☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Registrant’s telephone number, including area code: (561) 227-2727~~Former name, former address and formal fiscal year, if changed since last report)

Securities registered ~~under~~pursuant to Section 12(b) of the Act: ~~None~~None.

~~Securities registered under Section 12(g) of the Act: Common Stock, Par Value $0.001 per share~~

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically 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 registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§ 229.405) 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 ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check One)~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, ~~2018,~~2020, the last business day of the registrant’s last completed second quarter, based upon the closing price of the common stock of ~~$0.07~~$0.08029 on such date, is ~~$1,171,240.~~$756,055.

As of March ~~22, 2019,~~15, 2021, there were ~~16,832,065~~19,422,300 shares of registrant’s common stock ~~outstanding.~~outstanding held by approximately 111 shareholders.

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance, or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

Actual results could differ materially from the results described in the forward-looking statements due to the risks and uncertainties set forth in this Report and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”).

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts. These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances, or assumptions underlying such statements, or otherwise.

Home Bistro, Inc. (formerly known as Gratitude Health, Inc.,) (the “Company”) ~~manufactures, sells~~was incorporated in the State of Nevada on December 17, 2009. Effective March 23, 2018, the Company changed its name to Gratitude Health, Inc. from Vapir Enterprises Inc. On September 14, 2020, the Company changed its name from Gratitude Health, Inc. to Home Bistro, Inc. The Company is in the business of providing prepackaged and ~~markets~~prepared meals to consumers focused on offering a broad array of the highest quality meal planning, delivery, and preparation services. The Company’s primary former operations were in the business of manufacturing, selling, and marketing functional RTD (Ready to Drink) beverages sold under the ~~Gratitude trademark.~~Company’s trademark (the “RTD Business”). The ~~Company’s first five drinks are Chinese Dragon Well Green Teas. Second and third functional-drink lines are now in development. The Gratitude mission is~~RTD Business was disposed on September 25, 2020 as discussed below.

On April 7, 2020, the Board of Directors of the Company approved the increase of authorized shares of common stock from 600,000,000 to disrupt this beverage market through our manufacturing and marketing of functional beverages that specifically promote healthy aging and to never produce a product that in any way will adversely affect the health of our customer. The Gratitude vision is to work with research partners to develop functional drinks that can easily be incorporated into one’s daily lifestyle and fit their nutritional goals.1,000,000,000.

~~THE PRODUCTS AND PACKAGING:~~Acquisition of Home Bistro Holdings and Disposal of the Discontinued Operations of the RTD Business

~~Gratitude Health,~~Home Bistro, Inc. ~~is building~~was formed on April 9, 2013 as a Delaware corporation, under the ~~“Gratitude” brand~~name DineWise, LLC. On December 1, 2014, it underwent a statutory conversion filed under Section 8-265 of the Delaware Code to converted from a limited liability company to a corporation and changed its name to Home Bistro, Inc.

On September 22, 2020, Home Bistro, Inc. (presently known as Home Bistro Holdings, Inc., a Nevada corporation) (“Home Bistro Holdings”) filed a Certificate of Conversion to a Non-Delaware Entity Delaware Secretary State to file a statutory conversion under Section 266 of the Delaware General Corporation Law to convert its state of domicile from Delaware to Nevada and simultaneously filed an Articles of Conversion Nevada Secretary of State for the same and changed its name from Home Bistro, Inc. to Home Bistro Holdings, Inc., each effective as of September 30, 2020.

Home Bistro Holdings provides prepackaged and prepared meals as a solution for time-constrained but discerning consumers focused on satisfying every member of the family by offering a broad array of the highest quality meal delivery and preparation services. Products are gourmet meals delivered fresh-frozen directly to the home.

On April 20, 2020, the Company, Fresh Market Merger Sub, Inc., a Delaware corporation and a newly created wholly-owned subsidiary of the Company, also referred to herein as Merger Sub, and Home Bistro, Inc., a privately-held Delaware corporation engaged in the food preparation and home-delivery business (presently known as Home Bistro Holdings, Inc., a Nevada corporation), also referred to herein also Home Bistro Holdings, entered into an Agreement and Plan of Merger, also referred to herein as the Merger Agreement, pursuant to which, among other things, Merger Sub agreed to merge with and into Home Bistro Holdings, with Home Bistro Holdings becoming a wholly-owned subsidiary of the Company and the surviving corporation in the merger, also referred to herein as the Merger. Pursuant to the terms of the Merger Agreement, Home Bistro Holdings filed a Certificate of Merger with the ~~launch~~Nevada Secretary of ~~unique, naturally flavored~~State on April 20, 2020.

Prior to the effective time of the Merger, the Company and ~~unsweetened~~certain of its existing securityholders entered into an Exchange Agreement providing for, among other things, the exchange (the “Exchange”) of securities held by such securityholders for shares of common stock, as more fully detailed therein. As a result of the Exchange, all of the Company’s issued and outstanding shares of Series A Preferred Stock, Series C Preferred Stock and convertible notes were converted into an aggregate of 5,405,479 shares of common stock on a fully diluted basis, consisting of 1,364,222 shares of common stock and warrants to purchase up to 4,041,258 shares of common stock. The 250,000 shares of Series B Preferred Stock owned by a former officer were cancelled on April 9, 2020 pursuant to a General Release Agreement and 250,000 shares of Series B Preferred Stock held by a related party remained issued and outstanding as of the date of the Merger.

After the Exchange, a total of 1,899,094 shares of common stock, warrants to purchase 4,041,258 shares of common stock and 60,638 stock options were deemed issued and outstanding.

At the effective time of the Merger, and subject to the terms and conditions of the Merger Agreement, each outstanding share of common stock of Home Bistro Holdings was converted into the right to receive approximately four hundred seventy-three (473) shares of common stock. Accordingly, the aggregate shares of the Company’s common stock issued in the Merger to the former securityholders of Home Bistro Holdings is 24,031,453 shares of common stock on a fully diluted basis consisting of 17,105,139 shares of common stock and warrants to purchase up to 6,926,314 shares of common stock.

Subsequent to the Merger, the Company had an aggregate of 30,031,501 shares of common stock issued and outstanding on a fully diluted basis consisting of 19,004,233 shares of common stock, 60,638 stock options and warrants to purchase up to 10,967,572 shares of common stock.

On April 20, 2020, pursuant to the terms of the Merger Agreement, Roy G. Warren, Jr., Mike Edwards, and Bruce Zanca resigned as directors of the Company and Roy G. Warren, Jr. resigned as Chief Operating Officer of the Company. The resignations were not the result of any disagreement related to the Company’s operations, policies, or practices. Furthermore, on April 20, 2020, Mr. Zalmi Duchman, the Chief Executive Officer of Home Bistro Holdings, Michael Finkelstein and Michael Novielli were appointed as directors of the Company. In addition, Mr. Duchman was appointed Chief Executive Officer.

In connection with the Merger, certain Company stockholders entered into a Lock-Up and Leak-Out Agreement with the Company pursuant to which, among other thing, such stockholders agreed to certain restrictions regarding the resale of common stock for a period of two years from the date of the Merger Agreement, as more fully detailed therein.

Additionally, on April 20, 2020, the Company and a stockholder entered into a Put Option Agreement, pursuant to which, among other things, the Company agreed, at the election of the stockholder, to purchase certain shares of common stock from such stockholder no sooner than two years from the date of the Put Option Agreement (the “Market Period”). Pursuant to the Put Option Agreement, in the event that the stockholder does not generate $1.3 million dollars (the “Total Investment”) in gross proceeds from the sale of its shares of common stock by the second anniversary of the Put Option Agreement, then the stockholder has the right to cause the Company to purchase shares held by the stockholder at a price equal to the difference between the Total Investment and the net proceeds actually realized by the stockholder from shares of common stock sold during the Market Period and the number of shares of common stock held by the stockholder on the date the put right is exercised. The put right expires fourteen (14) days from end of the Market Period. In connection with the Put Option Agreement, the Company recorded a common stock repurchase obligation in the amount of $1.3 million.

Effective April 20, 2020, the Company acquired all the issued and outstanding shares of Home Bistro Holdings pursuant to the Merger Agreement and Home Bistro Holdings became a wholly owned subsidiary of the Company. As a result of the Merger, for financial statement reporting purposes, the Merger between the Company and Home Bistro Holdings has been treated as a reverse acquisition and recapitalization with Home Bistro Holdings deemed the accounting acquirer and the Company deemed the accounting acquiree in accordance with FASB Accounting Standards Codification (“ASC”) Section 805-10-55. At the time of the Merger, both the Company and Home Bistro Holdings had their own separate operating segments. Accordingly, the assets and liabilities and the historical operations that are reflected in the consolidated financial statements after the Merger are those of Home Bistro Holdings and are recorded at the historical cost basis of Home Bistro Holdings. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of Home Bistro Holdings which are recorded at historical cost. The results of operations of the Company are consolidated with results of operations of Home Bistro Holdings starting on the date of the Merger Agreement. The equity of the consolidated entity is the historical equity of Home Bistro Holdings retroactively restated to reflect the number of shares issued by the Company in the reverse acquisition.

The Merger constituted a change of control and the majority of the Board of Directors changed with the consummation of the Merger. The Company issued to the stockholders of Home Bistro Holdings shares of common stock and stock warrants which represented approximately 80% of the combined company on a fully converted basis after the closing of the Merger. As a result of the above transactions and the Company’s intent to dispose of or divest the assets and liabilities associated with the RTD Business as discussed below, this transaction was accounted for as a reverse recapitalization of Home Bistro Holdings where Home Bistro Holdings is considered the historical registrant and the historical operations presented will be those of Home Bistro Holdings.

On September 25, 2020, pursuant to the Asset Purchase Agreement, among other things, the Company agreed to sell all of the Company’s business, assets and properties used, or held or developed for use, in its functional RTD (Ready Toto Drink) ~~teas.~~beverage segment (the “RTD Business”), and the Buyer agreed to assume certain debts, obligations and liabilities related to the RTD Business. The Company assumed an accounts payable liability in the amount of $14,000 related to accounting expense of the RTD Business for a period prior to the Merger. Pursuant to the Asset Purchase Agreement, the Buyer reimbursed the Company for t accounting expenses in amount of $14,000 incurred prior to the Merger, of which $7,000 was payable in cash and the balance in form of a promissory note dated September 25, 2020 in the amount of $7,000. The promissory note bears interest at a rate of 5% per annum, matures on April 25, 2021 and is payable in monthly installments of $1,000 commencing on October 25, 2020 through April 25, 2021. The Company received the $7,000 cash portion of the consideration subsequent to September 30, 2020 which has been included in the prepaid and other current assets on the accompanying consolidated balance sheets as of September 30, 2020 (see Note 1). The $14,000 reimbursement was recorded to additional paid in capital as reflected in the accompanying consolidated statements of changes in stockholders’ deficit.

~~Today, tea is~~ASC 205-20 “Discontinued Operations” establishes that the ~~second largest drink category~~disposal or abandonment of a component of an entity or a group of components of an entity should be reported in ~~America~~discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and ~~is an obvious driver and mainstay in delivery systems across food and beverage categories. Americans and, especially Millennial Americans,~~financial results. As a result, the component’s results of operations have been classified as discontinued operations on a retrospective basis for all periods presented. The results of operations of this component, for all periods, are ~~increasingly becoming more and more aware~~separately reported as “discontinued operations” on the consolidated statements of ~~the generous levels of cancer-fighting antioxidants found in tea.~~

~~While Green, White and Black teas are the most common types consumed in America, research shows that their growth is solid year-over-year but barely above flat. We believe this is due to two factors:~~

We are addressing these issues with unique varieties of tea that not only have interesting and curious names but also health research that supports their benefits. Naturally, we will be calorie and carb free and always strive for maximum antioxidant delivery. Our teas are sourced from Dragon Well in China. Our initial five flavors are:

Supporting these unique flavors and key to our brand-building presentation will be our package, a first-to- RTD-market “mason jar” like 16-oz bottle featuring artistic, graphic designs actually etched onto the glass-container.

We will promote this unique presentation as more than eco-friendly (“eco” being of great importance to millennials) because they will be collectibles and advertised as such thus making their collectability and reuse arguably the eco-friendliest mass-market beverage bottle in the world. To even further support this unique presentation, artistic and colorful labels (logo, art, nutritional and redemption information) will cover the etchings driving the desires for those that keep them to buy their “missing” collectible.

Interestingly, the 2017 Natural Beverage Guide (Bevnet, Inc.) displays hundreds of Natural-Drink companies and not one has a “Mason” jar configuration. We believe this packaging will be widely preferred to the predominantly plastic bottles in the market today, we further expect modern consumers to understand and appreciate the flavor profile and obvious nutritional benefits of the teas.

Having identified the opportunity and clearly focused upon the healthy features and benefits available in Gratitude’s tea offerings, Gratitude has introduce its first five flavors of tea into the New York City market.operations.

The ~~Company is continuing its development plan for 2019: (1) pursuing additional distributors for our Dragon Well Tea brands on the east coast~~Asset Purchase Agreement, discussed above under Agreement and Plan of Merger, was intended to be part of the ~~United States;~~Merger and ~~(2) launching~~in effect transferred the RTD Business and ~~distributing KetoFuel™ a ready-to-drink line of ketogenic meal-replacement shakes in shelf-stable Tetra Pak containers. We haveengaged a leading scientist with advanced studies into~~ the ~~ketogenic diet~~related assets and liabilities to create this proprietary and strategically balanced fat-to-protein-to-carbohydrate, macro-nutrient formulation that refuels and supports the body’s ability to naturally burn fat for energy and maintain consumers already in ketosis.KetoFuel™ is the ultimate meal replacement drink and is created to deliver healthy nutrition for all. Each “keto shake” delivers proper macro and micro nutrients in a scientifically developed balance of healthy fat, protein and carb ratios. KetoFuel™ is USDA Organic and will come in 16.9 oz, shelf-stable Tetra Pak Prisma containers and will be sold across multiple beverage channels. Additional information can be found atGratitude Keto, whose CEO, Roy Warren Jr., formerly served as the Company’s ~~investor relations website, www.ir.organicgratitude.com.~~director and Chief Operating Officer and was considered a related party, in substance, in the accounting of this transaction. Therefore, the disposal of net liabilities and the reimbursement discussed above in connection with the disposal of the RTD Business was recorded to additional paid in capital as reflected in the accompanying consolidated statements of changes in stockholders’ deficit.

The following table set forth the selected financial data of the net liabilities recorded to additional paid in capital as of September 24, 2020.

~~MARKET INFORMATION AND THE VALUE CHAIN AND ROUTES TO MARKET~~The Products and Packaging:

~~According~~The Company manufactures, packages, and sells, direct-to-consumer, gourmet meals under the Home Bistro brand and markets restaurant quality meats and seafood under the Prime Chop and Colorado Prime brands. The Company’s meals are freshly prepared, flash-frozen, to ~~Beverage Marketing Corporation’s 2017 “DrinkTell” database, RTD tea sales totaled $10.31 billion in 2017 up four percent. Importantly, Gratitude’s market analyses~~preserve freshness, and ~~product development targets the main attributes fueling this growth. According to this database, “Ready-to-drink tea is leading the growth~~packaged in its ~~category~~facility located in Miami, Florida. Home Bistro meals are ordered on-line and delivered to consumers in containers designed to keep the products frozen during transport. Once delivered, the meals can be heated using a microware cooker or hot water for consumption within minutes and with ~~new forms~~little to no preparation and ~~formulations that~~minimal cleanup.

In addition to its diverse menu of gourmet meals, the Company has also partnered with world-renowned chefs to offer ~~both function and flavor. Consumers are willing~~a selection of each chef’s specialty cuisine (the “Celebrity Chef Program”). The Company launched its Celebrity Chef Program with Iron Chef, Cat Cora to ~~trade up~~offer Chef Cora’s Mediterranean/Southern inspired cooking. Home Bistro also partnered with “Hungry Fan” celebrity chef, Daina Falk to ~~products that~~ offer ~~them better quality or benefits.” Further according~~Ms. Falk’s sports stadium tailgate inspired recipes. The Company plans to ~~BMC, “Retailers say refrigerated RTD teas are~~expand it celebrity chef program to include gourmet cuisine from notable chefs around the ~~leading segment in this category, and new varieties are emerging.~~world. In doing so, the ~~RTD tea category, reduced-sugar formulations and local and artisanal brands are poised for continued growth.”~~

~~We are the first company~~Company intends to ~~introduce Chinese Dragon Well Tea to the mass RTD American market. Dragon Well is subtle in taste with~~create a ~~hint of chestnut and is the most popular tea in China being granted “Imperial” status. Because it is “Green”, our tea will be well known to the US consumer. Because it is “DragonWell”,~~digital food court through which it will be a welcome new experience to the US RTD market. All our teas are either low calorie--45 per 16z—or totally unsweetened. Our “small batch * handmade” brand positioning features totally unique and first-to-market packaging that meets artisanal characteristics influencing today’s consumer purchase.offer consumers an internationally diversified selection of fully cooked gourmet meals.

According to the Tea Association of the USA, in its 2017-2018 Tea Market Review and Forecast, Ready-to-drink (RTD) tea accounted for some 45.7% of the tea market share in 2017 and will exceed 1.7 billion gallons in 2017. The Review states “Specialty Tea is still driving interest and consumption in the category with consumers grazing for new and different options and flavors and origins. Sustainability of these high quality, higher priced teas confirms that the analogy to wine is stronger than ever.” Furthermore, according to the Tea Association: “Naturalness continues to drive consumers who demand foods that are closer to their unrefined or pure state, seeking “less processed” drinks, incentivizing companies to remove artificial ingredients. This trend will also encourage consumers to reach for foods in their most natural, original form, such as true teas, for health benefits, instead of supplements and nutraceuticals. Tea is a natural, simple and whole food.”

By marrying a famous and revered green tea in China with such organic flavors as Peach, Mint, Wildberry and Blood Orange and putting those complementary flavors in a totally unique glass package, Gratitude is well positioned for our targeted consumer audience.

Gratitude’s retail shelf price is between $2.99 to $3.49 per bottle. We have established cost for finished product per bottle and per 12-count case. We will approach and engage the same retail systems and value chain structure relative to all RTD beverage brands in the industry.

~~There will be three routes~~Market Information and the Value Chain and Routes to ~~market:~~

~~We used~~The online food delivery market is projected to reach $28.5 billion in the United States in 2021 and achieve a cumulative average growth rate of 4.3% through 2024, according to a recent report by market and consumer data company Statista.

Consumers are continually becoming time-starved and convenience-seeking, while others have tired from the impact the pandemic has had on their access to restaurant quality food over the last year. As a result, consumers have aggressively sought out alternatives to cooking at home or ordering take-out.

Business models for meal-kit providers, third-party delivery services and prepared “heat-to-eat” meal companies, differ vastly from one another. Meal-kit companies provide customers pre-portioned, raw ingredients and recipes that require preparation, cooking, and the ensuing clean-up, not to mention that the resulting meal is still subject to the preparer’s ability, or lack thereof, to cook. On average, meals take anywhere from 30-60 minutes for preparation and cooking and another 15 minutes to clean up. In addition, due to the short shelf life of raw materials provided in meal-kits, meal-kit providers experience higher operating and supply chain costs compared to prepared meal providers. Home Bistro’s flash freezing process and packaging serves to extend its product’s shelf life and promotes operational efficiencies.

Third-party online delivery platforms such as Grubhub, Uber Eats and DoorDash offer access to restaurants’ menus via a single online portal. Customers then order directly from the app and cooked meals are delivered typically within 60 minutes by the restaurant, third party ~~vendors~~delivery service or the app platform itself. During the delivery, cooked meals lose heat, which can decrease the enjoyment of the meal or require reheating.

The prepared, heat-to-eat providers in the meal delivery segment (in which Home Bistro operates) ship fresh and fresh-frozen, fully cooked meals direct-to-consumer. On average, these meals require heating for only three to ~~outsource~~five minutes using a microwave of sous vide machine. The experience is extremely convenient, requires very little cleanup and ~~purchase raw materials~~delivers a gourmet meal prepared by a professional chef. Consumers can order one meal or several meals, which can be stored and heated when desired.

Until mid-2020, the Company used third-party co-packers to cooks, packages, fulfill and ship its meals to its customers. In June, Home Bistro entered into a lease for commercial kitchen facilities, hired and trained professional chefs and implemented its own fulfillment operations. By managing its own food production and fulfillment, Home Bistro expects to be able to improve its competitive position, while expanding its gross profit and operating margins. It will provide the Company with significantly greater flexibility to create and introduce new menu items, including the expansion of its Celebrity Chef Program, and react to dynamics of a developing marketplace.

Orders for restaurant quality meats and seafood through the Company’s Prime Chop and Colorado Prime brands continue to be processed through a third-party co-packer based in North Carolina who fulfills and ships customer orders.

In the direct-to-consumer prepared meal home delivery market segment, our competition is extensive and includes larger more established companies such as Jenny Craig, WW International and Nutrisystem which have significantly greater financial, technical, sales and marketing resources than the Company, as well as ~~contract manufactures (co-packers)~~numerous smaller independent providers. We believe, however, there is considerable room for additional competitors offering modestly priced, high quality offerings, as the direct-to-consumer segment of the home delivery market for food continues to expand. In addition, we believe the competition for consumers seeking ready-made gourmet meals (such as Home Bistro) is less intensive than other niches such as weight loss, high protein, keto, or paleo.

In the direct-to-consumer, high quality meats and seafood market segment, our competition is extensive and includes larger more established companies such as Omaha Steaks, Kansas City Steak Company and Snake River Farms which have significantly greater financial, technical, sales and marketing resources than the Company, as well as Butcher Block, D’Artagnan and Crowd Cow. We believe, however, there is considerable room for additional competitors offering modestly priced, high quality offerings, as the direct-to-consumer segment of the home delivery market for food continues to expand.

Home Bistro’s online competition consists primarily of national and local service providers, point-of-sale module vendors that serve some independent restaurants who have their own standalone websites and the online interfaces of restaurants that also offer takeout. The Company also competes for diners with online competitors on the basis of convenience, control, and customer care. For restaurants, Home Bistro competes with other online platforms based on its ~~products. Our co-packer is independently owned~~ability to generate additional orders, manage challenges such as customization, change orders, menu updates and ~~operated~~specials and ~~function as a third party manufacturing partner in order fulfill~~ the ~~inventory needs of Gratitude’s RTD brands. Our co-packer is located in the northeastern United States, and currently we use one co-packer.~~ability to help them improve their operational efficiency.

Gratitude’s RD&P (Research, Development and Philanthropy) is working with a number of institutions to develop, license and/or acquire valid and proven intellectual property that fights cancer and promotes healthy aging. To that end, Gratitude has solely licensed patented technology from a prominent U.S. university research foundation for their patent (U.S. Patent #: 6,713,605) for the use of tea polyphenol esters for cancer prevention and treatment. The patented invention relates to novel polyphenol esters derived from green teas, which are potent inhibitors of the growth of cancerous cells, and their use in the prevention and treatment of conditions characterized by abnormal cellular proliferation. Gratitude will fund our charities from our sales and, in addition to giving away product to those who cannot afford them, we will contribute to university and institutional research studies that focus on chemo-protection, healthy aging, phytochemical superfoods and clean nutrition.

We are subject to labor and employment laws, import and trade restrictions laws, laws governing advertising, privacy and data security laws, safety regulations and other laws, including consumer protection regulations that apply to retailers and/or the promotion and sale of merchandise and the operation of stores and warehouse facilities. In the United States, we are subject to the regulatory authority of, among other agencies, the Federal Trade Commission (“FTC”) and U.S. Food and Drug Administration (“FDA”). We will employ a number of external resources to assist us in complying with our regulatory obligations. These external resources will include outside technology providers and consultants. As we expand our business, we will be required to raise additional capital to cover the expected increase in costs to hire and train additional internal and external resources to ensure we remain in substantial compliance with our governmental obligations. We monitor changes in these laws and believe that we are in material compliance with applicable laws.

In January 2018, we entered into a Standard Exclusive License Agreement (the “License Agreement”) whereby the licensor agreed to grant exclusive license to us for licensed patent owned or controlled by licensor. The licensed patent is related to tea polyphenols esters and analogs for cancer prevention and treatment. The term of this license shall begin on the effective date of this License Agreement and continue until the later of the date that no licensed patent remains a pending application or an enforceable patent, or the date on which Company’s obligation to pay royalties expires pursuant to the License Agreement. If the Company has not pursued a market or territory respecting the licensed patents within one year of the date of execution of this License Agreement and Licensor has received notice that a third party wishes to negotiate a license for such market or territory, Licensor may terminate the license granted in with respect to such market or territory upon sixty (60) days written notice to Licensee. See Note 9 to the consolidated financial statements included elsewhere in this report.

including Trademark serial ~~number 87943839, “Gratitude®”~~numbers 86636971 and 86636968.

As of December 31, ~~2018, we have four~~2020, Home Bistro had 5 full-time ~~and one part-time~~ employees. None of these employees are represented by collective bargaining agreements and the Company considers it relations with its employees to be good.

We were incorporated in the State of Nevada on December 17, 2009. Effective March 23, 2018, the Company changed its legal name to Gratitude Health, Inc. from Vapir Enterprises Inc. On March 26, 2018, the Company merged with Gratitude Health Inc. (“Gratitude Subsidiary”), a private company incorporated in Florida on September 14, 2017, in a transaction treated as a reverse acquisition and recapitalization effected by a share exchange. The consolidated financial statements are those of Gratitude Subsidiary (the accounting acquirer) prior to the merger and include the activity of the Company (the legal acquirer) from the date of the merger. Our former business was focused on inventing, developing and producing aromatherapy devices and vaporizers before the merger. We are now engaged in manufacturing, selling and marketing functional RTD (Ready to Drink) beverages sold under the Company’s trademark.

~~Recent developments- Acquisition~~

On March 26, 2018 (“Closing Date”), Gratitude Subsidiary, a private Florida corporation, entered into a Share Exchange Agreement (the “Exchange Agreement”) with the Company, Hamid Emarlou, the principal shareholder of the Company (“Acquiror Principal Shareholder”), and all of the principal shareholders of Gratitude Subsidiary. Upon closing of the transactions contemplated under the Exchange Agreement (the “Merger”), Gratitude Subsidiary became a wholly-owned subsidiary of the Company.

On March 26, 2018, the Company closed the Merger with Gratitude Subsidiary. The Merger has constituted a change in control, the majority of the Board of Directors changed with the consummation of the Merger. The Company issued to the stockholders of Gratitude Subsidiary shares of preferred stock which represented approximately 86% of the combined company on a fully converted basis after the closing of the Exchange Agreement and the Spin off Agreement as described below.

On the Closing Date, Acquiror Principal Shareholder entered into a Spin Off Agreement with the Company for the sale of the existing wholly owned Vapir, Inc. subsidiary of the Company in exchange for Acquiror Principal Shareholder’s 36,309,768 shares of Common Stock. The Spin Off Agreement closed on April 14, 2018. The Company recognized the disposition of the Vapir business on the date of merger.

~~Item 1A.~~

~~Risk Factors~~

~~We are a small public company and we face ever-increasing challenges in fulfilling the ever-rising costs of regulatory compliance under our federal, state, and other laws.~~ITEM 1A. RISK FACTORS

~~As a small company we have limited financial resources and we face compliance and regulatory costs that are increasing yearly. While we believe that~~In the execution of our business ~~strategies~~strategy, our operations and financial condition are ~~sound, we cannot assure~~subject to certain risks. A summary of certain material risks is provided below, and you ~~that we will~~should take such risks into account in evaluating any investment decision involving the Company. This section does not ~~incur such costs~~describe all risks applicable to us and have the ability to pass these increased costs onto our customers. As a result, we may incur significant operating losses and negative cash flow for the foreseeable future with resulting adverse impact on our continued existenceis intended only as a ~~corporation.~~summary of certain material factors that could impact our operations in the industries in which we operate. Other sections of this report contain additional information concerning these and other risks.

We incurred significant losses in 2018 and our cash flow is limited and volatile with the result that we face constant financial challenges in meeting our monthly operating and other financial obligations.Risks Relating to Our Business Generally

We incurred significant losses in 2018 and we cannot assure you that we will achieve profitability or if we do achieve it that we can sustain any profitability in the future. Further and as a small company, our cash flow is limited and we do not have a diversified customer base with diversified customers and markets compared to larger companies. As a result, our monthly cash flow is limited and more volatile than other larger companies. For this reason we are exposed to greater financial risks and persons who acquire our common stock could lose all or substantially all of their investment.

~~Continuing and increasing losses may directly impact our ability to remain in business.~~

We incurred approximately $1,019,000 in net losses for the year ended December 31, 2018, and we anticipate these losses continuing in 2019. While we believe that if circumstances and market conditions allow, we may be able to achieve profitability, there can be no assurance that we will be successful in these efforts or if we are successful, that we can sustain any profitability. If are not successful in achieving and sustaining profitability and positive cash flow, then persons who acquire our common stock could lose all or substantially all of their investment.

~~Limited trading market and limited and sporadic trading of our Common Stock.~~

The trading market for our Common Stock is limited and any holder of our Common Stock will likely find it difficult to sell their shares in any large amount without incurring protracted delays and difficulty and without a significant reduction in the market price of the overall trading market for our Common Stock. The trading market for our Common Stock is limited and sporadic and there can be no assurance that any liquid trading market will develop or if it does develop that it can be sustained. As a result, any purchase of our Common Stock or any conversion of any debt instrument that is convertible into our Common Stock should only be considered by those who can afford to own a relatively illiquid investment and the likelihood that they may incur the total loss of their investment.

There is substantial doubt about our ability to continue as a going concern.

We had had net ~~loss of approximately $1,019,000~~losses $1,241,661 and ~~$96,000~~$199,061 for the years ended December 31, ~~2018~~2020 and ~~2017,~~2019, respectively. The net cash used in operations ~~were~~was approximately ~~$759,000~~$273,817 and ~~$71,000~~$30,244 for the years ended December 31, ~~2018~~2020 and ~~2017,~~2019, respectively. Additionally, the Company had an accumulated deficit of approximately ~~$1,115,000 at~~$6,333,389 on December 31, ~~2018.~~2020. These conditions, among others, raise substantial doubt about our ability to continue as a going concern for a period of twelve months for the issuance date of this ~~report as described in Note 3 in our consolidated financial statements for the year ended December 31, 2018.~~report.

Management cannot provide assurance that we will ultimately achieve sufficient profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. The Company ~~will~~may seek to raise capital through additional debt and/or equity financings and generate sufficient revenues to fund its operations in the future.

~~Although management believes there is~~The Report of our Independent Registered Public Accountant firm issued in connection with our audited consolidated financial statement for the years ended December 31, 2020 and 2019 express substantial doubt about our ability to continue as a going ~~concern, they~~concern.

Our business strategy relating to the development and introduction of new products and services exposes us to risks such as limited customer and/or market acceptance and additional expenditures that may not result in additional net revenue.

An important component of our business strategy is to focus on new products and services that enable us to provide immediate value to our customers. Customer and/or market acceptance of these new products and services cannot be predicted with certainty, and if we fail to execute properly on this strategy or to adapt this strategy as market conditions evolve, our ability to grow revenue and our results of operations may be adversely affected. If we fail to successfully implement our business strategy, our financial performance and our growth could be materially and adversely affected.

If we fail to successfully implement our business strategy, our financial performance and our growth could be materially and adversely affected.

Our future financial performance and success are dependent in large part upon our ability to implement our business strategy successfully. Implementation of our strategy will require effective management of our operational, financial, and human resources and will place significant demands on those resources. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report for more information regarding our business strategy. There are risks involved in pursuing our strategy, including the ability to hire or retain the personnel necessary to manage our strategy effectively.

In addition to the risks set forth above, implementation of our business strategy could be affected by a number of factors beyond our control, such as increased competition, legal developments, government regulation, general economic conditions, increased operating costs or expenses, and changes in industry trends. We may decide to alter or discontinue certain aspects of our business strategy at any time. If we are not able to implement our business strategy successfully, our long-term growth and profitability may be adversely affected. Even if we are able to implement some or all of the initiatives of our business strategy successfully, our operating results may not improve to the extent we anticipate, or at all.

We may fail to realize the anticipated benefits and cost savings of the acquisition of Home Bistro, which could adversely affect the value of our common stock.

The ultimate success of the acquisition of Home Bistro will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the business of Home Bistro with our legacy business. Our ability to realize these anticipated benefits and cost savings is subject to certain risks including:

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our ability to successfully combine the business of Home Bistro with our legacy business, including with respect to the integration of our systems and technology;

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whether the combined businesses will perform as currently expected;

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the possibility that we paid more for Home Bistro than the value we will derive from the acquisition; and

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the assumption of known and unknown liabilities of Home Bistro.

If we are not able to successfully combine the business of Home Bistro with our legacy business within the anticipated time frame, or at all, the anticipated cost savings and other benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected, the combined businesses may not perform as expected, and the value of our common stock may be adversely affected.

We cannot provide assurances that Home Bistro’s business and our legacy business can be integrated successfully. It is possible that the integration process could result in the loss of key employees, the disruption of our ongoing businesses or in unexpected integration issues, higher than expected integration costs, and an overall integration process that takes longer than originally anticipated. In addition, at times, the attention of certain members of our management and resources may be focused on completion of the integration and diverted from day-to-day business operations, which may disrupt our ongoing business. We may experience difficulties associated with the implementation and/or integration of new businesses, services (including outsourced services), technologies, solutions, or products.

We may face difficulties, costs, and delays in effectively implementing and/or integrating acquired businesses, services (including outsourced services), technologies, solutions, or products into our business. Implementing internally developed solutions and products, and/or integrating newly acquired businesses, services (including outsourced services), and technologies could be time-consuming and may strain our resources. Consequently, we may not be successful in implementing and/or integrating these new businesses, services, technologies, solutions, or products and may not achieve anticipated revenue and cost benefits.

We may experience difficulties associated with the implementation and/or integration of new businesses, services (including outsourced services), technologies, solutions, or products.

Changes in macroeconomic conditions may adversely affect our business.

Economic difficulties and other macroeconomic conditions could reduce the demand and/or the timing of purchases for certain of our services from customers and potential customers. In addition, changes in economic conditions could create liquidity and credit constraints. We cannot assure you that we would be able to secure additional financing if needed and, if such funds were available, that the terms and conditions would be acceptable to us.

The effects of the outbreak of the novel coronavirus (“COVID-19”) have negatively affected the global economy, the United States economy, and the global financial markets, and may disrupt our operations and our clients’ and counterparties’ operations, which could have an adverse effect on our business, financial condition and results of operations.

The effects of the outbreak of the novel coronavirus have negatively affected the global economy, the United States economy, and the global financial markets, and may disrupt our operations and our clients’ and counterparties’ operations, which could have an adverse effect on our business, financial condition and results of operations.

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Our employees contracting COVID-19;

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Reductions in our operating effectiveness as our employees work from home or disaster-recovery locations;

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Unavailability of key personnel necessary to conduct our business activities;

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Unprecedented volatility in global financial markets;

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Reductions in revenue across our operating businesses;

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Closure of our offices or the offices of our clients; and

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De-globalization.

Furthermore, the Company has been following the recommendations of local health authorities to minimize exposure risk for its employees for the past several weeks, including the temporary closures of its offices and having employees work remotely to the extent possible, which has to an extent adversely affected their efficiency. In addition, the cancellation of in-person meetings and conferences has had an adverse impact on the Company’s business and financial condition and has hampered the Company’s ability to meet with customers to promote products, generate revenue and access usual sources of liquidity on reasonable terms, which in turn has negatively impacted the Company’s cash flow and its ability to pay for certain professional services.

The COVID-19 pandemic also has the potential to significantly impact our Home Bistro segment’s supply chain, food manufacturers, distribution centers, or logistics and other service providers. Additionally, our service providers and their operations may be disrupted, temporarily closed or experience worker or meat or other food shortages, which could result in additional disruptions or delays in shipments of our Home Bistro segment’s products.

We are still assessing our business operations and system supports and the impact COVID-19 may have on our results and financial condition, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sectors in particular. To date, the Company has been able to avoid layoffs and furloughs of employees.

As the situation continues to evolve, the Company will continue to closely monitor market conditions and respond accordingly.

The further spread of the COVID-19 outbreak may materially disrupt banking and other financial activity generally and in the areas in which we operate. This would likely result in a decline in demand for our products and services, which would negatively impact our liquidity position and our business strategies. Any one or more of these developments could have a material adverse effect on our and our consolidated subsidiaries’ business, operations, consolidated financial condition, and consolidated results of operations.

A failure of our information technology or systems could adversely affect our business.

Our ability to deliver our products and services depends on effectively using information technology. We rely upon our information technology and systems, employees, and third parties for operating and monitoring all major aspects of our business. These technologies and systems and, therefore, our operations could be damaged or interrupted by natural disasters, power loss, network failure, improper operation by our employees, data privacy or security breaches, computer viruses, computer hacking, network penetration or other illegal intrusions or other unexpected events. Any disruption in the operation of our information technology or systems, regardless of the cause, could adversely impact our operations, which may adversely affect our financial condition, results of operations and cash flows.

A cybersecurity incident could result in the loss of confidential data, give rise to remediation and other expenses, expose us to liability under consumer protection laws, common law theories or other laws, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.

The nature of our business involves the receipt, storage and use of personal data about our customers, as well as employees. Additionally, we rely upon third parties that are not directly under our control to store and use portions of that personal data as well. The secure maintenance of this and other confidential information or other proprietary information is critical to our business operations. To protect our information systems from attack, damage, and unauthorized use, we have implemented multiple layers of security, including technical safeguards, processes, and our people. Our defenses are monitored and routinely tested internally and by external parties. Despite these efforts, threats from malicious persons and groups, new vulnerabilities, technology failures, and advanced attacks against information systems create risk of cybersecurity incidents. We cannot provide assurance that we or our third-party vendors or other service providers will not be subject to cybersecurity incidents, which may result in unauthorized access by third parties, loss, misappropriation, disclosure or corruption of customer, employee, or our information; or other data subject to privacy laws. Such cybersecurity incidents or delays in responding to or remedying damage caused by such incidents may lead to a disruption in our systems or business, costs to modify, enhance, or remediate our cybersecurity measures, liability under privacy, security and consumer protection laws or litigation under these or other laws, including common law theories, and subject us to enforcement actions, fines, regulatory proceedings or litigation against us, damage to our business reputation, a reduction in participation and sales of our products and services, and legal obligations to notify customers or other affected individuals about an incident, which could cause us to incur substantial costs and negative publicity, any of which could have a material adverse effect on our financial condition and results of operations and harm our business reputation.

As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices remain a priority for us. We may be required to expend significant additional resources in our efforts to modify or enhance our protective measures against evolving threats or to investigate and remediate any cybersecurity vulnerabilities.

Our business is subject to changing privacy and security laws, rules, and regulations, including the Payment Card Industry Data Security Standards, the Telephone Consumer Protection Act and other state privacy regulations, which impact our operating costs and for which failure to adhere could negatively impact our business.

Our business is subject to various privacy and data security laws, regulations, and codes of conduct that apply to our various business units (e.g., Payment Card Industry Data Security Standards and Telephone Consumer Protection Act (“TCPA”)). These laws and regulations may be inconsistent across jurisdictions and are subject to evolving and differing (sometimes conflicting) interpretations. While we are using internal and external resources to monitor compliance with and to continue to modify our data processing practices and policies in order to comply with evolving privacy laws, relevant regulatory authorities could determine that our data handling practices fail to address all the requirements of certain new laws, which could subject us to penalties and/or litigation. Government regulators, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. This increased scrutiny may result in new interpretations of existing laws as well as new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions, thereby further impacting our business. For example, the California Consumer Privacy Act of 2018 (“CCPA”), went into effect on January 1, 2020, and it applies broadly to information that identifies or is associated with any California household or individual, and compliance with the new law requires that we implement several operational changes, including processes to respond to individuals’ data access and deletion requests. Failure to comply with the CCPA may result in attorney general enforcement action and damage to our reputation. The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. We may also be exposed to litigation, regulatory fines, penalties or other sanctions if the personal, confidential or proprietary information of our customers is mishandled or misused by any of our suppliers, counterparties or other third parties, or if such third parties do not ~~reflect~~have appropriate controls in place to protect such personal, confidential or proprietary information. Additionally, the Federal Trade Commission (“FTC”) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the collection, use, dissemination, and security of data. The obligations imposed by the CCPA and other similar laws that may be enacted at the federal and state level may require us to modify our business practices and policies and to incur substantial expenditures in order to comply.

We depend on our management team.

The Company’s future success primarily depends on the efforts of the existing management team, particularly, Zalmi Duchman, our Chief Executive Officer. Loss of the services of Mr. Duchman could materially and adversely affect the Company’s business prospects. We do not carry “key-man” life insurance on the lives of any ~~adjustments~~of our employees or advisors. As sufficient funds become available, the Company intends to hire additional qualified personnel. Significant competition exists for such personnel and, accordingly, our compensation costs may increase significantly. The Company believes it will be able to recruit and retain personnel with the skills required for present needs and future growth but cannot assure it will be successful in those efforts.

In order to be successful, we must attract, engage, retain, and integrate key employees and have adequate succession plans in place, and failure to do so could have an adverse effect on our ability to manage our business.

Our success depends, in large part, on our ability to attract, engage, retain, and integrate qualified executives and other key employees throughout all areas of our business. Identifying, developing internally, or hiring externally, training and retaining highly skilled managerial and other personnel are critical to our future, and competition for experienced employees can be intense. Failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations. The loss of services of any key personnel, the inability to retain and attract qualified personnel in the future, or delays in hiring may harm our business and results of operations. Further, changes in our management team may be disruptive to our business, and any failure to successfully integrate key newly hired employees could adversely affect our business and results of operations.

We face competition for staffing, which may increase our labor costs and reduce profitability.

We compete with other food and beverage services providers in recruiting qualified management, including executives with the required skills and experience to operate and grow our business, and staff personnel for the day-to-day operations of our business. These challenges may require us to enhance wages and benefits to recruit and retain qualified management and other professionals. Difficulties in attracting and retaining qualified management and other professionals, or in controlling labor costs, could have a material adverse effect on our profitability.

We are or may become a party to litigation that could potentially force us to pay significant damages and/or harm our reputation.

We could be subject to certain legal proceedings, which potentially involve large claims and significant defense costs (see “Legal Proceedings”). These legal proceedings and any other claims that we may face in the future, whether with or without merit, could result in costly litigation, and divert the time, attention, and resources of our management. The coverage limits of our insurance policies may not be adequate to cover all such claims and some claims may not be covered by insurance. Additionally, insurance coverage with respect to some claims against us or our directors and officers may not be available on terms that would be favorable to us, or the cost of such coverage could increase in the future. Further, although we believe that we have conducted our operations in compliance with applicable statutory and contractual requirements and that we have meritorious defenses to outstanding claims, it is possible that resolution of these legal matters could have a material adverse effect on our results of operations. In addition, legal expenses associated with the defense of these matters may be material to our results of operations in a particular financial reporting period.

Third parties may infringe on our brands, trademarks, and other intellectual property rights, which may have an adverse impact on our business.

We currently rely on a combination of trademark and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights, including our brands. If we fail to successfully enforce our intellectual property rights, the value of our brands, services and products could be diminished and our business may suffer. Our precautions may not prevent misappropriation of our intellectual property. Any legal action that we may bring to protect our brands and other intellectual property could be unsuccessful and expensive and could divert management’s attention from other business concerns. In addition, legal standards relating to the validity, enforceability, and scope of protection of intellectual property, especially in Internet-related businesses, are uncertain and evolving. We cannot assure you that these evolving legal standards will sufficiently protect our intellectual property rights in the future.

We may be subject to intellectual property rights claims.

Third parties may make claims against us alleging infringement of their intellectual property rights. Any intellectual property claims, regardless of merit, could be time-consuming and expensive to litigate or settle and could significantly divert management’s attention from other business concerns. In addition, if we were unable to successfully defend against such claims, we may have to pay damages, stop selling the service or product or stop using the software, technology or content found to be in violation of a third party’s rights, seek a license for the infringing service, product, software, technology, or content or develop alternative non-infringing services, products, software, technology or content. If we cannot license on reasonable terms, develop alternatives, or stop using the service, product, software, technology or content for any infringing aspects of our business, we may be forced to limit our service and product offerings. Any of these results could reduce our revenue and our ability to compete effectively, increase our costs or harm our business.

Damage to our reputation could harm our business, including our competitive position and business prospects.

Our ability to attract and retain customers and employees is impacted by our reputation. Harm to our reputation can arise from various sources, including employee misconduct, cyber security breaches, unethical behavior, litigation, or regulatory outcomes, which could, among other consequences, increase the size and number of litigations claims and damages asserted or subject us to enforcement actions, fines and penalties and cause us to incur related costs and expenses.

We rely on third parties to provide us with adequate food supply, freight and fulfillment and Internet and networking services, the loss or disruption of any of which could cause our revenue, earnings, or reputation to suffer.

We rely on third-party manufacturers to supply all of the food and other products we sell as well as packaging materials. If we are unable to obtain sufficient quantity, quality and variety of food, other products, and packaging materials in a timely and low-cost manner from our manufacturers, we will be unable to fulfill our customers’ orders in a timely manner, which may cause us to lose revenue and market share or incur higher costs, as well as damage the value of our brands.

Currently, all of our Home Bistro order fulfillment is handled by one third-party provider. Also, almost all of our direct-to-consumer Home Bistro customer orders are shipped by one third-party provider and almost all of our orders for Home Bistro retail programs are shipped by another third-party provider. Should these providers be unable to service our needs for even a short duration, our revenue and business could be adversely affected. Additionally, the cost and time associated with replacing these providers on short notice would add to our costs. Any replacement fulfillment provider would also require startup time, which could cause us to lose sales and market share.

Our business also depends on a number of third parties for Internet access and networking, and we have limited control over these third parties. Should our network connections go down, our ability to fulfill orders would be delayed. Further, if our websites or call center become unavailable for a noticeable period of time due to Internet or communication failures, our business could be adversely affected, including harm to our brands and loss of sales.

Therefore, we are dependent on these third parties. The services we require from these parties may be disrupted by a number of factors, including the following:

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labor disruptions;

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delivery problems;

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financial condition or results of operations;

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internal inefficiencies;

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equipment failure;

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severe weather;

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fire;

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natural or man-made disasters; and

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with respect to our food suppliers, shortages of ingredients or United States Department of Agriculture (“USDA”) or United States Food and Drug Administration (“FDA”) compliance issues.

Further, if a regional or global health epidemic or pandemic occurs, such as COVID-19, depending upon its location, duration and severity, our business could be severely affected. A regional or global health epidemic or pandemic might also adversely affect our business by disrupting the operations of our call center, creating negative popular sentiment among consumers of delivered food, or by disrupting or delaying our third-party providers’ ability to, among other things (i) supply the products that we sell, as well as packaging materials, (ii) fulfill segment customer orders and (iii) provide internet and networking services.

Our industries are highly competitive. If any of our competitors or a new entrant into the market with significant resources has products similar to ours, our business could be significantly affected.

Competition is intense in the meal delivery services industry and the beverage industry and we must remain competitive in the areas of program efficacy, price, taste, customer service and brand recognition. Some of our competitors are significantly larger than we are and have substantially greater resources. Our business could be adversely affected if someone with significant resources decided to imitate our services or products. Any increased competition from new entrants into our segments’ industry or any increased success by existing competition could result in reductions in our sales or prices, or both, which could have an adverse effect on our business and results of operations.

If we do not continue to receive referrals from existing Home Bistro segment customers, our Home Bistro segment’s customer acquisition cost may increase.

We rely on word-of-mouth advertising for a portion of our new Home Bistro segment customers. If our brands suffer or the number of customers acquired through referrals drops due to other circumstances, our costs associated with acquiring new Home Bistro segment customers and generating revenue will increase, which will, in turn, have an adverse effect on our profitability.

Changes in customer preferences could negatively impact our operating results.

Our Home Bistro segment programs feature gourmet online meal delivery service selections, which we believe offer convenience and value to our customers. Our continued success depends, to a large degree, upon the continued popularity of our Home Bistro segment programs versus various other food services. Changes in customer tastes and preferences away from our ready-to-go food, and any failure to provide innovative responses to these changes, may have a materially adverse impact on our business, financial condition, operating results, and cash flows.

Our success is also dependent on our food innovation including maintaining a robust array of food items and improving the quality of existing items. If we do not continually expand our food items or provide customers with items that are desirable in taste and quality, our business could be adversely impacted.

The industry in which our Home Bistro segment operates is subject to governmental regulation that could increase in severity and hurt results of operations.

The industry in which our Home Bistro segment operates is subject to federal, state, and other governmental regulation. Certain federal and state agencies, such as the FTC, regulate and enforce such laws relating to advertising, disclosures to customers, privacy, customer pricing and billing arrangements and other customer protection matters. A determination by a federal or state agency, or a court, that any of our practices do not meet existing or new laws or regulations could result in liability, adverse publicity, and restrictions on our business operations.

Other aspects of the industry in which our Home Bistro segment operates are also subject to government regulation. For example, the manufacturing, labeling and distribution of food products are subject to strict USDA and FDA requirements and food manufacturers are subject to rigorous inspection and other requirements of the USDA and FDA, and companies operating in foreign markets must comply with those countries’ requirements for proper labeling, controls on hygiene, food preparation and other matters. Additionally, remedies available in any potential administrative or regulatory actions may include product recalls and requiring us to refund amounts paid by all affected customers or pay other damages, which could be substantial.

Laws and regulations directly applicable to communications, operations, or commerce over the Internet such as those governing intellectual property, privacy, libel and taxation, are becoming more prevalent and some remain unsettled. If we are required to comply with new laws or regulations or new interpretations of existing laws or regulations, or if we are unable to ~~continue~~comply with these laws, regulations or interpretations, our business could be adversely affected.

Future laws or regulations, including laws or regulations affecting our marketing and advertising practices, relations with customers, employees, service providers, or our services and products, may have an adverse impact on us.

The sale of ingested products involves product liability and other risks.

Like other distributors of products that are ingested, we face an inherent risk of exposure to product liability claims if the use of our products results in illness or injury. The foods that we resell in the U.S. are subject to laws and regulations, including those administered by the USDA and FDA that establish manufacturing practices and quality standards for food products. Product liability claims could have a material adverse effect on our business as existing insurance coverage may not be adequate. The successful assertion or settlement of an uninsured claim, a significant number of insured claims or a claim exceeding the limits of our insurance coverage would harm us by adding costs to the business and by diverting the attention of senior management from the operation of our business. We may also be subject to claims that our Home Bistro segment products contain contaminants, are improperly labeled, include inadequate instructions as to use or inadequate warnings covering interactions with other substances. Product liability litigation, even if not meritorious, is very expensive and could also entail adverse publicity for us and adversely affect our results of operations. In addition, the products we distribute, or certain components of those products, may be subject to product recalls or other deficiencies. Any negative publicity associated with these actions would adversely affect our brands and may result in decreased product sales and, as a result, lower revenue, and profits.

Risks Related to an Investment in Our ~~consolidated~~Common Stock

There is currently a limited public market for our common stock, a trading market for our common stock may never develop, and our common stock prices may be volatile and could decline substantially.

Although our common stock is quoted on OTC Markets, OTCQB tier of OTC Markets Group Inc., an over-the-counter quotation system, under the symbol “GRTD,” there has been no material public market for our common stock. In these marketplaces, our stockholders may find it difficult to obtain accurate quotations as to the market value of their shares of our common stock and may find few buyers to purchase their stock and few market makers to support its price. As a result of these and other factors, investors may be unable to resell shares of our common stock at or above the price for which they purchased them, at or near quoted bid prices, or at all. Further, an inactive market may also impair our ability to raise capital by selling additional equity in the future and may impair our ability to enter into strategic partnerships or acquire companies or products by using shares of our common stock as consideration.

Moreover, there can be no assurance that any stockholders will sell any or all of their shares of common stock and there may initially be a lack of supply of, or demand for, our common stock. In the case of a lack of supply for our common stock, the trading price of our common stock may rise to an unsustainable level, particularly in instances where institutional investors may be discouraged from purchasing our common stock because they are unable to purchase a block of shares in the open market due to a potential unwillingness of our stockholders to sell the amount of shares at the price offered by such investors and the greater influence individual investors have in setting the trading price. In the case of a lack of demand for our common stock, the trading price of our common stock could decline significantly and rapidly at any time.

We intend to list shares of our common stock on a national securities exchange in the future, but we do not now, and may not in the future, meet the initial listing standards of any national securities exchange, which is often a more widely traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our common stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our common stock may not be sufficiently widely held; we may not be able to secure market makers for our common stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our common stock listed. Should we fail to satisfy the initial listing standards of the national exchanges, or our common stock is otherwise rejected for listing, and remains listed on the OTC Markets or is suspended from the OTC Markets, the trading price of our common stock could suffer and the trading market for our common stock may be less liquid and our common stock price may be subject to increased volatility.

Therefore, an active, liquid, and orderly trading market for our common stock may not initially develop or be sustained, which could significantly depress the public price of our common stock and/or result in significant volatility, which could affect your ability to sell your common stock. Even if an active trading market develops for our common stock, the market price of our common stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our common stock.

Our CEO has significant voting power and may take actions that may not be in the best interests of our other stockholders.

Stockholders have limited ability to exercise control over the Company’s daily business affairs and implement changes in its policies because management beneficially owns a majority of the current shares of Common Stock. As of April 20, 2020, the Company’s Chief Executive Officer, Mr. Zalmi Duchman beneficially owns 50.7% of the Common Stock. As directors and officers of the Company, the Company’s management team has a fiduciary duty to the Company and must act in good faith in the manner it reasonably believes to be in the best interest of the members. As stockholders, the management team is entitled to vote its shares in its own interest, which may not always be in the best interest of the stockholders.

We are not subject to the rules of a national securities exchange requiring the adoption of certain corporate governance measures and, as a result, our stockholders do not have the same protections.

We are quoted on the OTCQB marketplace and are not subject to the rules of a national securities exchange, such as the New York Stock Exchange or the Nasdaq Stock Market. National securities exchanges generally require more rigorous measures relating to corporate governance designed to enhance the integrity of corporate management. The requirements of the OTCQB afford our stockholders fewer corporate governance protections than those of a national securities exchange. Until we comply with such greater corporate governance measures, regardless of whether such compliance is required, our stockholders will have fewer protections such as those related to director independence, stockholder approval rights and governance measures designed to provide board oversight of management.

We do not have a class of our securities registered under Section 12 of the Exchange Act. Until we do, or we become subject to Section 15(d) of the Exchange Act, we will be a “voluntary filer.”

We are not currently required under Section 13 or Section 15(d) of the Exchange Act to file periodic reports with the SEC. We have in the past voluntarily elected to file some or all of these reports to ensure that sufficient information about us and our operations is publicly available to our stockholders and potential investors. Until we become subject to the reporting requirements under the Exchange Act, we are a “voluntary filer”, and we are currently considered a non-reporting issuer under the Exchange Act. We will not be required to file reports under Section 13(a) or 15(d) of the Exchange Act until the earlier to occur of: (i) our registration of a class of securities under Section 12 of the Exchange Act, which would be required if we list a class of securities on a national securities exchange or if we meet the size requirements set forth in Section 12(g) of the Exchange Act, or which we may voluntarily elect to undertake at an earlier date; or (ii) the effectiveness of a registration statement under the Securities Act relating to our common stock. Until we become subject to the reporting requirements under either Section 13(a) or 15(d) of the Exchange Act, we are not subject to the SEC’s proxy rules, and large holders of our capital stock will not be subject to beneficial ownership reporting requirements under Sections 13 or 16 of the Exchange Act and their related rules. As a result, our stockholders and potential investors may not have available to them as much or as robust information as they may have if and when we become subject to those requirements. In addition, if we do not register under Section 12 of the Exchange Act, and remain a “voluntary filer”, we could cease filing annual, quarterly, or current reports under the Exchange Act.

If our common stock becomes subject to the “penny stock” rules, it could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

The SEC has adopted Rule 3a51-1, which establishes the definition of a “penny stock” as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If the price if our common stock is less than $5.00, our common stock will be deemed a penny stock. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires that a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Our common stock prices may be volatile which could cause the value of an investment in our common stock to decline.

The market price of our common stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our common stock. The public price of our common stock may be subject to wide fluctuations in response to the risk factors described in this Annual Report and others beyond our control, including:

●

the number of shares of our common stock publicly owned and available for trading;

●

actual or anticipated quarterly variations in our results of operations or those of our competitors;

●

our actual or anticipated operating performance and the operating performance of similar companies in our industry;

●

our announcements or our competitors’ announcements regarding, significant contracts, acquisitions, or strategic investments;

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general economic conditions and their impact on the food and beverage markets;

●

the overall performance of the equity markets;

●

threatened or actual litigation;

●

changes in laws or regulations relating to our industry;

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any major change in our board of directors or management;

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publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts; and

●

sales or expected sales of shares of our common stock by us, and our officers, directors, and significant stockholders.

In addition, the stock market in general has experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to the operating performance of those companies. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our business, operating results, and financial condition.

Because we are a “smaller reporting company,” we will not be required to comply with certain disclosure requirements that are applicable to other public companies and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.

We are a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K. As a smaller reporting company, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies, including, but not limited to:

●

Reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements;

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Not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002; and

●

Reduced disclosure obligations for our annual and quarterly reports, proxy statements and registration statements.

We will remain a smaller reporting company until the end of the fiscal year in which (1) we have a public common equity float of more than $250 million, or (2) we have annual revenues for the most recently completed fiscal year of more than $100 million plus we have any public common equity float or public float of more than $700 million. We also would not be eligible for status as smaller reporting company if we become an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent company that is not a smaller reporting company.

We do not expect to pay any cash dividends to the holders of the common stock in the foreseeable future and the availability and timing of future cash dividends, if any, is uncertain.

We expect to use cash flow from future operations to support the growth of our business and do not expect to declare or pay any cash dividends on our common stock in the foreseeable future. Our board of directors will determine the amount and timing of stockholder dividends, if any, that we may pay in future periods. In making this determination, our directors will consider all relevant factors, including the amount of cash available for dividends, capital expenditures, covenants, prohibitions, or limitations with respect to dividends, applicable law, general operational requirements and other variables. We cannot predict the amount or timing of any future dividends you may receive, and if we do commence the payment of dividends, we may be unable to pay, maintain or increase dividends over time. Therefore, you may not be able to realize any return on your investment in our common stock for an extended period of time, if at all.

Future sales of our common stock, or the perception that such sales may occur, may depress our share price, and any additional capital through the sale of equity or convertible securities may dilute your ownership in us.

We may in the future issue our previously authorized and unissued securities. We are authorized to issue 1,000,000,000 shares of common stock and 20,000,000 shares of preferred stock with such designations, preferences, and rights as determined by our board of directors. The potential issuance of such additional shares of common stock will result in the dilution of the ownership interests of the holders of our common stock and may create downward pressure on the trading price, if any, of our common stock.

In connection with the Exchange Agreement and the Merger Agreement, the Company agreed to issue to certain stockholders a warrant to purchase shares of Common Stock.

The exercise, conversion, or exchange of convertible securities, including for other securities, will dilute the percentage ownership of our stockholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to exercise or convert such securities at a time when we would be able to obtain additional equity capital on terms more favorable than such securities or when our common stock is trading at a price higher than the exercise or conversion price of the securities. The exercise or conversion of outstanding securities will have a dilutive effect on the securities held by our stockholders. We have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other stockholders not participating in such exchange.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

Our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations, and relative rights, including preferences over our common stock with respect to dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events, or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might grant to holders of preferred stock could affect the value of the common stock.

We will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we incur significant legal, accounting, and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC, impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly, particularly after we are no longer a smaller reporting company. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.

Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

We will continue to incur significant costs in staying current with reporting requirements. Our management will be required to devote substantial time to compliance initiatives. Additionally, the lack of an internal audit group may result in material misstatements to our financial statements ~~contain additional note disclosure describing the circumstances that lead~~and ability to ~~this disclosure.~~provide accurate financial information to our stockholders.

Our management and other personnel will need to devote a substantial amount of time to compliance initiatives to maintain reporting status. Moreover, these rules and regulations, which are necessary to remain as a public reporting company, will be costly because external third-party consultant(s), attorneys, or other firms may have to assist us in following the applicable rules and regulations for each filing on behalf of the Company.

We currently do not have an internal audit group, and we may eventually need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to have effective internal controls for financial reporting. Additionally, due to the fact that our officers and directors have limited experience as an officer or director of a reporting company, such lack of experience may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate financial information to our stockholders.

Moreover, if we are not able to comply with the requirements or regulations as a public reporting company in any regard, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Many of our officers and directors lack significant experience in, and with, the reporting and disclosure obligations of publicly traded companies in the United States.

Many of our officers and directors lack significant experience in, and with the reporting and disclosure obligations of publicly traded companies, and with serving as an officer and or director of a publicly traded company. This lack of experience may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate financial information to our stockholders. Consequently, our operations, future earnings and ultimate financial success could suffer irreparable harm due to our officers’ and director’s ultimate lack of experience in our industry and with publicly traded companies and their reporting requirements in general.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

~~Item 2.~~

~~Properties~~

~~The Company’s~~ITEM 2. PROPERTIES

Subsequent to the Merger to acquire Home Bistro Holdings, the Company moved its corporate headquarters ~~is located in Florida at 11770~~from 11231 US Highway One, ~~suite E303,~~Suite 200, North Palm Beach, ~~Gardens,~~ FL ~~33408.~~33408 to 4014 Chase Avenue, #212, Miami Beach, FL 33140. Our telephone number, including area code, is ~~(561) 227-2727~~(631) 964-1111.

~~Item 3.~~

~~Legal Proceedings.~~

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation matters relating to claims arising from the ordinary course of business. While the results of such claims and legal actions cannot be predicted with certainty, the Company’s management does not believe that there are claims or actions, pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on our business, results of operations, financial condition, or cash flows.

~~Item 4.~~

~~Mine Safety Disclosure~~

ITEM 4. MINE SAFETY DISCLOSURES

Not ~~Applicable~~applicable.

PART II

~~Item 5.~~

~~Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is currently approved for quotation on the OTC Bulletin Board (OTCQB) maintained by the Financial Industry Regulatory Authority, Inc. under the symbol ~~“GRTD”~~“HBIS”. ~~There were no trades of our stock prior to April 6, 2015.~~ The table below sets forth the high and low closing price per share of our common stock for each quarter during ~~2017~~2020 and ~~2018.~~2019. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

Fiscal Quarter Ended High Low
31-Mar-17 $ 0.120 $ 0.010
30-Jun-17 $ 0.070 $ 0.0151
30-Sep-17 $ 0.035 $ 0.012
31-Dec-17 $ 0.110 $ 0.021
31-Mar-18 $ 0.785 $ 0.050
31-June-18 $ 0.1010 $ 0.050
31-Sep-18 $ 0.080 $ 0.0131
31-Dec-18 $ 0.150 $ 0.010

	High		Low
Fiscal Year 2020
First Quarter ended March 31, 2020	$	0.88	$	0.19
Second Quarter ended June 30, 2020	$	6.01	$	0.20
Third Quarter ended September 30, 2020	$	3.00	$	0.77
Fourth Quarter Ended December 31, 2020	$	1.52	$	0.76

Fiscal Year 2019
First Quarter ended March 31, 2019	$	3.52	$	0.81
Second Quarter ended June 30, 2019	$	2.81	$	0.96
Third Quarter ended September 30, 2019	$	1.53	$	0.61
Fourth Quarter Ended December 31, 2019	$	1.05	$	0.36

Holders of Common Stock

As of March ~~22, 2019,~~18, 2021, there were approximately 63111 record holders ~~of record~~ of our common ~~stock, and an indeterminate~~stock. The number of record holders does not include beneficial owners of ~~unrestricted shares.~~common stock whose shares are held in the names of banks, brokers, nominees, or other fiduciaries.

Dividends

We have not declared cash dividends on our common stock since our inception and we do not anticipate paying any cash dividends in the foreseeable future. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.

Recent Sales of Unregistered Securities

~~Except for provided below, all~~All unregistered sales of our securities during the ~~year~~quarter ended December 31, ~~2018,~~2020, were previously disclosed in a Quarterly Report on Form 10-Q.

●

During the three months ended December 31, 2018, the Company sold 1,500 shares of Series C Preferred, pursuant to a stock purchase agreement dated between October 2018 and December 2018, in exchange for consideration of $300,000 and the Company used the proceeds as working capital for its business operations.

The shares of common stock referenced herein were issued in reliance upon the exemption from securities registration afforded by the provisions of Section 4(a)(2) of the Securities Act of 1933, as amended (“Securities Act”).

Authorized Capital Stock

The authorized capital of the Company consists of ~~300,000,000~~1,000,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share.

817

~~Common Stock~~

The holders of common stock are entitled to one vote per share on all matters submitted to a vote of shareholders, including the election of directors. There is no right to cumulate votes in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the board of directors out of funds legally available for payment of dividends subject to the prior rights of holders of preferred stock and any contractual restrictions we have against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no preemptive rights and have no right to convert their common stock into any other securities.

~~Preferred stock~~

On March 19, 2018, the Company designated 520,000 shares of Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) Each share of Series A Preferred Stock is convertible into shares of the Company’s common stock with a stated value of $10 per share of Series A Preferred Stock and conversion price of $0.10 per share, subject to adjustment in the event of stock split, stock dividends, and recapitalization or otherwise. The holders of the Series A Preferred Stock shall not possess any voting rights. The Series A Preferred Stock does not contain any redemption provision. The Series A Preferred Stock are entitled to receive in cash out of assets of the Company before any amounts shall be paid to the holders of any of shares of junior stock, an amount equal to the stated value plus any accrued and unpaid dividends thereon and any other fees due and owing.

On March 19, 2018, the Company designated 500,000 shares of Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”). Each share of Series B Preferred Stock is convertible into shares of the Company’s common stock with a stated value of $10 per share of Series B Preferred Stock and conversion price of $0.10 per share, subject to adjustment in the event of stock split, stock dividends, and recapitalization or otherwise. The Series B Preferred Stock votes with the common stock on a fully as converted basis. The Series B Preferred Stock does not contain any redemption provision. The Series B Preferred Stock are entitled to receive in cash out of assets of the Company before any amounts shall be paid to the holders of any of shares of junior stock, an amount equal to the stated value plus any accrued and unpaid dividends thereon and any other fees due and owing.

On August 1, 2018, the Company designated 1,000 shares of Series C Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”) Each share of Series C Preferred Stock is convertible into shares of the Company’s common stock with a stated value of $200 per share of Series C Preferred Stock and conversion price of $0.05 per share, subject to adjustment in the event of stock split, stock dividends, subsequent equity sales with lower effective price, and recapitalization or otherwise. The Series C Preferred Stock votes with the common stock on a fully as converted basis. The Series C Preferred Stock does not contain any redemption provision. The Series C Preferred Stock are entitled to receive in cash out of assets of the Company before any amounts shall be paid to the holders of any of shares of junior stock, an amount equal to the stated value plus any accrued and unpaid dividends thereon and any other fees due and owing. In October 2018, the Board of Directors of the Company approved and authorized an amendment to increase the number of designated authorized shares of the Series C preferred stock from 1,000 to 2,500 shares.

~~Item 6.~~

~~Selected Financial Data~~

ITEM 6. SELECTED FINANCIAL DATA

Not ~~Applicable as we are a smaller reporting company.~~applicable.

~~Item 7.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this ~~report.~~Report. Our actual results or actions may differ materially from these forward-looking statements for many reasons. Our discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes and with the understanding that our actual future results may be materially different from what we currently expect.

~~Forward-Looking Statements~~

Certain information contained in this Annual Report on Form 10-K, as well as other written and oral statements made or incorporated by reference from time to time by the Company and its representatives in other reports, filings with the Securities and Exchange Commission, press releases, conferences or otherwise, may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. This information includes, without limitation, statements concerning the Company’s future financial position and results of operations, planned expenditures, business strategy and other plans for future operations, the future mix of revenues and business, customer retention, project reversals, commitments and contingent liabilities, future demand and industry conditions. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Generally, the words “anticipate,” “believe,” “estimate,” “expect,” “may” and similar expressions, identify forward-looking statements, which generally are not historical in nature. Actual results could differ materially from the results described in the forward-looking statements due to the risks and uncertainties set forth in this Annual Report on Form 10-K, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

The following discussion is qualified in its entirety by, and should be read in conjunction with, the Company’s financial statements, including the notes thereto, included in this Annual Report on Form 10-K.

See “CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION” above. As used herein, the terms “we,” “us,” “our” and ~~“the Company”~~the “Company” refers to ~~Gratitude Health,~~Home Bistro, Inc., a Nevada corporation, and its ~~subsidiaries.~~subsidiaries unless otherwise stated.

On March 26, 2018, Gratitude Health, Inc. f/ka Vapir Enterprises, Inc., a corporation organized under the laws of Nevada (the “Acquiror” or “Company”), Hamid Emarlou, the principal shareholder of the Acquiror (the “Acquiror Principal Shareholder”), Gratitude Health, Inc. (FL), a corporation organized under the laws of Florida (the “Acquiree” or “Gratitude Subsidiary”), and each of the Persons who are shareholders of the Acquiree (collectively, the “Acquiree Shareholders,” and individually an “Acquiree Shareholder”) entered into a Share Exchange Agreement (the “Exchange Agreement”) pursuant to which the Acquiree Shareholders (who are the holders of all of the issued and outstanding shares of common stock of the Acquiree (the “Acquiree Interests”)) have agreed to transfer to the Acquiror, and the Acquiror has agreed to acquire from the Acquiree Shareholders, all of the Acquiree Interests, in exchange for the issuance of 520,000 shares of Series A Preferred Stock and 500,000 shares of Series B Preferred Stock, to the Acquiree Shareholders the “Acquiror Shares”), which Acquiror Shares shall, upon conversion into 102,000,000 shares of common stock of the Acquiror, constitute approximately 85.84% on a fully diluted basis of the issued and outstanding shares of Acquiror Common Stock immediately after the closing of the transactions contemplated herein, in each case, on the terms and conditions as set forth in the Agreement. For accounting purposes, the Share Exchange was treated as an acquisition of Acquiror and a recapitalization of Acquiree. Acquiree is the accounting acquirer, and the result is of its operations carryover. On the Closing Date, Acquiror Principal Shareholder entered into a Spin Off Agreement with the Company for the sale of the existing wholly owned Vapir, Inc. subsidiary of the Company in exchange for Acquiror Principal Shareholder’s 36,309,768 shares of Common Stock. The Spin Off Agreement closed on April 14, 2018. The Company recognized the disposition of the Vapir business on the date of merger.Overview

~~As a result of the Exchange Agreement, for financial statement reporting purposes, the business combination between the~~The Company and Acquiree has been treated as a reverse acquisition and recapitalization with the Acquiree deemed the accounting acquirer and the Company deemed the accounting acquiree under the acquisition method of accountingwas incorporated in accordance with FASB ASC Section 805-10-55. At the time of the Exchange Agreement, both the Company and Acquiror have their own separate operating segments. Accordingly, the assets and liabilities and the historical operations that are reflected in the consolidated financial statements after the Exchange Agreement are those of the Acquiree and are recorded at the historical cost basis of the Acquiree. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of the Acquiree which are recorded at historical cost. The results of operations of the Company are consolidated with results of operations of the Acquiree starting on the date of the Exchange Agreement. The equity of the consolidated entity is the historical equity of Gratitude Subsidiary retroactively restated to reflect the number of shares issued by the Company in the reverse acquisition.

~~For information on the new business of Gratitude Health, Inc. after the March 26, 2018 share exchange, please refer to Section 1 of this Annual Report on Form 10-K.~~

~~Overview~~

~~Gratitude Health Inc. was originally incorporated under the laws of~~ the State of Nevada on December 17, 2009 under the name Apps Genius Corp. Our original business was to develop, market, publish and distribute social games and software applications that consumers could use on a variety of platforms, including social networks, wireless devices and stand-alone websites. We were unsuccessful in operating our business and on October 7, 2013 we entered into a Membership Interest Purchase Agreement with FAL Minerals LLC and we changed our name to FAL Exploration Corp. The agreement with FAL Minerals LLC has since been terminated and we entered into an Exchange Agreement with Vapir, Inc. and its shareholders. In December 2014, the Company changed its name into Vapir Enterprises, Inc.2009. Effective March 23, 2018, the Company changed its ~~legal~~ name from Vapir Enterprises, Inc. to Gratitude Health, Inc. ~~from Vapir Enterprises Inc. The Company’s principal business was focused on inventing, developing and producing aromatherapy devices and vaporizers.~~ On ~~March 26, 2018,~~September 14, 2020, the Company ~~merged with~~changed its name from Gratitude Health, Inc. ~~(“Gratitude Subsidiary”), a private company incorporated~~to Home Bistro, Inc. The Company is in ~~Florida on September 14, 2017, in a transaction treated as a reverse acquisition and recapitalization effected by a share exchange, and~~ the business of ~~Gratitude Subsidiary became~~providing prepackaged and prepared meals to consumers focused on offering a broad array of the highest quality meal planning, delivery, and preparation services. The Company’s primary former operations were in the business of the Company. On March 26, 2018, Gratitude Subsidiary, which is the historical business of the Company’s wholly-owned subsidiary, entered into a Share Exchange Agreement with the Company, Gratitude Subsidiary, all of the stockholders of Gratitude Subsidiary, and the Company’s principal stockholder whereby the Company agreed to acquire all of the issued and outstanding capital stock of Gratitude Subsidiary in exchange for the issuance of 520,000 shares of Series A Preferred Stock and 500,000 shares of Series B Preferred Stock, to the stockholders of Gratitude Subsidiary, upon conversion into 102,000,000 shares of the Company’s common stock. On March 26, 2018, the transaction closed and Gratitude Subsidiary is now a wholly-owned subsidiary of the Company. The number of shares issued represented approximately 86% of the issued and outstanding common stock immediately after the consummation of the Share Exchange Agreement. In addition, Gratitude Subsidiary’s board of directors and management obtained the board and management control of the combined entity stock immediately after the consummation of the Share Exchange Agreement.

~~The Company is now engaged in~~ manufacturing, selling, and marketing functional RTD (Ready to Drink) beverages sold under the Company’s ~~trademark.~~trademark (the “RTD Business”). The RTD Business was disposed on September 25, 2020 as discussed below.

~~Results~~On April 7, 2020, the Board of ~~Operations~~Directors of the Company approved the increase of authorized shares of common stock from 600,000,000 to 1,000,000,000.

~~For~~On April 20, 2020, the ~~year ended December 31, 2018~~Company, Fresh Market Merger Sub, Inc., a Delaware corporation and ~~for~~a newly created wholly-owned subsidiary of the ~~period from inception (September 14, 2017)~~Company (“Merger Sub”), and Home Bistro, Inc., a privately-held Delaware corporation engaged in the food preparation and home-delivery business (presently known as Home Bistro Holdings, Inc., a Nevada corporation) (“Home Bistro Holdings”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to ~~December 31, 2017~~which, among other things, Merger Sub agreed to merge with and into Home Bistro Holdings, with Home Bistro Holdings becoming a wholly-owned subsidiary of the Company and the surviving corporation in the merger (the “Merger”). Pursuant to the terms of the Merger Agreement, Home Bistro Holdings filed a Certificate of Merger with the Nevada Secretary of State on April 20, 2020.

On ~~March 26, 2018,~~April 20, 2020, pursuant to the terms of the Merger Agreement, Roy G. Warren, Jr., Mike Edwards, and Bruce Zanca resigned as directors of the Company ~~merged~~and Roy G. Warren, Jr. resigned as Chief Operating Officer of the Company. The resignations were not the result of any disagreement related to the Company’s operations, policies, or practices. Furthermore, on April 20, 2020, Mr. Zalmi Duchman, the Chief Executive Officer of Home Bistro Holdings, Michael Finkelstein and Michael Novielli were appointed as directors of the Company. In addition, Mr. Duchman was appointed Chief Executive Officer.

The Merger constituted a change of control and the majority of the Board of Directors changed with ~~Gratitude Subsidiary,~~the consummation of the Merger. The Company issued to the stockholders of Home Bistro Holdings shares of common stock and stock warrants which represented approximately 80% of the combined company on a ~~private company incorporated in Florida on September 14, 2017, in~~fully converted basis after the closing of the Merger. As a result of the above transactions and the Company’s intent to dispose or divest the assets and liabilities associated with the RTD Business, this transaction ~~treated~~was accounted for as a reverse ~~acquisition and~~ recapitalization effected by a share exchange ~~and the business~~ of ~~Gratitude Subsidiary became the business of the Company.~~Home Bistro Holdings. The consolidated interim financial statements are those of ~~Gratitude Subsidiary~~Home Bistro Holdings (the accounting acquirer) prior to the ~~merger~~Merger and include the activity of the Company (the ~~legal acquirer)~~accounting acquiree) from the date of the ~~merger. Accordingly, we do not~~Merger.

On September 14, 2020, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment to its Articles of Incorporation to effect (i) a 1 for 31.993 reverse stock split of its common stock, par value $0.001 per share, with fractional shares rounding up to the nearest whole share (the “Reverse Stock Split”), and (ii) the change of the Company’s name from “Gratitude Health, Inc.” to “Home Bistro, Inc.”. All share and per-share data and amounts have ~~comparable transactions~~been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse Stock Split.

On Sept. 14, 2020, the Financial Industry Regulatory Authority approved the Company’s symbol change from “GRTD” to “HBIS”, effective twenty (20) business days from the ~~prior periods.~~approval date.

~~Net Revenues~~

~~As previously stated,~~On September 25, 2020, the Company ~~began~~entered into, and closed the transactions contemplated by, that certain Asset Purchase Agreement (the “Asset Purchase Agreement”), by and among the Company, Gratitude Keto Holdings, Inc., a Florida corporation (the “Buyer” or “Gratitude Keto”), and the holder of 250,000 of the Company’s issued and outstanding shares of Series B Preferred Stock, $0.001 par value per share (such stock, the “Series B Preferred Stock”, and such stockholder, the “Stockholder”). Pursuant to the Asset Purchase Agreement, among other things, the Company agreed to sell to the Buyer all of the Company’s business, assets and properties used, or held or developed for use, in its functional RTD Business, and the Buyer agreed to assume certain debts, obligations and liabilities related to the RTD Business. Furthermore, in connection with the Asset Purchase Agreement, the Buyer returned the 250,000 shares of Series B Preferred Stock held by the Stockholder which was then cancelled by the Company upon return. As a result, the Company has no outstanding shares of preferred stock. Additionally, the RTD Business activities were reclassified and reported as part of “discontinued operations” for all periods presented on the consolidated statements of operations. In addition, the Company assumed an accounts payable liability in the amount of $14,000 related to accounting expenses of the RTD Business for a period prior to the Merger. Pursuant to the Asset Purchase Agreement, the Buyer reimbursed the Company for the accounting expenses in amount of $14,000, of which $7,000 was payable in cash and the balance in form of a promissory note dated September 25, 2020 in the amount of $7,000. The promissory note bears an interest rate of 5% per annum, matures on April 25, 2021 and is payable in monthly installments of $1,000 commencing on October 25, 2020 through maturity.

The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The COVID-19 pandemic has the potential to significantly impact the Company’s supply chain, food manufacturers, distribution centers, or logistics and other service providers. Additionally, the Company’s service providers and their operations may be disrupted, temporarily closed or experience worker or meat or other food shortages, which could result in additional disruptions or delays in shipments of Home Bistro’s products. To date, the Company has been able to avoid layoffs and furloughs of employees. The Company is not able to estimate the duration of the pandemic and potential impact on ~~September 14, 2017.~~ the business if disruptions or delays in shipments of product occur. To date, the Company is not aware of any such disruptions. In addition, a severe prolonged economic downturn could result in a variety of risks to the business, including weakened demand for product and a decreased ability to raise additional capital when needed on acceptable terms, if at all. As the situation continues to evolve, the Company will continue to closely monitor market conditions and respond accordingly. The Company has applied for and received certain financial assistance under the Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”) enacted in March 2020 by the U.S. Government in response to COVID-19.

Results of Operations

For the ~~year~~Years Ended December 31, 2020 and 2019

The Company is in the business of providing prepackaged and prepared meals to consumers focused on offering a broad array of the highest quality meal delivery, and preparation services.

Product Sales

During the years ended December 31, ~~2018~~2020 and ~~for the period from inception (September 14, 2017) to December 31, 2017, the Company generated revenues~~2019, sales from the ~~sales of ready to drink beverages~~food preparation and home-delivery business amounted to ~~$18,672~~$1,335,859 and ~~$0, respectively.~~$836,599, respectively, an increase of $499,260 or 60%.

Cost of Sales

The primary components of cost of sales ~~include~~are royalty fee and food and processing costs directly attributable to fulfilment and the ~~cost~~delivery of the product ~~production~~to customers including both inbound and outbound shipping costs.

During the years ended December 31, 2020 and 2019, cost of sales amounted to $873,289 and ~~shipping fees.~~ $499,396, respectively, an increase of $373,893 or 75% due to increase in sales and royalty fee.

Operating Expenses

For the years ended December 31, 2020 and 2019, operating expenses consisted of the following:

	Year Ended December 31,
	2020		2019
Compensation and related expenses	$	547,940	$	362,526
Professional and consulting expenses		434,450		27,231
Product development expense		360,000		—
Selling and marketing expenses		226,428		57,067
General and administrative expenses		198,082		104,569
Total	$	1,766,900	$	551,393

●

Compensation and related expenses:

During the year ended December 31, ~~2018~~2020, compensation and ~~for the period from inception (September 14, 2017) to December 31, 2017, the Company’s cost of sales~~related expenses amounted to ~~$15,588 and $0, respectively. For the year ended December 31, 2018 and for the period from inception (September 14, 2017)~~$547,940 as compared to ~~December 31, 2017, gross profit margins were at 17% and 0%, respectively.~~

~~Operating Expenses~~

~~Total operating expenses~~$362,526 for the year ended December 31, ~~2018 and for the period from inception (September 14, 2017) to December 31, 2017 were $988,166 and $89,488, respectively.~~2019, an increase of $185,414 or 51%. The increase ~~in operating expenses of $898,678~~ was primarily attributable to an increase in employee stock-based compensation ~~of $286,274 due to increase~~ in ~~number of employees, increase in~~2020.

●

Professional and consulting expenses:

During the year ended December 31, 2020, professional and consulting ~~fees of $431,511 primarily related~~expenses amounted to ~~increase in stock-based consulting fees, accounting and legal expenses and increase in general and administrative expenses of $180,893~~$434,450 as compared to $27,231 for the year ended December 31, ~~2018~~2019, an increase of $407,219 or 1,495%. The increase was primarily due to ~~increase~~increases in ~~travel expenses, license fees, inventory spoilage~~stock-based compensation to consultants and legal of $124,219, legal expense of $187,318 and ~~office expenses. Total operating expenses for~~accounting and auditing expense of $86,713 in 2020.

●

Product development expense:

During the ~~period from inception (September 14, 2017) to~~year ended December 31, ~~2017 was $89,488 and was primarily related~~2020, product development expenses amounted to ~~compensation of $53,000~~$360,000 as compared to ~~our CEO and COO and stock based compensation through the issuance of preferred stock to our founders.~~

~~Other Income (Expense), net~~

~~Interest expense, net~~$0 for the year ended December 31, ~~2018 and for~~2019, an increase of $360,000, or 100%. The increase was primarily due to the ~~period from inception (September 14, 2017)~~grant of warrant to ~~December 31, 2017 was $33,518 and $6,936, respectively primarily related~~purchase up to ~~interest expense and amortization~~300,000 shares of ~~debt discount~~the Company’s common stock with grant date fair value of $360,000 in 2020 in connection with ~~convertible notes which were paid off during fiscal 2018.~~the execution of that Joint Production Development and Distribution Agreement.

~~Net loss~~

●

Selling and marketing expenses:

~~Our net loss~~During the year ended December 31, 2020, selling and marketing expenses to $226,428 as compared to $57,067 for the year ended December 31, ~~2018~~2019, an increase of $169,361, or 297%. The increase was primarily due to stock-based compensation to a vendor of $11,717 and ~~for~~increase in marketing activities in 2020 in connection with the ~~period from inception (September 14, 2017) to December 31, 2017 was $1,018,600~~execution of that Joint Production Development and ~~$96,424, respectively, as a result of the items discussed above.~~Distribution Agreement.

●

General and administrative expenses:

~~Liquidity and Capital Resources~~

~~For~~During the year ended December 31, ~~2018~~2020, general and administrative expenses amounted to $198,082 as compared to $104,569 for the ~~period from inception (September 14, 2017) to~~year ended December 31, ~~2017~~2019, an increase of $93,513 or 89%. The increase was primarily due to increase in operational expenses such as rent for a kitchen facility for the Company.

Loss from Operations

During the year ended December 31, 2020, loss from operations amounted to $1,304,330 as compared to $214,190 for the year ended December 31, 2019, an increase of $1,215,507 or 509%. The increase was due to the changes discussed above.

Other Income

●

During year ended December 31, 2020, other income, net amounted to $24,466 as compared to other income, net of $15,129 for the year ended December 31, 2019, an increase in other income, net of $9,337 or 62%. The change was primarily due to increase in interest expense of $16,583, a decrease in gain on extinguishment of accounts payable of $11,395 offset by an increase in gain from change in fair value of derivative liabilities of $32,315 and an increase in other income of $5,000 grant received from the SBA under the SBA’s Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic in 2020.

Loss from continuing operations

●

During the year ended December 31, 2020, we had a loss from continuing operations of $1,279,864 or $(0.07) per common share (basic and diluted), compared to a loss from continuing operations of $199,061 or $(0.02) per common share (basic and diluted) for the year ended December 31, 2019, an increase of $1,080,833 or 543%. The increase was due to the changes discussed above.

Income from discontinued operations

●

During the year ended December 31, 2020, we had income from discontinued operations of $38,203 compared to income from discontinued operations of $0 for of the year ended December 31, 2019, an increase of $38,203 or 100%. The increase was due to the Merger and disposal of the RTD Business segment.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital deficit of $466,178 and cash of $447,354 as of December 31, 2020 and a working capital deficit of $271,679 and $7,137 of cash as of December 31, 2019.

	December 31, 2020			December 31, 2019			Change			Percentage Change
Working capital deficit:
Total current assets	$	480,942		$	8,053		$	472,889			5,872	%
Total current liabilities		(947,120	)		(279,732	)		(667,388	)		239	%
Working capital deficit:	$	(466,178	)	$	(271,679	)	$	(194,499	)		72	%

The increase in working capital deficit was primarily attributable to an increase in current assets of $472,889 and an increase in current liabilities of $667,388.

Cash Flows

The following table provides detailed information about our net cash flows:

For the
Year
Ended
December 31,
2018
For the
period from inception (September 14, 2017) to
December 31,
2017
Cash Flows
Net cash used in operating activities $ (758,859 ) $ (70,519 )
Net cash used in investing activities (36,348 ) (14,000 )
Net cash provided by financing activities 834,655 105,345
Net change in cash $ 39,448 $ 20,826

	Year Ended December 31,
	2020			2019
Net cash used in operating activities	$	(273,816	)	$	(30,244	)
Net cash provided by investing activities		1,749			—
Net cash provided by (used in) financing activities		712,284			(11,900	)
Net change in cash	$	440,217		$	(42,144	)

We have an accumulated deficit and have incurred operating losses since our inception and expect losses to continue during fiscal year ~~2018.~~2020. This raises substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement its business plan and generate sufficient revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Net Cash Used in Operating Activities

~~For the year ended December 31, 2018 and for the period from inception (September 14, 2017) to December 31, 2017~~

~~Cash~~Net cash used in operating activities was $273,816 for the year ended December 31, ~~2018 consisted of net loss~~2020 as ~~well as the effect of changes in operating assets and liabilities as well as adjustments~~compared to reconcile net to loss to net cash used in operating activities. Cash used in operating activities of $(758,859) consisted of a net loss of $(1,018,600). The net loss was partially offset by reconciliation of depreciation of $12,083, amortization of debt discount of $29,703, inventory write-off of $22,648, stock-based compensation of $234,000 offset by net changes in operating assets and liabilities of $16,045 primarily from an increase in accounts receivable, inventory and prepaid expenses offset by the increase in accounts payable and accrued expenses, accrued salaries and related payroll liabilities, and decrease in advances to suppliers. Cash used in operating activities$30,244 for the period from inception (September 14, 2017) to December 31, 2017 was $(70,519) and consisted of a net loss of $(96,424) offset by reconciliation of primarily stock-based compensation of $15,000, amortization of debt discount of $5,281 and increase in accounts payable and accrued expenses of $16,046 offset by increase in advances to suppliers of $11,200.

~~Investing Activities~~

~~For~~ the year ended December 31, ~~2018 and for the period from inception (September 14, 2017) to December 31, 2017~~2019, an increase of $243,572 or 805%.

●

Net cash used in operating activities for the year ended December 31, 2020 primarily reflected our net loss of $1,241,661 adjusted for the add-back on non-cash items such as depreciation expense of $440, stock-based compensation of $213,841 and commons stock and warrants issued for services of $609,740, amortization of debt discount of $7,983, offset by gain on extinguishment of accounts payable of $7,075, and gain from change in fair value of derivative liabilities $32,315 and changes in operating asset and liabilities consisting primarily of an increase of prepaid expenses and other current assets of $8,896, an increase in unredeemed gift cards of $37,946, an increase in accrued expense and other liabilities of $102,201 and an increase in accounts payable of $43,980.

●

Net cash used in operating activities from continuing operations for the year ended December 31, 2019 primarily reflected our net loss of $199,061 adjusted for the add-back on non-cash items such as stock-based compensation of $183,294, gain on extinguishment of accounts payable of $18,470 and changes in operating asset and liabilities consisting primarily of a decrease in inventory of $7,306, a decrease in prepaid expenses and other current assets of $7,428, an increase in unredeemed gift cards of $399 offset by a decrease in accounts payable of $11,140.

Net Cash Provided Investing Activities

~~For~~Net cash provided by investing activities was $1,749 for the year ended December 31, ~~2018 and~~2020 as compared to nil for ~~the period from inception (September 14, 2017) to December 31, 2017, we used cash in investing activities of $36,348 and $14,000, respectively, consisting of purchases of equipment and property.~~

~~Financing Activities~~

~~For~~ the year ended December 31, ~~2018 and for the period from inception (September 14, 2017) to December 31, 2017~~2019, an increase of $1,749 or 100%.

●

Net cash provided by investing activities for the year ended December 31, 2020 consisted of cash acquired from an acquisition of $4,917 offset by acquisition of property and equipment of $3,168.

Net Cash Provided by (Used in) Financing Activities

~~For~~Net cash provided by financing activities was $712,284 for the year ended December 31, ~~2018 we received~~2020 as compared to net ~~proceeds from issuance of convertible notes of $120,000 and we raised $715,000 from~~cash used amounting to $11,900 for the ~~sale of our preferred stocks offset by repayment of an advance to our CEO of $345. For the period from inception (September 14, 2017) to~~year ended December 31, ~~2017 we received proceeds from related party advances~~2019, a change of ~~$345 and proceeds from issuance of convertible notes of $105,000.~~$724,184 or 6,086%.

●

Net cash provided by financing activities for the year ended December 31, 2020 consisted of proceeds from sale of warrants of $100,005, notes payable of $171,612, advances payable of $140,840 and convertible notes payable of $384,100 offset by repayments of note payable – in default and advance payable in total amount of $84,273.

●

Net cash used in financing activities for the year ended December 31, 2019, consisted of proceeds from sale of common stock of $3,000 and advance payable of $23,000 off set by repayments of note payable – in default and advance payable in total amount of $37,900.

Cash Requirements

We currently have no external sources of liquidity, such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital. As noted above and below, the Company received a loan in the aggregate amount of $14,612 under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act, and a loan in the aggregate amount of $150,000 from the SBA under its Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic.

We are dependent on our product sales to fund our operations and may require the sale of additional common stock and preferred stock to maintain operations. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans, and/or financial guarantees.

If we are unable to raise the funds required to fund our operations, we will seek alternative financing through other means, such as borrowings from institutions or private individuals. There can be no assurance that we will be able to raise the capital we need for our operations from the sale of our securities. We have not located any sources for these funds and may not be able to do so in the future. We expect that we will seek additional financing in the future. However, we may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to cease operations. If we fail to raise funds, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.

~~Inflation and Changing Prices~~Going Concern

~~Neither inflation nor changing prices~~The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, for the year ended December 31, ~~2018~~2020, the Company had net loss and cash used in operations of $1,241,661 and $273,817, respectively. As of December 31, 2020, the Company had an accumulated deficit, stockholders’ deficit, and working capital deficit of $6,333,389, $1,914,994 and $466,178, respectively. These factors raise substantial doubt about the Company’s ability to continue as a ~~material impact on our operations.~~going concern for a period of twelve months from the issuance date of this report. The Company’s primary source of operating funds in 2020 was primarily from the third-party advances and proceeds from note payables. The Company has experienced net losses from operations since inception but expects these conditions to improve in the near term and beyond as it develops its business model.

~~Off-Balance Sheet Arrangements~~Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that the Company’s capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

~~None.~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

~~Not applicable.~~

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“USU.S. GAAP”) requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.

We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements. We believe the critical accounting policies in Note 2 to the consolidated financial statements appearing in our audited financial statements for the ~~year~~years ended December 31, ~~2018~~2020 and 2019 included in this ~~form~~Form 10-K, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities ~~the~~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. Actual results could differ from ~~those~~these estimates. Significant ~~matters requiring the use~~estimates as of ~~estimates~~December 31, 2020 and ~~assumptions~~2019 include ~~but may not be limited to, valuation of deferred tax assets, useful life of property and equipment, valuation of debt discount,~~ the assumptions used ~~to calculate fair value~~in the redemption recognition method for unredeemed gift cards, collectability of ~~stock warrants granted, the value~~note receivable, estimates of ~~stock-based compensation~~current and ~~fees~~deferred income taxes and deferred tax valuation allowances, valuation of derivative liabilities, and the fair value of non-cash equity transactions.

Fair Value of Financial Instruments and Fair Value Measurements

FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the ~~common stock issued. Management believes~~price that ~~its estimates and assumptions~~would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are ~~reasonable,~~ based on pertinent information available to the Company on December 31, 2020. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that ~~is available at~~could be realized on disposition of the ~~time they~~financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are ~~made.~~ observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

~~Revenue Recognition~~The three levels of the fair value hierarchy are as follows:

	Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

	Level 2—Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

	Level 3—Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the consolidated balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable and accrued liabilities approximate their fair market value based on the short-term maturity of these instruments.

~~We revenue~~Derivative Liabilities

The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC ~~Topic 606~~ 815-10 – Derivative and Hedging – Contract in Entity’s Own Equity. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment, or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.

In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. For public business entities, the amendments in Part I of the ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

Revenue from Contracts with Customers, which requires revenue to be recognized in a manner that depicts the transfer of goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.Recognition

The Company’s ~~performance obligations~~revenues consist of high quality, direct-to-consumer, ready-made meals that can be ordered by customers through www.homebistro.com, and restaurant quality meats and seafood through its Colorado Prime Brand. Revenues from the Company’s ready-made meals are ~~satisfied at~~recognized when the ~~point in time when products are shipped or~~product is delivered to the customer ~~which~~and title has transferred, it is ~~when~~at this point in time that the ~~customer has title~~Company’s performance obligations have been completed. Product sales are recorded net of any discounts or allowances and ~~the significant risks and rewards of ownership. Therefore, our contracts have a single performance obligation (shipment of product). We primarily receive fixed consideration for sales of product.~~include shipping charges.

Customers can purchase gift cards via phone or online through the Company’s e-commerce website. Gift card purchases are initially recorded as unredeemed gift card liabilities and are recognized as product sales upon redemption. Historically, the majority of gift cards are redeemed within two years of issuance. The Company does not charge administrative fees on unused gift cards, and its gift cards do not have an expiration date.

Based on historical redemption patterns, a portion of issued gift cards are not expected to be redeemed (breakage). The Company uses the redemption recognition method for recognizing breakage related to unredeemed gift cards for which it has sufficient historical redemption information. Under the redemption recognition method, breakage revenue is recorded in proportion to, and over the time period gift cards are actually redeemed. The estimated breakage rate is based on historical issuance and redemption patterns and is re-assessed by the Company on a regular basis. At least three years of historical data, which is updated annually, is used to estimate redemption patterns.

Inflation and Changing Prices

Neither inflation nor changing prices for the year ended December 31, 2020 had a material impact on our operations.

Off-Balance Sheet Arrangements

None.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

~~Item 8.~~

~~Financial Statements and Supplementary Data~~

~~GRATITUDE HEALTH, INC.~~ITEM 8. FINANCIAL STATEMENTS AND ~~SUBSIDIARY~~SUPPLEMENTARY DATA

~~FINANCIAL STATEMENTS~~

~~December 31, 2018~~

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2018 and 2017~~

~~CONTENTS~~

~~Report of Independent Registered Public Accounting Firm~~	~~F-3~~

~~Consolidated Financial Statements:~~

~~Consolidated Balance Sheets - As of December 31, 2018 and 2017~~	~~F-4~~

~~Consolidated Statements of Operations - For the Year Ended December 31, 2018 and For the Period From Inception (September 14, 2017) to December 31, 2017~~	~~F-5~~

~~Consolidated Statements of Changes in Stockholders’ Equity (Deficit) - For the Year Ended December 31, 2018 and For the Period From Inception (September 14, 2017) to December 31, 2017~~	~~F-6~~

~~Consolidated Statements of Cash Flows – For the Year Ended December 31, 2018 and For the Period From Inception (September 14, 2017) to December 31, 2017~~	~~F-7~~

~~Notes to Consolidated Financial Statements~~	~~F-8~~

~~Report of Independent Registered Public Accounting Firm~~

~~To the Board of Directors and~~
~~Stockholders of Gratitude Health, Inc.~~

~~Opinion on the Consolidated Financial Statements~~

We have audited the accompanying consolidated balance sheets of Gratitude Health, Inc. (the Company) as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2018 and period from September 14, 2017 (Inception) through December 31, 2017, 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 December 31, 2018 and 2017, and the results of its operations and its cash flows for the year ended December 31, 2018 and period from September 14, 2017 (Inception) through December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

~~Basis for Opinion~~

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. 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 audits 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 consolidated 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 its internal control over financial reporting. As part of our audits, 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 consolidated 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 consolidated financial statements. 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 3 to the consolidated financial statements, the Company has incurred operating losses, has incurred negative cash flows from operations and has an accumulated deficit. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 3 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~D. Brooks and Associates CPA’s, P.A.~~

~~We have served as the Company’s auditor since 2018. Palm Beach Gardens, Florida~~

~~March 22, 2019~~

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~CONSOLIDATED BALANCE SHEETS~~

DECEMBER 31,
2018 2017
ASSETS
CURRENT ASSETS:
Cash $ 60,274 $ 20,826
Accounts receivable 9,432 -
Inventory 60,116 -
Prepaid expenses and other current assets 8,939 -
Advance to supplier - 11,200

Total Current Assets 138,761 32,026

OTHER ASSETS:
Property and equipment, net 37,487 13,222
Deposit 6,828 -

Total Other Assets 44,315 13,222

TOTAL ASSETS $ 183,076 $ 45,248

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 69,867 $ 16,046
Accrued salaries and related payroll liabilities 21,745 -
Convertible notes payable, net of debt discount - 100,289
Due to related party - 345

Total Current Liabilities 91,612 116,680

Total Liabilities 91,612 116,680

COMMITMENTS AND CONTINGENCIES (see Note 9)

STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock $0.001 par value: 20,000,000 shares authorized;
Convertible Series A Preferred stock ($0.001 Par Value; 520,000 Shares Authorized; 520,0000 shares and none issued and outstanding as of December 31, 2018 and 2017, respectively) 520 -
Convertible Series B Preferred stock ($0.001 Par Value; 500,000 Shares Authorized; 500,000 shares issued and outstanding as of December 31, 2018 and 2017) 500 500
Convertible Series C Preferred stock ($0.001 Par Value; 2,500 Shares Authorized; 2,250 shares and none issued and outstanding as of December 31, 2018 and 2017, respectively) 2 -
Common stock $0.001 par value: 300,000,000 shares authorized; 16,832,065 and none shares issued and outstanding as of December 31, 2018 and 2017, respectively. 16,832 -
Common stock to be issued (2,600,000 and none shares as of December 31, 2018 and 2017, respectively) 2,600 -
Additional paid-in capital 1,186,034 24,492
Accumulated deficit (1,115,024 ) (96,424 )

Total Stockholders’ Equity (Deficit) 91,464 (71,432 )

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 183,076 $ 45,248

~~See accompanying notes to the consolidated financial statements.~~

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

For the period from inception
For the year ended (September 14,
2017) to
December 31,
2018 December 31,
2017

Net revenues $ 18,672 $ -

Cost of sales 15,588 -

Gross profit 3,084 -

OPERATING EXPENSES:
Compensation and related cost 339,274 53,000
Professional and consulting expenses 448,868 17,357
General and administrative 200,024 19,131

Total Operating Expenses 988,166 89,488

LOSS FROM OPERATIONS (985,082 ) (89,488 )

OTHER EXPENSE:
Interest income 9 -
Interest expense (33,527 ) (6,936 )

Other expense (33,518 ) (6,936 )

LOSS BEFORE PROVISION FOR INCOME TAXES (1,018,600 ) (96,424 )

Provision for income taxes - -

NET LOSS $ (1,018,600 ) $ (96,424 )

NET LOSS PER COMMON SHARE
Basic $ (0.04 ) $ (0.00 )
Diluted $ (0.04 ) $ (0.00 )

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 28,359,343 -
Diluted 28,359,343 -

~~See accompanying notes to the consolidated financial statements.~~

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)~~

~~For the year ended December 31, 2018 and for the Period from September 14, 2017 (Inception) to December 31, 2017~~

Common Total
SERIES A SERIES B SERIES C Stock - Additional Stockholders'
Preferred Stock Preferred Stock Preferred Stock Common Stock Unissued Paid-in Accumulated (Equity)
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit

Balance, inception - - - - - - - - - - - - -

Issuance of preferred stock to founders - - 500,000 500 - - - - - - 14,500 - 15,000

Debt discount in connection with the issuance of stock warrants - - - - - - - - - - 9,992 - 9,992

Net Loss - - - - - - - - - - - (96,424 ) (96,424 )

Balance, December 31, 2017 - - 500,000 500 - - - - - - 24,492 (96,424 ) (71,432 )
��
Recapitalization of the Company - - - - - - 53,141,833 53,142 - - (76,117 ) - (22,975 )

Cancellation of shares - - - - - - (36,309,768 ) (36,310 ) - - 36,310 - -

Issuance of preferred stock for cash 20,000 20 - - 2,250 2 - - - - 451,978 - 452,000

Issuance of preferred stock for cash and conversion of notes payable and accrued interest 500,000 500 - - - - - - - - 507,979 - 508,479

Unissued common stock for services - - - - - - - - 2,600,000 2,600 231,400 - 234,000

Debt discount in connection with the issuance of stock warrants - - - - - - - - - - 9,992 - 9,992

Net Loss - - - - - - - - - - - (1,018,600 ) (1,018,600 )

Balance, December 31, 2018 520,000 $ 520 500,000 $ 500 2,250 $ 2 16,832,065 $ 16,832 2,600,000 $ 2,600 $ 1,186,034 $ (1,115,024 ) $ 91,464

~~See accompanying notes to the consolidated financial statements.~~

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

For the period from inception
For the year ended (September 14,
2017) to
December 31,
2018 December 31,
2017

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,018,600 ) $ (96,424 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 12,083 778
Amortization of debt discount 29,703 5,281
Inventory write-off 22,648 -
Stock-based compensation 234,000 15,000
Change in operating assets and liabilities:
Accounts receivable (9,432 ) -
Inventory (82,764 ) -
Prepaid expenses and other current assets (8,939 ) -
Advance to supplier 11,200 (11,200 )
Deposit (6,828 ) -
Accounts payable and accrued expenses 36,325 16,046
Accrued salaries and related payroll liabilities 21,745 -

NET CASH USED IN OPERATING ACTIVITIES (758,859 ) (70,519 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (36,348 ) (14,000 )

NET CASH USED IN INVESTING ACTIVITIES (36,348 ) (14,000 )

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds received from issuance of notes payable, net of issuance cost 120,000 105,000
Net proceeds received from issuance of preferred stock 715,000 -
Advance from related parties - 345
Repayments on advances from related parties (345 ) -

NET CASH PROVIDED BY FINANCING ACTIVITIES 834,655 105,345

NET INCREASE IN CASH 39,448 20,826

CASH, beginning of period 20,826 -

CASH, end of period $ 60,274 $ 20,826

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of preferred stock for conversion of notes payable and accrued interest $ 245,479 $ -
Assumption of liabilities in connection with the reverse merger $ 22,975 $ -

~~See accompanying notes to the consolidated financial statements.~~

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 1 - Organization and Operations~~

Gratitude Health, Inc., (the “Company”, formerly Vapir Enterprises, Inc.) was incorporated in the State of Nevada on December 17, 2009. Effective March 23, 2018, the Company changed its legal name to Gratitude Health, Inc. from Vapir Enterprises Inc. On March 26, 2018, the Company merged with Gratitude Health Inc. (“Gratitude Subsidiary”), a private company incorporated in Florida on September 14, 2017, in a transaction treated as a reverse acquisition and recapitalization effected by a share exchange. The consolidated financial statements are those of Gratitude Subsidiary (the accounting acquirer) prior to the merger and reflect the consolidated operations of the Company (the legal acquirer) from the date of the merger (see Note 8). The equity of the consolidated entity is the historical equity of Gratitude Subsidiary retroactively restated to reflect the number of shares issued by the Company in the reverse acquisition. The Company’s former business was focused on inventing, developing and producing aromatherapy devices and vaporizers before the merger. The Company is now engaged in manufacturing, selling and marketing functional RTD (Ready to Drink) beverages sold under the Company’s trademark.

~~Recent developments- Acquisition~~

~~Note 2 - Significant and Critical Accounting Policies and Practices~~

~~Basis of Presentation and principles of consolidation~~

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Regulation S-X of the Securities and Exchange Commission (the “SEC”). The consolidated financial statements present the consolidated financial statements of the Company and its wholly-owned subsidiary as of December 31, 2018. All intercompany transactions and balances have been eliminated.

~~Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions~~

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the ~~reported amounts~~reports of ~~revenues and expenses during the reporting period. Actual results could differ from those estimates. In preparing the consolidated financial statements, management is~~our independent registered public accounting firm required pursuant to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to valuation of deferred tax assets, useful life of property and equipment, inventory reserves, and valuation of debt discounts.

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 2 - Significant and Critical Accounting Policies and Practices (continued)~~

~~Cash equivalents~~

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents. The Company held no cash equivalents as of December 31, 2018 and 2017. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, 2018 and 2017, the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

~~Fair value measurements and fair value of financial instruments~~

The estimated fair value of certain financial instruments, including cash, accounts receivable, advance to supplier, and 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.

~~Inventory~~

The Company values inventory, consisting of finished goods and raw materials, at the lower of cost or net realizable value. Cost is determined on the first-in and first-out (“FIFO”) method. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated net realizable value. Factors utilized in the determination of the estimated net realizable value include (i) estimates of future demand, and (ii) competitive pricing pressures. The Company did not record any allowance for slow moving inventory as of December 31, 2018.

~~Advances to suppliers~~

Advances to a supplier represents the cash paid in advance for the purchase of inventory. The advances to a supplier are interest free and unsecured. As of December 31, 2018 and 2017, advances to the Company’s major supplier amounted to $0 and $11,200, respectively. Upon shipment of the purchased inventory, the Company reclassifies or records such advances to the supplier into inventory.

~~Property and Equipment~~

Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets of 3 years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired, or disposed of, the cost and accumulated depreciation are removed, and any resulting gains or lossesItem are included in ~~the consolidated statement~~Item 15 of ~~operations.~~this report and are presented beginning on page F-1.

~~Revenue Recognition~~ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On January 1, 2018, the Company adopted the Accounting Standard Codification (“ASC”) Topic 606 and the related amendments Revenue from Contracts with Customers, which requires revenue to be recognized in a manner that depicts the transfer of goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.~~The Company recognizes revenue by applying the following steps:~~None.

~~Step 1: Identify the contract(s) with a customer.~~ITEM 9A. CONTROLS AND PROCEDURES

~~Step 2: Identify the performance obligations in the contract.~~

~~Step 3: Determine the transaction price.~~

~~Step 4: Allocate the transaction price to the performance obligations in the contract.~~

~~Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.~~

The Company’s performance obligations are satisfied at the point in time when products are shipped or delivered to the customer, which is when the customer has title and the significant risks and rewards of ownership. Therefore, the Company’s contracts have a single performance obligation (shipment of product). The Company primarily receives fixed consideration for sales of product.

~~Cost of Sales~~

~~The primary components of cost of sales include the cost of the product, production cost and shipping fees.~~

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 2 - Significant and Critical Accounting Policies and Practices (continued)~~

~~Shipping and Handling Costs~~

The Company accounts for shipping and handling fees in accordance with ASC 606. While amounts charged to customers for shipping products are included in revenues, the related costs of shipping products to customers are classified in general and administrative expenses as incurred. Shipping costs included in general and administrative expense were $1,500 and $0 for the year ended December 31, 2018 and for the period from inception (September 14, 2017) to December 31, 2017, respectively.

~~Advertising Costs~~

The Company applies ASC 720 “Other Expenses” to account for advertising related costs. Pursuant to ASC 720-35-25-1, the Company expenses the advertising costs when the first time the advertising takes place. Advertising costs were $13,089 and $0 for the year ended December 31, 2018 and for the period from inception (September 14, 2017) to December 31, 2017, respectively, and was included in general and administrative expenses.

~~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 requires 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 are 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.

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.

~~Basic and diluted net loss per share~~

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.

~~The potentially dilutive common stock equivalents during the year ended December 31, 2018 were excluded from the dilutive loss per share calculation as they would be antidilutive due to the net loss.~~

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 2 - Significant and Critical Accounting Policies and Practices (continued)~~

The following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share ("EPS") calculations for the period from inception (September 14, 2017) to December 31, 2017.

For the period from inception (September 14, 2017) to
December 31,
2017
Numerator:
Net loss $ (96,424 )

Denominator:
Weighted-average shares of common stock -
Dilutive effect of convertible instruments 74,000,000
Diluted weighted-average of common stock 74,000,000
Net income (loss) per common share from:
Basic $ (0.00 )
Diluted (0.00 )

~~The following were the computation of diluted shares outstanding and in periods where the Company has a net loss, all dilutive securities are excluded.~~

December 31,
2018 December 31,
2017
Common stock equivalents:
Stock warrants - 12,000,000
Stock options 1,940,000 -
Convertible notes payable - 12,000,000
Convertible Preferred Stock 111,000,000 50,000,000
Total 112,940,000 74,000,000

~~Recent accounting pronouncements~~

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods and is applied retrospectively. Early adoption is permitted. The Company does not believe the guidance will have a material impact on its financial statements.

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 Company adopted this pronouncement as of fiscal 2017.

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 2 - Significant and Critical Accounting Policies and Practices (continued)~~

In June 2018, the FASB issued ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The guidance is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company is assessing ASU 2018-07 and does not expect it to have a 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 will be evaluating the impact this standard will have on the Company’s consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

~~Note 3 - Going Concern~~

The Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the consolidated financial statements, the Company has an accumulated deficit of approximately $1,115,000 at December 31, 2018, and incurred a net loss of approximately $1,019,000 and net cash used in operating activities of approximately $759,000 for the year ended December 31, 2018. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the 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 sufficient revenues. Currently, management is seeking capital to implement its business plan and generate sufficient revenues. There is no guarantee that the Company will be able to raise sufficient capital or generate a level of revenues to sustain its operations. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

~~Note 4 - Inventory~~

~~Inventory consisted of the following:~~

December 31,
2018 December 31,
2017

Finished goods $ 39,984 $ -
Raw materials 20,132 -
$ 60,116 $ -

At December 31, 2018, inventory held at third party locations amounted to $60,116. During the year ended December 31, 2018, the Company wrote down inventory for spoilage of $22,648 which is included in general and administrative expenses on the statements of operations.

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 5 - Property and Equipment~~

~~Property and equipment, stated at cost, less accumulated depreciation consisted of the following:~~

Estimated life As of
December 31,
2018 As of
December 31,
2017

Molding Tool equipment 3 years $ 30,592 $ 14,000
Packing equipment 3 years 19,756 -
Less: Accumulated depreciation (12,861 ) (778 )
$ 37,487 $ 13,222

~~Depreciation expense amounted to $12,083 and $778 for the year ended December 31, 2018 and for the period from inception (September 14, 2017) to December 31, 2017, respectively.~~

~~Note 6 - Convertible Notes Payable~~

~~Convertible notes payable consisted of the following:~~

December 31,
2018 December 31,
2017

Convertible notes payable $ - $ 120,000
Debt discount - (19,711 )
Total convertible notes payable $ - $ 100,289

Between October 2017 to December 2017, the Company issued 12% convertible notes payable of $120,000 and 5 year warrants to acquire an aggregate of 12,000,000 shares of the Company’s common stock at an exercise price of $0.02 per share. The notes were due one year from the date of issuance. The annual interest rate for the notes were 12%. The notes were convertible any time after the issuance date of the note at $0.01 per share. The Company accounted for the warrants by using the relative fair value method. The debt discount consisted of relative fair value of the warrants of $9,992 using a Black-Scholes model with the following assumptions: dividend yield of zero, years to maturity of 5.00, a risk free rate of 2.00%, and expected volatility of 200% using volatilities of similar companies. The Company also paid financing costs of $15,000 in connection with these notes which was initially recorded as debt discount and was amortized over the term of these notes.

Between January 2018 to March 2018, the Company through the Company’s wholly owned subsidiary, Gratitude Subsidiary, entered into promissory note agreements, providing for the issuance of notes in the principal amount of $120,000 to an unrelated party pursuant to a Securities Purchase Agreement. The notes were due one year from the date of issuance. The annual interest rate for the notes were 12%. The notes were convertible any time after the issuance date of the note at $0.01 per share. The Company granted the note holder an aggregate of 12,000,000 warrants in connection with the issuance of these notes. The warrants had a term of 5 years from the date of grant and was exercisable at an exercise price of $0.02. The Company accounted for the warrants by using the relative fair value method. The debt discount consisted of relative fair value of the warrants of $9,992 using a Black-Scholes model with the following assumptions: dividend yield of zero, years to maturity of 5.00, a risk free rate of 2.00%, and expected volatility of 200% using volatilities of similar companies.

In connection with the merger, the Company entered into a Surrender and Exchange Agreement with these note holders whereby the note holders agreed to surrender the 12% convertible notes including accrued interest of $5,479 and the total principal amount of $240,000 and the cancellation of all the stock warrants granted to the note holders in exchange for Series A Preferred Stock. Such surrender of notes and warrants was done in connection with the Exchange Agreement which closed on March 26, 2018 (see Note 8). Accordingly, the Company fully amortized the debt discount of $29,703 for the year ended December 31, 2018 and such 24,000,000 warrants granted by Gratitude Subsidiary were cancelled as of December 31, 2018. As of December 31, 2018, principal amount of the notes and accrued interest outstanding was $0.

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 7 - Related Party Transactions~~

The Company’s chief executive officer, Mr. Roy Warren, from time to time, provided advances to the Company for working capital purposes. At December 31, 2018, and December 31, 2017, the Company had a payable to the officer of $0 and $345. These advances were short-term in nature and non-interest bearing.

~~In connection with the Exchange Agreement (see Note 8), the Company issued 500,000 shares of Series B Preferred Stock to the founders who are the CEO and COO of the Company.~~

In April 2018, the Company granted 100,000 shares of the Company’s common stock to the son of the CEO of the Company for services rendered (see Note 8). The Company valued these common shares at the fair value of $9,000 or $0.09 per common share based on the closing trading price on the date of grant. The Company recorded stock-based compensation of $9,000 during the year ended December 31, 2018. These shares were to be issued as of December 31, 2018.

~~Note 8 - Stockholders’ Equity (Deficit)~~

~~Shares Authorized~~

~~The authorized capital of the Company consists of 300,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share.~~

~~Preferred stock~~

On March 19, 2018, the Company designated 520,000 shares of Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) Each share of Series A Preferred Stock is convertible into shares of the Company’s common stock with a stated value of $10 per share of Series A Preferred Stock and the conversion price of $0.10 per share, subject to adjustment in the event of stock split, stock dividends, and recapitalization or otherwise. The holders of the Series A Preferred Stock shall not possess any voting rights. The Series A Preferred Stock does not contain any redemption provision. The Series A Preferred Stock are entitled to receive in cash out of assets of the Company before any amounts shall be paid to the holders of any of shares of junior stock, an amount equal to the stated value plus any accrued and unpaid dividends thereon and any other fees due and owing.

On March 19, 2018, the Company designated 500,000 shares of Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”) Each share of Series B Preferred Stock is convertible into shares of the Company’s common stock with a stated value of $10 per share of Series B Preferred Stock and conversion price of $0.10 per share of common stock, subject to adjustment in the event of stock split, stock dividends, and recapitalization or otherwise. The Series B Preferred Stock votes with the common stock on a fully as converted basis. The Series B Preferred Stock does not contain any redemption provision. The Series B Preferred Stock are entitled to receive in cash out of assets of the Company before any amounts shall be paid to the holders of any of shares of junior stock, an amount equal to the stated value plus any accrued and unpaid dividends thereon and any other fees due and owing.

On August 1, 2018, the Company designated 1,000 shares of Series C Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”) Each share of Series C Preferred Stock is convertible into shares of the Company’s common stock with a stated value of $200 per share of Series C Preferred Stock and conversion price of $0.05 per share of common stock, subject to adjustment in the event of stock split, stock dividends, subsequent equity sales with lower effective price, and recapitalization or otherwise. The Series C Preferred Stock votes with the common stock on a fully as converted basis. The Series C Preferred Stock does not contain any redemption provision. The Series C Preferred Stock are entitled to receive in cash out of assets of the Company before any amounts shall be paid to the holders of any of shares of junior stock, an amount equal to the stated value plus any accrued and unpaid dividends thereon and any other fees due and owing. In October 2018, the Board of Directors of the Company approved and authorized an amendment to increase the number of designated authorized shares of the Series C preferred stock from 1,000 to 2,500 shares.

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 8 - Stockholders’ Equity (Deficit) (continued)~~

~~Share Exchange Agreement~~

On March 26, 2018, Gratitude Health, Inc. f/ka Vapir Enterprises, Inc., a corporation organized under the laws of Nevada (the “Acquiror” or the “Company”), Hamid Emarlou, the principal shareholder of the Acquiror (the “Acquiror Principal Shareholder”), Gratitude Health, Inc., a corporation organized under the laws of Florida (the “Acquiree” or “Gratitude Subsidiary”), and each of the Persons who are shareholders of the Acquiree (collectively, the “Acquiree Shareholders,” and individually an “Acquiree Shareholder”) entered into a Share Exchange Agreement pursuant to which the Acquiree Shareholders (who are the holders of all the issued and outstanding shares of common stock of the Acquiree (the “Acquiree Interests”)) have agreed to transfer to the Acquiror, and the Acquiror has agreed to acquire from the Acquiree Shareholders, all of the Acquiree Interests, in exchange for the issuance of 520,000 shares of Series A Preferred Stock and 500,000 shares of Series B Preferred Stock, to the Acquiree Shareholders (the “Acquiror Shares”), which Acquiror Shares shall, upon conversion into 102,000,000 shares of common stock of the Acquiror, constitute approximately 85.84% on a fully diluted basis of the issued and outstanding shares of Acquiror common stock immediately after the closing of the transactions on the terms and conditions as set forth in the Exchange Agreement and the closing of the Spin Off Agreement as described below.

Effective March 26, 2018, the Company acquired all the issued and outstanding shares of the Acquiree pursuant to the Exchange Agreement and the Acquiree became the Company’s wholly-owned subsidiary. As a result of the Exchange Agreement, for financial statement reporting purposes, the business combination between the Company and Acquiree has been treated as a reverse acquisition and recapitalization with the Acquiree deemed the accounting acquirer and the Company deemed the accounting acquiree under the acquisition method of accounting in accordance with FASB Accounting Standards Codification (“ASC”) Section 805-10-55. At the time of the Exchange Agreement, both the Company and Acquiror have their own separate operating segments. Accordingly, the assets and liabilities and the historical operations that are reflected in the consolidated financial statements after the Exchange Agreement are those of the Acquiree and are recorded at the historical cost basis of the Acquiree. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of the Acquiree which are recorded at historical cost. The results of operations of the Company are consolidated with results of operations of the Acquiree starting on the date of the Exchange Agreement. The equity of the consolidated entity is the historical equity of Gratitude Subsidiary retroactively restated to reflect the number of shares issued by the Company in the reverse acquisition.

The Merger has constituted a change of control or change in control, the majority of the Board of Directors changed with the consummation of the Merger. The Company issued to Acquiree shares of preferred stock which represented approximately 86% of the combined company on a fully converted basis after the closing of the Exchange Agreement and the Spin off Agreement as described below.

On the Closing Date, Acquiror Principal Shareholder entered into a Spin Off Agreement with Acquiror for the sale of the existing wholly owned Vapir, Inc. subsidiary of the Company in exchange for Acquiror Principal Shareholder’s 36,309,768 shares of Common Stock. The Spin Off Agreement closed on April 14, 2018. As such, the Company recognized the disposition of the Vapir business on the date of merger.

~~In March 2018, in connection with the Exchange Agreement, the Company issued 20,000 Series A Preferred stock for purchase price of $2,000.~~

In March 2018, in connection with the Exchange Agreement, the Company issued 500,000 Series A Preferred Stock for a purchase price of (i) $3,000 cash, (ii) the satisfaction of the convertible notes including accrued interest of $5,479 and total principal amount of $240,000 and the cancellation of all the stock warrants granted to the note holder pursuant to the Surrender and Exchange Agreement, (see Note 6) (iii) $260,000 additional funding in cash after the closing of an Exchange Agreement which is recorded as subscription receivable and (iv) the surrender and cancellation of certain notes and warrants owed by the Company prior to the merger pursuant to the Surrender and Exchange Agreement dated in March 2018 for a principal amount of $172,500 and accrued interest of $76,157. The subscription receivable of $260,000 was collected in April 2018. Such surrender of notes and warrants were done in connection with the Exchange Agreement which closed on March 26, 2018.

~~In connection with the Exchange Agreement, the Company issued 500,000 shares of Series B Preferred Stock to the founders who are the CEO and COO of the Company.~~

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 8 - Stockholders’ Equity (Deficit) (continued)~~

~~Sale of Preferred Stock~~

~~In March 2018, in connection with the Exchange Agreement, the Company issued 20,000 Series A Preferred stock for purchase price of $2,000.~~

~~In March 2018, in connection with the Exchange Agreement, the Company received gross proceeds for a total of $263,000 for the issuance of 490,000 Series A Preferred Stock (see note above).~~

~~In August 2018, the Company sold 750 shares of Series C Preferred stock for total proceeds of $150,000.~~

~~In October 2018, the Company sold 750 shares of Series C Preferred stock for total proceeds of $150,000.~~

~~In December 2018, the Company sold 750 shares of Series C Preferred stock for total proceeds of $150,000.~~

~~Common Stock~~

In connection with the Exchange Agreement, the Company is deemed to have issued 53,141,833 shares of common stock which represents the outstanding common shares of the Company prior to the closing of the Merger.

~~In connection with the Spin Off Agreement which closed on April 14, 2018, the Company cancelled the 36,309,768 shares.~~

In April 2018, the Company granted an aggregate of 2,600,000 shares of the Company’s common stock to various consultants and service providers for services rendered. The Company valued these common shares at the fair value of $234,000 or $0.09 per common share based on the closing trading price on the date of grant. The Company recorded stock-based compensation of $234,000 during the year ended December 31, 2018. In connection with these transactions, there were 2,600,000 shares of common stock to be issued as of December 31, 2018.

~~Common Stock Warrants~~

~~A summary of the Company’s outstanding stock warrants as of December 31, 2018 and changes during the period presented below:~~

Number of
Warrants Weighted Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life (Years)
Balance at December 31, 2017 12,000,000 $ 0.02 4.85
Granted 12,000,000 0.02 5.00
Cancelled (24,000,000 ) 0.10 4.70
Balance at December 31, 2018 - $ - -
Warrants exercisable at December 31, 2018 - $ - -
Weighted average fair value of warrants granted during the year ended December 31, 2018 $ 0.001

In March 2018 in connection with the merger, the Company entered into Surrender and Exchange Agreements with note holders whereby the note holders agreed to surrender the 12% convertible notes including accrued interest of $5,479 and a total principal amount of $240,000 and the cancellation of all the stock warrants granted to the note holders. Such surrender of notes and warrants was done in connection with the Exchange Agreement which closed on March 26, 2018 (see Note 6).

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 8 - Stockholders’ Equity (Deficit) (continued)~~

~~Common Stock Options~~

~~Stock option activity for the year ended December 31, 2018 is summarized as follows:~~

Number of Options Weighted Average Exercise
Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic
Value
Balance at December 31, 2017 - - - -
Recapitalization on March 26, 2018 1,940,000 0.10 2.80 -
Balance at December 31, 2018 1,940,000 0.10 2.79 -
Options exercisable at December 31, 2018 1,940,000 $ 0.10 2.04 $ -

~~As of December 31, 2018, all outstanding options are fully vested and there were $0 unrecognized compensation expense in connection with unvested stock options.~~

~~Note 9 - Commitments and Contingencies~~

~~License Agreement~~

In January 2018, the Company entered into a Standard Exclusive License Agreement (the “License Agreement”) whereby the licensor agreed to grant exclusive license to the Company for licensed patent owned or controlled by licensor. The licensed patent is related to tea polyphenols esters and analogs for cancer prevention and treatment. The term of this license shall begin on the effective date of this License Agreement and continue until the later of the date that no licensed patent remains a pending application or an enforceable patent, or the date on which Company’s obligation to pay royalties expires pursuant to the License Agreement. If the Company has not pursued a market or territory respecting the licensed patents within one year of the date of execution of this License Agreement and Licensor has received notice that a third party wishes to negotiate a license for such market or territory, Licensor may terminate the license granted in with respect to such market or territory upon sixty (60) days written notice to Licensee. The Company agreed to pay license issue fee of $5,000 within 30 days of the effective date which was paid in March 2018.

~~Additionally, the Company agreed to pay certain royalty payments as follows:~~

(i) three percent (3%) for Net Sales of Licensed Products, and Licensed Processes (all as defined in the License Agreement), for each product or process, on a country-by-country basis, for cumulative Net Sales up to one million dollars ($1,000,000); and

(ii) four percent (4%) for Net Sales of Licensed Products and Licensed Processes, for each product or process, on a country-by-country basis, for cumulative Net Sales from one million dollars ($1,000,000) to five million dollars ($5,000,000); and

~~(iii) five percent (5%) for Net Sales of Licensed Products and Licensed Processes, for each product or process, on a country-by-country basis, Net Sales over five million dollars ($5,000,000).~~

~~Furthermore, the Company agrees to pay Licensor minimum royalty payments, as follows:~~

Payment Year
$ 20,000 2018
$ 50,000 2019
$ 100,000 2020 and every year thereafter on the same date, for the life of this License Agreement.

~~The minimum royalty shall be paid in advance on a quarterly basis for each year in which this License Agreement is in effect. The first minimum royalty payment shall be due on March 31~~^st, 2018 and shall be in the amount of $5,000. The minimum royalty for a given year shall be due in advance and shall be paid in quarterly installments on March 31, June 30, September 30, and December 31 for the following quarters. As of December 31, 2018, the Company has accrued royalty of $10,000 which is included in accounts payable and accrued expenses on the consolidated balance sheets.

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 9 - Commitments and Contingencies (continued)~~

In April 2018, the Company entered into a lease agreement for its corporate facility in Palm Beach Gardens, Florida. The lease is for a period of 36 months commencing in July 2018 and expiring in July 2021. Pursuant to the lease agreement, the lease requires the Company to pay a monthly base rent of $2,154 plus a pro rata share of operating expenses beginning July 2018. The base rent is subject to annual increases beginning the 2nd and 3rd lease year as defined in the lease agreement.

~~Future minimum rental payments required under operating leases are as follows:~~

2019 $ 26,238
2020 27,024
2021 13,710
$ 66,972

~~Note 10 - Concentrations of Revenue and Supplier~~

During the year ended December 31, 2018, beverage sales to a customer represented approximately 99% of the Company’s net sales. There was no revenues generated during the period from inception (September 14, 2017) to December 31, 2017.

~~As of December 31, 2018, accounts receivable from one customer represented approximately 98% of total accounts receivable. There was no accounts receivable as of December 31, 2017.~~

The Company purchased inventories and products from two vendors totaling approximately $65,900 (45% of the purchases at 12% and 33%). There was no purchases during the period from inception (September 14, 2017) to December 31, 2017.

~~Note 11 - Income Taxes~~

The Company has incurred aggregate net operating losses of approximately $834,656 for income tax purposes as of December 31, 2017. The net operating loss carries forward for United States income taxes, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, through 2037. 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.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act decreases the U.S. corporate federal income tax rate from a maximum of 35% to a flat 21% effective January 1, 2018. The Act also includes a number of other provisions including, among others, the elimination of net operating loss carrybacks and limitations on the use of future losses, the repeal of the Alternative Minimum Tax regime and the repeal of the domestic production activities deduction. These provisions are not expected to have a material effect on the Corporation. Given the significant complexity of the Act and anticipated additional implementation guidance from the Internal Revenue Service, further implications of the Act may be identified in future periods.

~~The items accounting for the difference between income taxes at the effective statutory rate and the provision for income taxes were as follows:~~

Year Ended
December 31,
2018

Period from September 14,
2017 (inception) to December 31, 2017

Income tax benefit at U.S. statutory rate of 21% $ (213,906 ) $ (20,249 )
Non-deductible expenses 55,378 3,500
Increase in valuation allowance 158,528 16,749
Total provision for income tax $ - $ -

~~GRATITUDE HEALTH, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~December 31, 2018~~

~~Note 11 - Income Taxes (continued)~~

~~The Company’s approximate net deferred tax asset was as follows:~~

Deferred Tax Asset:
December 31,
2018

December 31,
2017

Net operating loss carryforward $ 175,277 $ 16,749
Valuation allowance (175,277 ) (16,749 )
Net deferred tax asset $ - $ -

The Company provided a valuation allowance equal to the deferred income tax asset for the year ended December 31, 2018 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. The increase in the allowance was $158,528 in fiscal 2018. 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 the recent tax law and 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 2018 Corporate Income Tax Returns are subject to Internal Revenue Service examination.

~~Note 12 - Subsequent events~~

On February 13, 2019, the Company issued an unsecured promissory note for principal borrowings of $50,000. The 10% promissory note and all accrued interest were due on February 22, 2019. Any amount of principal or interest on this promissory note which was not paid when due shall bear interest at the rate of 20% per annum from the due date. In March 2019, this note was repaid in full using proceeds from the issuance of convertible notes as discussed below.

On March 7, 2019, the Company closed a financing transaction by entering into a Securities Purchase Agreement (the “ Securities Purchase Agreement ”) with an accredited investor for purchase of a promissory note (the “Note” and with other notes issued under the Securities Purchase Agreement, the “Notes”) an aggregate principal amount of $275,000 and gross cash proceeds of $250,000 (out of an aggregate of up to $550,000 principal amount of Notes representing $1.10 of note principal for each $1.00 of proceeds which can be purchased in subsequent closings in minimum amounts of $25,000). The Notes are convertible into common stock of the Company at a $0.05 conversion price, which is subject to standard anti-dilution adjustments and price protection, whereby upon any issuance of securities of the Company at a price below $0.05, the conversion price of the Notes is adjusted to the new lower issuance price. The Notes have a term of one year from the date of issuance. The Company received gross proceeds of $250,000 of which $50,000 was used to pay the promissory note issued in February 2019 (see above).

The Securities Purchase Agreement contains customary and usual provisions for a transaction of this type including, but not limited to, representations and warranties by the Company regarding its business and financial condition and jurisdiction and choice of governing law in New York. Under the Securities Purchase Agreement, for three years from the closing date, each Purchaser that still owns outstanding Securities shall have the right to participate in any Subsequent Financing up to an amount equal to 100% of the Subsequent Financing, on the same terms, conditions and price provided for in the Subsequent Financing. The Purchasers also are granted piggyback registration rights on all future registration statements. During the Protection Period (as defined in the Securities Purchase Agreement), there are prohibitions limiting the ability to issue any variable rate debt or equity instruments (or enter into an agreement which has a variable rate feature for the purchase price of any such instrument) and for so long as there Shares outstanding, the investors holders have most favored nations protection for future issuances of securities as well as there being certain prohibitions against issuance of indebtedness by the Company. The Company shall also reserve the number of shares of stock at all times for issuance into which the Notes can be converted.

~~Item 9.~~

~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~

~~None.~~

~~Item 9A.~~

~~Controls and Procedures.~~

Management’s Report on Internal Control over Financial Reporting

AsWe maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this ~~Annual Report,~~annual report on Form 10-K. Based on this evaluation, our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer performed an evaluation~~principal financial officer concluded that as of ~~the effectiveness~~December 31, 2020, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures ~~as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on the evaluation and the identification of the~~was due to material weaknesses, which we identified, in our report on internal control over financial ~~reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2018, the Company’s disclosure controls and procedures were not effective.~~reporting.

~~Management~~Internal Control over Financial Reporting

Management’s annual report on internal control over financial reporting

Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting as(as defined in ~~Rules~~Rule 13a-15(f) ~~and 15d-15(f) of~~under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with US GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of complianceAct). Our management, with the ~~policies or procedures may deteriorate.~~

~~Our Chief Executive Officer~~participation of our principal executive officer and ~~Chief Financial Officer have assessed~~principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, ~~2018. Management’s assessment~~2020. Our management’s evaluation of our internal control over financial reporting was ~~conducted using~~based on the ~~criteria~~framework in Internal ~~Control over Financial Reporting (“ICFR”) – Guidance for Smaller Public Companies (2006)~~Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway ~~Commission (“COSO”) and Management has determined~~Commission. Based on this evaluation, our management concluded that ~~the ICFR~~as of December 31, 2020, our internal control over financial reporting was not ~~effective~~effective.

The ineffectiveness of our internal control over financial reporting was due to the following material ~~weaknesses.~~weaknesses which we identified in our internal control over financial reporting:

	(1)	the lack of multiples levels of management review on complex accounting and financial reporting issues, and business transactions,

	(2)	a lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function as a result of our limited financial resources to support hiring of personnel and implementation of accounting systems, and

	(3)	a lack of operational controls and lack of controls over assets by the acquired subsidiaries.

We expect to be materially dependent upon third parties to provide us with accounting consulting services related to accounting services for the foreseeable future. We believe this will be sufficient to remediate the material weaknesses related to our accounting discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result in errors in our consolidated financial statements which could lead to a restatement of those financial statements.

A material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of ~~the Company’s~~our annual or interim financial statements will not be prevented or detected on a timely basis. ~~In connection with management’s assessment~~

Limitations on Effectiveness of Controls

Our principal executive officer and principal financial officer do not expect that our disclosure controls or our internal control over financial reporting ~~as required under Section 404~~will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the ~~Sarbanes-Oxley Act~~control system are met. Further, the design of ~~2002, we identified~~a control system must reflect the ~~following material weaknesses in our internal control over financial reporting as~~fact that there are resource constraints, and the benefits of ~~December 31, 2018:~~

	~~(1)~~	Lack of an independent audit committee or audit committee financial expert. Although our board of directors serves as the audit committee it has no independent directors. These factors are counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management.

	~~(2)~~	We do not have sufficient experience from our accounting personnel with the requisite U.S. GAAP public company reporting experience that is necessary for adequate controls and procedures due to our limited resources with appropriate skills, training and experience to perform the review processes to ensure the complete and proper application of generally accepted accounting principles.

	~~(3)~~	~~Need for greater integration, oversight, communication and financial reporting of the books and records of our office.~~

	~~(4)~~	Lack of sufficient segregation of duties such that the design over these areas relies primarily on detective controls and could be strengthened by adding preventative controls to properly safeguard company assets.

~~Remediation~~controls must be considered relative to their costs. Because of ~~Material Weaknesses in Internal Control over Financial Reporting~~

~~As a smaller reporting company,~~ the ~~Company does not have the resources to install a dedicated staff with deep expertise~~inherent limitations in all ~~facets~~control systems, no evaluation of ~~SEC disclosure~~controls can provide absolute assurance that all control issues and ~~US GAAP compliance. As is~~instances of fraud, if any, within our company have been detected. These inherent limitations include the ~~case with many small businesses, the Company will continue to work with its external consultants~~realities that judgments in decision-making can be faulty, and ~~attorneys as it relates to new accounting principles and changes to SEC disclosure requirements. The Company has found~~ that this approach worked well in the past and believes it to be the most cost effective solution available for the foreseeable future. We are seeking mitigating measures commencing with our recent appointmentbreakdowns can occur because of a ~~majority independent board~~simple error or mistake. Additional controls can be circumvented by the individual acts of ~~directors.~~some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

This ~~Annual Report~~annual report does not include an attestation report of ~~the Company’s~~our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the ~~Company’s~~company’s registered public accounting firm pursuant to SEC rules that permit ~~the Company~~us to provide only management’s report on internal control over financial reporting in this annual ~~report.~~report on Form 10-K.

Changes in ~~Internal Controls Over Financial Reporting~~internal control over financial reporting

There ~~have been~~was no ~~changes~~change in ~~our~~the Company’s internal ~~controls~~control over financial reporting or(as defined in ~~other factors~~Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) during the ~~fourth fiscal quarter~~year ended December 31, ~~2018,~~2020 that has materially affected, or is reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

~~ITEM 10.~~

~~DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE~~

Board of Directors and Executive Officers

The following table sets forth the names, positions and ages of our directors and executive officers as of the date of this report.

Name Age Position Commencement of Service As Officer/Director
Roy G. Warren 64 Chairman and CEO and Director 2018
Andrew Schamisso 56 President and COO 2018
Jack Shea 69 Director 2018
Mike Edwards 59 Director 2018
Bruce Zanca 58 Director 2018

Name	Age	Position
Zalmi Duchman	41	Chief Executive Officer and Secretary and Director
Michael Finkelstein	66	Director
Michael Novielli	56	Director

~~Set~~Biographical information concerning the directors and executive officers listed above is set forth ~~below are brief accounts of the~~below. The information presented includes information each individual has given us about all positions they hold and their principal occupation and business experience ~~during~~for the past five ~~years~~years. In addition to the information presented below regarding each director’s specific experience, qualifications, attributes, and skills that led our board to conclude that he should serve as a director, we also believe that all of ~~each director~~our directors have a reputation for integrity, honesty, and ~~executive officer~~adherence to high ethical standards. Each has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our company and our board of directors.

Zalmi Duchman. Mr. Duchman has been the Company’s Chief Executive Officer and Secretary, and a member of the ~~Company.~~

~~Roy G. Warren~~,Board of Directors of the Company since April 20, 2020. Mr. Duchman also serves as the Chief Executive Officer of the Company’s wholly owned subsidiary Home Bistro Holdings since March 2018 and a member of its Board of Directors since March 2018. Mr. Duchman founded The Fresh Diet, Inc. in 2005 and served as its Chief Executive Officer until July 2013 and its Chairman of the Board from July 2013 until its August 2014 acquisition. Mr. Duchman and ~~CEO~~

Roy Warren was founder and CEO of a public company called Bravo Brands from 1997 to 2007. There, he developed America’s first vitamin-fortified, branded consumer friendly flavored milk line. Having introduced shelf stable bottled flavored milk in 2003, Roy ledThe Fresh Diet, Inc. have earned numerous prestigious accolades over the ~~company to a market capitalization that increased from approximately $20mm to over $300mm. Roy left Bravo after 10~~ years, and immediately, in late 2007, founded Attitude Drinks to develop functional protein delivery drinks made with ultra-filtered milk with which he was involved until 2015, when he temporarily stepped back from business pursuits for personal reasons. After this temporary hiatus, in 2017, Roy began his quest to develop drinks specifically intended to promote healthy aging and, thus, Gratitude Health,including making the Inc. ~~was born.~~

~~Andrew Schamisso~~~~, President and COO~~

Andy Schamisso was the President and Founder of Inko’s Tea from 2002 to 2015, creating that brand for the health-conscious consumer and focusing on low carb/calorie and totally unsweetened teas. He was the first to introduce RTD white tea to the beverage market and his drive to provide great-tasting, organic and healthy alternative drinks is evident in every offering Gratitude provides. Andy successfully commercialized the line of all natural RTD white teas and sold the company and drink brand to a private brand developer in 2015. He created the brand for the discerning consumer and the entire offerings (17 skus in all) were low carb/calorie and/or totally unsweetened. Andy was the first to introduce RTD white tea to the beverage market and white tea is now offered by all “Big Three” companies.

~~Jack Shea,~~ ~~Independent Director~~

Jack Shea has been involved in the sales and marketing of food and beverages for over 35 years. Mr. Shea has directed the sales and marketing efforts of soft drink bottlers, RTD tea brewers, beer, wine and spirits importers and shelf stable milk companies. He has also led the US divisions of companies from China, Israel and the United Kingdom. Since 2009, Mr. Shea has been Director of Parish Ministries of Religious education at Saints John and Paul Parish and School in Mamaroneck, NY. Mr. Shea was ordained a Deacon in the Catholic Church500 list consecutively in 2010, 2011 and ~~now devotes his talents~~2012, the Forbes Top 20 Most Promising U.S. Companies List in 2011 and ~~abilities to taking care~~2012, as well as being an Ernst & Young Entrepreneur of the ~~poor~~Year nominee in both 2009 and ~~the sick and also teaching in a Catholic School. Deacon Shea~~2011. The Miami Herald named Duchman as one of Miami’s leading “20 under 40”. Mr. Duchman is well ~~suited~~qualified to ~~be our director~~serve as ~~a result of~~the Chief Executive Officer due to his ~~long~~extensive experience in the ~~food~~management and ~~beverage industry.~~operation of companies in the Company’s industry, and his previous leadership experience as an entrepreneur, chairman and chief executive officer.

~~Mike Edwards~~Michael Finkelstein~~, Independent Director~~

~~Mike Edwards, who~~. Mr. Finkelstein has been a member of Board of Directors of the Company since April 20, 2020. From 2013 to present, Mr. Finkelstein has consulted with family offices in New York City and Europe as a reorganization and problem-solving specialist and has founded and run a high-quality catering business. From 2003 to 2013, Michael co-founded a “pipe fund” with a U.S. partner which grew at its peak into a $100 million dollar entity and was liquidated in 2013. His public accounting, financial and taxation experience is primarily derived from his time at Arthur Andersen & Co. where he rose to the ~~current owner~~high level of ~~Car Pro Auto Spa~~income tax manager. Mr. Finkelstein became one of Canada’s top producing investment advisors after departing public accounting and was a multiple award winner at his firm in ~~Stuart, Florida, a position he has held since 2008,~~the investment services business. Michael is a ~~self-motivated, results-oriented entrepreneur~~graduate of McGill University with a Major in Economics. Michael received his diploma in public accounting after his B.A. at McGill and ~~has extensive executive and marketing professional experience with over 26 years~~successfully completed the chartered accountancy exams in business development, promotion, strategic planning, and finance. He previously worked as the Executive Vice President of International Sales and Marketing at the Bravo Brands International Corporation, an international functional drink marketing firm operational in the Americas, Australia, Europe, and Asia. He also has more than two decades of experience in private financial banking.

Canada. Mr. Edwards also worked as an Executive for Peregrine Enterprises, a market research company that provided custom study design and implementation for a wide range of Fortune 500 clients. He holds a Bachelor of Science degree from Florida State University, and has completed training in market research, banking, sales management, commercial lending, and credit analysis. He also served in the United States Navy ReserveFinkelstein is well qualified to serve as a ~~Lieutenant for five years. Mr. Edwards is suited to sit on the Company’s board due to his experience in private financial banking and his industry experience with Bravo Brands.~~

~~Bruce Zanca~~~~, Independent Director~~

Over the course of a career spanning more than 30 years, Bruce Zanca has developed a core competency in building award-winning “earned media campaigns” for companies to gain positive exposure in broadcast, print, and social media. He worked as a “C-Suite” communications executive at four publicly traded businesses; assisting three companies to complete initial public offerings and helping to bring one public company private. He served as a White House spokesperson and communications advisor for three presidential administrations. He has lead teams of PR experts to win numerous awards including four American Business Awards “Stevies” and a Telly award for video production. Bankrate, Inc (NASDAQ:RATE) in July 2004 Bruce Zanca joined Bankrate as Senior Vice President/Chief Marketing Communications Office. Among Zanca’s other responsibilities is managing the company’s communications and investor relations efforts. In July 2011 Bankrate once again became a public company by making an initial public offering New York Stock Exchange. (NYSE: RATE) Zanca continued to manage the company’s investor relations programs until he retired from the company as of December 31, 2014. Since he has retired, he has headed Zanca PR & Corporate Communications, a public relations and corporate communications firm, which has the ability to lead the public opinion for all aspects of external communications: Investor Relations, television including the major television networks and news shows (CNN, MSNBC, CSPAN, Fox News, etc.), internet, social media, and print. In 2011 Bruce J Zanca was recruited and elected as a board member/director to the charity Scenarios USA, (501(c)(3)). He was elected chairmanmember of the ~~board in 2013 and served in that position until his term ended at the end~~Board of 2015. Founded in 1999, scenarios usa is a national non-profit organization that uses writing and film to foster youth leadership, advocacy and self-expression in students across the country with a focus on marginalized populations and underserved communities. The Company believes that Mr. Zanca has the qualifications to act as a director forDirectors of the Company due to his extensive experience in the financial and accounting industries.

Michael Novielli. Mr. Novielli has been a member of the Company’s Board of Directors since April 20, 2020. Since January 2020, Mr. Novielli has been a Managing Partner of Hudson View Capital Management, a corporate advisory and investment firm. From 1996 to 2019, he was a Managing Partner of Dutchess Capital which invested in over 200 growth-stage companies, with a total transaction value exceeding $1 billion. Mr. Novielli was a member of the firm’s investment committee and also served on the board of directors of the firm’s portfolio companies. He helped engineer the firm’s expansion into Europe, Asia, Australia, and Latin America and also led the firm’s private to public ~~relations~~strategy, as well as restructurings and ~~public company~~workouts of its distressed portfolio, which included corporate divestitures, asset sales, ABCs, and bankruptcy. Mr. Novielli has over 30 years’ experience in asset management, corporate finance, advisory and investment banking. He began his investment career with PaineWebber (now UBS), and held previous positions in corporate accounting and finance with PHH Corp., a Fortune 100 company. Mr. Novielli graduated with a BS in Business from the University of South Florida and completed post-graduate Business studies at Colorado State University. Mr. Novielli is well qualified to serve as a member of the Board of Directors of the Company due to his extensive financial and investment experience.

Involvement in Certain Legal Proceedings

ToZalmi Duchman is the founder of Fresh Diet Inc. (“Fresh Diet”). On or around July 29, 2016, Fresh Diet undertook an assignment of all of its assets to Seth Heller, as assignee for the benefit of Fresh Diet’s creditors (“Fresh Diet Assignee”). On August 1, 2016, Fresh Diet Assignee initiated state-level insolvency proceedings on behalf of Fresh Diet (an assignment for the benefit of creditors), captioned In re The Fresh Diet, Inc., Case No. 2016-019789-CA-01 (Fla. 11th Cir. Ct.) before the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida.

Except as set forth above, to the best of our knowledge, ~~neither~~none of our ~~sole director and~~directors, executive officer or ~~our~~ promoter and control person (as identified under “Certain Relationships and Related Transactions”) has, during the past ten years:

●

been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

●

had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation, or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

●

been subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

●

been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

●

been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

●

been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity, or organization that has disciplinary authority over its members or persons associated with a member.

Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates, or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

Committees; Audit Committee Financial Expert

Our board does not have an Audit Committee or other committees.

Changes in Nominating Procedures

None.

~~Significant Employees~~

We have no employees who are not executive officers, but who are expected to make a significant contribution to our business. We intend in the future to hire independent contractors on an as needed basis.

Family Relationships

None of the directors and officers is related to any other director or officer of the Company.

Board Oversight in Risk Management

Our Chief Executive Officer, who is our principal executive officer, also serves ~~as Chairman of~~on the Board of Directors, and we do not have a lead director. In the context of risk oversight, we believe that our selection of one person to serve in both positions provides the Board with additional perspective which combines the operational experience of a member of management with the oversight focus of a member of the Board. The business and operations of our Company are managed by our Board as a whole, including oversight of various risks, such as operational and liquidity risks that our Company faces. Because our Board includes a member of our management, this individual is responsible for both the day-to-day management of the risks we face as well as the responsibility for the oversight of risk management.

~~Section 16(a) Beneficial Ownership Reporting Compliance~~ITEM 11. EXECUTIVE COMPENSATION

~~Not disclosed herein.~~

~~ITEM 11.~~

~~EXECUTIVE COMPENSATION~~

The following table sets forth information concerning the total compensation paid during the ~~year~~years ended December 31, ~~2018~~2020 and ~~for the period from inception (September 14, 2017) to December 31, 2017.~~2019.

	(i)	our principal executive officer or other individual serving in a similar capacity during the ~~fiscal year 2018 and for the period from inception (September 14, 2017) to~~years ended December 31, ~~2017 (“2017”);~~2020 and 2019;

	(ii)	our ~~two most highly compensated~~named executive officers ~~other than our principal executive officers who were serving as executive officers at~~during the years ended December 31, ~~2018~~2020 and ~~2017 whose compensation exceed $100,000; and~~2019;

	(iii)	~~up to two additional~~ individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer ~~at December 31, 2018. Compensation information is shown for~~during the ~~fiscal year~~years ended December 31, ~~2018:~~2020 and 2019:

~~2018~~ SUMMARY COMPENSATION TABLE

FOR OUR NAMED EXECUTIVE OFFICERS

Name and Principal Position Year Salary Bonus Stock
Awards Option
Awards All Other
Compensation Total
Roy Warren 2018 $ 106,173 $ — $ — $ — $ — $ 106,173
Chief Executive Officer (1) 2017 $ 20,000 $ — $ 7,500 $ — $ — $ 27,500
Andrew Schamisso 2018 106,054 — — — — $ 106,054
Chief Operating Officer (2) 2017 $ 18,000 $ — $ 7,500 $ — $ — $ 25,500

Name and Principal Position	Year	Salary		Bonus		Stock Awards			Option Awards		All Other Compensation		Total
Zalmi Duchman	2020	$	43,750	$	—	$	97,720	(2)	$	—	$	—	$	141,470
Chief Executive Officer;	2019	$	1	$	—	$	—		$	—	$	—	$	1
Chief Executive Officer (1)

Roy G. Warren	2020	$	—	$	—	$	—		$	—	$	—	$	—
Former Chief Executive Officer (3)	2019	$	50,769	$	—	$	—		$	—	$	—	$	50,769

Roy G. Warren, Jr.	2020	$	—	$	—	$	—		$	—	$	—	$	—
Former Chief Operating Officer (4)	2019	$	—	$	—	$	—		$	—	$	—	$	—

Andrew Schamisso	2020	$	—	$	—	$	—		$	—	$	—	$	—
Former President (5)	2019	$	—	$	—	$	—		$	—	$	—	$	—

(1)	Mr. ~~Warren~~Duchman was appointed to serve as the Chief Executive Officer of the Company on April 20, 2020 and continue to serve as the Chief ~~Financial~~Executive Officer ~~and a director on March 29, 2018. We have no employment agreement with Mr. Warren.~~of Home Bistro Holdings.

(2)	Mr. ~~Schamisso~~Duchman was ~~appointed~~granted 4,746 shares of Home Bistro Holdings common stock with grant date fair value of $97,720 as ~~President~~bonus in April 2020. These shares of Home Bistro Holdings common stock were converted into 2,242,924 shares of the Company’s common stock post-merger and post-reverse stock split.

(3)	Roy G. Warren was the Chief Executive Officer of the Company from March 29, 2018 until his death on July 1, 2019.

(4)	Roy G. Warren, Jr. was the Chief Operating Officer and a director of the Company from August 9, 2019 until his resignation on April 20, 2020.

(5)	Mr. Schamisso was the President of the Company from March 29, ~~2018. We have no employment agreement with Mr. Schamisso.~~2018 until his termination on April 9, 2020.

Employment Agreement with Executives

~~We have not~~On February 20, 2018, the Home Bistro Holdings entered into an employment ~~agreements~~agreement (the “Employment Agreement”) with ~~our officers~~Zalmi Scher Duchman to serve as the Company’s Chief Executive Officer, the term of which runs for three years includes an annual salary of $1.00 for the first year which shall be increased in the second and ~~directors. Additionally, we~~third year of employment to an amount mutually approved by Mr. Duchman and the Company’s Board of Directors. Thereafter, the Employment Agreement shall be renewed upon the mutual agreement of Mr. Duchman and Company. In connection with this Employment Agreement, the Company issued 7,643,239 (retroactively restated to reflect shares issued in Merger and post reverse stock split) shares of restricted common stock with a grant date fair value of $549,882, as a sign-on bonus. The Company shall have ~~not approved any retirement benefit plan, termination or severance provisions~~the right and option to repurchase the stock at par value of $0.001 if Mr. Duchman is terminated for ~~any~~cause; (i) all of ~~our named executive officers.~~the shares shall be eligible for stock repurchase if terminated for cause within the first year; (ii) 2/3 of the shares shall be eligible for stock repurchase terminated for cause within the second year and; (iii) 1/3 of the shares shall be eligible for stock repurchase terminated for cause within the third year.

Outstanding Equity Awards at ~~December 31, 2018~~

On September 23, 2010, the Company’s board of directors adopted, and the Company’s stockholders approved the Equity Incentive Plan (the “Plan”), which covers 5,000,000 shares of common stock. The purpose of the Plan is to advance the interests of the Company by enhancing the ability of the Company to (i) attract and retain employees and other persons or entities who are in a position to make significant contributions to the success of the Company and its subsidiaries; (ii) reward such persons for such contributions; and (iii) encourage such persons or entities to take into account the long-term interest of the Company through ownership of shares of the Company’s common stock, par value $0.0001 per share. The Plan became effective on September 23, 2010 and will terminate on September 23, 2020.

Subject to adjustment as provided in the Plan, the aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the Plan shall be five million (5,000,000) shares; provided, however, that within sixty (60) days of the end of each fiscal year following the adoption of the Plan, the Board, in its discretion, may increase the aggregate number of shares of Common Stock available for issuance under the Plan by an amount not greater than the difference between (i) the number of shares of Common Stock available for issuance under the Plan on the last day of the immediately preceding fiscal year, and (ii) the number of shares of Common Stock equal to 15% of the shares of Common Stock outstanding on the last day of the immediately preceding fiscal year.

On January 12, 2016, the Company granted an aggregate of 2,480,000 five year options to purchase shares of common stock to the former CEO of the Company and six former employees of the Company. The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share. The 2,480,000 options were valued on the grant date at approximately $0.35 per option or a total of $728,000 using a Black-Scholes option pricing model with the following assumptions: stock price of $0.35 per share (based on the quoted trading prices on the date of grant), volatility of 286% (based from volatilities of similar companies), expected term of 5 years, and a risk-free interest rate of 1.55%. In March, August, and September of 2016, 40,000, 100,000, and 400,000, respectively, of these unvested options were forfeited due to the termination of employees. There remains 1,940,000 options which are fully vested upon the change of ownership as of December 31, 2018.

~~Outstanding Equity Awards at 2018~~2020 Fiscal Year-End ~~For~~for Named Executive Officers

The following table sets forth certain information concerning the outstanding equity awards as of December 31, ~~2018,~~2020, for each named executive officer.

Option Awards

Stock Awards

Name

Number of Securities Underlying Unexercised Options (#) Exercisable

Number of Securities Underlying Unexercised Options (#) Unexercisable

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options

Option Exercise Price($)

Option Expiration Date

Number of Shares or Units of Stock that Have Not Vested

Market Value of Shares or Units of Stock that Have Not Vested

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested

~~Roy Warren~~

Zalmi Duchman (1)

—

Roy G. Warren (2)

—

Roy G. Warren, Jr. (3)

—

Andrew Schamisso (4)

—

(1)	Mr. Duchman was appointed the Chief Executive Officer of the Company on April 20, 2020 and has been the Chief Executive Officer of Home Bistro Holdings, Inc since March 2018.

(2)	Roy G. Warren was the Chief Executive Officer of the Company from March 29, 2018 until his death on July 1, 2019.

(3)	Roy G. Warren, Jr. was the Chief Operating Officer and a director of the Company from August 9, 2019 until his resignation on April 20, 2020.

(4)	Mr. Schamisso was the President of the Company from March 29, 2018 until his termination on April 9, 2020.

~~Board~~

Compensation of Directors

The following table sets forth certain information regarding the compensation paid to our directors during the fiscal year ended December 31, 2020:

Name

Fees earned or cash paid

Stock Awards

Option Awards

All other compensation

Total

Zalmi Duchman

—

Michael Finkelstein

—

Michael Novielli

—

All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified, or until their earlier death, resignation, or removal. Officers are elected by and serve at the discretion of the board.

Our directors are reimbursed for expenses incurred by them in connection with attending board meetings, but they do not receive any other compensation for serving on the board.

~~ITEM 12.~~

~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~

Resignation, Retirement, Other Termination, or Change in Control Arrangements

We do not have arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following ~~table~~tables sets forth certain information regarding beneficial ownership of our common stock as of March ~~22, 2019~~15, 2021 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent of the outstanding shares of our common stock, (ii) each director, executive officer, and director nominee, and (iii) all of our directors and executive officers ~~and director nominees~~ as a group.

~~Beneficial ownership~~The number of shares of common stock beneficially owned by each person is determined ~~in accordance with~~under the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, ~~and generally~~beneficial ownership includes any shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days after the date hereof, through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to ~~securities. All share ownership figures include~~the shares set forth in the following table. The inclusion herein of ~~our Common Stock issuable upon securities convertible or exchangeable into~~any shares ~~of our Common Stock within sixty (60) days of the share exchange, which are~~ deemed ~~outstanding and~~ beneficially owned ~~by such person for purposes~~does not constitute an admission of ~~computing his or her percentage ownership, but not for purposes of computing the percentage~~beneficial ownership of ~~any other person.~~those shares.

~~Combined~~ Common Stock ~~and Series A, Series B and Series C Preferred Stock on an as Converted Basis~~

Name and Address Beneficial
Ownership Percentage of Class (1)

Officers and Directors
Roy G. Warren, 11770 US Highway One, suite E303, Palm Beach Gardens, FL 33408 (1) 25,000,000 19.16 %
Andrew Schamisso, 11770 US Highway One, suite E303, Palm Beach Gardens, FL 33408 (1) 25,000,000 19.16 %

All officers/directors as a group (2 persons) 50,000,000 38.32 %
Alpha Capital Anstalt, Lettstrasse 32, FL-9490 Vaduz, Furstentums, Liechtenstein (2) 13,030,163 9.99 %

Name and Address	Beneficial Ownership		Percentage of Class (1)
Officers and Directors
Zalmi Duchman, 4014 Chase Avenue, #212 Miami Beach, FL 33140 (2)		8,956,164		46.11	%
Michael Finkelstein, 4014 Chase Avenue, #212 Miami Beach, FL 33140 (3)		115,066		*
Michael Novielli, 4014 Chase Avenue, #212 Miami Beach, FL 33140 (4)		934,516		4.81	%
All officers/directors as a group (3 persons)		10,005,746		51.52	%

*	Less than 1%.

(1)	Based on shares of common stock outstanding and common stock issuable of ~~130,432,065~~19,422,300 shares as of March ~~22, 2019 assuming all~~18, 2021.

(2)	All of shares of ~~Series A Preferred~~Common Stock ~~Series B Preferred Stock,~~are held by Fresh Brands LLC, a Delaware limited liability company (“Fresh Brands”). Mr. Duchman and ~~Series C Preferred Stock were converted.~~ his wife own 100% of the membership interests in Fresh Brands in tenancy-by-entirety, and accordingly, Mr. Duchman has shared voting power and shared dispositive power over such shares.

(3)	All shares of Common Stock owned by ~~Messrs. Warren~~Whalehaven Capital Fund Ltd. Mr. Finkelstein is the Managing Partner of Whalehaven Capital Fund Ltd and ~~Schamisso are in the form of Series B Preferred Stock which is convertible into common stock in a ratio of 100~~thus has sole voting and sole dispositive power over such shares.

(4)	All shares of ~~common stock for each~~Common Stock owned by Dutchess Capital Partners LLC, an entity which Mr. Novielli is the sole managing partner and has sole voting and dispositive control over the Common Stock owned it (“DCP”) and excludes all warrants held by Mr. Novielli through DCP and Dutchess Strategic Fund, LLC Each of the foregoing warrants were issued on April 20, 2020 and may be exercised on or prior to April 20, 2030 at a price of $0.001 per share of ~~preferred stock converted. The Series B Preferred Stock votes with the common stock on a fully as converted basis.~~Common Stock.

~~(2)~~

Based on footnote (1) with regard to the 9.99% beneficial ownership limitation, the number of shares issuable upon conversion would be limited to 13,030,163. Konrad Ackermann is the director of Alpha Capital Anstalt.

~~Series A Preferred Stock~~

Name and Address Beneficial
Ownership Percentage of Class (1)

Alpha Capital Anstalt, Lettstrasse 32, FL-9490 Vaduz, Furstentums, Liechtenstein 490,000 94.23 %

~~(1)~~

Based on 520,000 shares of Series A Preferred Stock issued and outstanding as of March 22, 2019. The Series A Preferred Stock is nonvoting and contains blocker provisions such that the Preferred Shares held by a holder shall not be convertible by such Holder to the extent (but only to the extent) that such Holder or any of its affiliates would beneficially own in excess of 9.99% of the Common Stock. Konrad Ackermann is the director of Alpha Capital Anstalt.

~~Series B Preferred Stock~~

Name and Address Beneficial
Ownership Percentage of Class (1)

Roy G. Warren 250,000 50 %
Andy Schamisso 250,000 50 %
Officers and directors as a group 500,000 100 %

~~Series C Preferred Stock~~

Name and Address Beneficial
Ownership Percentage of Class (1)

Alpha Capital Anstalt, Lettstrasse 32, FL-9490 Vaduz, Furstentums, Liechtenstein 2,250 100.00 %

~~(1)~~

Based on 2,250 shares of Series C Preferred Stock issued and outstanding as of March 22, 2019. The Series C Preferred Stock is convertible into common stock in a ratio of 4,000 shares of common stock for each share of preferred stock converted. The Series C Preferred Stock votes with the common stock on a fully as converted basis. The Series C Preferred Stock contains blocker provisions such that the Preferred Shares held by a holder shall not be convertible by such Holder to the extent (but only to the extent) that such Holder or any of its affiliates would beneficially own in excess of 9.99% of the Common Stock. Konrad Ackermann is the director of Alpha Capital Anstalt.

Change in Control

There are no present arrangements known to the Company, including any pledge by any person of the Company’s securities, the operation of which may at a subsequent date result in a change in control of the Company, except as disclosed in the subsequent event footnote to the audited financial statements accompanying this Annual Report on Form 10-K.

~~ITEM 13.~~

~~CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Party Transactions

None.

Director Independence

Currently, we have ~~three~~one independent ~~directors.~~director. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

●

the director is, or at any time during the past three years was, an employee of the Company;

●

the director or a family member of the director accepted any compensation from the Company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

●

a family member of the director is, or at any time during the past three years was, an executive officer of the Company;

●

the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the Company made, or from which the Company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

●

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the Company served on the compensation committee of such other entity; or

●

the director or a family member of the director is a current partner of the Company’s outside auditor, or at any time during the past three years was a partner or employee of the Company’s outside auditor, and who worked on the company’s ~~audit.~~audit

~~Related Party Transactions~~ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

~~Our chief executive officer, Mr. Roy Warren, from time~~The following table sets forth the fees billed to ~~time, provided advances~~date to usour company for ~~working capital purposes. At December 31, 2018, and December 31, 2017, we had a payable to~~ the ~~officer of $0 and $345. These advances were short-term in nature and non-interest bearing.~~

~~In connection with the Exchange Agreement, we issued 500,000 shares of Series B Preferred Stock to the founders who are the CEO and COO of the Company.~~

In April 2018, we granted 100,000 shares of the Company’s common stock to the son of our CEO for services rendered. The Company valued these common shares at the fair value of $9,000 or $0.09 per common share based on the closing trading price on the date of grant. The Company recorded stock-based compensation of $9,000 during the yearyears ended December 31, ~~2018. These shares were to be issued as of December 31, 2018.~~

~~ITEM 14.~~

~~PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

~~Fees~~

~~Aggregate fees~~2020 and 2019 for professional services rendered ~~to us~~ by our independent registered public accounting firm ~~engaged~~D. Brooks and Associates CPAs, P.A.

Fees	2020		2019
Audit Fees	$	31,556	$	29,643
Audit—Related Fees		—		—
Tax Fees		—		—
Other Fees		1,031		—
Total Fees	$	32,588	$	29,643

Audit Fees

Audit fees were for professional services rendered for the audits of our annual financial statements and for review of our quarterly financial statements during the 2020 and 2019 fiscal years.

Audit-related Fees

This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees”.

Tax Fees

As our independent registered public accountants did not provide ~~accounting~~any services to us for tax compliance, tax advice and tax planning during the fiscal years ended December 31, ~~2018~~2020 and ~~2017 were:~~ 2019, no tax fees were billed or paid during those fiscal years.

Year Ended December 31, 2018 For the Period Ended December 31, 2017
Audit fees $ 28,582 $ 21,367
Audit related fees - -
Tax fees - -
All other fees - -
Total $ 28,582 $ 21,367

All Other Fees

Our independent registered public accountants did not provide any products and services not disclosed in the table above during the 2020 and 2019 fiscal years. As a result, there were no other fees billed or paid during those fiscal years.

Pre-Approval Policies and Procedures

Our entire board of directors, which acts as our audit committee, pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by our board of directors before the respective services were rendered.

Our board of directors has considered the nature and amount of fees billed by our independent registered public accounting firm and believe that the provision of services for activities unrelated to the audit is compatible with maintaining their respective independence.

~~Policy on Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors~~PART IV

Consistent with the SEC policies regarding auditor independence, our Board of Directors has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, our Board of Directors has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.

Prior to engagement of the independent auditor for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of the following four categories of services to the Board of Directors for approval.

1.~~Audit~~ ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULESservices include audit work performed in the preparation of year-end financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services, assistance reviewing our quarterly financial statements and SEC filings, and consultation regarding financial accounting and/or reporting standards.

2.~~Audit-Related~~ services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

3.~~Tax~~ services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

4.~~Other Fees~~ ~~are those associated with services not captured in the other categories.~~

~~ITEM 15.~~(a)	~~EXHIBITS AND FINANCIAL STATEMENT SCHEDULES~~1.	Financial Statements
		The financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to Financial Statements and Schedules” on page F-1 and included on pages F-2 thereon.

	2.	Financial Statement Schedules
		All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (the “Commission”) are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.

	3.	Exhibits (including those incorporated by reference).

~~(a) The following documents are filed as part of this Annual Report on Form 10-K.~~

~~Exh. No.~~Exhibit No		~~Exhibit~~ Description
~~31.1~~2.1		Agreement and Plan of Merger dated April 20, 2020, by and among Gratitude Health, Inc., Fresh Market Merger Sub, Inc. and Home Bistro, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2020).
3.1		Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.A.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 28, 2017).
3.2		Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 28, 2018).
3.3		Certificate of Amendment to Articles of Incorporation (incorporated by reference Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2020).
3.4		Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K/A filed with the SEC on March 31, 2015).
4.1		Certificate of Designation of Series A Preferred Stock (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 28, 2018).
4.2		Certificate of Designation of Series B Preferred Stock (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 28, 2018).
4.3		Certificate of Designation of Series C Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 21, 2018).
4.4		Amendment to Certificate of Designation of Series C Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 24, 2018).
10.1		Loan Authorization and Agreement, dated June 17, 2020, by and between Home Bistro, Inc. and the U.S. Small Business Administration (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on June 29, 2020).
10.2		Note, dated June 17, 2020, by Home Bistro, Inc. for the benefit of the U.S. Small Business Administration (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on June 29, 2020).
10.3		Security Agreement, dated June 17, 2020, by and between Home Bistro, Inc. and the U.S. Small Business Administration (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on June 29, 2020).
10.4		Form of Exchange Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2020).
10.5		Form of Warrant (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2020).
10.6		Form of Lock-Up and Leak-Out Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2020).
10.7		Put Option Agreement, dated April 20, 2020, between the Company and the stockholder named therein (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2020).
10.8		Securities Purchase Agreement dated December 18, 2020, by and between Home Bistro, Inc. and Labrys Fund, LP. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2021).
10.9		Self-Amortization Promissory Note, dated December 18, 2020, issued to Labrys Fund, LP. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2021).
10.10		Securities Purchase Agreement dated December 28, 2020, by and between Home Bistro, Inc. and FirstFire Global Opportunities Fund, LLC. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2021).
10.11		Self-Amortization Promissory Note dated December 28, 2020, issued to FirstFire Global Opportunities Fund, LLC. (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2021)
10.12		Registration Rights Agreement dated December 28, 2020, by and between Home Bistro, Inc. and FirstFire Global Opportunities Fund, LLC. (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2021)

10.13		Securities Purchase Agreement dated January 27, 2021, by and between Home Bistro, Inc. and Vista Capital Investments, LLC. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2021)
10.14		Convertible Note, dated January 27, 2021, issued to Vista Capital Investments, LLC. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2021)
10.15		Warrant to Purchase Shares of Common Stock, dated January 27, 2021, issued to Vista Capital Investments, LLC. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2021)
10.16		Securities Purchase Agreement dated January 12, 2021, by and between Home Bistro, Inc. and GS Capital Partners, LLC. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 19, 2021)
10.17		Self-Amortization Promissory Note, dated January 12, 2020, issued to GS Capital Partners, LLC. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 19, 2021)
31.1*		Section 302 Certification by the Registrant’s Principal Executive Officer and Principal Financial Officer
~~32.1~~32.1*		Section 906 Certification by the Registrant’s Principal Executive Officer and Principal Financial Officer
~~101.INS~~
101.ins		XBRL Instance Document
~~101.SCH~~101.sch		XBRL Taxonomy ~~Extension~~ Schema Document
~~101.CAL~~101.cal		XBRL Taxonomy ~~Extension~~ Calculation ~~Linkbase~~Document
~~101.DEF~~101.def		XBRL Taxonomy ~~Extension Definition~~ Linkbase Document
~~101.LAB~~101.lab		XBRL Taxonomy ~~Extension Presentation~~Label Linkbase Document
~~101.PRE~~101.pre		XBRL Taxonomy ~~Extension~~ Presentation Linkbase Document

Filed herewith.

ITEM 16. FORM 10-K SUMMARY

Not Applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	~~Gratitude Health, Inc.~~HOME BISTRO, INC.

Date: March ~~25, 2019~~22, 2021	By:	/s/ ~~Roy G. Warren~~Zalmi Duchman
		~~Roy G. Warren~~Zalmi Duchman
		Chief Executive Officer
		(Principal Executive Officer and
		Principal Financial Officer)

Pursuant to the requirements of the Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ ~~Roy G. Warren~~Zalmi Duchman
~~Roy G. Warren~~Zalmi Duchman	~~CEO, Chairman~~Chief Executive Officer and Secretary and Director	March ~~25, 2019~~22, 2021

/s/ ~~Andy Schamisso~~Michael Finkelstein
~~Andy Schamisso~~Michael Finkelstein	~~President and COO~~Director	March ~~25, 2019~~22, 2021

/s/ ~~Jack Shea~~Michael Novielli
~~Jack Shea~~Michael Novielli	Director	March ~~25,~~22, 2021

HOME BISTRO, INC. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

CONTENTS

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2020 and 2019	F-4

Consolidated Statement of Operations for the Years Ended December 31, 2020 and 2019	F-5

Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2020 and 2019	F-6

Consolidated Statement of Cash Flows for the Years Ended December 31, 2020 and 2019	F-7

Notes to Consolidated Financial Statements	F-8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Home Bistro, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Home Bistro, Inc. (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years ended December 31, 2020 and 2019, and the related consolidated financial statement footnotes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019 and the results of its operations and its cash flows for the years ended December 31, 2020 and 2019 in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 of the consolidated financial statements, the Company suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2 of the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee or those charged with governance and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Description of the Matter

During the year ended December 31, 2020, the Company issued convertible debt notes (the “Notes”) that allow the holders to convert the debt into common stock upon certain default events not within the control of the Company. The Company determined that the terms of the Notes included an embedded conversion option to be accounted for as derivative liabilities, which are required to be accounted for at fair value upon issuance and each reporting period, under the provisions of ASC 815-40 – Derivatives and Hedging – Contracts in an Entity’s Own Stock (ACS 815).

As disclosed in Notes 2 and 4 to the consolidated financial statements, the Company recorded initial derivative liabilities and debt discount of $212,344 from the embedded conversion options. Further, as of December 31, 2020, the Company recorded a gain on the change in fair value of the derivative liabilities of $32,315. There is no current observable market for these types of derivatives and, as such, the Company measured the initial and December 31, 2020 fair value of the embedded derivative liabilities using the Bionomial lattice valuation model. Such a model includes techniques that require management to make several assumptions with a high degree of subjectivity related to stock price, discount yield, risk free rates, volatility, probability of principal repayment in cash or common stock and probability of the Company defaulting on the convertible debt notes.

We identified the evaluation of the terms of financial instruments to determine whether the embedded conversion option met the definition of a derivative, the analysis of the accounting treatment, presentation and disclosures, and the valuation of the derivative liabilities as critical audit matters due to the complex nature of these financial instruments.

How the Critical Audit Matter Was Addressed in the Audit

The primary procedures we performed to address these critical audit matters included (a) reviewing and testing the Company’s conclusions as to whether the financial instruments included an embedded conversion option that met the definition of a derivative as defined by ASC 815 by evaluating and comparing the Company’s analysis and conclusions to authoritative and interpretive literature, (b) comparing the accounting treatment and presentation to that described by authoritative and interpretive literature, (c) testing the Company’s process and methodology for valuing the derivatives by comparing it to generally accepted methodologies for valuing derivatives, (d) testing the Company’s valuation of the derivatives by testing assumptions and data used in the valuation model including the term, volatility and risk free rate, (e) recomputing the fair value of the derivative at issuance and December 31, 2020 and (f) utilizing a valuation specialist to assist in evaluating the Company’s model, methodology, and significant assumptions.

We agreed with management’s final conclusions with regards to the accounting treatment of the embedded conversion options, valuations, accounting treatment, presentation, and disclosures.

D. Brooks and Associates CPAs, P.A

Palm Beach Gardens, Florida

March 22, 2021

We have served as the Company’s independent auditor since 2020

F-3

HOME BISTRO, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	December 31, 2020			December 31, 2019
ASSETS

CURRENT ASSETS:
Cash	$	447,354		$	7,137
Prepaid expenses and other current assets		28,588			916
Note receivable		5,000			-

Total Current Assets		480,942			8,053

OTHER ASSETS:
Property and equipment, net		2,728			-

Total Assets	$	483,670		$	8,053

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable	$	352,466		$	223,046
Accrued expenses and other liabilities		126,273			24,391
Convertible notes payable, net of debt discount		141,476			-
Note payable - in default		-			3,738
Notes payable - current portion		20,068			-
Advances payable		78,497			18,192
Derivative liabilities		180,029			-
Unredeemed gift cards		48,311			10,365

Total Current Liabilities		947,120			279,732

LONG-TERM LIABILITIES:
Notes payable - long-term portion		151,544			-
Common stock repurchase obligation		1,300,000			-

Total Liabilities		2,398,664			279,732

Commitments and contingency (Note 13):

STOCKHOLDERS' DEFICIT:
Preferred Stock: $0.001 par value; 20,000,000 shares authorized;
Convertible Series B Preferred stock: $0.001 Par Value; 500,000 Shares Authorized; nil shares issued and outstanding as of December 31, 2020 and 2019		-			-
Common stock: $0.001 par value; 1,000,000,000 shares authorized; 19,123,767 and 13,104,561 shares issued and outstanding as of December 31, 2020 and 2019		19,123			13,105
Additional paid-in capital		4,399,272			4,806,944
Accumulated deficit		(6,333,389	)		(5,091,728	)

Total Stockholders' Deficit		(1,914,994	)		(271,679	)

Total Liabilities and Stockholders' Deficit	$	483,670		$	8,053

The accompanying notes are an integral part of these consolidated financial statements.

HOME BISTRO, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Years Ended December 31,
	2020			2019

Product sales, net	$	1,335,859		$	836,599

Cost of sales		873,289			499,396

Gross profit		462,570			337,203

Operating Expenses:
Compensation and related expenses		547,940			362,526
Professional and consulting expenses		434,450			27,231
Product development expense		360,000			-
Selling and marketing expenses		226,428			57,067
General and administrative expenses		198,082			104,569

Total Operating Expenses		1,766,900			551,393

Operating Loss from Continuing Operations		(1,304,330	)		(214,190	)

Other Income (Expense):
Interest expense, net		(19,924	)		(3,341	)
Change in fair value of derivative liabilities		32,315			-
Gain from extinguishment of accounts payable		7,075			18,470
Other income		5,000			-

Total Other Income, net		24,466			15,129

Loss from Continuing Operations Before Provision for Income Taxes		(1,279,864	)		(199,061	)

Provision for Income Taxes		-			-

Loss from Continuing Operations		(1,279,864	)		(199,061	)

Discontinued Operations:
Income from Discontinued Operations Before Provision for Income Taxes		38,203			-

Provision for Income Taxes		-			-

Income from Discontinued Operations		38,203			-

Net Loss	$	(1,241,661	)	$	(199,061	)

BASIC AND DILUTED LOSS PER COMMON SHARE:
Continuing operations - basic and diluted	$	(0.07	)	$	(0.02	)
Discontinued operations - basic	$	0.00		$	0.00
Discontinued operations - diluted	$	0.00		$	0.00

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		17,393,644			13,104,561
Diluted		17,393,644			13,104,561

The accompanying notes are an integral part of these consolidated financial statements.

HOME BISTRO, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

For the Years Ended December 31, 2020 and 2019

	Preferred Stock						Common Stock				Additional						Total
	Number of						Number of				Paid-in			Accumulated			Stockholders'
	Shares			Amount			Shares		Amount		Capital			Deficit			Deficit

Balance at December 31, 2018		-		$	-			13,104,561	$	13,105	$	4,623,650		$	(4,892,667	)	$	(255,912	)

Accretion of stock-based compensation		-			-			-		-		183,294			-			183,294

Net loss		-			-			-		-		-			(199,061	)		(199,061	)

Balance at December 31, 2019		-			-			13,104,561		13,105		4,806,944			(5,091,728	)		(271,679	)

Warrants issued for cash		-			-			-		-		100,005			-			100,005

Common stock issued for services		-			-			4,000,577		4,000		234,269			-			238,269

Recapitalization of the Company		250,000			250			1,899,094		1,899		(196,873	)		-			(194,724	)

Common stock repurchase obligation (see Note 3)		-			-			-		-		(1,300,000	)		-			(1,300,000	)

Disposal of a component with related party (see Note 3)		(250,000	)		(250	)		-		-		131,471			-			131,221

Warrant issued pursuant to an agreement		-			-			-		-		360,000			-			360,000

Warrant issued for services		-			-			-		-		11,471			-			11,471

Accretion of stock-based compensation		-			-			-		-		213,841			-			213,841
															-
Common stock issued as commitment fee with convertible notes payable		-			-			119,535		119		38,144						38,263

Net loss		-			-			-		-		-			(1,241,661	)		(1,241,661	)

Balance at December 31, 2020		-		$	-			19,123,767	$	19,123	$	4,399,272		$	(6,333,389	)	$	(1,914,994	)

The accompanying notes are an integral part of these consolidated financial statements.

HOME BISTRO, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,241,661	)	$	(199,061	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		440			-
Stock-based compensation		213,841			183,294
Common stock and warrant issued for services		609,739			-
Gain on extinguishment of accounts payable		(7,075	)		(18,470	)
Amortization of debt discount		7,983			-
Change in fair value of derivative liabilities		(32,315	)		-
Change in operating assets and liabilities:
Inventory		-			7,306
Prepaid expenses and other current assets		(8,896	)		7,428
Accounts payable		43,980			(11,140	)
Accrued expense and other liabilities		102,201			-
Unredeemed gift cards		37,946			399

Net Cash Used in Operating Activities		(273,816	)		(30,244	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment		(3,168	)		-
Cash acquired from acquisition		4,917			-

Net cash provided by investing activities		1,749			-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of warrants		100,005			-
Proceeds from notes payable		171,612			-
Proceeds from note payable - related party		-			3,000
Advance payable		140,840			23,000
Proceeds from convertible note payable		384,100			-
Repayment of note payable - related party		-			(3,000	)
Repayment of note payable - in default		(3,738	)		(34,900	)
Repayments of advance payable		(80,535	)		-

Net Cash (Used in) Provided by Financing Activities		712,284			(11,900	)

Net Change in Cash		440,217			(42,144	)

Cash - beginning of year		7,137			49,281

Cash - end of year	$	447,354		$	7,137

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	7,670		$	3,064
Income taxes	$	-		$	-

Non-cash investing and financing activities:
Initial amount of ROU asset and related liability	$	32,444		$	-
Termination of the ROU asset and related liability	$	27,843		$	-
Disposal of a component with related party	$	131,221		$	-
Repurchase obligation pursuant to the Put Option Agreement	$	1,300,000		$	-
Common stock issued with convertible notes payable recorded as debt discount	$	38,263		$	-
Initial derivative liability recorded in connection with convertible notes payable	$	212,344		$	-

Net Liabilities Assumed in Reverse Acquisition:
Cash	$	4,917		$	-
Prepaid expenses		9,776			-
Operating right-of-use asset		32,444			-
Accounts payable and accrued liabilities		(209,417	)		-
Operating right-of-use liability		(32,444	)		-
Net liability assumed	$	(194,724	)	$	-

The accompanying notes are an integral part of these consolidated financial statements.

F-7

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

Home Bistro, Inc. (formerly known as Gratitude Health, Inc.) (the “Company”) was incorporated in the State of Nevada on December 17, 2009. Effective March 23, 2018, the Company changed its name from Vapir Enterprises Inc. to Gratitude Health, Inc. On September 14, 2020, the Company changed its name from Gratitude Health, Inc. to Home Bistro, Inc. The Company is in the business of providing prepackaged and prepared meals to consumers focused on offering a broad array of the highest quality meal delivery, and preparation services. The Company’s primary former operations were in the business of manufacturing, selling, and marketing functional RTD (Ready to Drink) beverages sold under the Company’s trademark (the “RTD Business”). The RTD Business was disposed on September 25, 2020 as discussed below.

On April 7, 2020, the Board of Directors of the Company approved the increase of authorized shares of common stock from 600,000,000 to 1,000,000,000 (see Note 11).

On April 20, 2020, the Company, Fresh Market Merger Sub, Inc., a Delaware corporation and a newly created wholly-owned subsidiary of the Company (“Merger Sub”), and Home Bistro, Inc., a privately-held Delaware corporation formed on April 9, 2013, engaged in the food preparation and home-delivery business (presently known as Home Bistro Holdings, Inc., a Nevada corporation) and now wholly-owned subsidiary of the Company (“Home Bistro Holdings”) (see Note 3), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which, among other things, Merger Sub agreed to merge with and into Home Bistro Holdings, with Home Bistro Holdings becoming a wholly-owned subsidiary of the Company and the surviving corporation in the merger (the “Merger”). Pursuant to the terms of the Merger Agreement, Home Bistro Holdings filed a Certificate of Merger with the Nevada Secretary of State on April 20, 2020 (see Note 3).

The Merger constituted a change of control and the majority of the Board of Directors changed with the consummation of the Merger. The Company issued to the stockholders of Home Bistro Holdings shares of common stock and stock warrants which represented approximately 80% of the combined company on a fully converted basis after the closing of the Merger and approximately 51% of voting control. As a result of the above transactions and the Company’s intent to dispose or divest the assets and liabilities associated with the RTD Business, this transaction was accounted for as a reverse recapitalization effected by a share exchange of Home Bistro Holdings. The consolidated financial statements are those of Home Bistro Holdings (the accounting acquirer) prior to the Merger and include the activity of the Company (the accounting acquiree) from the date of the Merger (see Note 3).

On September 14, 2020, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment to its Articles of Incorporation to effect (i) a 1 for 31.993 reverse stock split of its common stock, par value $0.001 per share, with fractional shares rounding up to the nearest whole share (the “Reverse Stock Split”), and (ii) the change of the Company’s name from “Gratitude Health, Inc.” to “Home Bistro, Inc.”. All share and per-share data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse Stock Split (see Note 3).

On Sept. 14, 2020, the Financial Industry Regulatory Authority approved the Company’s symbol change from “GRTD” to “HBIS”, effective twenty (20) business days from the approval date (see Note 3).

On September 25, 2020, the Company entered into, and closed the transactions contemplated by, that certain Asset Purchase Agreement (the “Asset Purchase Agreement”), by and among the Company, Gratitude Keto Holdings, Inc., a Florida corporation (the “Buyer” or “Gratitude Keto”), and the holder of 250,000 of the Company’s issued and outstanding shares of Series B Preferred Stock, $0.001 par value per share (such stock, the “Series B Preferred Stock”, and such stockholder, the “Stockholder”). Pursuant to the Asset Purchase Agreement, among other things, the Company agreed to sell to the Buyer all of the Company’s business, assets and properties used, or held or developed for use, in its functional RTD Business, and the Buyer agreed to assume certain debts, obligations and liabilities related to the RTD Business. Furthermore, in connection with the Asset Purchase Agreement, the Buyer returned the 250,000 shares of Series B Preferred Stock held by the Stockholder which was then cancelled by the Company upon return. As a result, the Company has no outstanding shares of preferred stock. Additionally, the RTD Business activities were reclassified and reported as part of “discontinued operations” for all periods presented on the consolidated statements of operations. In addition, the Company assumed an accounts payable liability in the amount of $14,000 related to accounting expenses of the RTD Business for a period prior to the Merger. Pursuant to the Asset Purchase Agreement, the Buyer reimbursed the Company for the accounting expenses in amount of $14,000, of which $7,000 was payable in cash and the balance in form of a promissory note dated September 25, 2020 in the amount of $7,000. The promissory note bears an interest rate of 5% per annum, matures on April 25, 2021 and is payable in monthly installments of $1,000 commencing on October 25, 2020 through maturity (see Note 3).

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The COVID-19 pandemic has the potential to significantly impact the Company’s supply chain, food manufacturers, distribution centers, or logistics and other service providers. Additionally, the Company’s service providers and their operations may be disrupted, temporarily closed or experience worker or meat or other food shortages, which could result in additional disruptions or delays in shipments of Home Bistro’s products. To date, the Company has been able to avoid layoffs and furloughs of employees. The Company is not able to estimate the duration of the pandemic and potential impact on the business if disruptions or delays in shipments of product occur. To date, the Company is not aware of any such disruptions. In addition, a severe prolonged economic downturn could result in a variety of risks to the business, including weakened demand for product and a decreased ability to raise additional capital when needed on acceptable terms, if at all. As the situation continues to evolve, the Company will continue to closely monitor market conditions and respond accordingly. The Company has applied for and received certain financial assistance under the Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”) enacted in March 2020 by the U.S. Government in response to COVID-19 (see Note 6).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Regulation S-X of the Securities and Exchange Commission (the “SEC”). The consolidated financial statements present the consolidated financial statements of the Company and Home Bistro Holdings, Inc., its wholly owned subsidiary for the years ended December 31, 2020 and 2019. All intercompany transactions and balances have been eliminated.

Going Concern

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, for the year ended December 31, 2020, the Company had net loss and cash used in operations of $1,241,661 and $273,817, respectively. As of December 31, 2020, the Company had an accumulated deficit, stockholders’ deficit, and working capital deficit of $6,333,389, $1,914,994 and $466,178, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The Company’s primary source of operating funds in 2020 was primarily from third-party advances and proceeds from convertible notes payable and note payables. The Company has experienced net losses from operations since inception but expects these conditions to improve in the near term and beyond as it develops its business model.

Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that the Company’s capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP 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. Actual results could differ from these estimates. Significant estimates as of December 31, 2020 and 2019 include the assumptions used in the redemption recognition method for unredeemed gift cards, collectability of note receivable, estimates of current and deferred income taxes and deferred tax valuation allowances, valuation of derivative liabilities, and the fair value of non-cash equity transactions.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. As of December 31, 2020 and 2019, the Company did not have any cash equivalents.

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. As of December 31, 2020, the balance outstanding was in excess of FDIC insured levels by approximately $197,000. As of December 31, 2019, the balance outstanding was not in excess of FDIC insured levels. The Company has not experienced any losses in such accounts through December 31, 2020.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

Fair Value of Financial Instruments and Fair Value Measurements

FASB ASC 820 - Fair Value Measurements and Disclosures, 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. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on December 31, 2020. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy are as follows:

	Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

	Level 2—Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

	Level 3—Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

Assets or liabilities measured at fair value or a recurring basis included embedded conversion options in convertible debt (see Note 4) and were as follows at December 31, 2020:

	At December 31, 2020
Description	Level 1		Level 2		Level 3
Derivative liabilities	$	—	$	—	$	180,029

A roll forward of the level 3 valuation financial instruments is as follows:

	For the Year Ended December 31, 2020
Balance at beginning of year	$	—
Initial valuation of derivative liabilities included in debt discount		212,344
Change in fair value of derivative liabilities		(32,315	)
Balance at end of year	$	180,029

There were no assets or liabilities measured at fair value as of December 31, 2019.

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding equity instruments.

Derivative Liabilities

The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 – Derivative and Hedging – Contract in Entity’s Own Equity. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment, or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

Revenue Recognition

The Company’s revenues consist of high quality, direct-to-consumer, ready-made meals that can be ordered by customers through www.homebistro.com, and restaurant quality meats and seafood through its Colorado Prime Brand. Revenues from the Company’s ready-made meals are recognized when the product is delivered to the customer and title has transferred, it is at this point in time that the Company’s performance obligations have been completed. Product sales are recorded net of any discounts or allowances and include shipping charges.

Cost of Sales

The Company’s policy is to recognize product related cost of sales in conjunction with revenue recognition, when the product costs are incurred which is upon delivery of product. Cost of sales includes the food and processing costs directly attributable to fulfillment and the delivery of the product to customers including both inbound and outbound shipping costs. In additional, the royalty fee related to the Joint Product Development and Distribution Agreement (see Note 13) was also included in cost of sales.

Shipping and handling costs incurred for product shipped to customers are included in cost of sales and amounted to $873,289 and $499,396 for the years ended December 31, 2020 and 2019, respectively. Shipping and handling costs charged to customers are included in product sales, net.

Stock-Based Compensation

Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation–Stock Compensation”, which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

Advertising costs

The Company participates in various advertising programs. All costs related to advertising of the Company’s products are expensed in the period incurred. Advertising costs charged to operations were $226,428 and $57,067, for the years ended December 31, 2020 and 2019, respectively, and are presented on the accompanying consolidated statement of operations as selling and marketing expenses.

Income Taxes

The Company accounts for income taxes using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. On December 31, 2020, the Company early adopted ASU 2019-12 and its adoption did not have any material impact on the Company’s financial statements.

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. For the year ended December 31, 2020, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

Basic and Diluted Loss Per Share

Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of common stock issuable for stock options and stock warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.

The potentially dilutive common stock equivalents as of December 31, 2020 and 2019 were excluded from the dilutive loss per share calculation as they would be antidilutive due to the net loss. The following were the computation of diluted shares outstanding and in periods where the Company has a net loss, all dilutive securities are excluded.

	December 31, 2020		December 31, 2019
Common Stock Equivalents:
~~/s/ Mike Edwards~~Stock Options		60,638		—
Stock Warrants		11,278,211		—
Convertible Debt		589,704		—
Total		11,928,553		—

Concentration Risk

The Company purchased approximately 100% of its food products from two vendors during the year ended December 31, 2020 (approximately 74% and 26%) and 2019 (approximately 79% and 31%). The Company is not obligated to purchase from these vendors and, if necessary, there are other vendors from which the Company can purchase food products. As of December 31, 2020 and 2019, the Company had accounts payable balance of $0 and $2,103, respectively, to these vendors.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on its consolidated financial statements.

NOTE 3 – REVERSE RECAPITALIZATION OF HOME BISTRO HOLDINGS AND DISPOSAL OF THE DISCONTINUED OPERATIONS OF THE RTD BUSINESS

Home Bistro, Inc. was formed on April 9, 2013 as a Delaware corporation, under the name DineWise, LLC. On December 1, 2014, it underwent a statutory conversion filed under Section 8-265 of the Delaware Code to convert from a limited liability company to a corporation and changed its name to Home Bistro, Inc.

On September 22, 2020, Home Bistro, Inc. filed a Certificate of Conversion under Section 266 of the Delaware General Corporation Law to convert its state of domicile from Delaware to Nevada and simultaneously filed an Articles of Conversion Nevada Secretary of State for the same and changed its name from Home Bistro, Inc. (the now wholly-owned subsidiary of the Company) to Home Bistro Holdings, Inc., each effective as of September 30, 2020.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

Home Bistro manufactures, packages, and sells, direct-to-consumer, gourmet meals under the Home Bistro brand and markets restaurant quality meats and seafood under the Prime Chop and Colorado Prime brands. The Company’s meals are freshly prepared, flash-frozen, to preserve freshness, and packaged in its facility located in Miami, Florida. Home Bistro meals are ordered on-line and delivered to consumers in containers designed to keep the products frozen during transport. Orders for restaurant quality meats and seafood through the Company’s Prime Chop and Colorado Prime brands are processed through a third-party co-packer based in North Carolina who fulfills and ships customer orders.

Agreement and Plan of Merger

On April 20, 2020, the Company, Fresh Market Merger Sub, Inc., a Delaware corporation and a newly created wholly-owned subsidiary of the Company, also referred to herein as Merger Sub, and Home Bistro, Inc., a privately-held Delaware corporation engaged in the food preparation and home-delivery business (presently known as Home Bistro Holdings, Inc., a Nevada corporation), also referred to herein also Home Bistro Holdings, entered into an Agreement and Plan of Merger, also referred to herein as the Merger Agreement, pursuant to which, among other things, Merger Sub agreed to merge with and into Home Bistro Holdings, with Home Bistro Holdings becoming a wholly-owned subsidiary of the Company and the surviving corporation in the merger, also referred to herein as the Merger. Pursuant to the terms of the Merger Agreement, Home Bistro Holdings filed a Certificate of Merger with the Nevada Secretary of State on April 20, 2020 (see Note 1).

Prior to the effective time of the Merger, the Company and certain of its existing securityholders entered into an Exchange Agreement providing for, among other things, the exchange (the “Exchange”) of securities held by such securityholders for shares of common stock, as more fully detailed therein. As a result of the Exchange, all of the Company’s issued and outstanding shares of Series A Preferred Stock, Series C Preferred Stock and convertible notes were converted into an aggregate of 5,405,479 shares of common stock on a fully diluted basis, consisting of 1,364,222 shares of common stock and warrants to purchase up to 4,041,258 shares of common stock (see Note 11). The 250,000 shares of Series B Preferred Stock owned by a former officer were cancelled on April 9, 2020 pursuant to a General Release Agreement (see Note 11) and 250,000 shares of Series B Preferred Stock held by a related party remained issued and outstanding as of the date of the Merger.

After the Exchange, a total of 1,899,094 shares of common stock, warrants to purchase 4,041,258 shares of common stock and 60,638 stock options were deemed issued and outstanding.

Additionally, on April 20, 2020, the Company and a stockholder entered into a Put Option Agreement (see Note 11), pursuant to which, among other things, the Company agreed, at the election of the stockholder, to purchase certain shares of common stock from such stockholder no sooner than two years from the date of the Put Option Agreement (the “Market Period”). Pursuant to the Put Option Agreement, in the event that the stockholder does not generate $1.3 million dollars (the “Total Investment”) in gross proceeds from the sale of its shares of common stock by the second anniversary of the Put Option Agreement, then the stockholder has the right to cause the Company to purchase shares held by the stockholder at a price equal to the difference between the Total Investment and the net proceeds actually realized by the stockholder from shares of common stock sold during the Market Period and the number of shares of common stock held by the stockholder on the date the put right is exercised. The put right expires fourteen (14) days from end of the Market Period. In connection with the Put Option Agreement, the Company recorded a common stock repurchase obligation in the amount of $1.3 million, reflected in the accompanying consolidated balance sheets as a long-term liability, Common stock repurchase obligation (see Note 11).

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

The Merger constituted a change of control and the majority of the Board of Directors changed with the consummation of the Merger. The Company issued to the stockholders of Home Bistro Holdings shares of common stock and stock warrants which represented approximately 80% of the combined company on a fully converted basis after the closing of the Merger. As a result of the above transactions and the Company’s intent to dispose or divest the assets and liabilities associated with the RTD Business as discussed below, this transaction was accounted for as a reverse recapitalization of Home Bistro Holdings where Home Bistro Holdings is considered the historical registrant and the historical operations presented will be those of Home Bistro Holdings.

The following assets and liabilities were assumed in the Merger:

Cash	$	4,917
Prepaid expense		9,776
Operating right-of-use asset		32,444
Total assets acquired		47,137

Accounts payable and accrued expenses		(209,417	)
Operating right-of-use liability		(32,444	)
Total liabilities assumed	$	(241,861	)

Net liability assumed	$	(194,724	)

Disposal of Discontinued Operations of the RTD Business

On September 25, 2020, pursuant to the Asset Purchase Agreement, among other things, the Company agreed to sell all of the Company’s business, assets and properties used, or held or developed for use, in its functional RTD (Ready to Drink) beverage segment (the “RTD Business”), and the Buyer agreed to assume certain debts, obligations and liabilities related to the RTD Business. The Company assumed an accounts payable liability in the amount of $14,000 related to accounting expense of the RTD Business for a period prior to the Merger. Pursuant to the Asset Purchase Agreement, the Buyer reimbursed the Company for accounting expenses in amount of $14,000 incurred prior to the Merger, of which $7,000 was payable in cash and the balance in form of a promissory note dated September 25, 2020 in the amount of $7,000. The promissory note bears interest at a rate of 5% per annum, matures on April 25, 2021 and is payable in monthly installments of $1,000 commencing on October 25, 2020 through April 25, 2021. As of December 31, 2020, $5,000 remained due on the promissory note. The Company received the $7,000 cash portion of the consideration as of December 31, 2020. The $14,000 reimbursement was recorded to additional paid in capital as reflected in the accompanying consolidated statements of changes in stockholders’ deficit.

ASC 205-20 “Discontinued Operations” establishes that the disposal or abandonment of a component of an entity or a group of components of an entity should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result, the component’s results of operations have been classified as discontinued operations on a retrospective basis for all periods presented. The results of operations of this component, for all periods, are separately reported as “discontinued operations” on the consolidated statements of operations.

The Asset Purchase Agreement, discussed above under Agreement and Plan of Merger, was intended to be part of the Merger and in effect transferred the RTD Business and the related assets and liabilities to Gratitude Keto, whose CEO, Roy Warren Jr., formerly served as the Company’s director and Chief Operating Officer and was considered a related party, in substance, in the accounting of this transaction. Therefore, the disposal of net liabilities and the reimbursement discussed above in connection with the disposal of the RTD Business was recorded to additional paid in capital as reflected in the accompanying consolidated statements of changes in stockholders’ deficit.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

The following table set forth the selected financial data of the net liabilities recorded to additional paid in capital as of September 24, 2020.

	September 24, 2020
Assets:
Other assets:
Operating lease right-of-use assets, net	$	2,417
Total assets	$	2,417

Liabilities:
Current liabilities:
Accounts payable	$	112,212
Accrued expenses and other liabilities		5,009
Operating lease liabilities, current portion		2,417
Total current liabilities		119,638
Total liabilities	$	119,638

Net liabilities	$	117,221
Expense reimbursement by Buyer		14,000
Disposal of net liabilities to a related party	$	131,221

The summarized operating result of discontinued operations of the RTD Business included in the Company’s consolidated statements of operations for the year ended December 31, 2020 is as follows:

	Year Ended December 31, 2020
Revenues
Cost of revenues	$	—
Gross (loss) profit		—
		—
Operating expenses:
Compensation expense		5,511
Professional and consulting expenses		26,606
Selling and marketing expenses		(7,850	)
General and administrative expenses		37,255
Total operating expenses		61,522
Loss from operations	$	61,522

Gain on debt extinguishment		99,897
Interest income (expense)		(172	)
Other income, net		99,725

Income from discontinued operations	$	38,203

The gain on debt extinguishment in the amount of $99,897 reflected above was due to the settlement of outstanding liabilities owed to a vendor in connection with the RTD Business.

NOTE 4 – CONVERTIBLE NOTES

At December 31, 2020, the convertible debt consisted of the following:

	December 31, 2020

Principal amount	$	447,000
Less: debt discount		(305,524	)
Convertible notes payable balance	$	141,476

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

December 2020 Financings:

On December 18, 2020, the Company entered a Securities Purchase Agreement (the “December 2020 SPA I”) with an investor for the sale of the Company’s convertible note. Pursuant to the December 2020 SPA I, among other things, (i) the Company issued a self-amortization promissory note (the “December 2020 Note I”, and together with the December 2020 SPA I, the “December 2020 Agreements I”) in the aggregate principal amount of $275,000, and (ii) issued a total of 75,546 shares of common stock, as a commitment fee and 183,866 shares (the “Second Commitment Shares”) issued as a returnable commitment fee. Accordingly, the Company deems the Second Commitment Shares as unissued shares for accounting purposes. The 75,546 shares of common stock were recorded as a debt discount of $23,546 based on the relative fair value method. Pursuant to the December 2020 Note I, the Company received net proceeds of $234,100, net of $27,500 OID and $13,400 of issuance costs. The December 2020 Note I bears an interest rate of 12% per annum (which interest rate shall be increased to 16% per annum upon the occurrence of an Event of Default (as defined in the December 2020 Note I)) and shall mature on December 18, 2021. The investor has the right, only upon the occurrence of an Event of Default, to convert all or any portion of the then outstanding and unpaid principal amount and interest thereon (including any default interest) into shares of common stock equal to the lesser of (i) 105% multiplied by the closing bid price of the common stock on the trading day immediately preceding the issue date ($1.04) or (ii) the closing bid price of the common stock on the trading day immediately preceding the date of the respective conversion (the “Conversion Price”), subject to certain percentage of ownership limitations. The Second Commitment Shares must be returned to the Company’s treasury if the December 2020 Note I is fully repaid and satisfied on or prior to the maturity date, the. Upon the occurrence and during the continuation of any Event of Default (as defined in December 2020 Note I), the investor is no longer required to return the Second Commitment Shares to the Company and the December 2020 Note I becomes immediately due and payable thereunder in the amount equal to the principal amount then outstanding plus accrued interest (including any default interest) through the date of full repayment multiplied by 125%. The obligations of the Company under the December 2020 Note I rank senior with respect to any and all unsecured indebtedness incurred following the issue date except with respect to the Company’s current and future indebtedness with Shopify and any further loans that may be received pursuant to the CARES Act and the SBA’s Economic Injury Disaster loan program. Further, the December 2020 Note I contain standard anti-dilution provisions and price protections provisions in the event that the Company issues securities for a price per share less than the Conversion Price. The December 2020 Agreements I contain other provisions, covenants, and restrictions common with this type of debt transaction. Furthermore, the Company is subject to certain negative covenants under the December 2020 Agreements I, which the Company also believes are customary for transactions of this type. The December 2020 SPA I also provides the investor with certain “piggyback” registration rights, permitting them to request that the Company include the issued shares for sale in certain registration statements filed by the Company under the Securities Act of 1934, as amended. As of December 31, 2020, the December 2020 Note I had outstanding principal and accrued interest of $275,000 and $1,175, respectively.

On December 28, 2020, the Company entered into a Securities Purchase Agreement (the “December 2020 SPA II”) with an investor for the sale of the Company’s convertible note. Pursuant to the SPA II, among other things, (i) the Company issued a self-amortization promissory note (the “December 2020 Note II”, and together with the December 2020 SPA II, the “December 2020 Agreements II”) in the aggregate principal amount of $172,000, and (ii) issued a 45,989 shares of common stock as a commitment fee and 114,667 shares (the “Second Commitment Shares”) issued as a returnable commitment fee. Accordingly, the Company deems the Second Commitment Shares as unissued shares for accounting purposes. The 45,989 shares of common stock issued were recorded as a debt discount of $14,720 based on the relative fair value method. Pursuant to the December 2020 Note II, the Company received net proceeds of $150,000, net of $15,500 OID and $6,500 of issuance costs. The December 2020 Note II bears an interest rate of 12% per annum (which interest rate shall be increased to 16% per annum upon the occurrence of an Event of Default (as defined in the December 2020 Note II)) and shall mature on December 28, 2021. The investor has the right, only upon the occurrence of an Event of Default, to convert all or any portion of the then outstanding and unpaid principal amount and interest thereon (including any default interest) into shares of common stock equal to the lesser of (i) 105% multiplied by the closing bid price of the common stock on the trading day immediately preceding the issue date ($1.00) or (ii) the closing bid price of the common stock on the trading day immediately preceding the date of the respective conversion (the “Conversion Price”), subject to certain percentage of ownership limitations. The Second Commitment Shares must be returned to the Company’s treasury if the December 2020 Note II is fully repaid and satisfied on or prior to the maturity date, the. Upon the occurrence and during the continuation of any Event of Default (as defined in the December 2020 Note II), the investor is no longer required to return the Second Commitment Shares to the Company and the December 2020 Note II becomes immediately due and payable thereunder in the amount equal to the principal amount then outstanding plus accrued interest (including any default interest) through the date of full repayment multiplied by 125%. The obligations of the Company under the December 2020 Note II rank senior with respect to any and all unsecured indebtedness incurred following the issue date except with respect to the Company’s current and future indebtedness with Shopify and any further loans that may be received pursuant to the CARES Act and the SBA’s Economic Injury Disaster loan program. Further, the December 2020 Note II contain standard anti-dilution provisions and price protections provisions in the event that the Company issues securities for a price per share less than the Conversion Price. The December 2020 Agreements II contain other provisions, covenants, and restrictions common with this type of debt transaction. Furthermore, the Company is subject to certain negative covenants under the December 2020 Agreements II, which the Company also believes are also customary for transactions of this type. The December 2020 SPA II also provides the investor with certain “piggyback” registration rights, permitting them to request that the Company include the issued shares for sale in certain registration statements filed by the Company under the Securities Act of 1934, as amended. As of December 31, 2020, the December 2020 Note II had outstanding principal and accrued interest of $172,000 and $0, respectively.

The Company also entered into a Registration Rights Agreement (“Registration Agreement”) in connection with the December 2020 Agreements II (see Note 13). Pursuant to which the Company is required to prepare and file with the SEC a Registration Statement or Registration Statements (as is necessary) covering the resale of all of the Registrable Securities , which Registration Statement(s) shall state that, in accordance with Rule 415 promulgated under the Securities Act, such Registration Statement also covers such indeterminate number of additional shares of Securities as may become issuable upon stock splits, stock dividends or similar transactions. The Company shall initially register for resale all of the Registerable Securities, or an amount equal to the maximum amount allowed under Rule 415 (a)(1)(i) as interpreted by the SEC. In the event the Company cannot register sufficient shares of Securities, due to the remaining number of authorized shares of Securities being insufficient, the Company will use its best efforts to register the maximum number of shares it can base on the remaining balance of authorized shares and will use its best efforts to increase the number of its authorized shares as soon as reasonably practicable.

F-16

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

The Company shall use its best efforts to have the Registration Statement filed with the SEC within 60 or 120 days following the closing date of the December 2020 Agreements II (collectively as “Filing Deadline”). The Company shall pay the holder the sum of 1% of the purchase amount of the December 2020 Note II as liquidated damages, and not as a penalty for each time it fails to meet the Filing Deadline. The liquidated damages set forth in the Registration Agreement shall be paid, at the holder’s option, in cash or securities priced at the share price, or portion thereof. Failure of the Company to make payment within five business days of the Filing Date shall be considered a breach of the Registration Agreement.

Derivative Liabilities Pursuant to Convertible Notes

In connection with the issuance of the December 2020 Note I and II (collectively referred to as “Notes”), the Company determined that the terms of the Notes contain an embedded conversion option to be accounted for as derivative liabilities due to the holder having the potential to gain value upon an event of default, which includes events not within the control of the Company. Accordingly, under the provisions of ASC 815-40 –Derivatives and Hedging – Contracts in an Entity’s Own Stock, the embedded conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion options was determined using the Binomial valuation model. At the end of each period and on note conversion date, the Company revalues the derivative liabilities resulting from the embedded option.

During year ended December 31, 2020, in connection with the issuance of the December 2020 Note I and Note II, on the initial measurement date, the fair values of the embedded conversion option of $212,344 was recorded as derivative liabilities and debt discount. Additionally, the Company accounted for the 119,535 commitment shares issued by using the relative fair value method and recorded $38,263 of a debt discount which will be amortized over the term of the Notes (see Note 11).

At the end of the period, the Company revalued the embedded conversion option derivative liabilities. In connection with these revaluations, the Company recorded a gain from the change in the derivative liabilities fair value of $32,315 for the year ended December 31, 2020.

During the year ended December 31, 2020, the fair value of the derivative liabilities was estimated at issuance and at December 31, 2020, using the Binomial valuation model with the following assumptions:

	2020
Dividend rate		—	%
Term (in years)		1 year
Volatility		138 - 139	%
Risk—free interest rate		0.09 to 0.12	%

For the year ended December 31, 2020, amortization of debt discounts related to this convertible note amounted to $7,983 included in interest expense on the accompanying consolidated statements of operations. At December 31, 2020, unamortized debt discount was $305,524.

NOTE 5 – NOTE PAYABLE – IN DEFAULT

On July 3, 2015, the Company entered into a promissory note payable with a principal amount of $33,000. The note bore interest at a rate of 5% per year and had a maturity date of September 1, 2016. During the year ended December 31, 2018, the Company repaid $18,000 of outstanding principal. In 2019, the Company paid $11,262 of the outstanding principal balance and $3,738 remained unpaid and was classified as Note Payable – In default on the accompanying December 31, 2019 balance sheet. During the year ended December 31, 2020, the Company paid the outstanding principal balance of the note payable in full and there was no balance outstanding as of December 31, 2020.

NOTE 6 - NOTES PAYABLE

Notes payable is summarized below:

	December 31, 2020
Principal amount	$	171,612
Less: current portion		(20,068	)
Notes payable - long term portion	$	151,544

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

Minimum principal payments under notes payable are as follows:

Year ended December 31, 2021	$	20,068
Year ended December 31, 2022		6,350
Year ended December 31, 2023		3,185
Year ended December 31, 2024		3,307
Year ended December 31, 2025		3,433
Thereafter		135,269
Total principal payments	$	171,612

Paycheck Protection Program Loan

On April 8, 2020, the Company received federal funding in the amount of $14,612 through the Paycheck Protection Program (the “PPP”) of the CARES Act, administered by the U.S. Small Business Administration (“SBA”). The PPP note bears an interest rate 0.98% per annum and accrues on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. Commencing six months after the effective date of the PPP note, the Company is required to pay the lender equal monthly payments of principal and interest as required to fully amortize any unforgiven principal balance of the loan by the two-year anniversary of the effective date of the PPP note (the “Maturity Date”). The Maturity Date can be extended to five years if mutually agreed upon by both the lender and the Company. The PPP note contains customary events of default relating to, among other things, payment defaults, making materially false or misleading representations to the SBA or the lender, or breaching the terms of the PPP note. The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP note, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. Recent modifications to the PPP by the U.S. Treasury and Congress have extended the time period for loan forgiveness beyond the original eight-week period, making it possible for the Company to apply for forgiveness of its PPP note. No assurance can be given that the Company will be successful in obtaining forgiveness of the loan in whole or in part. As of December 31, 2020, the PPP note had an outstanding principal balance of $14,612 and accrued interest of $106, reflected in the accompanying balance sheets under accrued expense and other liabilities.

Economic Injury Disaster Loan

On June 17, 2020, the Company entered into a Loan Authorization and Agreement (“SBA Loan Agreement”) with the SBA, under the SBA’s Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic. Pursuant to the SBA Loan Agreement, the Company received an advanced of $150,000, to be used for working capital purposes only. Pursuant to the SBA Loan Agreement, the Company executed; (i) a note for the benefit of the SBA (“SBA Note”), which contains customary events of default; and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of the Company, which also contains customary events of default. The SBA Note bears an interest rate of 3.75% per annum which accrue from the date of the advance. Installment payments, including principal and interest, are due monthly beginning June 17, 2021 (twelve months from the date of the SBA Note) in the amount of $731. The balance of principal and interest is payable thirty years from the date of the SBA Note. As of December 31, 2020, the SBA Note had an outstanding principal balance of $150,000 and accrued interest of $3,036, reflected in the accompanying balance sheets under accrued expense and other liabilities.

On June 26, 2020, in connection SBA Loan Agreement, the Company received a grant that does not have to be repaid, in the amount of $5,000. It was recorded as other income in the accompanying consolidated statement of operations.

November Note Payable

On November 12, 2020, the Company entered into a Note Agreement with an investor for the sale of the Company’s note (the “Note”). Pursuant to the terms provided for in the Note Agreement, the Company issued to the investor a Note and the Company received proceeds in the amount of $7,000. The Note bears an interest of 5% per annum and matures on November 12, 2021. The Company may prepay all or any portion of the interest and the unpaid principal balance of this Note at any time, or from time to time, without penalty or premium. As of December 31, 2020, the Note had an outstanding principal balance of $7,000 and accrued interest of $47, reflected in the accompanying balance sheets under accrued expense and other liabilities.

NOTE 7 – ADVANCE PAYABLE

On October 15, 2019, the Company entered into a capital advance agreement (the “First Advance Agreement”) with their e-commerce platform provider (“Shopify”). Under the terms of the First Advance Agreement, the Company received $23,000 of principal and will repay $25,999 by remitting 17% of the total customer payments processed daily by the e-commerce platform provider until the advance is repaid in full. As of December 31, 2019, the advance had an outstanding principal balance of $18,192. During the year ended December 31, 2020, the Company paid the principal balance of the advance in full and there was no balance outstanding as of December 31, 2020.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

On March 17, 2020, the Company entered into a capital advance agreement (the “Second Advance Agreement”) with Shopify. Under the terms of the Second Advance Agreement, the Company received $10,000 of principal and will repay $11,300 by remitting 17% of the total customer payments processed daily by the e-commerce platform provider until the advance is repaid in full. During the year ended December 31, 2020, the Company paid the advance in full and there was no balance outstanding as of December 31, 2020.

On August 5, 2020, the Company entered into a capital advance agreement (the “Third Advance Agreement”) with Shopify. Under the terms of the Third Advance Agreement, the Company has received $49,000 of principal and will repay $55,370 by remitting 17% of the total customer payments processed daily by the e-commerce platform provider until the advance is repaid in full. During the year ended December 31, 2020, the Company paid $47,328 of the principal balance and the advance had an outstanding balance $1,672 as of December 31, 2020 presented as advance payable on the accompanying consolidated balance sheets.

On November 17, 2020, the Company entered into a capital advance agreement (the “Fourth Advance Agreement”) with Shopify. Under the terms of the Fourth Advance Agreement, the Company has received $63,000 of principal and will repay $71,190 by remitting 17% of the total customer payments processed daily by the e-commerce platform provider until the advance is repaid in full. As of December 31, 2020, the entire principal balance of $63,000 remained outstanding and is presented as advances payable on the accompanying consolidated balance sheets.

On December 10, 2020, the Company entered into a working capital agreement (the “First PayPal Advance Agreement”) with PayPal. Under the terms of the Fifth Advance Agreement, the Company received net proceeds of $17,000, net of $1,840 loan fee for a total principal amount of $18,840. and will repay the principal and by remitting The Company shall pay a minimum payment every 90-days beginning at the end of the Cancellation Period and ending when the Total Payment Amount has been delivered to Lender. The minimum payment is due in each 90-day period, irrespective of the amount paid in any previous 90-day period. The minimum payment is 5% of the principal amount for loans expected to be repaid in 12 months or more and 10% of the principal amount for loans expected to be repaid in less than 12 months (based on the Company’s account history). During the year ended December 31, 2020, the Company paid $5,015 of the principal balance and the advance had an outstanding balance $13,825 as of December 31, 2020 presented as advance payable on the accompanying consolidated balance sheets.

NOTE 8 – OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

Operating lease right-of-use (ROU) and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is an incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. During the Year ended December 31, 2020 and 2019, the Company recorded $4,601 and $0, respectively, as operating lease expense which is included the income from disposal of discontinued operations on the statements of operations.

On the date of the Merger, the Company had an operating lease for its office and a copier. On June 30, 2020, the Company and the lessor (collectively as “Parties”) entered into an Office Lease Termination Agreement (the “Termination Agreement”) whereby the Parties agreed to terminate the lease and settle all claims and to extinguish all rights and claims arising out of the lease agreement entered into in April 2018. Pursuant to the Termination Agreement, the Parties agreed for the lessor to retain the deposit in the amount of $6,828 to settle all remaining claims. As of December 31, 2020, the Company had no remaining lease obligations towards the lease. At termination, the Company removed the remaining ROU asset and liability of $25,426.

The equipment lease agreement for a copier expires March 27, 2022 and requires monthly payments of $145 with an option to purchase the equipment at fair market value at the end of the lease term. Pursuant to the disposal of discontinued operations discussed in Note 3, the ROU asset and liability related to the equipment lease was assumed by Gratitude Keto., a related party, pursuant to the Asset Purchase Agreement between the Company and Gratitude Keto. As of December 31, 2020, the Company had no remaining lease obligations towards the lease. Upon the closing of the Asset Purchase Agreement, the Company removed the remaining ROU asset and liability of $2,417.

Right-of-use assets are summarized below:

	December 31, 2020

Office lease	$	29,417
Equipment lease (remaining lease term of 21 months)		3,027
Subtotal		32,444
Less accumulated amortization		(4,601	)
Adjustment in connection with the termination of lease		(25,426	)
Adjustment in connection with the disposal of discontinued operations		(2,417	)
Right-of-use assets, net	$	—

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

Operating Lease liabilities are summarized below:

	December 31, 2020

Office lease	$	29,417
Equipment lease		3,027
Subtotal		32,444
Reduction of lease liability		(4,601	)
Adjustment in connection with the termination of lease		(25,426	)
Adjustment in connection with the disposal of discontinued operations		(2,417	)
Right-of-use liability, net	$	—

NOTE 9 – UNREDEEMED GIFT CARDS

Unredeemed gift cards activities as of December 31, 2020 and 2019 are summarized as follows:

	December 31,
	2020			2019
Beginning balance	$	10,365		$	9,966
Sale of gift cards		99,322			26,217
Revenue from breakage		(17,114	)		—
Total gift card redemptions		(44,262	)		(25,818	)
Ending balance	$	48,311		$	10,365

NOTE 10 – RELATED PARTY TRANSACTIONS

The Company utilizes the shipping carrier account of a related entity, owned 50% by the Company’s current chief executive officer and principal stockholder for its inbound and outbound shipping needs. The related entity bills the Company for the direct cost of the shipping charges plus a 10% fee. The total amount paid to the related entity during the years ended December 31, 2020 and 2019 were $117,310 and $72,077, respectively, which is included in cost of goods sold on the statement of operations.

See also disposal of the RTD Business with related party in Note 3 – Acquisition of Home Bistro Holdings and Disposal of the Discontinued Operations of the RTD Business.

NOTE 11 – STOCKHOLDERS’ DEFICIT

On September 14, 2020, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment to its Articles of Incorporation to effect a 1 for 31.993 reverse stock split of its common stock. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, stock warrants and equity incentive plans. All share and per-share data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the reverse stock split (see Note 1 and Note 3).

Shares Authorized

On April 7, 2020, the Board of Directors of the Company approved the increase of the authorized shares of the common stock to 1,000,000,000 from 600,000,000 (see Note 1).

Stocks Issued Pursuant to Recapitalization

On April 20, 2020, as a result of the closing of the Share Exchange Agreement with Home Bistro Holdings (see Note 3), the equity of the consolidated entity is the historical equity of Home Bistro Holdings retroactively restated to reflect the number of shares issued by the Company in the reverse recapitalization and to reflect the reverse stock split.

As a result, in connection with the Exchange Agreement and Merger (see Note 3), the Company was deemed to have issued a total of 250,000 shares of Series B Convertible Preferred Stock, 1,899,094 shares of common stock.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

Preferred Stock

On September 25, 2020, in connection with the Asset Purchase Agreement between the Company and Gratitude Keto, the Company repurchased the 250,000 shares of Series B Preferred Stock (see above Stocks Issued Pursuant to Recapitalization) held by a stockholder (see Note 1 and Note 3).

As of December 31, 2020, there were no outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (see above Stocks Issued Pursuant to Recapitalization).

Common Stock

Common stock for commitment fee with convertible notes payable

●

In December 2020, the Company issued an aggregate of 119,535 shares of common stock valued at $38,263 using the relative fair value method to two non-affiliate investors as commitment fee in connection with the December 2020 Financings (see Note 4) which was recorded as debt discount which will be amortized over the life of the Notes. The Company did not issue any common stock as commitment fee during the year ended December 31, 2019.

Stock-based compensation

●

During the year ended December 31, 2020 and 2019, the Company recorded stock-based compensation of $213,841 and $183,294, respectively, related to common stock issued to an executive pursuant to an employment agreement (see Note 11) and which was recorded as compensation and related expenses in the accompanying statements of operations. As of December 31, 2020, there was no unamortized compensation expense related to these common shares.

●

During the year ended December 31, 2020, the Company recorded stock-based compensation of $238,268 related to an aggregate of 4,000,577 shares of common stock issued to employees and various consultants, of which $102,332 was charged as compensation and related expenses, $124,219 as professional and consulting expenses and $11,717 as selling and marketing expenses in the accompanying consolidated statements of operations. The stock-based compensation was based on the fair value of common stock on the date of grant based on recent sales of common stock. In addition, the Company issued a warrant to purchase up to 300,000 shares of the Company’s common stock with grant date fair value of $360,000 for product development services pursuant to an agreement (see below under Warrants).

Stock Options

A summary of the Company’s outstanding stock options as of December 31, 2020 and changes during the period ended are presented below:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance on December 31, 2019		—	$	—		—	$	—
Deemed issued in connection with the Company’s recapitalization (see Note 3)		60,638	$	3.20		0.03		—
Balance on December 31, 2020		60,638	$	3.20		0.03	$	—

Stock Warrants

On April 20, 2020, pursuant to the Merger (see Note 3), the Company issued warrants to purchase up to 4,041,258 shares of common stock with exercise price of $0.032 per share (in whole or in part) and expiration date of April 20, 2030 (see above Stocks Issued Pursuant to Recapitalization), in exchange for certain outstanding shares of the Company’s common stock on the date of the Merger.

On April 20, 2020, pursuant to the Exchange Agreement (see Note 3), the Company issued warrants to purchase up to 6,926,314 shares of common stock with an exercise price of $0.032 per share (in whole or in part) and expiration date of April 20, 2030 in exchange for certain outstanding common stock shares of Home Bistro Holdings on the date of the Merger, of which the Company had received $100,005 in total proceeds prior to the Merger in exchange for shares of Home Bistro Holdings common stock.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

On September 22, 2020, the Company issued a warrant to purchase up to 300,000 shares of the Company’s common stock to a third-party entity in connection with the Joint Product Development and Distribution Agreement (see Note 13). This warrant is exercisable, in whole or in part, upon issuance at $0.001 per share, and expires on September 22, 2030. This warrant has a grant date fair value of $360,000 recorded as product development expense at issuance on the consolidated statements of operations.

On December 18, 2020, the Company issued warrants to purchase up to 10,640 shares of the Company’s common stock to a third-party entity in connection with a consulting agreement. This warrant is exercisable, in whole or in part, upon issuance at $1.27 per share, and expires on December 18, 2025. These warrants have a grant date fair value of $11,471, recorded as consulting fee on the consolidated statements of operations.

The Company used the Binomial pricing model to determine the fair value of its stock options which requires the Company to make several key judgments including:

	●	the expected life of issued stock warrants;

~~Mike Edwards~~	●	~~Director~~	~~March 25, 2019~~the expected volatility of the Company’s stock price;

	●	the expected dividend yields to be realized over the life of the stock warrants; and
~~/s/ Bruce Zanca~~
~~Bruce Zanca~~	●	~~Director~~	~~March 25, 2019~~the risk-free interest rate over the expected life of the stock warrants.

The Company’s computation of the expected life of issued stock warrants was based on the simplified method as the Company does not have adequate exercise experience to determine the expected term and was estimated to be 2 years. The interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The computation of volatility was based on the historical volatility of the Company’s common stock and the Company’s expected divided yield was estimated to be zero.

Dividend rate	—	%
Term (in years)	5 to 10 years
Volatility	139	%
Risk-free interest rate	0.39% to 0.68	%

A summary of the Company’s outstanding stock warrants as of December 31, 2020 and changes during the period ended are presented below:

	Number of Stock Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Balance on December 31, 2019		—	$	—		—
Deemed issued in connection with the Company’s recapitalization (see Note 3)		4,041,258		0.032		9.31
Issued pursuant to Exchange Agreement (see Note 3)		6,926,314		0.032		9.31
Granted		310,640		0.044		9.57
Balance on December 31, 2020		11,278,212	$	0.032		9.31

Stock warrants exercisable on December 31, 2020		11,278,212	$	0.032		9.31

Weighted average fair value of stock warrants granted during the period			$	0.044

The exercisable stock warrants had an intrinsic value of $9,564,277 on December 31, 2020.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

NOTE 12– INCOME TAXES

The Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax assets on December 31, 2020 and 2019 consist of net operating loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of the attainment of future taxable income.

The items accounting for the difference between income taxes at the effective statutory rate and the provision for income taxes for the years ended December 31, 2020 and 2019 are as follow:

	Years Ended December 31,
	2020			2019
Income tax benefit at U.S. statutory rate of 21%	$	(260,749	)	$	(41,803	)
Income tax benefit – state		(108,025	)		(17,318	)
Non-deductible expenses		223,929			48,953
Change in valuation allowance		144,845			10,168
Total provision for income tax	$	—		$	—

The Company’s approximate net deferred tax asset as of December 31, 2020 and 2019 was as follow:

	Years Ended December 31,
	2020			2019
Net operating loss carryforward	$	1,210,697		$	1,065,852
Total deferred tax asset		1,210,697			1,065,852
Less: valuation allowance		(1,210,697	)		(1,065,852	)
Net deferred tax asset	$	—		$	—

The gross operating loss carryforward available to the Company was $4,076,418 at December 31, 2020. The Company provided a full valuation allowance equal to the net deferred income tax asset as of December 31, 2020 and 2019 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. Additionally, the future utilization of the net operating loss carryforward to offset future taxable income is subject to annual limitations as a result of ownership or business changes that occurred prior to 2020 and may occur in the future. The Company has not conducted a study to determine the limitations on the utilization of these net operating loss carryforwards.

The increase in the valuation allowance was $144,845 in 2020. The total net loss carryforward on December 31, 2020 is $1,210,697. The potential tax benefit arising from the net operating loss carryforward of $1,055,538 generated prior to January 1, 2018 will expire in 2033. The potential tax benefit arising from the net operating loss carryforward of $155,159 generated from January 1, 2018 thereon can be carried forward indefinitely within the annual usage limitations.

The Company does not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s 2020, 2019 and 2018 Corporate Income Tax Returns are subject to Internal Revenue Service examination.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Employment Agreements

On February 20, 2018, the Home Bistro Holdings entered into an employment agreement (the “Employment Agreement”) with Zalmi Scher Duchman to serve as the Company’s Chief Executive Officer, the term of which runs for three years includes an annual salary of $1.00 for the first year which shall be increased in the second and third year of employment to an amount mutually approved by Mr. Duchman and the Company’s Board of Directors. Thereafter, the Employment Agreement shall be renewed upon the mutual agreement of Mr. Duchman and Company. In connection with this Employment Agreement, the Company issued 7,643,239 (retroactively restated to reflect shares issued in Merger and post reverse stock split) shares of restricted common stock with a grant date fair value of $549,882, as a sign-on bonus (see Note 11). The Company shall have the right and option to repurchase the stock at par value of $0.001 if Mr. Duchman is terminated for cause; (i) all of the shares shall be eligible for stock repurchase if terminated for cause within the first year; (ii) 2/3 of the shares shall be eligible for stock repurchase terminated for cause within the second year and; (iii) 1/3 of the shares shall be eligible for stock repurchase terminated for cause within the third year. As a result of the Merger (see Note 3) all these shares of common stock fully vested on the date of Merger and any unamortized deferred compensation was expensed during the year ended December 31, 2020 (see Note 11).

Lease Obligation Settlement

On February 22, 2018, the Company entered into a Surrender Agreement with a former landlord for rental obligations dating back to the year ended December 31, 2017 until the space was vacated by the Company on March 31, 2017. Upon executing the Surrender Agreement, the former landlord and the Company agreed that the total rental obligation due was $109,235. The former landlord agreed to $50,000 as full satisfaction of all obligations owed at the time of the Surrender Agreement. The Company agreed to make regular payments on the outstanding rental obligation until paid in full through September 2019; however, there is no penalty if the obligation is not fully paid by such date. As of December 31, 2020 and 2019, the balance remaining due on this obligation were $26,400 and $30,700, respectively, included in accounts payable on the accompanying consolidated balance sheets.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

Put Option Agreement

On April 20, 2020, the Company and a stockholder entered into a Put Option Agreement (see Note 3), pursuant to which, among other things, the Company agreed, at the election of the stockholder, to purchase certain shares of common stock from such stockholder no sooner than two years from the date of the Put Option Agreement also referred to herein as Market Period. Pursuant to the Put Option Agreement, in the event that the stockholder does not generate $1.3 million dollars also referred to herein as Total Investment in gross proceeds from the sale of its shares of common stock by the second anniversary of the Put Option Agreement, then the stockholder has the right to cause the Company to purchase shares held by the stockholder at a price equal to the difference between the Total Investment and the net proceeds actually realized by the stockholder from shares of common stock sold during the Market Period and the number of shares of common stock held by the stockholder on the date the put right is exercised. The put right expires fourteen (14) days from end of the Market Period. In connection with the Put Option Agreement, the Company recorded a common stock repurchase obligation in the amount of $1.3 million, reflected in the accompanying consolidated balance sheets as a long-term liability, Common stock repurchase obligation. The repurchase obligation is re-assessed by the Company each reporting period and adjusted for the proceeds received by the stockholder from sale of common stock. As of December 31, 2020, the Company had $1.3 million of common stock repurchase obligation outstanding.

Joint Product Development and Distribution Agreement

On September 22, 2020, the Company and Corlich Enterprises, Inc., a New Jersey corporation (“Corlich”) entered into a Joint Product Development and Distribution Agreement (the “Development Agreement”), effective the same date, pursuant to which, among other things, Corlich agreed to provide certain commercial services (the “Services”) of Cat Cora, an American professional chef, in order for the Company and Corlich to collaboratively develop a brand of meals (the “Cat Cora Meals”). In consideration for the Services, the Company agreed to (i) pay Corlich a royalty on net revenues generated from (A) the Cat Cora Meals, and (B) Home Bistro and Prime Chop brand orders where a dedicated code is used at purchase, and (ii) issue a warrant to purchase up to 300,000 shares of common stock (see Note 11). The Development Agreement has a three-year term, unless sooner terminated pursuant to its terms.

During the first year of the Development Agreement’s term, Corlich is guaranteed a minimum royalty payment of $109,210. For the second and third year of the Development Agreement’s term, the Development Agreement estimates that Corlich will be guaranteed a minimum royalty payment of $218,380 and $436,770, respectively, subject to the achievement of the prior year’s guaranteed minimum royalty payment and the parties’ agreement to negotiate in good faith a lower guaranteed minimum royalty if such guaranteed minimum royalty payment is not achieved or to otherwise terminate the Development Agreement. Royalties above the guaranteed minimum royalty are based on an increasing percentage of net revenues generated from the sale of Cat Cora Meals as certain revenue milestones are met as defined in the Distribution Agreement. Royalties will be accrued over the term of the Development Agreement and $36,403 of royalty fee was accrued during the period ended December 31, 2020 and included in cost of sales in the accompanying consolidated statement of operations.

Extinguishment of Accounts Payable

The Company settled certain accounts payable and recognized gain on extinguishment of accounts payable of $7,075 and $18,470 during the years ended December 31, 2020 and 2019, respectively.

Registration Rights Agreement

The Company also entered into a Registration Rights Agreement (“Registration Agreement”) in connection with the December 2020 Agreements II (see Note 4). Pursuant to which the Company is required to prepare and file with the SEC a Registration Statement or Registration Statements (as is necessary) covering the resale of all of the Registrable Securities, which Registration Statement(s) shall state that, in accordance with Rule 415 promulgated under the Securities Act, such Registration Statement also covers such indeterminate number of additional shares of Securities as may become issuable upon stock splits, stock dividends or similar transactions. The Company shall initially register for resale all of the Registerable Securities, or an amount equal to the maximum amount allowed under Rule 415 (a)(1)(i) as interpreted by the SEC. In the event the Company cannot register sufficient shares of Securities, due to the remaining number of authorized shares of Securities being insufficient, the Company will use its best efforts to register the maximum number of shares it can base on the remaining balance of authorized shares and will use its best efforts to increase the number of its authorized shares as soon as reasonably practicable.

HOME BISTRO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

NOTE 14 - SUBSEQUENT EVENTS

January 2021 Financing:

On January 12, 2021, the Company entered into a Securities Purchase Agreement (the “January 2021 SPA I”) with an investor for the sale of the Company’s convertible note. Pursuant to the January 2021 SPA I, among other things; (i) the Company issued a self-amortization promissory note (the “January 2021 Note I”, and together with the January 2021 SPA I, the “January 2021 Agreements I”) in the aggregate principal amount of $120,000 and (ii) shall issue a total of 29,385 shares of common stock as a commitment fee and 73,269 shares (the “Second Commitment Shares”) shall be issued as a returnable commitment fee. Pursuant to the January 2021 Note I, the Company received net proceeds of $105,000, net of $10,000 OID and $5,000 issuance cost. The January 2021 Note I bears an interest rate of 10% per annum (which interest rate shall be increased to 16% per annum upon the occurrence of an Event of Default (as defined in the January 2021 Note I)) and shall mature on January 12, 2022. The investor has the right, only upon the occurrence of an Event of Default, to convert all or any portion of the then outstanding and unpaid principal amount and interest thereon (including any default interest) into shares of common stock equal to the lesser of (i) 105% multiplied by the closing bid price of the common stock on the trading day immediately preceding the issue date or (ii) the closing bid price of the common stock on the trading day immediately preceding the date of the respective conversion (the “Conversion Price”), subject to certain percentage of ownership limitations. The Second Commitment Shares must be returned to the Company’s treasury if the January 2021 Note I is fully repaid and satisfied on or prior to the maturity date, the. Upon the occurrence and during the continuation of any Event of Default (as defined in the January 2021 Note I), the investor is no longer required to return the Second Commitment Shares to the Company and the January 2021 Note I becomes immediately due and payable thereunder in the amount equal to the principal amount then outstanding plus accrued interest (including any default interest) through the date of full repayment multiplied by 125%. The obligations of the Company under the January 2021 Note I rank senior with respect to any and all unsecured indebtedness incurred following the issue date except with respect to the Company’s current and future indebtedness with e-commerce platform provider (see Note 7) and any further loans that may be received pursuant to the CARES Act and the SBA’s Economic Injury Disaster loan program. Further, the January 2021 Note I contain standard anti-dilution provisions and price protections provisions in the event that the Company issues securities for a price per share less than the Conversion Price. The January 2021 Agreements I contain other provisions, covenants, and restrictions common with this type of debt transaction. Furthermore, the Company is subject to certain negative covenants under the January 2021 Agreements I, which the Company also believes are also customary for transactions of this type. The January 2021 SPA I also provides the investor with certain “piggyback” registration rights, permitting them to request that the Company include the issued shares for sale in certain registration statements filed by the Company under the Securities Act of 1934, as amended.

On January 27, 2021, the Company entered into a Securities Purchase Agreement (the “January 2021 SPA II”) with an investor for the sale of the Company’s convertible note. Pursuant to the January 2021 SPA II, among other things the Company; (i) agreed to issue a convertible note in the original principal amount of $330,000 (the “January 2021 Note II”); (ii) shall issue 150,000 shares of common stock, subject to a true-up based upon the trading price of the common stock and the investor’s ownership limitations (“commitment share true up”) and; (iii) a warrant to purchase up to 150,000 shares of common stock (the “January 2021 Warrant”, and together with the January 2021 SPA II and the January 2021 Note II, the “January 2021 Agreements II”). Upon closing, the Company received $300,000 in net proceeds, net of $33,000 of OID and issuance cost. The January 2021 Note II matures on February 1, 2022 or such later date as determined at the option of the investor in the event that, and for so long as, an Event of Default (as defined in the January 2021 Note II) has not occurred and is not continuing and no event has occurred and is continuing that with the passage of time and the failure to cure would result in an Event of Default, or upon earlier acceleration or prepayment as provided therein. Upon an Event of Default, the outstanding balance will immediately and automatically increase to 140% of the outstanding balance under the January 2021 Note II as of immediately prior to the occurrence of the Event of Default and the January 2021 Note II becomes immediately due and payable. A one-time interest charge of 8% was applied on the issue date and will be payable on the maturity date. Beginning May 1, 2021 and continuing on the first day of every consecutive month thereafter for nine-months, the Company will make cash payments of $39,600. The investor may only convert the January 2021 Note II at any time or times on or after the occurrence of an Event of Default. The January 2021 Note II is convertible at the rate equal to 105% of the lowest trading price occurring during the twenty-five consecutive trading days immediately preceding the applicable conversion date (“Conversion Price”). The January 2021 Note II contains an embedded option to be accounted for as a derivative liability that will need to be valued on note inception and an obligation pursuant to the commitment fee true up. The obligations under the Note are not secured by any assets of the Company.

The January 2021 Warrant, issued to the investor as commitment fee, provides for the right to purchase up to 150,000 shares of common stock at an exercise price of $2.50, subject to the adjustments and 4.99%, ownership limitation, until the date which is the last calendar day of the month in which the fifth anniversary of the issue date occurs.

The January 2021 Note II and the January 2021 Warrant also provides the investor with certain “piggyback” registration rights, permitting them to request that the Company include the shares issued upon conversion of the January 2021 Note II or exercise of the January 2021 Warrant, respectively, for sale in certain registration statements filed by the Company under the Securities Act of 1934, as amended (the “Securities Act”). The Agreements contain other provisions, covenants, and restrictions common with this type of debt transaction, including a no shorting provision preventing the investor from taking a short position against the Company’s stock. Furthermore, the Company is subject to certain negative covenants under the January 2021 Agreements II, which the Company also believes are also customary for transactions of this type.

On March 18, 2021 (the “Redemption Date”), the Company elected, pursuant to terms of payment as described in the December 2020 Note I (see Note 4), date December 18, 2020 to pay the Investor an aggregate amount of 283,615.75 (the “Payoff Amount”) consisting of $275,000 of principal, $7,865.75 of accrued interest and $750.00 in administrative fees (the “Redemption Amount”). So long as the Investor receives the Payoff Amount on March 18, 2021 (i) the December 2020 Note I shall be deemed to have been paid in full, (ii) the Investor will not exercise any of its rights relating to any potential default that may have occurred after the issue date of the December 2020 Note I, and (iii) the Second Commitment Shares (as defined in the December 2020 Note I) shall be returned by the Investor to the Company’s transfer agent for cancellation as provided for in the December 2020 Agreements I (see Note 4).

F-25

Nevada	~~333-185083~~	~~27-1517938~~
~~(State or Other Jurisdiction~~ ~~of Incorporation)~~	27-1517938
(~~Commission File Number)~~State or other jurisdiction of incorporation or organization)	(IRS Employer Identification ~~Number)~~No.)

15000 W. 6th Avenue, Suite 400 Golden, CO 80401	(631) 964-1111
(Address of principal executive offices, including zip code)	(Registrant’s telephone number, including area code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	~~☐ (Do not check if a smaller reporting company)~~	Smaller reporting company	☒
		Emerging growth company
☐	☐	☒	☒	☐

		Page
	PART I

Item 1.	Business	2
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	16

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 8.	Financial Statements and Supplementary Data	24
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	24
Item 9A.	Controls and Procedures	24
Item 9B.	Other Information	25

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	26
Item 11.	Executive Compensation	28
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	30
Item 13.	Certain Relationships and Related Transactions, and Director Independence	30
Item 14.	Principal Accounting Fees and Services	31

	PART IV

Item 15.	Exhibits and Financial Statement Schedules	32
Item 16	Form 10-K Summary	33
	Signatures	34

	●	~~The category is staid and boring and,~~

	●	~~RTD teas are not delivering on their health promises.~~

	●	~~Wildberry~~

	●	~~Blood Orange~~

	●	~~Mint~~

	●	~~Original~~

	●	~~Peach~~

	1.	~~Direct-to-Retail sales (grocery, big box, and drug chains).~~

	2.	~~Direct Store Delivery (DSD) with shelf management for C-stores, specialty accounts, and such institutions as colleges and universities.~~

	3.	~~Direct-to-Consumer sales via the internet. We will partner with Amazon for fulfillment.~~

Fiscal Quarter Ended	High		Low
31-Mar-17	$	0.120	$	0.010
30-Jun-17	$	0.070	$	0.0151
30-Sep-17	$	0.035	$	0.012
31-Dec-17	$	0.110	$	0.021
31-Mar-18	$	0.785	$	0.050
31-June-18	$	0.1010	$	0.050
31-Sep-18	$	0.080	$	0.0131
31-Dec-18	$	0.150	$	0.010

	For the Year Ended December 31, 2018			For the period from inception (September 14, 2017) to December 31, 2017
Cash Flows
Net cash used in operating activities	$	(758,859	)	$	(70,519	)
Net cash used in investing activities		(36,348	)		(14,000	)
Net cash provided by financing activities		834,655			105,345
Net change in cash	$	39,448		$	20,826

	DECEMBER 31,
	2018			2017
ASSETS
CURRENT ASSETS:
Cash	$	60,274		$	20,826
Accounts receivable		9,432			-
Inventory		60,116			-
Prepaid expenses and other current assets		8,939			-
Advance to supplier		-			11,200

Total Current Assets		138,761			32,026

OTHER ASSETS:
Property and equipment, net		37,487			13,222
Deposit		6,828			-

Total Other Assets		44,315			13,222

TOTAL ASSETS	$	183,076		$	45,248

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	69,867		$	16,046
Accrued salaries and related payroll liabilities		21,745			-
Convertible notes payable, net of debt discount		-			100,289
Due to related party		-			345

Total Current Liabilities		91,612			116,680

Total Liabilities		91,612			116,680

COMMITMENTS AND CONTINGENCIES (see Note 9)

STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock $0.001 par value: 20,000,000 shares authorized;
Convertible Series A Preferred stock ($0.001 Par Value; 520,000 Shares Authorized; 520,0000 shares and none issued and outstanding as of December 31, 2018 and 2017, respectively)		520			-
Convertible Series B Preferred stock ($0.001 Par Value; 500,000 Shares Authorized; 500,000 shares issued and outstanding as of December 31, 2018 and 2017)		500			500
Convertible Series C Preferred stock ($0.001 Par Value; 2,500 Shares Authorized; 2,250 shares and none issued and outstanding as of December 31, 2018 and 2017, respectively)		2			-
Common stock $0.001 par value: 300,000,000 shares authorized; 16,832,065 and none shares issued and outstanding as of December 31, 2018 and 2017, respectively.		16,832			-
Common stock to be issued (2,600,000 and none shares as of December 31, 2018 and 2017, respectively)		2,600			-
Additional paid-in capital		1,186,034			24,492
Accumulated deficit		(1,115,024	)		(96,424	)

Total Stockholders’ Equity (Deficit)		91,464			(71,432	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	183,076		$	45,248

				For the period from inception
	For the year ended			(September 14, 2017) to
	December 31, 2018			December 31, 2017

Net revenues	$	18,672		$	-

Cost of sales		15,588			-

Gross profit		3,084			-

OPERATING EXPENSES:
Compensation and related cost		339,274			53,000
Professional and consulting expenses		448,868			17,357
General and administrative		200,024			19,131

Total Operating Expenses		988,166			89,488

LOSS FROM OPERATIONS		(985,082	)		(89,488	)

OTHER EXPENSE:
Interest income		9			-
Interest expense		(33,527	)		(6,936	)

Other expense		(33,518	)		(6,936	)

LOSS BEFORE PROVISION FOR INCOME TAXES		(1,018,600	)		(96,424	)

Provision for income taxes		-			-

NET LOSS	$	(1,018,600	)	$	(96,424	)

NET LOSS PER COMMON SHARE
Basic	$	(0.04	)	$	(0.00	)
Diluted	$	(0.04	)	$	(0.00	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		28,359,343			-
Diluted		28,359,343			-

															Common										Total
	SERIES A			SERIES B			SERIES C								Stock -			Additional							Stockholders'
	Preferred Stock			Preferred Stock			Preferred Stock			Common Stock					Unissued			Paid-in			Accumulated				(Equity)
	Shares	Amount		Shares	Amount		Shares	Amount		Shares		Amount			Shares	Amount		Capital			Deficit				Deficit

Balance, inception	-		-	-		-	-		-	-			-		-		-		-				-			-

Issuance of preferred stock to founders	-		-	500,000		500	-		-	-			-		-		-		14,500				-			15,000

Debt discount in connection with the issuance of stock warrants	-		-	-		-	-		-	-			-		-		-		9,992				-			9,992

Net Loss	-		-	-		-	-		-	-			-		-		-		-				(96,424	)		(96,424	)

Balance, December 31, 2017	-		-	500,000		500	-		-	-			-		-		-		24,492				(96,424	)		(71,432	)
						��
Recapitalization of the Company	-		-	-		-	-		-	53,141,833			53,142		-		-		(76,117	)			-			(22,975	)

Cancellation of shares	-		-	-		-	-		-	(36,309,768	)		(36,310	)	-		-		36,310				-			-

Issuance of preferred stock for cash	20,000		20	-		-	2,250		2	-			-		-		-		451,978				-			452,000

Issuance of preferred stock for cash and conversion of notes payable and accrued interest	500,000		500	-		-	-		-	-			-		-		-		507,979				-			508,479

Unissued common stock for services	-		-	-		-	-		-	-			-		2,600,000		2,600		231,400				-			234,000

Debt discount in connection with the issuance of stock warrants	-		-	-		-	-		-	-			-		-		-		9,992				-			9,992

Net Loss	-		-	-		-	-		-	-			-		-		-		-				(1,018,600	)		(1,018,600	)

Balance, December 31, 2018	520,000	$	520	500,000	$	500	2,250	$	2	16,832,065		$	16,832		2,600,000	$	2,600	$	1,186,034			$	(1,115,024	)	$	91,464

	For the period from inception (September 14, 2017) to December 31, 2017
Numerator:
Net loss	$	(96,424	)

Denominator:
Weighted-average shares of common stock		-
Dilutive effect of convertible instruments		74,000,000
Diluted weighted-average of common stock		74,000,000
Net income (loss) per common share from:
Basic	$	(0.00	)
Diluted		(0.00	)

	December 31, 2018		December 31, 2017
Common stock equivalents:
Stock warrants	-		12,000,000
Stock options		1,940,000		-
Convertible notes payable		-		12,000,000
Convertible Preferred Stock		111,000,000		50,000,000
Total		112,940,000		74,000,000

	December 31, 2018		December 31, 2017

Finished goods	$	39,984	$	-
Raw materials		20,132		-
	$	60,116	$	-

	Estimated life	As of December 31, 2018			As of December 31, 2017

Molding Tool equipment	3 years	$	30,592		$	14,000
Packing equipment	3 years		19,756			-
Less: Accumulated depreciation			(12,861	)		(778	)
		$	37,487		$	13,222

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Balance at December 31, 2017		12,000,000		$	0.02		4.85
Granted		12,000,000			0.02		5.00
Cancelled		(24,000,000	)		0.10		4.70
Balance at December 31, 2018		-		$	-		-
Warrants exercisable at December 31, 2018		-		$	-		-
Weighted average fair value of warrants granted during the year ended December 31, 2018				$	0.001

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance at December 31, 2017		-		-		-		-
Recapitalization on March 26, 2018		1,940,000		0.10		2.80		-
Balance at December 31, 2018		1,940,000		0.10		2.79		-
Options exercisable at December 31, 2018		1,940,000	$	0.10		2.04	$	-

Payment		Year
$	20,000	2018
$	50,000	2019
$	100,000	2020 and every year thereafter on the same date, for the life of this License Agreement.

	Year Ended December 31, 2018			Period from September 14, 2017 (inception) to December 31, 2017
Income tax benefit at U.S. statutory rate of 21%	$	(213,906	)	$	(20,249	)
Non-deductible expenses		55,378			3,500
Increase in valuation allowance		158,528			16,749
Total provision for income tax	$	-		$	-

Deferred Tax Asset:	December 31, 2018			December 31, 2017
Net operating loss carryforward	$	175,277		$	16,749
Valuation allowance		(175,277	)		(16,749	)
Net deferred tax asset	$	-		$	-

Name	Age	Position	Commencement of Service As Officer/Director
Roy G. Warren	64	Chairman and CEO and Director	2018
Andrew Schamisso	56	President and COO	2018
Jack Shea	69	Director	2018
Mike Edwards	59	Director	2018
Bruce Zanca	58	Director	2018

Name and Address	Beneficial Ownership		Percentage of Class (1)

Officers and Directors
Roy G. Warren, 11770 US Highway One, suite E303, Palm Beach Gardens, FL 33408 (1)		25,000,000		19.16	%
Andrew Schamisso, 11770 US Highway One, suite E303, Palm Beach Gardens, FL 33408 (1)		25,000,000		19.16	%

All officers/directors as a group (2 persons)		50,000,000		38.32	%
Alpha Capital Anstalt, Lettstrasse 32, FL-9490 Vaduz, Furstentums, Liechtenstein (2)		13,030,163		9.99	%

	Year Ended December 31, 2018		For the Period Ended December 31, 2017
Audit fees	$	28,582	$	21,367
Audit related fees		-		-
Tax fees		-		-
All other fees		-		-
Total	$	28,582	$	21,367