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Eaton Scientific Systems, Inc. (ESSI) SEC Filing 10-K Annual report for the fiscal year ending Thursday, January 31, 2013

Eco Science Solutions, Inc.

CIK: 1490873 Ticker: ESSI
Document and Entity Information (USD $)
12 Months Ended
Jan. 31, 2013
Apr. 25, 2013
Aug. 20, 2012
Jul. 31, 2012
Document And Entity Information        
Entity Registrant Name EATON SCIENTIFIC SYSTEMS, INC.      
Entity Central Index Key 0001490873      
Document Type 10-K      
Document Period End Date Jan. 31, 2013      
Amendment Flag false      
Current Fiscal Year End Date --01-31      
Is Entity a Well-known Seasoned Issuer? No      
Is Entity a Voluntary Filer? No      
Is Entity's Reporting Status Current? Yes      
Entity Filer Category Smaller Reporting Company      
Entity Public Float       $ 45,675,514
Entity Closing Share Price     $ 0.225  
Entity Common Stock, Shares Outstanding   443,000,686    
Document Fiscal Period Focus FY      
Document Fiscal Year Focus 2012      


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
(Mark One)
 
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the fiscal year ended January 31, 2013
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934
 
For the transition period from ________ to ________
 
Commission file number 333-166487 
 
 
EATON SCIENTIFIC SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
N/A
(State or other jurisdiction of incorporation or
 
(I.R.S. Employer Identification No.)
organization)
 
 
 
 
 
9595 Wilshire Blvd., Suite 900
Beverly Hills, California
 
90212
(Address of principal executive offices)
 
(Zip Code)
 
Registrant's telephone number, including area code: 310-281-6923
 
PRISTINE SOLUTIONS, INC.
 (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 if the Securities Act.  Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days.  Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registration statement was required to submit and post such files).  Yes x No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes o No x

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x
 
The aggregate market value of Common Stock held by non-affiliates of the Registrant as of July 31, 2012 was $45,675,514 based on a closing price of $0.225 for the Common Stock on August 20, 2012, the closest available date to last business day of the Registrant’s most recently completed second fiscal quarter. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the Registrant.
 
Indicate the number of shares outstanding of each of the registrant’s
classes of common stock as of the latest practicable date.

443,000,686 Common Shares issued and outstanding as of April 25, 2013
 
DOCUMENTS INCORPORATED BY REFERENCE

Current Report, Item 2.01 on Form 8-K filed on November 13, 2012
 
 



 

 TABLE OF CONTENTS

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PART I


This annual report contains forward-looking statements. These statements relate to future events or the Company’s future financial performance, and include statements made by the Company regarding product development and obtaining FDA clearances. In some cases, forward-looking statements can be identified by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors” that may cause the Company’s or its industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

The Company’s financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to “common shares” refer to the common shares in the Company’s capital stock.

As used in this annual report, the terms "we", "us", "our" and "Eaton" mean Eaton Scientific Systems, Inc. (formerly Pristine Solutions, Inc.), and its wholly-owned subsidiary, Eaton Scientific Systems, Ltd., unless otherwise indicated.

Corporate Overview

The Company’s principal executive office is located at 9595 Wilshire Blvd., Suite 900, Beverly Hills, CA 90212, with administrative operations at 1327 Ocean Avenue, Suite B, Santa Monica, California, 90401. The Company’s telephone number is 310-281-6923.

The Company’s website is www.eatonscientific.com.

The Company’s common stock is traded on the OTC Bulletin Board and the OTCQB under the symbol “ESSI”.

Corporate History

Formation and Development

The Company was incorporated in the state of Nevada on December 8, 2009, under the name Pristine Solutions, Inc. The Company’s wholly owned subsidiary, Pristine Solutions Limited, was incorporated under the laws of Jamaica. The Company’s 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. The Company’s aim was to become the first tankless water heater company specializing in tankless-only products to enter the Jamaican market, and the only company in the Jamaican market offering solar-powered tankless water heater products. As part of its plan, on December 30, 2009, the Company entered into a distribution agreement with Zhongshan Guangsheng Industry Co., Ltd., of China (“Zhongshan”), the manufacturer of the tankless water heaters.  Zhongshan manufactures the tankless water heaters under the brand Gleamous Electric Appliances. 

On August 22, 2012, Christine Buchanan-McKenzie resigned from all positions with the Company, including, but not limited to that of President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and a member of the Board of Directors. The resignation did not involve any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. On the same day, Mr. Michael Borkowski was appointed as President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and the sole member of the Board of Directors of the Company.

 
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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. In addition, the Company’s Chief Executive Officer, Mr. Michael J. Borkowski, and the Company’s controlling shareholder and former President, Ms. Christine Buchanan-McKenzie, entered into a Common Stock Purchase Agreement, whereby Mr. Borkowski would purchase one hundred (100%) percent of the Company’s common shares owned by Mrs. Buchanan-McKenzie, or 240,000,000 shares, at par value $.0001, representing approximately 54.1% of the Company’s total issued and outstanding shares. The Common Stock Purchase Agreement and Share Exchange, was completed on October 22, 2012. On October 23, 2012, the Common Stock Purchase Agreement was finalized, and a change in control of the Registrant took place.

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. Certain ESSL shareholders owning a total of 135,779,375 shares of the Company’s 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 Registrant; (ii) ESSL became the Company’s wholly owned subsidiary; and (iii) the ESSL operations will continue as the Company’s primary business.

On November 27, 2012, the Company changed its name to Eaton Scientific Systems, Inc.
 
NOTE: The following sections of this annual report 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.
 
Description of Business

Headquartered in Beverly Hills, California, the Company is engaged in biomedical product development in the area of women’s health.  The Company is a development stage company whose principal line of business is focused on quality solutions to women’s 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.

 Product Strategy and Overview

The Company has recently completed its Clinical Trial Protocol entitled “An Open Label Escalating Study to Determine Maximum Necessary Dose (MND) of Homatropine Methylbromide needed for Palliation of Hot Flashes in Menopausal Women,” dated March 14, 2013, a copy of which is attached herewith as Exhibit 99.6, for its new drug indication, with the goal of generating data that supports its claims. The Company has retained a team of medical professionals and is ready to begin Phase I of the Clinical Trial/Study (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.  A copy of the CTS Agreement is included in this filing as Exhibit 10.13.  The Company’s goal is to complete the Study, barring any unforeseen delays, by the end of the 3nd calendar quarter of 2013.

The Study will consist of two parts: Study A and Study B. Study A be run in 2 stages: (1) a baseline run-in stage where subjects take no drug and record selected baseline climacteric symptoms for a duration of 7 days, and (2) a dose escalation stage where subjects take the study drug starting at the lowest dose and can escalate the drug to the next highest does if the drug is not working based on improvement of symptoms, minimization of side effect and tolerability duration 14 days. After maximum dose needed is decided then Study B can begin, which will involve a randomized double-blind placebo controlled study to test and measure the efficacy of Homatropine under its new indication.

Part of the Company’s mission is to prove its central thesis that Homatropine in an oral suspension formula can reduce hot flashes, and improve the quality of life in pre-menopausal, menopausal and post-menopausal women through multiple clinical trial validations. Provided that the data supports the Company’s claims it has outlined its Patent Application, it will present the information to the FDA for review.  The FDA may potentially request additional Trials to be conducted by the Company prior to a review for consideration of Tropine 3 receiving an FDA Approval.

 
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The Market

Pre-Menopausal, Menopausal & Post-Menopausal
 
The climacteric (also known as menopause) is defined as the syndrome of endocrine (hormonal), somatic (bodily) and psychological changes occurring at the termination of the reproductive period in the female. According to the Greene Climacteric scale,  there are 21 common symptoms associated with a woman’s climacteric stage, namely heart beating quickly or strongly, feeling tense or nervous, difficulty in sleeping, excitability, attacks of panic, difficulty in concentrating, feeling tired or lacking in energy, loss of interest in most things, feeling unhappy or depressed, crying spells, irritability, feeling dizzy or faint, pressure or tightness in head or body, parts of the body feel numb or tingling, headaches, muscle and joint pains, loss of feeling in hands and feet, breathing difficulties, hot flashes, sweating at night, and loss of interest in sex. Other symptoms commonly experienced in climacteric women include urinary frequency and urgency, palpitations, and anxiety.

 
About 50 million women in the United States alone experience hot flashes. Eighty-five percent of the women in the United States experience hot flashes of some kind as they approach menopause and for the first year or two after their periods stop. Between 20% and 50% of women continue to have them for many more years. As time goes on, the intensity decreases. The women’s health market as it pertains to menopause is approximately 26.8 million women and is expected to grow to over 50 million as the baby boomers start to enter this phase of their life. Though there are many issues affecting women in the menopausal age the biggest factors focus on hormonal replacement therapies and the treatments association to breast cancer.

Menopause is a normal part of life, just like puberty. It is the time of a woman’s last period, but symptoms can begin several years earlier. Some symptoms of menopause can last for months or years after. Changing levels of estrogen and progesterone, which are two female hormones made in a women’s ovaries, might lead to these symptoms. This time of change is known as the menopausal transition, but many women and their doctors also call it peri-menopause. It can begin several years before a women’s last menstrual period. Peri-menopause lasts for 1 year after a women’s last period. After a full year without a period, women can say they have been "through menopause." Post-menopause follows menopause and lasts the rest of their life.

The average age of a woman having her last period, menopause, is 51. But, some women have their last period in their forties, and some have it later in their fifties. Smoking can lead to early menopause. So can some types of operations. For example, surgery to remove a uterus (called a hysterectomy) will make a woman’s periods stop, and that is menopause. A woman might not have menopause symptoms like hot flashes immediately, however, because, if her ovaries are untouched, they still make hormones. In time, when the ovaries start to make less estrogen, menopause symptoms could start. But, sometimes both ovaries are removed (called an oophorectomy), usually along with her uterus. That is menopause too. In this case, menopause symptoms can start right away; no matter what age a woman is, because her body has lost its main supply of estrogen.

 
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According to the recent study “Women’s Health Therapeutics Market to 2017” (“GBI Study”) by GBI Research issued in January 1, 2012, there continues to be a “high unmet need will drive uptake of novel drugs”. GBI Research finds that the women’s health therapeutics market will grow rapidly, largely due to the introduction of new therapies and the increased awareness among patients and physicians in two of the largest segments within women’s health disorders, the menopause and osteoporosis areas. According to the GBI Research Study, Novel non-hormonal therapeutics will become more popular during the forecast period. The GBI Study further overall women’s health therapeutics market is driven by postmenopausal osteoporosis and menopause.

According to the GBI Study the women’s health therapeutics market research and development pipeline is only moderately strong, with the majority of first-in-class drugs in late stages of development. These drugs are expected to drive market revenues and it is expected that, if they are approved and are shown to have better safety profiles, patients will comply with novel therapies. In particular, non-hormones are set to take over the conventional hormone therapeutics market.

In 2010, the global women’s health therapeutics market was estimated to be worth $14.5 billion, after a Compound Annual Growth Rate (“CAGR”) of 3.5% between 2002 and 2010. By 2017, the market is estimated to reach $24.6 billion, indicating a CAGR of 7.9% between 2010 and 2017. Owing to several factors such as the publication of the Women’s Health Initiative (“WHI”) study results, and a lack of effective therapeutics, the women’s health therapeutics market grew only moderately between 2002 and 2010. However, the launch of novel therapeutics in the near future is expected to satisfy the unmet need in the market. This will have a pronounced effect on positive growth in the menopause therapeutics market.

The Company believes that the menopausal market has considerable unmet need, as the fear of diseases that have, in certain studies (“2002 Women’s Health Initiative”) been linked to hormonal therapeutics. Hormones have been shown to be associated with significant safety issues such as risks of breast cancer and cardiovascular disease. Hence, the use of hormones has declined and women are worried about resuming hormonal therapy for the treatment of the menopause/osteoporosis. There is an opportunity for pharmaceutical companies to develop drugs with greater safety profiles and more competitive prices.

Menopause Advertising

Menopausal advertising is currently a real challenge, and it appears that, unless real change occurs in the public perception of menopause, it will continue to be a challenge. Unfortunately, advertisers consistently project negative images of menopause in order to promote their products since fear of the lack of sex also sells and in doing so they perpetuate the myth. The overwhelming message is that unless women actually do something about this dreadful impending thing called menopause, they will not be “slim, sane and sexy”. The media plays into that message as well.

The underlying message communicated by advertisers is that women must project an image that equates to reproductive viability in order to be of any true value to society. If women cannot attract a mate in order to reproduce they are of no true use except possibly as grandmothers. Menopause by definition means they cannot reproduce.

Hormone Replacement Therapy Market

The U.S. Preventive Services Task Force (“USPSTF”), an independent group of health experts convened at the request of Congress, first hinted that hormone replacement therapy (“HRT”) may be too risky for long-term use in 2005. At that time, after reviewing the available data, the task force warned women against relying on HRT to prevent chronic conditions like heart disease and dementia. Some earlier studies had suggested that the supplemental hormones that women take to relieve night sweats and hot flashes associated with menopause could also protect the heart and brain from aging-related decline. Use of hormone therapy declined, however, after a 2002 WHI study found little difference in rates of heart disease among women who used HRT and those who did not. Instead, the study reported HRT might increase the risks of heart disease and breast cancer.

 
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In the past, HRT was widely recommended for the treatment of menopause and menopausal symptoms, as well as for the prevention of osteoporosis and heart disease. The large study, conducted in 2002 by WHI, shed new light on how HRT is viewed. HRT is used to supplement the body with either estrogen alone or estrogen and progesterone in combination during and after menopause. Estrogen and progesterone are hormones that are produced by a woman's ovaries. As menopause nears, the ovaries reduce most of their production of these hormones. Lowered or fluctuating estrogen levels may cause menopause symptoms such as hot flashes, and medical conditions such as osteoporosis. When the ovaries no longer produce adequate amounts of estrogen and progesterone (as in menopause) HRT can be given to supplement the body with adequate levels.

Estrogen and progesterone together thicken the lining of the uterus, preparing it for the possible implantation of a fertilized egg. Estrogen also influences how the body uses calcium, an important mineral in the building of bones, and helps maintain healthy levels of cholesterol in the blood. Estrogen also keeps the vagina healthy. Hormone therapy helps to replenish the estrogen, relieving some of the symptoms of menopause when they are moderate to severe. They are no longer recommended, however, to prevent chronic diseases.

Progesterone is used along with estrogen in women who still have their uterus. In these women, if taken without progesterone, estrogen increases the risk for cancer of the endometrium (the lining of the uterus). During a woman's reproductive years, endometrial cells are shed during menstruation. When the endometrium is no longer shed, estrogen can cause an overgrowth of cells in the uterus, a condition that can lead to cancer.

Progesterone reduces the risk of endometrial cancer by making the endometrium shed each month. As a result, women who take progesterone may have monthly bleeding. Monthly bleeding can be lessened and, in some cases, eliminated by taking progesterone and estrogen together continuously. Women who have had a hysterectomy (removal of the uterus through surgery) usually do not need to take progesterone.

There are two main types of hormone replacement therapy:

·    
Estrogen Therapy: Estrogen is taken alone. Doctors most often prescribe a low dose of estrogen to be taken as a pill or patch every day. Estrogen may also be prescribed as a cream. The lowest dose of estrogen needed to relieve menopause symptoms is recommended. Estrogen is prescribed to relieve:
 
§  
Hot flashes
§  
Vaginal dryness that can result in painful intercourse
§  
Other problematic symptoms of menopause, such as night sweats and dry, itchy skin

·    
Progesterone/Progestin-Estrogen Hormone Therapy: Also called combination therapy, this form of HRT combines doses of estrogen and progesterone (progestin is a synthetic form of progesterone). Estrogen and a lower dose of progesterone also may be given continuously to prevent the regular, monthly bleeding that can occur when combination HRT is used. The current recommendation is to take the lowest dose of hormone therapy for the shortest time possible. Progestins do cause side effects, including irregular bleeding and fluid retention. Progestins, such as Provera, are a synthetic version of progesterone, which is the chemical equivalent to the progesterone produced by the body. Like all prescription medications, HRT should be re-evaluated each year.

Hormone replacement therapy is not usually recommended for women who have:

§  
Active or past breast cancer
§  
Recurrent or active endometrial cancer
§  
Abnormal vaginal bleeding
§  
Recurrent or active blood clots
§  
History of stroke
§  
Liver disease
§  
Known or suspected pregnancy

 
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Side Effects of Hormone Replacement Therapy
 
There are no prescription medications that are as effective as estrogen for the treatment of hot flashes, but many have a positive impact for some women. Unfortunately, all have side effects that balance their clinical use.
 
Like almost all medications, hormone replacement therapy has side effects. The most common side effects are:

§  
Monthly bleeding
§  
Irregular spotting
§  
Breast tenderness

Less common side effects of HRT include:

§  
Blood clots and stroke (rare, but the most serious risk)
§  
Fluid retention
§  
Headaches (including migraine)
§  
Dizziness
§  
Skin discoloration (brown or black patches)
§  
Increased breast density (making mammogram evaluation more difficult)
§  
Skin irritation under estrogen patch

The 2002 WHI study was the largest placebo controlled study of hormone replacement therapy to date, and showed an increase in thromboembolism (blood clots), stroke, and breast cancer in the estrogen-progestin group, leaving many women with the uncomfortable feeling that they were compromising their long-term health by using hormone therapy.

The most recent analysis conducted by the US Preventive Services Task Force (USPSTF), confirmed that the risks of HRT outweigh its potential benefits, based on a review of 51 studies published since 2002 through the Annals of Internal Medicine online. Overall, the data showed that HRT, which combines estrogen and progestin, is linked to increased risk of stroke, blood clots, gallbladder disease, urinary incontinence, and dementia and breast cancer. The risks remained significant, even among women who have had a hysterectomy, and who only need to take estrogen, not progestin, to protect endometrial tissue. The USPSTF found that the only benefit of HRT, outside of relieving menopause symptoms, was a lower risk of bone fractures, and concluded that the risks far outweighed this improvement. For women at average-risk of heart disease or breast cancer, which make up the majority of those who might take HRT during menopause, peri-menopause and post menopause, the Task Force recommended against long-term use of the hormones. Accordingly, there is a need for effective treatment regimens for relieving symptoms of menopause. The Company’s present invention meets this long-felt need.

Competition

The following table represents the current market Brand leaders in the prescription market for Hormone Replacement Therapy separated by Estrogen, Progestin & combinations of the two and delivery methods.

Estrogen Types:
 
Brand Names:
Pills
 
Cenestin, Estrinyl, Estrace, Menest, Ogen, Premarin
Cream
 
Estrace, Ogen, Ortho, Dienestrol, Premarin
Vaginal ring
 
Estring, Femring
Vaginal tablet
 
Vagifem
Patch
 
Alora, Climara, Esclim, Esraderm, Vivelle-Dot
 
 
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Progestin Types:
 
Brand Names:
Pills/Capsules
 
Amen, Aygestin, Curretab, Cycrin, Megace, Prometrium, Provera
Vaginal Gel
 
Prochieve progesterone gel 4%, 8%
 
Combination Types:
 
Brand Names:
Pills
 
Activella, FemHRT, Ortho-Prefast, Premphase, Prempro, low-dose Prempro
Patch
 
CombiPatch, Climara-Pro

Alternatives, Natural Treatment, and Competition

HRT was long the standard treatment for menopause, however, since it is now known that traditional HRT using synthetic estrogen and progestins increases the risk of breast cancer and heart disease, many women and healthcare providers are no longer routinely asking for or prescribing traditional estrogen replacement therapy, but rather are seeking alternative treatments,

The alternatives to hormone replacement therapy range between prescription drugs that consist of slightly different hormone formulations, nutritional supplements made of herbs and vitamins, soy products said to be natural sources of estrogen, lifestyle changes, and even what might be termed menopause accessories, such as one company's ''cooling comfort towelettes'' to wipe the sweat from hot flashes.

Alternative Prescriptions
 
Selective Serotonin Reuptake Inhibitors (“SSRIs”) are a class of anti-depressants most commonly used in the treatment of depression, and some personality disorders. They have been found as efficient in alleviating hot flashes.  Venlafaxine (Effexor), paroxetine (Paxil), and fluoxetine (Prozac), have all shown an approximate 60% reduction in hot flashes but with side effects common to the SSRIs.
 
Clonidine, more commonly used for high blood pressure, has a 50% reduction in menopausal symptoms, but causes dry mouth, sedation and hypotension. Gabapentin, an anti-seizure medication, has a 45% reduction in frequency, and 54% decrease in menopausal symptom severity but can cause somnolence, fatigue, tremors, nausea, edema and ataxia.

Natural Alternatives

More and more women every day are turning to natural alternative treatments to treat the symptoms they experience during menopause including hot flashes, night sweats, and mood swings. There are several natural ways to ease the symptoms of menopause.

Natural estrogen compounds are available by prescription from compounding pharmacists. These types of estrogen are bio-identical -- they are chemically equal to the estrogen produced naturally in a woman’s body. There are 3 types of estrogens commonly used in bio-identical hormone replacement therapy. These are: Estrone (E1); Estradiol (E2), and Estriol (E3). Estrone and estradiol cause most of the risks associated with estrogen use. Natural or bio-identical estrogen compounds are prepared in any combination or number of these 3 types of estrogen; the most common formulation is 10 percent Estrone, 10 percent Estradiol, and 80 percent Estriol--called Tri-estrogen or Tri-est. A two estrogen bio-identical compound is called bi-estrogen.

Natural progesterone is an important component in menopausal symptom management for many women. It's available over-the-counter in products such as Pro-Gest, in compounded prescriptions, and a pharmaceutical called Prometrium. The benefit of using a cream product over an oral form is that you need a much lower dose because it does not have to be metabolized by the liver. Natural progesterone causes virtually no side effects.

 
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There is also evidence which suggests that red clover isoflavones decrease the incidence of hot flashes. In one study, after 8 weeks using Promensil, a dietary supplement formulated with red clover isoflavones, at a dose of 40mg daily, participants experienced a 58% decrease in the number of hot flashes experienced. Study participants also experienced a significant reduction in the severity of night sweats. Promensil is available over-the-counter, without a prescription, at retail grocery, drug, and health food stores.

Black Cohash is an herbal supplement, which has been shown to have benefit for hot flashes without altering FSH levels or endometrial thickness. Side effects such as nausea, headaches, dizziness and liver toxicity have been reported. A black cohash/St John’s Wort combination has been shown to reduce the Menopause rating scale by 50% and the Hamilton Depression Scale by 41%.

There have also been several clinical trials using flaxseed. Flaxseed is the richest source of lignans, an anti-oxidant, which is one of three major classes of phytoestrogen. Lignans are thought to have estrogen agonist and antagonist effects as well as antioxidant properties. Flaxseed and its lignans may have potent anti-estrogenic effects on estrogen receptor positive breast cancer and may have benefits in breast cancer prevention efforts.

Lifestyle Changes

Lifestyle changes may help alleviate hot flashes. A diet is an important tool that a woman can use to help control their menopausal symptoms. Foods to avoid include high amounts of caffeine in any foods, carbonated beverages (which contain phosphorous and can increase bone loss), hot drinks, chocolate, spicy or hot foods and alcohol. Also, limit its consumption of commercially raised meats including beef, pork, and chicken because these meats contain a high amount of saturated fats and decrease the body's ability to metabolize estrogen. Excessive sugar intake also limits the liver's ability to metabolize estrogen and impairs the immune system.

Increasing the intake of foods that contain phytoestrogens, including soy, is also recommended. Other foods that should be included in a woman’s diet include grains, oats, wheat, brown rice, tofu, almonds, cashews, and fresh fruits and vegetables.  According to research published by the Journal of the British Menopause Society, red clover isoflavones supplements, used in controlled studies, have been shown to have a significant positive effect on the rate of bone loss, improve cardiovascular health, and may offer some protective effect against breast and endometrial cancer.

In addition, women need to get plenty of regular exercise. Exercise is probably the single most important thing a woman can do to improve her overall health and well being throughout her life. Regular exercise (at least 3 or 4 days a week) helps prevent and reduce bone loss, and plays a key role in reducing the risk of many types of cancer, as well as heart disease.

Although these treatments work for many women, every woman is different and it may take some time for a woman to find which treatments, or combination of treatments, work best Dressing in layers, wearing breathable clothing such as cotton and natural linen, and using fans, may aid in comfort. . It is always recommended for a woman to inform her healthcare provider of any natural alternative treatments being considered and/or used--this includes all vitamins, herbs, creams, etc.

Strategic Plan

Phase I & II Clinical Trial, Phase III Clinical Trial

The Company has recently completed its Clinical Trial Protocol entitled “An Open Label Escalating Study to Determine Maximum Necessary Dose (MND) of Homatropine Methylbromide needed for Palliation of Hot Flashes in Menopausal Women,” dated March 14, 2013, a copy of which is attached herewith as Exhibit 99.6, for its new drug indication, with the goal of generating data that supports its claims. The Company has retained a team of medical professionals and is ready to begin Phase I of the Clinical Trial/Study (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.  A copy of the CTS Agreement is included in this filing as Exhibit 10.13.  The Company’s goal is to complete the Study, barring any unforeseen delays, by the end of the 3nd calendar quarter of 2013.

The Study will consist of two parts: Study A and Study B.  Study A be run in 2 stages: (1) a baseline run-in stage where subjects take no drug and record selected baseline climacteric symptoms for a duration of 7 days, and (2) a dose escalation stage where subjects take the study drug starting at the lowest dose and can escalate the drug to the next highest does if the drug is not working based on improvement of symptoms, minimization of side effect and tolerability duration 14 days. After maximum dose needed is decided then Study B can begin, which will involve a randomized double-blind placebo controlled study to test and measure the efficacy of Homatropine under its new indication.

Part of the Company’s mission is to prove its central thesis that Homatropine in an oral suspension formula can reduce hot flashes, and improve the quality of life in pre-menopausal, menopausal and post-menopausal women through multiple clinical trial validations. Provided that the data supports the Company’s claims it has outlined its Patent Application, it will present the information to the FDA for review.  The FDA may potentially request additional Trials to be conducted by the Company prior to a review for consideration of Tropine 3 receiving an FDA Approval.
 
10

 
 

The Company intends on conducting Trials at multiple sites.  In addition, the Company intends to publish its results in medical journals and women’s health publications.

Intellectual Property
 
The Company has filed a US Patent Application for a patent for its novel method for alleviating hot flashes in climacteric women. The US Patent Application, referenced below, covers the method involved in administering to a climacteric woman a therapeutically effective amount of an anticholinergic agent, thereby alleviating at least one climacteric symptom in the woman. In some embodiments, the anticholinergic agent is homatropine, or a salt thereof. The US Patent Application is based on a new indication for the use of Homatropine, an FDA Approved drug.
 
The Company’s founders, Dr. Hootan Melamed and Mr. Edward W. Withrow III (“Founders”), retained Cislo & Thomas, LLC (“Cislo”), a Santa Monica, California based legal firm specializing in intellectual property, to work with the Company in all areas of its intellectual property. The chronological history of the Company’s pending patent applications is as follows:

a.    
On September 22, 2005, the Founders retained Cislo to file a US Provisional Patent Application Ser. No. 60/719,756.

b.    
On March 29, 2006, The Founders retained Cislo to conduct a search of Prior Art as it pertained to the Company’s U.S. Provisional Application Ser. No. 60/719,756. A copy of the Prior Art Search Letter is included as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed November 13, 2013.

c.    
On September 19, 2006, The Founders and the Company entered into a Patent Assignment, whereby the US Provisional Patent Application Ser. No. 60/719,756 was assigned exclusively to the Company. The Assignment was subsequently filed with the USPTO, and is included as Exhibit 10.8 to the Company’s Current Report on Form 8-K filed November 13, 2013.

d.    
On September 22, 2006, the Company filed US Patent Application Ser. No. 11/523,975. The USPTO Published US 2007/0066603 A1 Patent Application on the date of March 22, 2007. A copy of the Abstract of US Patent Application 11/523,975 and the Published US 2007/0066603 A1 is included as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed November 13, 2013.

e.    
From the date of March 23, 2007 to September 24, 2012 the Company has maintained its responses to Actions by the USPTO as they pertain to US Patent Application Ser. No. 11/523,975.

f.    
On September 14, 2012, the Company entered into a Retainer Agreement with Cislo to represent the Company on its current intellectual property matters, including the Patent Application referenced in item d. A copy of the Retainer Agreement is included as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed November 13, 2013.

g.    
On March 24, 2012, the Company received an Action by the USPTO. The Company’s Response was prepared by Cislo and filed on September 25, 2012, a copy of which is included as Exhibit 99.3 to the Company’s Current Report on Form 8-K filed November 13, 2013.
 
 
11

 
 
The following table summarizes the Company’s filings with the USPTO:

Patent Number
 
Patent Description
 
Patent Type
60/719,756
 
Method for Alleviating Climacteric Symptoms
 
Provisional Patent filed September 22, 2005
11/523,975
 
Method for Alleviating Climacteric Symptoms
 
Patent Application filed September 14,2006

Food & Drug Administration Approved Homatropine Drug Combinations in the U.S.

The following table represents the current approved FDA Cleared use of Homatropine by medical professionals and their patients.

Primary
 
Secondary
 
Disp.
 
Brand
 
Manufacturer
 
ID #
Homatropine Methylbromide; 1.5 mg/5m1
 
Hydrocodone Bitartrate 5mg/5ml
 
Syrup
 
Hycodan
 
Endo
 
088008
Homatropine Methylbromide; 1.5 mg/5m1
 
Hydrocodone Bitartrate 5mg/5ml
 
Syrup
 
Mycodone
 
Morton Grove
 
040295
Homatropine Methylbromide; 1.5 mg/5m1
 
Hydrocodone Bitartrate 5mg/5ml
 
Syrup
 
Generic
 
Alpharma
 
040285
Homatropine Methylbromide; 1.5 mg/5m1
 
Hydrocodone Bitartrate 5mg/5ml
 
Syrup
 
Generic
 
Axiom
 
005213
Homatropine Methylbromide; 1.5 mg
 
Hydrocodone Bitartrate 5mg
 
Tablet
 
Generic
 
Amide
 
005213
Homatropine Methylbromide; 1.5 mg
 
Hydrocodone Bitartrate 5mg
 
Tablet
 
Generic
 
Endo
 
088508

Government Regulations

The health care industry, and thus the Company’s business, is subject to extensive federal, state, local and foreign regulation. Some of the pertinent laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of subjective interpretations. In addition, these laws and their interpretations are subject to change.

Both federal and state governmental agencies continue to subject the health care industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts. As indicated by work plans and reports issued by these agencies, the federal government will continue to scrutinize all companies in the health care field. The federal government also has increased funding in recent years to fight health care fraud, and various agencies, such as the U.S. Department of Justice, the Office of Inspector General of the Department of Health and Human Services, or OIG, and state Medicaid fraud control units, are coordinating their enforcement efforts.

The Company must also comply with numerous other federal, state, and local laws relating to such matters as safe working conditions, environmental protection, industrial safety, and hazardous substance disposal. The Company may incur significant costs to comply with such laws and regulations in the future, and lack of compliance could have material adverse effects on the Company’s operations.
 
Distribution

As the Company is still in the development stages and has not yet commenced commercial operations, it has yet to develop methods of distribution for its products beyond the business plan stage.

 
12

 
 
Facilities

In addition to its corporate headquarters, the Company maintains administrative operations at 1327 Ocean Avenue Suite B, Santa Monica, California 90401.

Employees

As of January 31, 2013, the Company had no employees, in addition to its directors and executive officers.

The Company currently has no employees, in addition to its directors and executive officers.

Research and Development
 
The Company has incurred $28,751 and $2,471 during the fiscal years ended January 31, 2013 and 2012, respectively, in expenditures relating to the research and development of its novel method for alleviating hot flashes in climacteric women, including costs for consultants, patent costs, and costs to conduct clinical trials.    As of January 31, 2013, the Company has incurred $64,806 in research and development costs.

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. 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.
 
Reports to Security Holders

The Company is not required to deliver an annual report to its stockholders, but will voluntarily send an annual report, together with the Company’s annual audited financial statements upon request. The Company is required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission. The Company’s Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website at www.sec.gov.
 
The public may read and copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Internet address of the site is www.sec.gov.
 
 
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
 
ITEM 1B.  UNRESOLVED STAFF COMMENTS
 
None.
 
 
The Company’s principal executive offices are located at 9595 Wilshire Blvd, Suite 900, Beverly Hills, CA 90212, with operations at 1327 Ocean Avenue, Suite B, Santa Monica, CA 90401.

The Company currently rents the Beverly Hills space for approximately $100 a month, and sub-leases the Ocean Avenue space for $1,000 per month as of January 1, 2013. Currently, this space is sufficient to meet the Company’s needs. However, once the Company expands its business to a significant degree, it will require additional space. The Company does not currently own any real estate.
 
The Company knows of no material, existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which its director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to its interest.
 
 
 
13

 
 
PART II
 
 
The Company’s Common Stock is quoted on the OTC Bulletin Board “OTCBB – U.S. Registered” under the trading symbol “ESSI”, which was issued to the Company on January 3, 2013. Because the Company is quoted on the OTCQB, its securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.

The Company’s common stock is subject to rules adopted by the Commission regulating broker dealer practices in connection with transactions in “penny stocks.” Those disclosure rules applicable to “penny stocks” require a broker dealer, prior to a transaction in a “penny stock” not otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the Securities and Exchange Commission. That disclosure document advises an investor that investment in “penny stocks” can be very risky and that the investor’s salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution in connection with an investment in “penny stocks,” to independently investigate the security, as well as the salesperson with whom the investor is working and to understand the risky nature of an investment in this security. The broker dealer must also provide the customer with certain other information and must make a special written determination that the “penny stock” is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Further, the rules require that, following the proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.

These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for its common stock. Many brokers may be unwilling to engage in transactions in its common stock because of the added disclosure requirements, thereby making it more difficult for stockholders to dispose of their shares.

Record Holders
 
The Company’s common shares are issued in registered form. Empire Stock Transfer Inc., 1859 Whitney Mesa Drive, Henderson, NV 89014, (702) 818-5898, is the registrar and transfer agent for the Company’s common shares.

As of January 31, 2013, the Empire Stock Transfer Inc. shareholders' list of the Company’s common shares showed 95 registered shareholders and 443,000,686 shares outstanding, all of which have been recorded by the Company.

Re-Purchase of Equity Securities

None.
 
Dividends
 
The Company has not declared any dividends on its common stock since the Company’s inception. There is no restriction in the Company’s Articles of Incorporation and Bylaws that will limit its ability to pay dividends on its common stock. However, the Company does not anticipate declaring and paying dividends to its shareholders in the near future.

 
14

 
 
Equity Compensation Plan Information

On September 1, 2012, the board of directors of the Company adopted the 2012 Employee Stock Option Plan (the “2012 Plan”). Under the 2012 Plan, 25,000,000 restricted shares of common stock have been reserved for issuance upon exercise of options granted from time to time under the stock option plan. 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. Under the 2012 Plan, the Company may grant incentive stock options only to key employees and employee directors, or the Company may grant non-qualified options to employees, officers, directors and consultants. Subject to the provisions of the 2012 Plan, the board of directors will determine who shall receive options, and the number of shares of common stock that may be purchased under the 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. The options are exercisable for a period of five 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.
 
As of January 31, 2013, the Company has granted a total of 6,500,000 options to purchase common stock shares. In connection with the options granted, a total of $2,665,000 has been recorded as deferred compensation, of which $222,083 has been expensed as of January 31, 2013. There remains $2,442,917 of deferred compensation to be amortized over the next 21 months.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

The Company did not purchase any shares of its common stock or other securities during the years ended January 31, 2013 or 2012.

Recent Sales of Unregistered Securities

On August 23, 2012, the Company and its controlling stockholders (the “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. 

Exemption From Registration. The shares of Common Stock referenced herein were issued in reliance upon an exemption from registration afforded either under Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering, or Regulation D promulgated thereunder, or Regulation S for offers and sales of securities outside the U.S.
 
As a “smaller reporting company”, the Company is not required to provide the information required by this Item.

 
15

 
 
The following discussion should be read in conjunction with the Company’s audited consolidated financial statements and the related notes for the year ended January 31, 2013, and the unaudited consolidated financial statements and the related notes for the year ended January 31, 2012, that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report.
 
The Company's consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Overview

The Company was incorporated in the state of Nevada on December 8, 2009, under the name Pristine Solutions, Inc. The Company’s wholly owned subsidiary, Pristine Solutions Limited, was incorporated under the laws of Jamaica. The Company’s 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. The Company’s aim was to become the first tankless water heater company specializing in tankless-only products to enter the Jamaican market, and the only company in the Jamaican market offering solar-powered tankless water heater products. As part of its plan, on December 30, 2009, the Company entered into a distribution agreement with Zhongshan Guangsheng Industry Co., Ltd., of China (“Zhongshan”), the manufacturer of the tankless water heaters.  Zhongshan manufactures the tankless water heaters under the brand Gleamous Electric Appliances. 
 
On August 22, 2012, Christine Buchanan-McKenzie resigned from all positions with the Company, including, but not limited to that of President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and a member of the Board of Directors. The resignation did not involve any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. On the same day, Mr. Michael Borkowski was appointed as President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and the sole member of the Board of Directors of the Company.

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. In addition, the Company’s Chief Executive Officer, Mr. Michael J. Borkowski, and the Company’s controlling shareholder and former President, Ms. Christine Buchanan-McKenzie, entered into a Common Stock Purchase Agreement, whereby Mr. Borkowski would purchase one hundred (100%) percent of the Company’s common shares owned by Mrs. Buchanan-McKenzie, or 240,000,000 shares, at par value $.0001, representing approximately 54.1% of the Company’s total issued and outstanding shares. The Common Stock Purchase Agreement and Share Exchange, was completed on October 22, 2012. On October 23, 2012, the Common Stock Purchase Agreement was finalized, and a change in control of the Registrant took place.

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. Certain ESSL shareholders owning a total of 135,779,375 shares of the Company’s 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 Registrant; (ii) ESSL became the Company’s wholly owned subsidiary; and (iii) the ESSL operations will continue as the Company’s primary business.

 
16

 
 
On November 27, 2012, the Company changed its name to Eaton Scientific Systems, Inc.

NOTE: The following sections of this annual report 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.

Description of Business

Headquartered in Beverly Hills, California, the Company is engaged in biomedical product development in the area of women’s health. The Company’s mission is to provide solutions to women’s 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 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 there from.  At January 31, 2013 the Company has not yet commenced its principal operations.

Results of Operations

The following summary of the Company’s results of operations should be read in conjunction with the Company’s audited consolidated financial statements for the year ended January 31, 2013 and unaudited consolidated financial statements as of January 31, 2012, which are included herein. The financial information provided includes the accounts of the Company and its wholly owned subsidiary, Eaton Scientific Systems, Ltd. (“ESSL”), on a consolidated basis. All significant inter-company accounts and transactions have been eliminated.

As a result of the Share Exchange and Common Stock Purchase Agreement, a change in control occurred whereby the Company is the legal parent/accounting subsidiary of ESSL, and ESSL is the legal subsidiary/accounting parent of the Company. The transaction has therefore been identified and recorded as a reverse acquisition and, pursuant to ASC 805-40-45-1, the consolidated financial statements’ historical and cumulative data are a continuation of the financial statements of the legal subsidiary, ESSL. ESSL has adopted the fiscal year end of the Registrant and as a result, for comparative purposes, the historical and cumulative data as of January 31, 2012 is unaudited. The audited financial statements of ESSL for the year ended December 31, 2011, are incorporated by reference to the Company’s Current Report on Form 8-K filed November 13, 2012. For cumulative purposes, the date of inception is that of ESSL, January 31, 2006.

   
For the year ended
January 31,
    Cumulative from
 January 31, 2006
(inception) to
January 31,
 
   
2013
   
2012
   
2013
 
Revenue
  $     $     $  
Cost of sales
                 
Gross profit (loss)
                 
General and administrative expenses
    331,599       49,404       549,824  
Operating (loss)
    (331,599 )     (49,404 )     (549,824 )
Interest expense
    (15,401 )           (15,401 )
Amortization of intangible assets
    (2,526 )     (2,513 )     (13,749 )
Amortization of stock options
    (222,083 )           (222,083 )
Net (loss)
  $ (571,608 )   $ (51,917 )   $ (801,057 )
 
 
17

 
 
General and Administrative Expenses

During the year ended January 31, 2013, the Company incurred operating expenses related to continuing operations in the amount of $331,599, compared with $49,404 during the year ended January 31, 2012. The increase in operating expenses in the amount of $282,195 is attributable to:

·    
an increase in accounting, audit and consulting services of $118,550, due to accounting fees of $30,000 incurred for the corporate controller, audit fees of $10,750 resulting from audit work required related to the Share Exchange, other audit fees of $7,000 incurred for the current year, and consulting fees related to website design of $10,000, all of which were not incurred in the prior year; and consulting fees of $60,800 due to the new consulting agreements entered into in September 2012, versus none for the prior year;
·    
an increase in management salaries and fees, of $110,500, due to $30,000 in officer salaries resulting from the employment agreement entered into September 1, 2012 for the Company’s CEO; and an increase in management fees of $80,500 resulting from the consulting agreement entered into January 1, 2013, versus $42,000 in management fees for the prior year;
·    
a decrease in stock compensation of $1,225, due to stock compensation of $5,638 for the current year, versus $6,863 for the prior year;
·    
an increase in travel, meals and entertainment of $17,843 resulting from an increase of $15,313 in travel expenses and an increase of $2,531 in meals and entertainment, due to additional expenses incurred in the current year related to the Share Exchange and investor relations; versus limited travel and entertainment costs in the prior year;
·    
an increase in publicity and promotion of $22,352, due to various press releases issued in the current year, versus none issued in the prior year;
·    
an increase in office supplies and other general expenses of $14,175, due to an increase in filing fees of $6,278 due to additional SEC filings made in the current year that were not made in the prior year; an increase in transfer agent fees of $2,050 due to various stock issuances and report costs for the current year, versus none in the prior year; and an increase in other general office expenses of $5,847; resulting from limited office expenses incurred during the prior year.

   
For the year ended
       
General and Administrative Expenses
 
January 31,
       
   
2013
   
2012
   
Variances
 
Accounting, audit, and consultant services
  $ 118,550     $     $ 118,550  
Management salaries and fees
    152,500       42,000       110,500  
Stock compensation
    5,638       6,863       (1,225 )
Publicity and promotion
    22,352             22,352  
Travel, meals and entertainment
    18,056       213       17,843  
Office supplies and other general expenses
    14,503       328       14,175  
Total general and administrative expenses
  $ 331,599     $ 49,404     $ 282,195  

Net Loss

During the year ended January 31, 2013, the Company incurred a net loss of $571,608 compared with a net loss of $51,917 for the year ended January 31, 2012. The increase in net loss of $519,691 is attributable to an increase in stock option amortization of $222,083 resulting from stock options granted in the current year, compared to none granted in the prior year; an increase in general and administrative expenses of $282,195; an increase in interest expense of $15,401, resulting from notes payable issued in the current year, versus none in the prior year; and an increase in amortization expense related to intangibles of $12.
 
 
18

 
 
Liquidity and Capital Resources

Working Capital
                 
 
  At January 31,    
Increase
 
   
2013
   
2012
   
(Decrease)
 
Current Assets
  $ 292,421     $ 159     $ 292,262  
Current Liabilities
    92,546       166,327       (73,781 )
Working Capital (Deficit)
  $ 199,875     $ (166,168 )   $ 366,043  

As at January 31, 2013, the Company had cash in the amount of $287,421, compared to $159 as of January 31, 2012.

The Company had working capital of $199,875 as of January 31, 2013, compared to a working capital deficit of $(166,168) at January 31, 2012. The decrease in working capital deficit of $366,043 is primarily attributable to an increase in cash of $287,262; an increase in prepaid expense of $5,000; an increase in accounts payable and accrued expenses of $85,106; and a decrease in related party payable of $158,887.
 
Cash Flows
 
For the year ended
       
   
January 31,
   
Increase
 
   
2013
   
2012
   
(Decrease)
 
 
                 
Net cash provided by (used in) Operating Activities
  $ (133,743 )   $ 465     $ (134,208 )
Net cash (used in) Investing Activities
    (10,419 )     (2,471 )     (7,948 )
Net cash provided by Financing Activities
    431,424       1,800       429,624  
Increase (decrease) in Cash
  $ (287,262 )   $ (206 )   $ 287,468  

Cash Flows from Operating Activities

During the year ended January 31, 2013, the Company used $133,743 of cash flow for operating activities, compared with $465 provided for the year ended January 31, 2012. The increase in cash used for operating activities of $134,208 is primarily attributable to an increase in the net loss from operations of $519,691, an increase accrued compensation converted to notes payable of $273,000, an increase in stock option amortization of $222,083, an increase in amortization of intangibles of $12, a decrease in stock compensation of $1,225, an increase in prepaid expenses of $5,000, an increase in accounts payable and accrued expenses of $84,136 and a decrease in related party payables of $187,523.

Cash Flows from Investing Activities

During the years ended January 31, 2013 the Company used $10,419 of cash flow for investing activities, compared with $2,471 for the year ended January 31, 2012. The increase in cash used for investing activities of $7,928 is attributable to the purchase of equipment in the current year of $1,668, and an increase in product development costs of $6,280.
 
Cash Flows from Financing Activities
 
During the year ended January 31, 2013, the Company was provided with $431,424 of cash flow from financing activities compared with $1,800 during the year ended January 31, 2012. The increase in cash flows provided from financing activities of $429,624 is attributable to an increase in related party loans of $248,200, an increase in notes payable of $250,000, and repayments of related party loans of $68,576.
 
 
19

 
 
Future Financings
 
The Company will require additional financing in order to proceed with its plan of operations, including approximately $2,000,000 over the next 12 months to pay for its ongoing expenses. These cash requirements include working capital, general and administrative expenses, the development of the Company’s product line, and the pursuit of acquisitions. These cash requirements are in excess of the Company’s current cash and working capital resources. Accordingly, the Company will require additional financing in order to continue operations and to repay its liabilities. There is no assurance that any party will advance additional funds to the Company in order to enable the Company to sustain its plan of operations or to repay its liabilities. There can be no assurance that raising the desired amount of financing will enable the Company successfully to complete its plan of operations.

The Company anticipates continuing to rely on equity sales of its common stock in order to continue to fund its business operations. Issuances of additional shares will result in dilution to the Company’s existing stockholders. There is no assurance that the Company will achieve any additional sales of its equity securities or arrange for debt or other financing to fund its planned business activities.
 
Personnel
 
As of January 31, 2013, the Company had no employees in addition to its executive officers and directors. Currently, the Company has no employees in addition to its executive officers and directors.

Contractual Obligations

As a “smaller reporting company”, the Company is not required to provide tabular disclosure obligations.

Going Concern
 
These 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 as a going concern 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 January 31, 2013, the Company had working capital of $199,875, and an accumulated deficit of $801,057. 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 Company’s ability to continue as a going concern.
 
Off-Balance Sheet Arrangements

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

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated audited financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. The Company believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Company’s financial statements is critical to an understanding of its consolidated financial statements.

 
20

 
 
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States and 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions, 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. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

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.

In August 2012, the Company acquired 100% of ESSL’s common stock in exchange for, among other things, approximately 60% of the Company’s common stock (the “Share Exchange”). As a result of the Share Exchange and Common Stock Purchase Agreement, a change in control occurred whereby the Company is the legal parent/accounting subsidiary of ESSL, and ESSL is the legal subsidiary/accounting parent of the Company. The transaction has therefore been identified and recorded as a reverse acquisition and, pursuant to ASC 805-40-45-1, the consolidated financial statements’ historical and cumulative data are a continuation of the financial statements of the legal subsidiary, ESSL. ESSL has adopted the fiscal year end of the Registrant and as a result, for comparative purposes, the historical and cumulative data as of January 31, 2012 is unaudited. The audited financial statements of ESSL for the year ended December 31, 2011, are incorporated by reference to the Company’s Current Report on Form 8-K filed November 13, 2012. For cumulative purposes, the date of inception is that of ESSL, January 31, 2006.

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 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.

Recently Adopted Accounting Standards
The 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:
 
Trouble Debt Restructuring: Issued in April, 2011, ASU 2011-02 clarifies which loan modifications constitute troubled debt restructurings. It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings. The new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption. Early adoption is permitted.

 
21

 
 
Comprehensive Income: Issued in June, 2011, ASU 2011-05 eliminates the current option to present other comprehensive income and its components in the statement of changes in equity. It will require companies to report the total of comprehensive income including the components of net income and the components of other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in the ASU are effective for interim and annual periods beginning on or after December 15, 2011, and should be applied retrospectively. Early adoption is permitted.

Intangibles: Issued in September, 2011, ASU 2011-08 permits entities to first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If the entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it would then perform the first step of the goodwill impairment test; otherwise, no further impairment test would be required. The amendments will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted.

Disclosures about Offsetting Assets and Liabilities: Issued in December, 2011, ASU 2011-11 requires disclosures to provide information to help reconcile differences in the offsetting requirements under U.S. GAAP and IFRS. The differences in the offsetting requirements account for a significant difference in the amounts presented in statements of financial position prepared in accordance with U.S. GAAP and IFRS for certain entities. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.

Impairment Testing-Intangibles: Issued in July 2012, ASU 2012-02 reduces the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment, and improves consistency in impairment testing guidance among long-lived asset categories. The amendments will be effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted.
 
As a “smaller reporting company”, the Company is not required to provide the information required by this Item.
 
 
22

 
 
 
The Company’s consolidated audited financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following consolidated audited financial statements are filed as part of this annual report:

 
 
23

 
 
SEALE AND BEERS, CPAs
PCAOB & CPAB REGISTERED AUDITORS
www.sealebeers.com


To the Board of Directors and Stockholders of
Eaton Scientific Systems, Inc.
(A Development Stage Company)

We have audited the accompanying balance sheets of Eaton Scientific Systems, Inc. (A Development Stage Company) as of January 31, 2013, and the related statements of income, stockholders’ equity (deficit), and cash flows for the one year period ended January 31, 2013. Eaton Scientific Systems, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. The cumulative statements of operations, changes in stockholders’ deficit and cash flows for the period from January 31, 2006, (date of inception) to January 31, 2012 were audited by other auditors whose report dated April 30, 2012 on those statements included an explanatory paragraph describing conditions that raised substantial doubt about the Company’s ability to continue as a going concern.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company has no revenues, has negative working capital at January 31, 2013, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
/s/ Seale and Beers, CPAs    
Seale and Beers, CPAs
Las Vegas, Nevada
May 15, 2013
   
 
50 S. Jones Blvd. Suite 202 Las Vegas, NV 89107 Phone: (888)727-8251 Fax: (888)782-2351
 
 
F-1

 
 
(FORMERLY PRISTINE SOLUTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
 
   
January 31, 2013
   
January 31, 2012
 
         
(unaudited)
 
ASSETS
           
Current assets
           
Cash
  $ 287,421     $ 159  
Prepaid expenses
    5,000        
Total current assets
    292,421       159  
                 
Property and equipment, net
    1,668        
Intangible assets, net
    31,057       24,831  
                 
TOTAL ASSETS
  $ 325,146     $ 24,990  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities
               
Accounts payable and accrued expenses
  $ 86,509     $ 1,403  
Related party payables
    6,037       164,924  
Total current liabilities
    92,546       166,327  
                 
Related party loans
    467,824        
Notes Payable     250,000       —   
Total liabilities
    810,370       166,327  
                 
Stockholders' deficit
               
Preferred stock, $.001 par, 50,000,000 shares authorized, none issued
           
Common stock, $.0001 par, 650,000,000 shares authorized, 443,000,686 and 23,590,625 shares issued and outstanding at January 31, 2013 and 2012, respectively
    44,300       2,359  
Additional paid in capital
    271,533       85,753  
Accumulated deficit
    (801,057 )     (229,449 )
Total stockholders' deficit
    (485,224 )     (141,337 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 325,146     $ 24,990  

The accompanying notes are an integral part of these financial statements
 
 
F-2

 
 
(FORMERLY PRISTINE SOLUTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED INCOME STATEMENTS
 
               
Cumulative from
 
               
January 31, 2006
 
   
For the year ended
   
(Inception) to
 
   
January 31, 2013
   
January 31, 2012
   
January 31, 2013
 
         
(unaudited)
   
 
 
Revenue
  $     $     $  
Cost of revenues
                 
Gross profit
              $  
                         
General and administrative expenses
    331,599       49,404       549,824  
                         
Net operating income (loss)
    (331,599 )     (49,404 )     (549,824 )
                         
Other income (expenses)
                       
Interest expense
    (15,401 )           (15,401 )
Amortization of intangible assets
    (2,525 )     (2,513 )     (13,749 )
Amortization of stock compensation
    (222,083 )           (222,083 )
                         
 Net (loss)
  $ (571,608 )   $ (51,917 )   $ (801,057 )
                         
Net (loss) per common share - basic and diluted
  $ (0.002 )   $ (0.004 )        
                         
Weighted average common shares outstanding - basic and diluted
    250,213,684       232,817,065          
 
The accompanying notes are an integral part of these financial statements
 
 
F-3

 
 
(FORMERLY PRISTINE SOLUTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
PERIOD FROM JANUARY 31, 2006 (INCEPTION) TO JANUARY 31, 2013
 
   
COMMON STOCK
   
PAID IN
   
DEFERRED
   
SUBSCRIPTIONS
   
(DEFICIT)
ACCUMULATED
DURING THE
EXPLORATION
       
   
SHARES
   
AMOUNT
   
CAPITAL
   
COMPENSATION
   
RECEIVABLE
   
STAGE
   
TOTAL
 
         
 
                     
 
   
 
 
Balance, January 31, 2006 (date of inception)
        $     $     $     $     $     $  
                                                         
Issuance of Founders shares of common stock @ $.0005, March 9, 2006
    3,125,000       313       5,938               (6,250 )            
                                                         
Subscriptions received
                                    2,500             2,500  
                                                         
Issuance of common stock for services, December, 2006
    8,250,000       825       32,175                               33,000  
                                                         
Net loss
                                          (33,907 )     (33,907 )
                                                         
Balance, December 31, 2006
    11,375,000       1,138       38,113             (3,750 )     (33,907 )     1,593  
                                                         
Issuance of common stock for services, December, 2007
    1,375,000       138       5,363                             5,500  
                                                         
Subscriptions received for services
                                    3,750             3,750  
                                                         
Net loss
                                            (10,969 )     (10,969 )
                                                         
Balance, December 31, 2007
    12,750,000       1,275       43,475                   (44,876 )     (126 )
                                                         
Issuance of common stock for services, December, 2008
    1,250,000       125       4,875                             5,000  
                                                         
Net loss
                                            (28,572 )     (28,572 )
                                                         
Balance, December 31, 2008
    14,000,000       1,400       48,350                   (73,448 )     (23,698 )
                                                         
Issuance of common stock for services, December, 2009
    1,331,250       133       5,192                             5,325  
                                                         
Net loss
                                            (49,569 )     (49,569 )
                                                         
Balance, December 31, 2009
    15,331,250       1,533       53,542                   (123,017 )     (67,942 )
                                                         
Issuance of common stock for services, December, 2010
    1,668,750       167       6,508                             6,675  
                                                         
Issuance of common stock for expenses, December, 2010
    4,875,000       488       19,013                             19,500  
                                                         
Net loss
                                            (50,999 )     (50,999 )
                                                         
Balance, December 31, 2010
    21,875,000       2,188       79,063                   (174,016 )     (92,766 )
                                                         
Issuance of common stock for services, December, 2011
    1,715,625       172       6,690                               6,862  
                                                         
Net loss
                                            (51,505 )     (51,505 )
                                                         
Balance, December 31, 2011
    23,590,625       2,359       85,753                   (225,521 )     (137,409 )
                                                         
Net loss, January 2012
                                            (3,928 )     (3,928 )
                                                         
Balance January 31, 2012 (conversion to fiscal year)
    23,590,625       2,359       85,753                   (229,449 )     (141,337 )
                                                         
Issuance of common stock for services, June, 2012
    1,409,375       141       5,497                             5,638  
                                                         
Net loss
                                            (24,652 )     (24,652 )
                                                         
Balance, August 23, 2012 (date of merger)
    25,000,000       2,500       91,250                   (254,101 )     (160,351 )
                                                         
Recapitalization due to merger
    418,000,686       41,800       (41,800 )                              
                                                         
Grant of stock options to officer
                    2,050,000       (2,050,000 )                      
                                                         
Grant of stock options to consultant
                    615,000       (615,000 )                      
                                                         
Amortization of stock options
                            222,083                       222,083  
                                                         
Net loss
                                            (546,956 )     (546,956 )
                                                         
Balance, January 31, 2013
    443,000,686     $ 44,300     $ 2,714,450     $ (2,442,917 )   $     $ (801,057 )   $ (485,224 )
 
The accompanying notes are an integral part of these financial statements
 
 
F-4

 
 
 
(FORMERLY PRISTINE SOLUTIONS, INC.)
 
(A DEVELOPMENT STAGE COMPANY)
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
             
Cumulative from
 
               
January 31, 2006
 
   
For the year ended
   
(Inception) to
 
   
January 31, 2013
   
January 31, 2012
   
January 31, 2013
 
         
(unaudited)
       
Cash flow from operations:
                 
Net loss
  $ (571,608 )   $ (51,917 )   $ (801,057 )
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
                       
Expenses converted to related party loans
    273,000             273,000  
Amortization of stock options
    222,083             222,083  
Amortization of intangible assets
    2,525       2,513       13,749  
Stock compensation
    5,638       6,863       87,501  
Changes in operating assets and liabilities:
                       
(Increase) in prepaid expenses
    (5,000 )           (5,000 )
Increase in accounts payable and accrued expenses
    85,107       971       86,509  
Increase (decrease) in related party payables
    (145,488 )     42,035       6,037 )
Net cash provided by (used in) operating activities
    (133,743 )     465       (117,178 )
                         
Cash flow from investing activities:
                       
Purchase of office equipment
    (1,668 )           (1,668 )
Patent development costs
    (8,751 )     (2,471 )     (44,807 )
Net cash (used in) investing activities
    (10,419 )     (2,471 )     (46,475 )
                         
Cash flow from financing activities:
                       
Proceeds from related party loans
    250,000       1,800       263,400  
        Proceeds from notes payable     250,000             250,000  
Repayment of related party loans
    (68,576 )           (68,576 )
Subscriptions received
                6,250  
Net cash provided by financing activities
    431,424       1,800       451,074  
                         
Increase in cash
    287,262       (206 )     287,421  
                         
Cash - beginning of period
    159       365        
                         
Cash - end of period
  $ 287,421     $ 159     $ 287,421  
                         
NONCASH ACTIVITIES
                       
Recapitalization due to share exchange
  $ 41,800     $     $ 41,800  
Subscriptions receivable
  $     $     $ (6,250 )
                         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                 
Interest paid
  $     $     $  
Income taxes paid
  $     $     $  

The accompanying notes are an integral part of these financial statements
 
 
F-5

 
 
(formerly Pristine Solutions, Inc.)
A DEVELOPMENT STAGE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2013 AND 2012

NOTE 1: NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS

The Company was incorporated in the state of Nevada on December 8, 2009 under the name Pristine Solutions, Inc. The Company’s wholly owned subsidiary, Pristine Solutions Limited, was incorporated under the laws of Jamaica. The Company’s 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 22, 2012, Christine Buchanan-McKenzie resigned from all positions with the Company, including, but not limited to that of President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and a member of the Board of Directors.  The resignation did not involve any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. On the same day, Mr. Michael Borkowski was appointed as President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and a member of the Board of Directors of the Company.

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”)

The Company’s Chief Executive Officer, Mr. Michael J. Borkowski, and the Company’s controlling shareholder and former President, Ms. Christine Buchanan-McKenzie, entered into a Common Stock Purchase Agreement, whereby Mr. Borkowski would purchase one hundred (100%) percent of the Company’s common shares owned by Mrs. Buchanan-McKenzie, or 240,000,000 shares, at par value $.0001, representing approximately 54.1% of the Company’s total issued and outstanding shares.  The Common Stock Purchase Agreement, and subsequent transaction closing, was completed on October 22, 2012.  On October 23, 2012, the Common Stock Purchase Agreement was finalized, and a change in control of the Company took place.

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 Company’s 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 Company’s 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 women’s health.  The Company’s mission is to provide solutions to women’s 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 Company’s 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.
 
 
F-6

 

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 January 31, 2013, the Company had working capital of $199,875, and an accumulated deficit of $801,057. 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 Company’s 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

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 Company’s 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 Company’s 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.

In August 2012, the Company acquired 100% of ESSL’s common stock in exchange for, among other things, approximately 60% of the Company’s common stock (Note 1). As a result, a change in control occurred whereby the Company is the legal parent/accounting subsidiary of ESSL, and ESSL is the legal subsidiary/accounting parent of the Company.  The transaction has therefore been identified and recorded as a reverse acquisition and, pursuant to ASC 805-40-45-1, the consolidated financial statements’ historical and cumulative data are a continuation of the financial statements of the legal subsidiary, ESSL.  ESSL has adopted the fiscal year end of the Registrant and as a result, for comparative purposes, the historical and cumulative data as of January 31, 2012 is unaudited. The audited financial statements of ESSL for the year ended December 31, 2011, are incorporated by reference to the Company’s Current Report on Form 8-K filed November 13, 2012.  For cumulative purposes, the date of inception is that of ESSL, January 31, 2006.

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. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
 
 
F-7

 

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 January 31, 2013 and 2012, the Company had no cash equivalents.

Property and Equipment
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 years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized.  During the years ended January 31, 2013 and 2012, respectively, $1,668 and $0 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 years ended January 31, 2013 and 2012, respectively, $8,751 and $2,471 were capitalized to patent development costs.
 
Impairment of Long-Lived Assets
The Company’s 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 Company’s 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.
 
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 instrument’s 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 Company’s 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.
 
 
F-8

 

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 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 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.

Recently Adopted Accounting Standards
The 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:
 
Trouble Debt Restructuring: Issued in April, 2011, ASU 2011-02 clarifies which loan modifications constitute troubled debt restructurings. It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings. The new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption. Early adoption is permitted.

Comprehensive Income: Issued in June, 2011, ASU 2011-05 eliminates the current option to present other comprehensive income and its components in the statement of changes in equity. It will require companies to report the total of comprehensive income including the components of net income and the components of other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in the ASU are effective for interim and annual periods beginning on or after December 15, 2011, and should be applied retrospectively. Early adoption is permitted.
 
 
F-9

 

Intangibles: Issued in September, 2011, ASU 2011-08 permits entities to first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If the entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it would then perform the first step of the goodwill impairment test; otherwise, no further impairment test would be required. The amendments will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted.

Disclosures about Offsetting Assets and Liabilities: Issued in December, 2011, ASU 2011-11 requires disclosures to provide information to help reconcile differences in the offsetting requirements under U.S. GAAP and IFRS. The differences in the offsetting requirements account for a significant difference in the amounts presented in statements of financial position prepared in accordance with U.S. GAAP and IFRS for certain entities. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.

Impairment Testing-Intangibles: Issued in July 2012, ASU 2012-02 reduces the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment, and improves consistency in impairment testing guidance among long-lived asset categories. The amendments will be effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted.

Recently Issued Accounting Standards Updates:
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

NOTE 3: PREPAID EXPENSES

Prepaid expenses consist of certain consulting fees paid in advance of services rendered. As of January 31, 2013 and 2012, respectively, the Company had $5,000 and $0 in prepaid expenses.

NOTE 4: PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

   
January 31, 2013
   
January 31, 2012
 
Office equipment
  $ 1,668     $  
Accumulated depreciation
           
Property and equipment, net
  $ 1,668     $  

No depreciation expense has been recorded for the years ended January 31, 2013 and 2012, respectively.

NOTE 5: INTANGIBLE ASSETS

Intangible assets consists of the following:

   
January 31, 2013
   
January 31, 2012
 
Product development costs
  $ 44,806     $ 36,055  
Accumulated amortization
    (13,749 )     (11,224 )
Intangible assets, net
  $ 31,057     $ 24,831  
 
 
F-10

 

Amortization expense totaled $2,525 and $2,513 for the years ended January 31, 2013 and 2012, respectively.

NOTE 6: RELATED PARTY TRANSACTIONS

Due to affiliates and related parties consists of the following:

   
January 31, 2013
   
January 31, 2012
 
Loans to the Company
  $ 194,824     $  
Notes payable for accrued compensation
    273,000        
Total related party loans
    467,824        
Accrued compensation
    6,000       150,500  
Overhead advances
          13,400  
Reimbursable expenses
    37       1,024  
Total related party payable
    6,037       164,924  
Total related party transactions
  $ 473,861     $ 164,924  
 
As at January 31, 2013, affiliates and related parties are due a total of $473,861, which is comprised of $194,824 in cash loans, $273,000 of accrued compensation converted to notes payable, $6,000 in unpaid compensation, and $37 due to related parties for reimbursable expenses.  During the year ended January 31, 2013, cash loans increased by $194,824, accrued compensation converted to notes payable increased by $273,000, unpaid compensation decreased by $144,500, overhead advances decreased by $13,400, and reimbursable expenses decreased by $988.
  
On July 1, 2008, the Company entered into a consulting agreement with Huntington Chase Financial Group Ltd. (“HCFG”), a Nevada corporation, whose principal is a related party. 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 $3,500 per month.  On August 31, 2012, a promissory note was issued by the Company in the amount of $168,000 for all unpaid compensation owing under this agre