans
|
|
334,370
|
|
|
467,824
|
|
Related party payable
|
|
|
|
|
|
|
Accrued compensation
|
|
128,000
|
|
|
6,000
|
|
Reimbursable expenses
|
|
(9,056
|
)
|
|
37
|
|
Total related party payable
|
|
118,944
|
|
|
6,037
|
|
Total related party transactions
|
$
|
453,314
|
|
$
|
473,861
|
|
|
|
|
|
|
|
|
As at July 31, 2013, affiliates and related parties are due a total of $453,314, which is comprised of $61,370 in cash loans, $273,000 of accrued compensation converted to notes payable, $128,000 in unpaid compensation, and $9,056 due from related parties for reimbursable expenses. During the six months ended July 31, 2013, cash loans decreased by $133,454, unpaid compensation increased by $122,000, and reimbursable expenses receivable increased by $9,093.
On August 31, 2012, the Company issued a promissory note in the amount of $168,000 to Huntington Chase Financial Group (HCFG), a Nevada corporation, whose principal is a related party, for all unpaid compensation owing under a related consulting agreement dated July 10, 2008. The promissory note is payable within three years, and accrues interest at a rate of 7% per annum. Interest in the amount of $10,761 and $4,930 has been accrued as of July 31, 2013 and January 31, 2013, respectively, and is included as an accrued expense on the accompanying consolidated balance sheets.
On January 1, 2013, the Company entered into a consulting agreement with HCFG. The consulting agreement provides for HCFG to provide advisory services to the Company for a period of three years for compensation in the amount of $15,000 per month, plus a one-time payment of $90,000 for prior services rendered. On January 31, 2013, a promissory note was issued by the Company in the amount of $105,000 for unpaid compensation owing under this agreement through January 31, 2013. The promissory note is payable within three years, and accrues interest at a rate of 7% per annum. Interest in the amount of $3,645 and $0 has been accrued as of July 31, 2013 and January 31, 2013, respectively, and is included as an accrued expense on the accompanying consolidated balance sheets. In addition, as of July 31, 2013, $90,000 in compensation not included in the promissory note has been recorded as related party unpaid compensation.
On January 7, 2013, the Company issued a convertible promissory note in the amount of $195,000 to a related party for cash loans made to the Company. The promissory note accrues interest at a rate of 6% per annum, and is convertible into the Companys common stock. A total of $133,454 and $176, in principal repayments were made during the six months ended July 31, 2013 and the year ended January 31, 2013, respectively, resulting in a principal balance of $61,370 and $194,824 as of July 31, 2013 and January 31, 2013, respectively. Interest in the amount of $13,180 and $9,485 has been accrued as of July 31, 2013 and January 31, 2013, respectively, and is included as an accrued expense on the accompanying consolidated balance sheets.
On September 1, 2012, the Company entered into an employment agreement with Mr. Michael J. Borkowski (the Employment Agreement) to serve as the Companys President, CEO, and Director of the Board of Directors. The Employment Agreement is for a term of three years, and includes compensation in the amount of $72,000 per year, bonus compensation in the amount of $100,000 contingent upon the Company meeting certain goals, 5,000,000 stock options, and certain other benefits in the event they are offered by the Company in the future. As of July 31, 2013 and January 31, 2013, respectively, $38,000 and $6,000 has been recorded as related party unpaid compensation.
As of July 31, 2013 and January 31, 2013, respectively, the Company has accrued $27,586 and $14,414 in interest on related party loans.
NOTE 7: NOTES AND LOANS PAYABLE
On January 7, 2013, the Company issued a Convertible Promissory Note in the amount of $250,000 to a non-related party (the Convertible Note). The Convertible Note is payable within two years, accrues interest at a rate of 6% per annum, and is convertible into the Companys common stock. Interest in the amount of $8,424 and $986 has been recorded as of July 31, 2013 and January 31, 2013, respectively, and is included as an accrued expense on the accompanying consolidated balance sheets.
As of July 31, 2013 and January 31, 2013, respectively, the Company has accrued $8.424 and $986 in interest on notes and loans payable
NOTE 7: COMMITMENTS AND CONTINGENCIES
On August 28, 2012, the Companys wholly owned subsidiary, Eaton Scientific Systems, Ltd. entered into a Consulting Agreement with Dr. David Stark (the Stark Agreement). The Stark Agreement, effective September 1, 2012, is for a period of 12 months, and provides compensation in the amount of $4,000 per month. As of July 31, 2013 and January 31, 2013, respectively $32,500 and $11,000 in unpaid compensation has been included in accounts payable on the accompanying consolidated balance sheets.
8
On May 14, 2013, the Company entered into a Clinical Trial/Study Agreement with the American Institute of Research (the CTS Agreement). The purpose of the Study will be to demonstrate that Tropine 3, its novel new indication of Homatropine, and existing FDA Approved drug currently used to treat heavy coughing, has the ability to provide relief to pre-menopausal, menopausal and post-menopausal women suffering from hot flashes. Pursuant to the CTS Agreement, the cost for the Study is approximately $257,875, based upon 50 (fifty) patients, not to exceed a cost of $5,037.50 per patient, plus preparation and pharmaceutical fees of $6,000.
NOTE 8: COMMON STOCK
On February 27, 2012, the Company authorized an increase to the authorized number of shares of common stock from 100,000,000 shares to 650,000,000 shares and decreased the authorized preferred stock from 100,000,000 shares to 50,000,000 shares. In addition, the par value of the Companys common stock was changed from $0.001 per share to $0.0001 per share.
The following reflects the common stock transactions as adjusted for the change in par value.
In June 2012, the Company issued 1,409,375 shares of its common stock for services rendered valued at $5,638. As a result, $5,497 has been recorded as paid in capital.
In July 2012, the Company effected a 4-to-1 reverse split, whereby each shareholder would receive one (1) share of common stock for each four (4) shares of common stock held. The reverse split resulted in the 100,000,000 shares issued and outstanding to be reduced by 75,000,000 shares, leaving 25,000,000 total shares of common stock issued and outstanding.
On August 23, 2012, in connection with the Share Exchange, the Companys common shares were recapitalized by an addition of 418,000,686 common stock shares. As a result, $41,800 was recorded to paid in capital.
As of July 31, 2013 and January 31, 2013, 443,000,686 shares of the Companys common stock were issued and outstanding.
NOTE 9: WARRANTS AND OPTIONS
On September 1, 2012, the Company adopted the Employee Stock Option Plan (2012 Plan), wherein 25,000,000 shares of common stock were reserved for issuance. The 2012 Plan is intended to assist the Company in securing and retaining key employees, directors and consultants by allowing them to participate in the Company's ownership and growth through the grant of incentive and non-qualified options.
On September 1, 2012, the Company, under its 2012 Plan, granted qualified stock options to purchase 6,500,000 shares of its common stock. Of the total options granted, 5,000,000 were granted to the sole officer of the Company at $0.10 per share, and 1,500,000 were granted to a consultant at $0.25 per share. All options are for a period of 5 years, vest quarterly over a period of two years, and were valued using the Black-Scholes valuation method at $0.41 per share, or $2,665,000, which is being amortized over a 24-month period.
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
Remaining
|
|
Exercise Price
|
|
Weighted
|
|
|
|
Number of
|
|
Contractual Life
|
|
times Number
|
|
Average
|
|
Exercise Price
|
|
Shares
|
|
(in years)
|
|
of Shares
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.10
|
|
5,000,000
|
|
4.25
|
|
$
|
500,000
|
|
$0.10
|
|
$0.25
|
|
1,500,000
|
|
4.25
|
|
|
375,000
|
|
$0.25
|
|
|
|
6,500,000
|
|
|
|
$
|
875,000
|
|
$0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Activity
|
|
|
Weighted
|
|
|
Number
|
|
Average
|
|
|
of Shares
|
|
Exercise Price
|
|
|
|
|
|
|
Outstanding at January 31, 2013
|
6,500,000
|
|
$0.20
|
|
Issued
|
|
|
|
|
Exercised
|
|
|
|
|
Expired / Cancelled
|
|
|
|
|
Outstanding at July 31, 2013
|
6,500,000
|
|
$0.20
|
|
|
|
|
|
|
During the six months ended July 31, 2013 and the year ended January 31, 2013, respectively, the Company expensed a total of $444,166 and $222,083 in stock option compensation. There remains $1,998,751 and $2,442,917 in deferred stock option compensation at July 31, 2013 and January 31, 2013, respectively, to be amortized over the next 15 months.
As of July 31, 2013 and January 31, 2013, the Company has no warrants and 6,500,000 options issued and outstanding.
9
NOTE 10: INCOME TAXES
The components of the net deferred tax asset at July 31, 2013 and January 31, 2013, the statutory tax rate, the effective tax rate and the amount of the valuation allowance are indicated below:
|
|
|
|
|
|
|
|
July 31, 2013
|
|
January 31, 2013
|
|
|
|
|
|
|
|
|
Income (Loss) Before Taxes
|
$
|
(726,854
|
)
|
$
|
(570,344
|
)
|
Statutory rate
|
|
34%
|
|
|
34%
|
|
|
|
|
|
|
|
|
Computed expected tax payable (recovery)
|
$
|
247,200
|
|
$
|
194,300
|
|
Non-deductible expenses
|
|
(800
|
)
|
|
(400
|
)
|
Change in valuation allowance
|
|
(246,400
|
)
|
|
(193,900
|
)
|
|
|
|
|
|
|
|
Reported income taxes
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
The significant components of deferred income tax assets and liabilities at July 31, 2013 and January 31, 2013 are as follows:
|
|
|
|
|
|
|
|
July 31, 2013
|
|
January 31, 2013
|
|
|
|
|
|
|
|
|
Net operating loss carried forward
|
$
|
518,200
|
|
$
|
271,900
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
(518,200
|
)
|
|
(271,900
|
)
|
|
|
|
|
|
|
|
Net deferred income tax asset
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
* * * * *