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

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NATURE’S BEST BRANDS, INC.

(formerly HIP CUISINE, INC.)

Unaudited Consolidated Statements of Cash Flows

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

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NATURE’S BEST BRANDS, INC.

(formerly HIP CUISINE, INC.)

Notes to Unaudited Consolidated Condensed Financial Statements

for the SixNine Months Ended JuneSeptember 30, 2018 and JuneSeptember 30 2017

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Nature’s Best Brands, Inc. (the “Company”) is a Florida corporation organized under the name Hip Cuisine, Inc. on March 19, 2014. The Company changed its corporate name to Nature’s Best Brand, Inc. on June 15, 2018. The Company has two subsidiaries, Hip Cuisine, Inc. (“Hip Cuisine”), a Panama corporation incorporated on February 24, 2014, and Rawkin Juice, Inc., a California corporation incorporated on November 7, 2016. The Company’s fiscal year end is December 31.

The Company, through its subsidiaries, intends to market organic foods to health-conscious consumers. In pursuance of this goal, the Company operatesoperated four restaurants that offer healthy food, coffee and juice, two in Panama and two in California. The Company is engaged is evaluating acquisitions that both would expandin the process of discontinuing its present lines ofrestaurant business, and expects to do so in the fourth quarter of 2018. The Company may not be able to sublease or assign its existing leases on a non-recourse basis, in which are in unrelated businesses. However,case, the Company cannotwill continue to have obligations under the leases to the extent that any subtenant or assignee does not comply with the lease terms, including the payment of rent.

The Company plans to change its business direction and negotiate a non-exclusive distribution agreement with a manufacturer of medical device systems used for various forms of screening which provides physicians and medical professionals with useful data utilized for maximizing the management of patients’ health, and upon entering into such an agreement, to market the equipment. The Company has never generated any revenue from such business, and the Company can give anyno assurance that it can or will complete any acquisitions.ever successfully negotiate a distribution agreement on acceptable terms, compete in the marketing of medical equipment, operate profitably or generate positive cash flow.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated significant revenues since inception.inception and is in the process of discontinuing its restaurant business. As at JuneSeptember 30, 2018, the Company has an accumulated loss from operations of $2,642,944$2,984,767 and it sustained an operating loss of $722,347$1,064,170 for the sixnine months ended JuneSeptember 30, 2018. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The continuing operations of the Company are dependent upon its ability to develop its proposed business of marketing medical devices used for screening, to raise adequate financing and to commence profitable operations in the future and repay its liabilities arising from normal business operations as they become due. The ability of the Company to raise financing may be impaired by the terms of the Company’s outstanding convertible notes and warrants.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended December 31, 2017 have been omitted. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the sixnine months JuneSeptember 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. This report should be read in conjunction with the audited consolidated financial statements and the footnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2017.

Basis of Consolidation

These consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated.

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Foreign Currency Translation and Re-measurement

The Company’s functional currency and reporting currency is the U.S. dollar. The functional currency of Hip Cuisine, which operatesoperated two restaurants in Panama, is the Panamanian Balboa. All transactions initiated in Panamanian Balboa are translated into U.S. dollars in accordance with ASC 830-30, “Translation of Financial Statements.” Since the Panamanian Balboa is pegged with the U.S. dollar at par, the Company recognized no gain or loss on foreign exchange translations during the sixnine months ended JuneSeptember 30, 2018 and JuneSeptember 30, 2017.

Use of 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As of JuneSeptember 30, 2018 and December 31, 2017, the Company had $93,723$86,555 and $87,102 in cash and cash equivalents, respectively.

Fair Value of Financial Instruments

The Company adopted ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.

The three-level hierarchy for fair value measurements is defined as follows:

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement

The Company’s financial instruments consist primarily of cash, prepaid expenses, accounts payable and accrued expenses, convertible notes and stockholder’s loan. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

Concentrations of Credit Risks

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

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Related Parties

The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions (see Note 7).

Prepaid and Deposits

Prepaid and deposits balances relate to security deposits for restaurant leases, prepaid rent and prepaid insurance. The prepaid balances and deposits will be amortized as the related expense is incurred.

Property, plant and equipment

Property and equipment are stated at cost. Depreciation is computed on the straight-line method. The depreciation and amortization methods are designed to amortize the cost of the assets over their estimated useful lives, in years, of the respective assets as follows:

Maintenance and repairs are charged to expense as incurred. Improvements of a major nature are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in income.

The long-lived assets of the Company are reviewed for impairment in accordance with ASC No. 360, “Property, Plant and Equipment” (“ASC No. 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the sixnine months ended JuneSeptember 30, 2018 and JuneSeptember 30, 2017, no impairment losses have been identified.

Goodwill and Other Intangible Assets

We account for goodwill and intangible assets in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

 

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No impairment loss was recognized for the sixnine months ended JuneSeptember 30, 2018 and JuneSeptember 30, 2017.

The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.

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Revenue Recognition

The Company recognizes revenue from the sale of products and services in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:

Step 1: Identify the contract(s) with customers

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to performance obligations

Step 5: Recognize revenue when the entity satisfies a performance obligation

The Company recognizes revenue when it satisfies its obligation by transferring control of the good or service to the customer. A performance obligation is satisfied over time if one of the following criteria are met:

Since the Company’s revenues are generated when products are sold with no remaining obligations on the part of the Company, revenue is recognized at the time of sale.

Stock-Based Compensation

ASC 718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity - Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

During the sixnine months ended JuneSeptember 30, 2018 and 2017, the Company incurred $184,670 and $251,360 from the issuance of 197,000 and 233,000 shares of common stock to the consultants for services.

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Recently Issued Accounting Pronouncements

In June 2018, the FASB issued ASU 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. ASU 2018-07 is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company does not currently expect the adoption to have any significant impact on the Company’s financial statements.

The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on the Company’s financial statements.

Adoption of New Accounting Standards.

We have adopted the following recent accounting pronouncement in these financial statements with no significant impact on reported financial position, results of operations or cash flow: 

ASU 2014-09, Revenue - Revenue from Contracts with Customers. The new standard, as amended, requires that we recognize revenue in the amount to which we expect to be entitled for delivery of promised goods and services to our customers. The new standard also resulted in enhanced revenue-related disclosures, including any significant judgments and changes in judgments. Additionally, the new standard requires the deferral of incremental direct selling costs to the period in which the related revenue is recognized.

We adopted the standard as of January 1, 2018 using the modified retrospective approach applied to all contracts that were not completed at adoption based on the contract terms in existence at adoption. No adjustment was required to beginning retained earnings as a result of this adoption and none of the enhanced revenue-related disclosures were required.

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NOTE 3 – PROPERTY, PLANT AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed on the straight-line method. The depreciation methods are designed to amortize the cost of the assets over their estimated useful lives, in years, of the respective assets as follows:

During the sixnine months ended JuneSeptember 30, 2018 and 2017, the depreciation cost was $100,407$147,920 and $60,363,$109,651, respectively.

During the sixnine months ended JuneSeptember 30, 2018, the Company issued 15,834 shares of common stock, valued at $15,674 based on the market price of the common stock on the date of issuance, for leasehold improvements.

NOTE 4 – INTANGIBLE ASSET – TRADEMARKS

The Company acquired rights with respect to three trademarks during 2017 and 2018, as follows:

_______________ 

¹ The Company acquired the rights to the Living Gourmet trademark in February 2017 for which the Company issued 10,000 shares of common stock, valued at $0.63 per share, which was the market price of the common stock on the date of the acquisition, from an unaffiliated party, and the Company agreed to pay a royalty of 20% of the net profits, as defined, generated from the use of the trademark. As of JuneSeptember 30, 2018, no royalties were payable since the Company did not generate any profits from the trademark.

² On June 15, 2017, the Company issued 8,000 shares of common stock valued at $12,640, based on market price of $1.58 per share, to the managing member of Medidate Coffee Ltd., pursuant to an agreement with Medidate Coffee pursuant to which the Company obtained the exclusive rights to distribute Medidate coffee in Panama, Colombia and Costa Rica and received a 10% membership interest in Medidate Coffee. The Company will pay 20% of net profit derived from the sales of Medidate Coffee sold in Company-owned outlets and 20% of the net profit derived from sales of Medidate Coffee products that were produced in the kitchens of the Company’s restaurants. The Company and Medidate Coffee have the exclusive right to use the Medidate Coffee brand name. As of JuneSeptember 30, 2018, no royalties were payable since the Company did not generate any profits from the sale of the coffee.

³ In May 2018, we were granted a service mark for the heart logo.

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We amortize the cost of our trademarks over the 15-year estimated useful life of the trademarks on a straight line basis.

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The following table sets forth the amortization for the trademarks at JuneSeptember 30, 2018 and December 31, 2017

NOTE 5 – GOODWILL

Goodwill is generated from the acquisition of net assets from Rawkin Bliss LLC by Rawkin Juice Inc. Based on the Company’s analysis of goodwill as of JuneSeptember 30, 2018, no indicators of impairment exist. No impairment loss on goodwill was recognized for the sixnine months ended JuneSeptember 30, 2018 and June 30, 2017.

NOTE 6 – BANK LOAN

The Company had the following bank loan outstanding as of JuneSeptember 30, 2018 and December 31, 2017:

During the sixnine months ended JuneSeptember 30, 2018 and 2017, the interest expense on bank loan was $807$1,215 and $667.

The following is a schedule by years of future bank loan payment as of JuneSeptember 30, 2018:

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NOTE 7 – RELATED PARTY TRANSACTIONS

Chief Executive Officer

The former chief executive officer, who resigned on October 15, 2018, has periodically made interest-free advances to the Company for working capital, and the Company has made periodic repayments to the former chief executive. Amounts due to the former chief executive officer on account of these advances were $323,605$413,087 at JuneSeptember 30, 2018 and $258,139 at December 31, 2017. The advances are payable on demand.

During the sixnine months ended JuneSeptember 30, 2018, the Company’s former chief executive officer advanced $189,036$282,586 to the Company, and the Company repaid $123,570$127,638 to the former chief executive officer.

During the sixnine months ended JuneSeptember 30, 2017, the Company’s chief executive officer advanced $76,187$341,693 to the Company, and the Company repaid $96,497$399,343 to the chief executive officer.

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Chief Financial Officer

During the sixnine months ended JuneSeptember 30, 2018, the Company’s chief financial officer advanced $16,000$60,000 to the Company for working capital.capital, and the Company repaid $99,000 to the chief financial officer. As of September 30, 2018 and December 31, 2017, the chief financial officer’s advances to the Company were $13,000 and $52,000, and therespectively. The Company owed the chief financial officer accrued interest of $2,000.$5,615. Advances from the chief financial officer bore interest at 3%30% per annum.

On March 20, 2018, the Company issued a convertible note to the chief financial officer in the principal amount of $80,250 with $5,250 original issuance discount to replace the principal and interest due to the chief financial officer in the amount of $75,000. The convertible note bears interest at a rate of 2% per annum, and is payable on September 20, 2018, which is six months from the March 20, 2018 funding date. The Company has determined that there is no convertible feature associated with the convertible note as of June 30, 2018, due to the variable feature not being in effect until 180 days after the issuance date of March 20, 2018. The note was issued in satisfaction of the Company’s obligations to the chief financial officer in the principal amount of $75,000. The issuance of the note on March 20, 2018 did not have substantially different terms than the original note, and is not considered to be a debt modification under U.S. GAAP guidance.

The convertible note bears interest at a rate of 2% per annum, and is payable on September 20, 2018, which is six months from the March 20, 2018 funding date. The note is convertible into common stock at a variable conversion rate commencing 180 days after issuance. In connection with the issuance of the convertible note to the chief financial officer, the Company issued to the chief financial officer two-year warrants to purchase 75,000 shares of common stock at an exercise price of $1.20 per share. The note is one of three convertible notes that were issued by the Company in the aggregate principal amount of $321,000 and which are described in Note 8. In connection with the issuance of the notes, the Company issued warrants to purchase an aggregate of 300,000 shares of common stock, as described in Note 9, to the purchasers of the notes.

NOTE 8 – CONVERTIBLE NOTES

The Company had no convertible notes on December 31, 2017 and had the following principal balances under its convertible notes outstanding as June 30, 2018:

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On March 8 and March 20, 2018, the Company issued convertible notes in the aggregate principal amount of $321,000 pursuant to a purchase agreements dated March 8 and March 20, 2018. The notes were issued for a purchase price of $300,000, with an original issue discount of $21,000. The convertible notes are due six months from funding are, accordingly, are treated as current liabilities. In connection with the issuance of the convertible notes, the Company issued to the holders of the convertible notes two-year warrants to purchase 300,000 shares of common stock at an exercise price of $1.20 per share, subject to adjustment. The warrants were valued at $155,742, which is treated as a debt issuance discount.

The Company recognized amortization expense related to the debt discount and deferred financing fees of $110,948 for the six months ended June 30, 2018, which is included in interest expense in the statements of operations.

The notes are senior notes and the Company cannot create indebtedness senior to or pari passu with the notes without the consent of the holders. The notes bear interest at 2% per annum and were issued on March 8, 2018 as to $160,500 and March 16, 2018 as to $160,500. The notes are convertible into common stock, commencing 180 days after the issue date, at a conversion price equal to lowest of (i) $1.00 or (ii) 75% of the closing price of the common stock on the 180^th day after the date of issuance, or (iii) at any time on or after the earlier of the (x) date of an event of default under the note occurs or (y) date which is 225 days after the issue date, 65% of the lowest closing price of the common stock during the 20 consecutive trading-day period immediately preceding the trading day that the Company receives a notice of conversion. Further, if the lowest traded price of the common stock is less than the conversion price on the date following the conversion date on which the holder receives the conversion shares which are immediately freely tradable by the holder, either pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, then the conversion price shall be deemed to have been retroactively adjusted, as of the conversion date, to a price equal to 65% of the lowest closing price of the common stock on such date of receipt.

As of June 30, 2018, no derivative liability associated with the convertible notes have been recorded, as June 30, 2018 is prior to the date on which the notes may be converted which is 180 days after the issuance of the notes.

The conversion price is also subject to adjustment inOn September 30, 2018, the event of issuances of common stock or convertible securitiesCompany entered into a note amendment with an exercise price or conversion price which is less than the conversion price otherwise determined pursuant to the note including certain acquisition transactions. Ifsettlement amount amended to $90,000 and note expiry date extended to December 30, 2018. Additionally, the Company (i) makes a public announcement that it intends to be acquired by, consolidate or merge with any other corporation or entity (other than a merger in which the Company is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Company or (ii) any person, group or entity (including the Company) publicly announces a tender offerwarrants to purchase 50% or more of the common stock (or any other takeover scheme) the conversion price shall, effective upon the date of the announcement and continuing until the transaction is either completed or abandoned, the conversion price shall be equal to the lower of (x) the conversion price otherwise determined pursuant to the note or a 25% discount to the acquisition price per share, as defined.

If the Company makes a dilutive issuance, other than for exempt issuances, the conversion price is reduced to the price at which the common stock was issued pursuant to the dilutive issuance. The adjustment of the conversion price as a result of a dilutive issuance does not apply to (a)original 75,000 shares of common stock will be settled by the Company through $12,500 to be paid to the warrant holder no later than December 30, 2018, or other securitiesthe issuance of 37,500 shares of common stock, at the option of the holder, per the modified terms. The change of conversion feature from the note amendment is considered to be a debt modification which resulted in loss on extinguishment of debt of $22,250.

As of September 30, 2018, the promissory note payable issued to officers or directors pursuant to an equity incentive plan adopted by a majority of the non-employee members of the Company’s board of directors or a majority of the members of a committee of non-employee directors established for such purpose; (b) securities issued pursuant to a merger, consolidation, acquisition or similar business combination approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a person which is an operating company in a business synergistic with the business of the Company; (c) securities issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement or debt financing from a bank or similarchief financial institution approved by a majority of the disinterested directors of the Company.officer was $102,500.

The note cannot be converted to the extent that, upon conversion of the note, the holder and his affiliates would beneficially own more than 4.99% of the Company’s common stock, provided, that the holder of the notes may terminate the 4.99% requirement on 61days’ notice.NOTE 8 – PROMISSORY NOTES

The Company may prepay thehad no promissory notes on three trading days’ noticeDecember 31, 2017 and had the following principal balances under its convertible notes outstanding as follows. DuringSeptember 30, 2018:

On March 8, 2018 the first 60 days, at 108%Company issued a convertible note with principal amount of $160,500. The note was issued for a purchase price of $160,500, with an original issue discount of $10,500. The convertible note was due six months from funding are, accordingly, was treated as current liability. In connection with the issuance of the principal amount, during the next 60 days at 113% of the principal amount, during the next 60 days at 120% of the principal amount and thereafter at 100% of the principal amount, in each case plus accrued interest and any default interest. The holders of the notes have certain rights to require prepayment from financing and other funding.

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Events of default are defined in theconvertible note, and include, in addition to events of default that are standard in promissory notes, (i) failure to comply with the reporting requirements of the Securities Exchange Act, including the filing for an extension under Rule 12b-25 of the Exchange Act, or failure to be subject to such reporting requirements; (ii) a reverse split not approved by the holders; (iii) any restriction placed by Depository Trust Company (DTC”) on one or more of DTC’s services, such as limiting a DTC participant’s ability to make a deposit or withdrawal of the security at DTC) the Company’s common stock, provided, however, that if such action by DTC did not result from any fault of the Company then the Company shall have ten trading daysissued to obtain the release, cancellation or termination of such restriction; (iv) the entry by the Company in any variable rate or similar transaction, which would include a transaction similar to the notes; (v) without consent of the holders of the notes, ifconvertible note, two-year warrants to purchase 150,000 shares of common stock at an exercise price of $1.20 per share, subject to adjustment. The warrants were valued at $69,650 which is treated as a debt issuance discount. On August 20, 2018 the Company changesentered into a note amendment with the naturenote settlement amount amended to $180,000 and note expiry date extended to October 16, 2018. Additionally, the warrants to purchase the original 150,000 shares of its businesscommon stock will be settled by the Company through $25,000 to be paid to the warrant holder no later than October 16, 2018, or sells, divests,the issuance of 75,000 shares of common stock, at the option of the holder, per the modified terms. The change of conversion feature from the note amendment is considered to be a debt modification which resulted in loss on extinguishment of debt of $44,500.

On March 20, 2018 the Company issued a convertible note with principal amount of $80,250. The note was issued for a purchase price of $80,250, with an original issue discount of $5,250. The convertible note was due six months from funding are, accordingly, was treated as current liability. In connection with the issuance of the convertible note, the Company issued to the holders of the convertible note, two-year warrants to purchase 75,000 shares of common stock at an exercise price of $1.20 per share, subject to adjustment. The warrants were valued at $43,046 which is treated as a debt issuance discount. On September 30, 2018, the Company entered into a note amendment with the note settlement amount amended to $90,000 and note expiry date extended to December 30, 2018. Additionally, the warrants to purchase the original 75,000 shares of common stock will be settled by the Company through $12,500 to be paid to the warrant holder no later than December 30, 2018, or changes the structureissuance of any material assets other than37,500 shares of common stock, at the option of the holder, per the modified terms. The change of conversion feature from the note amendment is considered to be a debt modification which resulted in loss on extinguishment of debt of $22,250. The Company recognized amortization expense related to the debt discount and deferred financing fees of $189,242 for the nine months ended September 30, 2018, which is included in interest expense in the ordinary coursestatements of business. In the event of a default, the Company would be required to pay 150% of the principal amount and the note includes a confession of judgment which would make it easier for the holders to obtain a judgment against the Company.operations.

For the sixnine months ended JuneSeptember 30, 2018 and 2017, the interest expense on convertible notes was $1,881$3,136 and $0, respectively. As of JuneSeptember 30, 2018 and December 31, 2017, the accrued interest payable was $1,881$3,136 and $0, respectively.

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NOTE 9 – CAPITAL STOCK

Common Stock

On February 7, 2017, the Company issued 10,000 shares of common stock valued at $6,300, based on market price of $0.63 per share, for the acquisition of a trademark from an unaffiliated party.

In March 2017, the Company sold 1,000,000 shares of common stock in a public offering at $0.75, from which the Company received net proceeds of $675,000 after expenses of $75,000.

On June 15, 2017, the Company issued 8,000 shares of common stock valued at $12,640, based on market price of $1.58 per share, to the managing member of Medidate Coffee Ltd., pursuant to an agreement whereby the Company obtained the exclusive rights to distribute Medidate coffee in Panama, Colombia and Costa Rica and received a 10% membership interest in Medidate Coffee. The Company will pay 20% of net profit derived from the sales of Medidate Coffee sold in Company-owned outlets and 20% of the net profit derived from sales of Medidate Coffee products that were produced in the kitchens of the Company’s restaurants.

On August 25, 2017, the Company sold 250,000 shares of common stock at $1.00 for cash proceeds of $250,000.

On October 17, 2017, the Company issued 115,000 shares of common stock valued at $1.00 per share, based on the market price of the stock, to employees of the Company as compensation.

During the year ended December 31, 2017, the Company issued 233,000 shares of common stock valued at $251,360, based on market price on the respective issuance dates, to consultants to assist in managing its locations, locating expansion of restaurants and promoting the new restaurant locations.

During the year ended December 31, 2017, the Company issued 306,250 shares of common stock valued at $398,750, based on the market price on the respective issuance dates, to repay certain notes payable of $132,500 assumed by the Company in connection with its acquisition of the net assets of Rawkin Bliss LLC. A loss on debt settlement of $266,250 was incurred related to the repayment of the notes payable.

On January 25, 2018, the Company issued 137,000 shares of common stock, valued at $124,670, based on market price of $0.91 per share, for services provided to the Company.

On January 25, 2018, the Company issued 25,000 shares of common stock, valued at $22,750, based on market price of $0.91 per share, to settle outstanding payables with a consultant of the Company.

On February 23, 2018, the Company issued 60,000 shares of common stock valued at $60,000, based on market price of $1.00 per share, to an investment banking firm for pursuant to a six-month investment banking agreement.

During the sixnine months ended JuneSeptember 30, 2018, the Company issued 15,834 shares of common stock, valued at $15,674 based on the market price of the common stock on the date of issuance, for leasehold improvements.

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Warrants

The Company accounted for the issuance of Warrants in connection with the issuance of convertible notes as an equity instrument and recognized the warrants under the Black-Scholes valuation model based on the market price of the Company’s common stock on the grant date at the exercise price of $1.20 per share. The holders of the warrants have piggyback registration rights with respect to the shares of common stock issuable upon exercise of the warrants.

The exercise price of the warrants is subject to adjustment in the event of any issuance of common stock or convertible securities with respect to which the purchase price or the conversion or exercise price is less than the exercise price of the warrants. The adjusted exercise price would be the purchase price per share or exercise price per share in the dilutive issuance. Unlike the comparable provisions in the convertible notes, there are no excluded issuances, so any dilutive issuance, even an issuance which would not result in an adjustment of the conversion price of the convertible notes, would result in an adjustment in the exercise price of the warrants.

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The below table summarizes warrant activity during the sixnine months ended JuneSeptember 30, 2018:

On August 20, 2018, the Company entered into a note amendment with a convertible promissory note holder which held 150,000 warrants. Per the amendment, the Company will purchase the warrants from the holders for total consideration of $25,000, or will issue 75,000 shares of common stock, before October 16, 2018.

On September 30, 2018, the Company entered into a note amendments with two convertible promissory note holders which held 150,000 warrants (75,000 warrants each). Per the amendments, the Company will purchase the warrants from the holders for total consideration of $25,000, or will issue 75,000 shares of common stock, before December 30, 2018.

The fair value of each warrant on the date of grant iswas estimated using the Black-Scholes option valuation model. The following weighted-average assumptions were used for options granted during the sixnine months ended JuneSeptember 30, 2018 and 2017:

The following table summarizes information relating to outstanding and exercisable warrants as of JuneSeptember 30, 2018:

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The valuation of the warrants at issuance date were $155,742, based on the Black-Sholes model discussed above, as well asresulting in a debt discount of $189,242.$155,742. During the sixnine months ended JuneSeptember 30, 2018, amortization of debt discount related to the warrants was $110,948.$155,742.

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at JuneSeptember 30, 2018, for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money” warrants). As of JuneSeptember 30, 2018, the aggregate intrinsic value of warrants outstanding was $0 based on the closing market price of $1.12$1.02 on JuneSeptember 30, 2018.

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NOTE 10 – COMMITMENTS AND CONTINGENCIES

The Company currently leases 152.18 square meters of space at Balboa Boutiques located in Panama City, Panama. The current lease is renewed on month-by-month basis. The monthly lease payment is $4,000 per month. This location serves as the Company’s only facility for day to day operations. During the sixnine months ended JuneSeptember 30, 2018 and 2017, the Company paid rent of approximately $24,000$32,000 and $26,000.$49,000. During the quarter ended September 30, 2018 the Company ceased operations in this location and fully moved out of their location by September 30, 2018. As of September 30, 2018, the Company had paid all the rent in full and has no further rent payable to the landlord as of September 30, 2018.

The Company currently leases 282.35 square meters of their second restaurant location in Costa del Este Panama. The current lease term began in January 2017 and expires in December 2021, but automatically reverts to a month to month rental after 5 years unless a new contract is entered into. The current monthly lease iswas approximately $12,000.$12,000 but reduced to approximately $9,000 per month. During the sixnine months ended JuneSeptember 30, 2018 and 2017, the Company paid rent of approximately $70,000$88,000 and $70,000.$90,000.

The Company currently leases a location in Burbank, CA. The current lease term began on July 1, 2017 and expires on April 30, 2023. The current monthly lease is approximately $5,800, with a 3% annual escalation. During the threenine months ended JuneSeptember 30, 2018 and 2017, the Company paid rent of approximately $34,000$52,000 and $34,000.$51,000.

On February 21, 2017, the Company entered into a 3 yearthree-year lease agreement which started June 1, 2017, for a 492 square meter restaurant location in Santa Monica, California. The total square meters is 492 and the rent for the location is $4,300 per month, with a 3% annual escalation. The lease can be extended for a further three years after the end of the current lease term. During the sixnine months ended JuneSeptember 30, 2018 and 2017, the Company paid rent of approximately $26,000$40,000 and $43,000.$30,000. On September 6, 2018, the Company entered into an agreement to sublease the location at monthly rental amount at approximately $4,500, for six months starting on December 1, 2018. As of September 30, 2018, the Company has received security deposits at $12,900.

Pursuant to the Company’s agreement with Medidate Coffee, commencing in the third year of the agreement, the Company is to purchase 15,000 kilograms per year from Medidate Coffee. This requirement increases by 10% each year, to a maximum of 30,000 kilograms.

The Company has no other commitments or contingencies as of JuneSeptember 30, 2018.

The following is a schedule by years of minimum future rentals on leases as of JuneSeptember 30, 2018:

From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that it is adequately insured for its operations and there are no current matters that would have a material effect on the Company’s financial position or results of operations.

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NOTE 11 – ACQUISITION AGREEMENT

On August 20, 2018, the Company, its wholly-owned subsidiary Unisource Acquisition Corp. (“Acquisition Sub”), and Unisource Health, Inc., a Nevada corporation (“Unisource”), entered into an agreement and plan of merger (the “Acquisition Agreement”), pursuant to which Acquisition Sub was to be merged with and into Unisource, and Unisource would become a wholly-owned subsidiary of the Company. Pursuant to Acquisition Agreement, the Company was to issue to the six holders of Unisource’s common stock a total of 20,000,000 shares of the Company’s common stock.

Prior to the execution of the Acquisition Agreement, there was no relationship between the Company and Unisource or its stockholders, except that Lawrence Biggs, the chief executive officer and largest stockholder of Unisource, owned 251,319 shares of common stock, representing approximately 2.8% of the Company’s outstanding common stock. One other Unisource stockholder owned 50,000 shares of common stock.

NOTE 1112 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date these condensed consolidated financial statements were available to be issued. BasedSubsequent to September 30, 2018 and through November 14, 2018, the date that these financials were made available, the Company had the following subsequent events:

In connection with the change of management and the Company’s new business direction subsequent to September 30, 2018, the Company intends to discontinue the restaurant business and negotiate a non-exclusive distribution agreement with a manufacturer of medical device systems used for various forms of screening which provides physicians and medical professionals with useful data utilized for maximizing the management of patients’ health, and upon entering into such an agreement, to market the equipment. As a result, the Company expects that, during the fourth quarter of 2018, it will recognize an impairment charge with respect to the intangible assets and goodwill associated with its restaurant business and is evaluating possible impairment charges with respect to the property, plant and equipment associated with the restaurant business.

On October 9, 2018, the Company terminated the Acquisition Agreement with Unisource (see Note 11) as a result of a breach by Unisource of its representations and warranties contained in the Acquisition Agreement.

On October 11, 2018, the Company paid $180,000 and issued 75,000 shares of common stock, valued at $1.20 per share, were issued to the lender to settle the principal amount and the warrants from the promissory note originally issued on our evaluationMarch 8, 2018 and amended on August 20, 2018. The Company has no other material events have occurred that require disclosure.further obligations related to this note after the repayment and share issuance.

On November 5, 2018, the Company entered into employment agreements dated October 31, 2018 with Lawrence Biggs and Justin E. Anderson.

Pursuant to Mr. Biggs’ employment agreement, the Company agrees to employ Mr. Biggs as its Chief Executive officer for a term ending on December 31, 2021, which continues thereafter on a year-to-year basis unless terminated by Mr. Biggs or the Company on not less than 30 days’ prior written notice. As compensation for his services, on November 5, 2018, we issued 5,000,000 shares of common stock, valued at $1.17 per share, which was the closing price for the common stock on November 5, 2018, for a total of $5,850,000, and the Company agreed to pay Mr. Biggs an annual salary of $300,000, which will commence at such time as the Company has raised $2,000,000 from the private placement of our equity securities, at which time the Company believes it will have the funds to enable it to pay his salary.

Pursuant to Mr. Anderson’s employment agreement, the Company agreed to employ Mr. Anderson as Chief Operating Officer for a term ending on October 31, 2021, which continues thereafter on a year-to-year basis unless terminated by Mr. Anderson or the Company on not less than 30 days’ prior written notice. Mr. Anderson has other business activities which do not conflict with his duties to the Company. As compensation for his services, the Company will issue to Mr. Anderson 250,000 shares per year. On November 5, 2018, the Company issued to Mr. Anderson the initial 250,000 shares, which are valued at $1.17 per share for a total of $292,500. The Company is to issue 250,000 shares on each of October 31, 2019 and October 31, 2020.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

Overview

Through our subsidiaries, we operated four restaurants that offer healthy food, coffee and juice, two in Panama and two in California. We ownare in the process of discontinuing our restaurant business, and operatewe expect to do so in the following business lines:

fourth quarter of 2018. We alsopresently have entered into two distributionlease obligations for three of our restaurants. We are attempting to sublease our restaurants or selling agreements:assign the restaurant leases. However, we may not be able to sublease or assign the leases on a non-recourse basis, which means that we may still have a continuing liability with respect to some or all of our leases until the leases expire to the extent that any subtenant or assignee does not comply with the lease terms, including the payment of rent.

We are lookingin the process of changing the direction of our business. We intend to negotiate a non-exclusive distribution agreement with a manufacturer of medical device systems used for various forms of screening which provides physicians and medical professionals with useful data utilized for maximizing the management of patients’ health, and upon entering into strategic relationships, joint-ventures or acquisition with other natural foods, or wellness companies, althoughsuch an agreement, to market the equipment. We never generated any revenue from such business, and we may consider acquisitions in other unrelated business. We can give no assurance that we can or will enter into any such agreementsever successfully negotiate a distribution agreement on acceptable terms, compete in the marketing of medical equipment, operate profitably or generate positive cash flow.

As a result of our proposed change in the direction of our business, we expects that, if we enter into any agreements,during the fourth quarter of 2018, we will be ablerecognize an impairment charge with respect to operate profitably.the intangible assets and goodwill associated with our restaurant business, which was $57,727 at September 30, 2018, and we are evaluating possible impairment charges with respect to the property, plant and equipment associated with the restaurant business, which was $502,505.

In connection with employment agreements with our newly appointed chief executive officer and chief operating officer, we issued 5,000,000 shares of common stock, valued at $5,850,000, to the chief executive officer and 250,000 shares of common stock, valued at $292,500, to the chief operating officer. These shares are fully vested on issuance, with the result that we will incur a non-cash compensation expense of $6,142,500 in the fourth quarter of 2018.

In view of the change in our business direction, the information relating to our operations and cash flow for the nine months ended September 30, 2018 will not have any relevance to our future business operations.

Results of Operations

Three months ended JuneSeptember 30, 2018 and JuneSeptember 30, 2017

The following table summarizes our results of operations for the three months ended JuneSeptember 30, 2108, and JuneSeptember 30, 2017:

For the three months ended JuneSeptember 30, 2018, we generated revenue of $133,755$91,914 compared to $161,307$203,327 for the three months ended JuneSeptember 30, 2017. The revenues generated by the Companywe were primarily related to restaurant sales. The decrease in revenues was primarily related to the Company having to remodelremodeling of the Santa Monica location, which resulted in decreased sales during the period. Cost of goods sold for the three months ended JuneSeptember 30, 2018 was $48,614,$33,491, resulting in a gross profit of $85,141,$58,423, compared to cost of goods sold of $64,625$90,927 and gross profit $96,682$112,400 from the three months ended JuneSeptember 30, 2017, with the gross margin sustained at relatively consistent level compared to the comparable period in 2017 as the Company is seeking to expand its business.2017.

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Operating expenses were $283,528$228,447 for the three months ended JuneSeptember 30, 2018, compared to $313,302$372,354 for the three months ended JuneSeptember 30, 2017.

Depreciation and amortization increased by $11,791 from $38,788 for thewas consistent and comparable as we acquired minimal amount of property, plant and equipment during three months ended JuneSeptember 30, 2017 primarily because of an increase of assets, including trademarks and property.2018.

General and administrative costsexpenses were $107,883, decreased by $65,280 from 173,163 for the three months ended JuneSeptember 30, 2017 as we planned to cease the current business operations in the fourth quarter of 2018 and 2017 were consistentincurred less rent, maintenance promotion and comparable.travel expenses during the three months ended September 30, 2018.

Professional fees were $35,644$25,593 for the three months ended JuneSeptember 30, 2018, decreased by $21,552$12,719 from $57,196$38,312 for the three months ended June 30,September30, 2017 primarily because of a higher level of expenses incurred relatedattributed to our public offering in the prior comparable period.decreased stock transfer and accounting fees.

Salaries and wages were $73,698$47,098 for the three months ended JuneSeptember 30, 2018, decreased by $7,550$64,598 from $81,248$111,696 for the three months ended JuneSeptember 30, 2017. The small decrease was due to cyclical workforce requirements, and temporary renovations that occurred in the Santa Monica location.

SixNine months ended JuneSeptember 30, 2018 and 2017

The following table summarizes our results of operations for the sixnine months ended JuneSeptember 30, 2108, and JuneSeptember 30, 2017:

For the sixnine months ended JuneSeptember 30, 2018, we generated revenue of $283,150$375,064 compared to $289,044$492,371 for the sixnine months ended JuneSeptember 30, 2017. The decrease in revenues was primarily related to the Company having to remodelremodeling of the Santa Monica location, which resulted in decreased sales during the period. Cost of goods sold for the sixnine months ended JuneSeptember 30, 2018 were $123,997$157,488 resulting in a gross profit of $159,153,$217,576, compared to cost of goods sold of $128,718$219,645 and gross profit $160,326$272,726 from the sixnine months ended JuneSeptember 30, 2017 with the gross margin sustained at a relatively consistent level compared to the comparative period of 2017 as the Company is seeking to expand its business.2017.

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Operating expenses were $761,856$990,303 for the sixnine months ended JuneSeptember 30, 2018, compared to $773,340$1,145,694 for the sixnine months ended JuneSeptember 30, 2017.