We have audited the accompanying balance sheet
of Vitana Distributions, Inc. (the “Company”) as of July 31, 2019, the related statements of operations, changes in
stockholders’ equity and cash flows for the period from inception (February 11, 2019) to July 31, 2019, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of July 31, 2019, and the results of its operations and its
cash flows the period from inception (February 11, 2019) to July 31, 2019, in conformity with accounting principles generally accepted
in the United States of America.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the
Company is in an early stage and has a net loss and net cash used in operations for the year period from inception (February 11,
2019) to July 31, 2019 of $1,117,804 and $283,645, respectively, has no revenues and has not implemented its business plan. These
matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plan in regard
to these matters is also described in Note 2. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audit
we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a
reasonable basis for our opinion.
Notes to Financial Statements
July 31, 2019
Note 1 - Organization and Description of Business
Vitana Distributions, Inc. (the
“Company”) was incorporated on February 11, 2019 in the State of Florida as Vitana-X, Inc. The Company changed
its corporate name to Vitana Distributions, Inc. on December 4, 2019. The Company is a wellness company specializing in the development
and manufacture of health promoting products based on DNA analysis. The Company has no operating history as of yet.
On August 21, 2019, the Company
entered into a Share Exchange Agreement with GH Capital, Inc. (“GHHC”) whereby 100% of Vitana’s outstanding stock
was purchased for certain shares of preferred stock of GHHC (the “Agreement”) (see Note 8). As a result, the equity
of the Company is retroactively restated to reflect the number and type of shares received in exchange for the Company’s
shares in the reverse recapitalization with GHHC.
Note 2 - Basis of presentation
and going concern
The accompanying financial statements
are prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities and commitments
in the normal course of business. As reflected in the accompanying financial statements, the Company had a net loss and net cash
used in operations of $1,117,804 and $283,645 respectively, for the period from inception (February 11, 2019) to July 31, 2019.
Additionally, the Company had no revenues for the period from inception (February 11, 2019) to July 31, 2019 and had an accumulated
deficit of $1,117,804 as of July 31, 2019. These matters raise substantial doubt about the Company’s ability to continue
as a going concern for twelve months from the issuance date of this report. The ability of the Company to continue as a going concern
is dependent on the Company’s ability to implement its business plan, raise capital, and generate revenues. Currently, management
is seeking capital to implement its business plan. Management believes that the actions presently being taken
provide the opportunity for the Company to continue as a going concern. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
Note 3 - Summary of Significant Accounting Policies
Use of estimates
The preparation of the financial
statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial
statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates
include the valuation of due from related parties, valuation of equity-based instruments issued for other than cash, and the valuation
allowance on deferred tax assets.
Risks and uncertainties for development stage company
The Company is considered to be
in an early stage since we have not commenced planned principal operations. Our activities since inception include devoting substantially
all of the Company’s efforts to business planning and development. Additionally, the Company has allocated a substantial
portion of its time and investment to the completion of the Company’s development activities to launch its marketing plan
and generate revenues and to raising capital. The Company has not generated revenue from operations and is currently in the development
stage. The Company’s activities during this early stage are subject to significant risks and uncertainties.
Vitana Distributions, Inc.
Notes to Financial Statements
July 31, 2019
Note 3 - Summary of Significant Accounting Policies (continued)
Cash and cash equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when acquired to be cash equivalents. The Company did not have cash equivalents as of July
31, 2019. The Company places its cash with high credit quality financial institutions. The Company’s accounts at these institutions
are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of July 31, 2019, the Company
had not reached bank balances exceeding the FDIC insurance limit on interest bearing accounts. To reduce its risk associated with
the failure of such financial institutions, the Company evaluates at least annually the rating of the financial institutions in
which it holds deposits.
Fair value measurements and fair value of financial
instruments
The Company adopted Accounting Standards
Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets
and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied
to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework
for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an
impact on the Company’s financial position or operating results, but did expand certain disclosures.
ASC 820 defines fair value
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable
inputs and minimize the use of unobservable inputs.
These inputs are prioritized below:
Level 1:
|
Observable inputs such as quoted market prices in active markets for identical assets or liabilities
|
Level 2:
|
Observable market-based inputs or unobservable inputs that are corroborated by market data
|
Level 3:
|
Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
The Company analyzes all financial
instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”)
accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety
based on the lowest level of input that is significant to the fair value measurement.
The estimated fair value of certain
financial instruments, including prepaid expense and other current assets, accounts payable and accrued expenses are carried at
historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
Stock-based compensation
The Company accounts for
employee stock-based compensation in accordance with ASC 718-10, "Share-Based Payment," which requires the measurement
and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock
options, restricted stock awards, and employee stock purchases based on estimated fair values.
Vitana Distributions, Inc.
Notes to Financial Statements
July 31, 2019
Note 3 - Summary of Significant Accounting Policies (continued)
In June
2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718). This update is intended to reduce cost and complexity
and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal
counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation-Stock Compensation, which currently only includes
share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services.
Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This standard
will be effective for financial statements issued by public companies for the annual and interim periods beginning after December
15, 2018. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period
presented. Management implemented this standard at inception on February 11, 2019.
Determining Fair Value Under
ASC 718-10
The Company
estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized
on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company's
determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number
of highly subjective variables.
The
Company estimates volatility based upon the historical stock price of the Company and estimates the expected term for employee
stock options using the simplified method for employees and directors and the contractual term for non-employees. The risk-free
rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities.
Income taxes
The Company accounts for income taxes pursuant
to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”), which requires, among other
things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach require the recognition
of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which
management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provision of ASC 740-10
related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there may be uncertainty about the merits
of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10,
the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution of
appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more likely than
not recognition threshold is measured at the largest amount of tax benefit that is more than 50 percent likely of being realized
upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed
the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance
sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company
believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a
liability for uncertain tax benefits.
Vitana Distributions, Inc.
Notes to Financial Statements
July 31, 2019
Note 3 - Summary of Significant Accounting Policies (continued)
The Company has adopted ASC 740-10-25, “Definition
of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for
the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon
the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than
not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The
federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally
for three years after they are filed.
Net loss per share of common stock
Basic net loss per share
is computed by dividing the net loss by the weighted average number of common shares during the period. Diluted net loss per share
is computed using the weighted average number of common shares and potentially dilutive securities outstanding during the
period. At July 31, 2019, the Company has no potentially dilutive securities outstanding.
Recent accounting pronouncements
In July 2017, the FASB issued ASU 2017-11 “Earnings
Per Share” (Topic 260). The amendments in the update change the classification of certain equity-linked financial instruments
(or embedded features) with down round features. The amendments also clarify existing disclosure requirements for equity-classified
instruments. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per
share (“EPS”) in accordance with Topic 260, Earnings Per Share, to recognize the effect of the down round feature when
it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.
Convertible instruments with embedded conversion options that have down round features would be subject to the specialized guidance
for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including
related EPS guidance (in Topic 260). For public business entities, the amendments in Part I of this update are effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of this guidance had no material
impact on its accounting and disclosures.
In June 2018, the FASB issued ASU
No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting
for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to
include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for
annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted,
but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The adoption of this guidance had
no material impact on its accounting and disclosures.
In August 2018, the FASB issued ASU
2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness
of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain
disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2019. The Company is assessing ASU 2018-07 and does not expect it to have a material impact on its accounting and disclosures.
Other accounting standards which
were not effective until after December 31, 2019 are not expected to have a material impact on the Company’s financial
position or results of operations.
Vitana Distributions, Inc.
Notes to Financial Statements
July 31, 2019
Note 4 – Related Party Transactions
During the period from
inception (February 11, 2019) to July 31, 2019, the Company issued 589,128 shares of the Company’s Series B preferred stock
to two founders for total proceeds of $17,400.
During the period from
inception (February 11, 2019) to July 31, 2019, the Company paid consulting fees of $33,450 to the Chief Executive officer (“CEO”)
of the Company for consulting services rendered. Additionally, on August 15, 2019, the Company entered into a Management Consulting
Agreement with the Company’s CEO to provide corporate development services for the period from August 15, 2019 to December
15, 2019 in exchange for 29,456 shares of the Company’s Series B preferred stock. The Company valued the shares of preferred
stock at the fair value of approximately $5.43 per preferred share or $160,000 based on the sales of preferred stock on recent
private placements on the dates of grants.
Between January 2019
and March 2019, the Company entered into two consulting agreements with two directors of the Company for business and strategic
consulting services. The term of the agreements commenced on the effective dates of the consulting agreements and continued upon
completion of the agreed upon services as defined in the consulting agreements. The Company may terminate these agreements upon
90 days written notice to the consultant. In connection with these consulting agreements, during the period from inception (February
11, 2019) to July 31, 2019, the Company paid total consulting fees of $79,900 to two directors of the Company for consulting services
rendered.
On January 3, 2019,
the Company entered into consulting agreement with an affiliated company which is majority owned by two directors of the Company
for advisory and consulting services. The consulting agreement may be terminated by either party by submitting a written notice
of termination. In connection with this consulting agreement, during the period from inception (February 11, 2019) to July 31,
2019, the Company paid consulting fees of $52,500 to such affiliated company for consulting services rendered.
On January 4, 2019,
the Company entered into a consulting agreement with an affiliated company which is owned by a director of the Company for business,
management, and strategic consulting services. The term of the agreement commenced on the effective date of the consulting agreement
and continued upon completion of the agreed upon services as defined in the consulting agreement. The Company may terminate this
agreement upon 90 days written notice to the consultant. In connection with this consulting agreement, during the period from inception
(February 11, 2019) to July 31, 2019, the Company paid total consulting fees of $46,852 to the affiliated company for consulting
services rendered.
On June 1, 2019, the
Company entered into a management consulting agreement with an affiliated company which is owned by two directors of the Company
for business development, management, and sales related consulting services for the period from June 1, 2019 to December 31, 2019
in exchange for 73,641 shares of the Company’s preferred stock. The Company valued the shares of preferred stock at the fair
value of approximately $5.43 per preferred share or $400,000 based on the sales of preferred stock on recent private placements
on the dates of grants. This value was recorded as prepaid expense to be amortized over the term of the agreement.
The Company provided advances to GH Capital,
Inc. (see Note 8) for working capital purposes. At July 31, 2019, the Company had a receivable from the related party of $26,100.
These advances were short-term in nature and non-interest bearing. On August 21, 2019, the receivable was considered paid upon
the consummation of the Share Exchange Agreement with GH Capital, Inc.
On July 1, 2019, the Company entered into a
License Agreement with an affiliated company,VitanaEU , which is majority owned by two directors of the Company (see Note 6). On
May 19, 2020, the Company received a notice of cancellation of the License Agreement from the affiliated company effective July
30, 2020. Additionally, as of July 31, 2019, the Company provided advances of
$13,921 to VitanaEU. At July 31, 2019, the Company had a receivable from the related party of $13,921 which was included in due
from related parties as reflected on the balance sheet. These advances were short-term in nature and non-interest bearing.
As of July 31, 2019, accounts payable due to
the CEO, two directors of the Company and an affiliated company totaled to $56,395 ($8,000, $18,400, $9,100 and $20,895, respectively).
Vitana Distributions, Inc.
Notes to Financial Statements
July 31, 2019
Note 5 – Stockholders’ Equity
The authorized capital stock consists
of 500,000,000 shares of common stock with no par value.
As a result of the closing of the
Share Exchange Agreement on August 21, 2019 with GHHC (see Note 8), the equity of the Company is retroactively restated to reflect
the number and type of shares received in exchange for the Company’s shares in the reverse recapitalization with GHHC.
Series B Preferred stock
During the period from
inception (February 11, 2019) to July 31, 2019, the Company issued 589,128 shares of the Company’s Series B preferred stock
to two founders for total proceeds of $17,400.
During the period from
inception (February 11, 2019) to July 31, 2019, the Company received total gross proceeds of $372,378 and $8,857 of subscription
receivable or average of approximately $5.43 per share from the sale of 70,186 shares of the Company’s Series B preferred
stock. The Company collected the $8,857 subscription receivable in August 2019.
During the period from
inception (February 11, 2019) to July 31, 2019, the Company issued an aggregate of 270,631 shares of the Company’s Series
B Preferred stock to various consultants for services rendered. The Company valued the shares of preferred stock at the fair value
of approximately $5.43 per share or $1,470,000 based on the sales of preferred stock on recent private placements on the dates
of grants. During the period from inception (February 11, 2019) to July 31, 2019, the Company recorded stock-based compensation
of $605,690 and prepaid expense of $864,309 to be amortized over the remaining service period.
Note 6 – Commitments and Contingencies
Between February 2019 and March 2019, the Company entered into various
consulting agreements with the CEO and two directors of the Company (see Note 4).
In January 2019 and June 2019, the Company entered into three consulting
agreements with three affiliated companies (see Note 4).
On July 1, 2019, the Company entered into a
License Agreement (the “License Agreement”) with an affiliated company (“VitanaEU”) which is majority owned
by two directors of the Company. The term of the License Agreement is for one year unless terminated by the non-breaching party
upon submitting a written notice within 90 days of such breach. The Company grants VitanaEU an exclusive license to develop, use,
and sell the Company’s products. In consideration for the grant of license, VitanaEU agrees to pay the Company a royalty
of 5% based on VitanaEU’s net sales and a monthly fee of 3,000 Euros due on the first day of each month beginning July 1,
2019 and until such time this License Agreement is terminated. On May 19, 2020, the Company received a notice of cancellation of
the License Agreement from the affiliated company effective July 30, 2020.
In March 2020, the
outbreak of COVID-19 (coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health
Organization, and the outbreak has become increasingly widespread in the United States, including in each of the areas in which
the Company operates. The COVID-19 (coronavirus) outbreak has had a notable impact on general economic conditions, including but
not limited to the temporary closures of many businesses, “shelter in place” and other governmental regulations, reduced
business and consumer spending due to both job losses and
reduced investing activity, among many other effects attributable to the COVID-19 (coronavirus), and there continue to be many
unknowns. While to date the Company has not been required to stop operating, management is evaluating its use of its office space,
virtual meetings and the like. The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak closely. The
extent to which the COVID-19 (coronavirus) outbreak will impact the Company’s operations, ability to obtain financing or
future financial results is uncertain.
Vitana Distributions, Inc.
Notes to Financial Statements
July 31, 2019
Note 7 – Income Taxes
The Company has no income tax expense or liability due to its net
taxable losses.
Management believes that the realization of
the benefits from these losses appears not more than likely due to the Company’s limited operating history and continuing
losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred
tax asset to reduce the asset to zero. Management will review this valuation allowance periodically and make adjustments as necessary.
The items accounting for the difference between
income taxes at the effective statutory rate and the provision for income taxes were as follows:
|
|
Period from Inception (February 11, 2019) to July 31,
2019
|
Income tax benefit at U.S. statutory rate of 21%
|
|
$
|
(234,739
|
)
|
Income tax benefit – State tax rate at 5%
|
|
|
(55,890
|
)
|
Non-deductible expenses
|
|
|
157,479
|
|
Increase in valuation allowance
|
|
|
133,150
|
|
Total provision for income tax
|
|
$
|
—
|
|
The Company’s approximate net deferred tax asset was as follows:
Deferred Tax Asset:
|
|
July 31,
2019
|
Net operating loss carryforward
|
|
$
|
133,150
|
|
Valuation allowance
|
|
|
(133,150
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
The net operating loss carryforward was approximately
$512,114 at July 31, 2019. The Company provided a valuation allowance equal to the deferred income tax asset for the year ended
July 31, 2019 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. The increase
in the allowance was $133,150 in fiscal 2019. The potential tax benefit arising from fiscal 2019 net operating loss carryforward
of approximately $512,114 may be carried forward indefinitely.
Additionally, the future utilization of the
net operating loss carryforward to offset future taxable income may be subject to an annual limitation as a result of ownership
changes that could occur in the future. If necessary, the deferred tax assets will be reduced by any carryforward that expires
prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance. The Company does
not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s 2019 Corporate Income
Tax Return is subject to Internal Revenue Service examination.
Vitana Distributions, Inc.
Notes to Financial Statements
July 31, 2019
Note 8 - Subsequent Events
Issuance of Series
B Preferred Stock
Between August 1, 2019
and August 21, 2019, the Company received total gross proceeds of $63,713 and subscription receivable of $30,011 or average of
approximately $5.43 per share from the sale of 16,924 shares of the Company’s Series B preferred stock.
Between August 1, 2019
and August 21, 2019, the Company issued an aggregate of 53,132 shares of the Company’s Series B preferred stock to various
consultants (including 29,456 shares to the CEO) for services to be rendered from August 2019 to December 2019. The Company valued
the shares of common stock at the fair value of approximately $5.43 per share or $288,600 based on the sales of preferred stock
on recent private placements on the dates of grants.
Between August 22, 2019 and November 17,
2019, the Company received total gross proceeds of $129,395 or average of approximately $5.43 per share from the sale of 23,989
shares of the Company’s Series B preferred stock.
Between August 1, 2019 and November 17,
2019, the Company collected total subscription receivable of $38,868 (includes $8,857 subscription receivable which was
recorded as of July 31, 2019).
Between August 22, 2019 and November 17,
2019, the Company issued an aggregate of 320,762 shares of the Company’s Series B preferred stock to various
consultants (including 73,641 shares to a director and 73,641 shares to an affiliated company) for services to be rendered
from August 2019 to December 2019. The Company valued the shares of preferred stock at the fair value of approximately $5.43
per share or $1,742,327 based on the sales of preferred stock on recent private placements on the dates of grants and such
value is being recognized over the terms of the service period.
Stock Option Grant
In October 2019, the Company granted 73,641
options to purchase shares of the Company’s Series B preferred stock to a consultant for investor relations services. The
options have a term of 1.23 years from the date of grant and were exercisable at an exercise price of $5.43 per share. These options vested immediately on the date of grant. The Company
accounted for the 73,641 options by using a Black-Scholes option pricing model with the following assumptions: stock price of $5.43
per share (based on the sales of preferred stock on recent private placements on the dates of grants), volatility of 293%, expected
term of 1.23 years, and a risk-free interest rate of 1.63%.
Share Exchange Agreement
On August 21, 2019, the Company (“Vitana”)
entered into a Share Exchange Agreement with GH Capital, Inc. (“GHHC”)
whereby 100% of Vitana’s outstanding stock was purchased for certain shares of preferred stock of GHHC (the “Agreement”).
Pursuant to the Agreement the shareholders of Vitana shall exchange their shares for shares of GHHC as follows:
The holders of the common stock of Vitana received
1,000,000 shares of newly designated Series B Preferred Stock (the “GHHC Series B Shares”) in exchange for each share
of common stock of Vitana, on a pro rata basis. The GHHC Series B Preferred Shares shall convert into a total amount
equaling 80% of the total issued and outstanding common shares, post conversion, on a pro rata basis based on a contingent event
described below. The Series B Preferred Share have no voting rights.
Vitana Distributions, Inc.
Notes to Financial Statements
July 31, 2019
Note 8 - Subsequent Events (continued)
Furthermore, simultaneously with the closing,
the two majority shareholders of Vitana purchased 1,000,000 shares of Series A preferred shares of GHHC from the majority shareholder
of GHHC. The Series A shares have a voting right equal to 65% of all the voting rights of all capital stock of GHHC.
Upon closing of the Agreement, Vitana became a wholly owned subsidiary of GHHC. Matthias Goeth,
CEO of Vitana, became director and COO of GHHC and Dirk Richter, Director of Vitana, became the Chairman of the board of directors
of GHHC.
Additionally, since the majority shareholders
of Vitana obtained majority voting control (at least 65%) of GHHC as a result of the above transactions and the operations of GHHC
were spun off to the former majority owner officer of GHHC, this transaction is being accounted for as a reverse recapitalization
of Vitana where Vitana is considered the historical registrant and the historical operations presented will be those of Vitana.
Series B Preferred
Stock Designation
On August 16, 2019, the Company filed a Certificate
of Designation of Preferences, Rights and Limitations of Series B Preferred Stock which designated 1,000,000 shares of preferred
stock as Series B Preferred Stock at par value of $0.0001 (see Note 1).
The Series B Preferred Stock Certificate
of Designation includes:
|
·
|
a par value of $0.0001 per share and 1,000,000
designated shares of Series B with no voting rights,
|
|
·
|
the Series B preferred stock shall rank senior to the Company's common
stock and to all other classes and series of equity securities of the Company which by their terms do not rank senior to the Series
B preferred stock and shall be subordinate to and rank junior to all indebtedness of the Company now or hereafter outstanding,
|
|
·
|
Series B preferred holders shall be entitled to receive out of the
assets of the Company whether such assets are capital or surplus, for each share of Series B preferred stock, an amount equal to
the holder's pro rata share of the assets and funds of the Company to be distributed, less any amount distributed to the holders
of the Series B preferred stock, assuming their conversion of Series B preferred stock to common stock and if the assets of the
Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders shall be distributed
among the holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full,
|
|
·
|
No dividends shall be declared or paid on the Series B preferred
stock,
|
|
·
|
The Series B preferred stock shall be automatically
converted upon the date where in a reverse stock split is deemed effective by the Financial Industry Regulatory Authority (“FINRA”),
each shares of Series B preferred stock shall automatically convert in a number of shares of common stock equal to its pro-rata
portion of 80% of the total issued and outstanding common shares, post conversion, to be issued to each holder on a pro-rata portion
of the total issued and outstanding Series B preferred stock.
|