Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results

This quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations and prospects. The Securities and Exchange Commission (the "SEC") encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This quarterly report on Form 10-Q and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management's plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will" and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.

We caution that these factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report on Form 10-Q.





Business Overview

We were incorporated on May 5, 2014 in the State of Florida and commenced operations in October 2014. We are a wellness company specializing in the development and manufacture of health promoting products based on DNA analysis. On August 21, 2019, we changed our fiscal year end from September 30 to July 31 to conform with our subsidiary which was acquired on the same day as discussed below. Our former operations were in the business of providing online payment processing services to consumers, primarily in Europe and provided certain consulting services to assist companies in going public.

On August 21, 2019, we entered into a Share Exchange Agreement with and Vitana Distributions, Inc. ("Vitana") whereby 100% of Vitana's outstanding stock was purchased for certain shares of preferred stock of Company (the "Exchange Agreement"). Pursuant to the Agreement, holders of the common stock of Vitana received 1,000,000 shares of our newly designated Series B Preferred Stock (the "Series B Shares") in exchange for each share of common stock of Vitana, on a pro rata basis. The Series B Preferred Stock shall convert into a total amount equaling 80% of the total issued and outstanding common shares, post conversion, on a pro rata basis. The Series B Preferred Share have no voting rights.

The closing of the Exchange Agreement was further conditioned upon the resignation of Wolfgang Ruecker, Bane Katic and William Eilers as Directors of the Company and appointment of Matthias Goeth as the Company's Chief Operating Officer and Director and Dirk Richter as the Company's Chairman of the Board of Directors. William Bollander shall remain a Director and Chief Executive Officer of the Company.





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Furthermore, simultaneously with the closing, the two majority shareholders of Vitana purchased 1,000,000 shares of our Series A preferred stock from the Company's majority shareholder. The Series A preferred stock have a voting right equal to 65% of all voting rights of all of our capital stock.

Upon closing of the Exchange Agreement, Vitana became our wholly owned subsidiary and since the majority shareholders of Vitana obtained majority voting control (at least 65%) as a result of the above transactions and its operations were spun off to our former majority owner officer, this transaction was accounted for as a reverse recapitalization of Vitana where Vitana is considered the historical registrant and the historical operations presented will be those of Vitana. Vitana was incorporated on February 11, 2019 in the State of Florida as Vitana-X, Inc. The Company changed its corporate name to Vitana Distributions, Inc. on December 4, 2019.

During the three and six months ended January 31, 2020, we generated $44,248 and $61,375 of revenues mainly from licensing and royalty fee from a related party, respectively.





Plan of Operations

The Company's strategy is to focus on development and manufacture of health promoting products based on DNA analysis.

Critical Accounting Policies and Estimates

While our significant accounting policies are more fully described in Note 2 to our unaudited consolidated financial statements, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management's discussion and analysis.





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 financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. Included in these estimates are assumptions used in determining the fair value of derivative liabilities, valuation allowance for deferred tax assets and the valuation of stock issued for services or upon conversion of debt.





Derivative Liabilities

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 FASB ASC 815-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any embedded conversion options 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 and 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.





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Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606 Revenue from Contracts with Customers ("ASC 606"), 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 adopted ASC 606 at inception date. For the license and royalty income, revenue is recognized when the Company satisfies the performance obligation based on the related license agreement.





Stock-Based Compensation

The Company accounts for employee stock-based compensation in accordance with ASC 718-10, "Share-Based Payment," which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock awards, and employee stock purchases based on estimated fair values.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation-Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This standard will be effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. Management implemented this standard at inception on February 11, 2019.

Determining Fair Value Under ASC 718-10

The Company estimates volatility based upon the historical stock price of the Company and estimates the expected term The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company's determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables.

For employee stock options using the simplified method for employees and directors and the contractual term for non-employees. The risk-free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities.



Results of Operations

Vitana was incorporated on February 11, 2019, accordingly, we do not have comparable transactions from the prior periods.





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Revenue:

For the six months ended January 31, 2020, revenue consisted of the following:





                                  Three months Ended     Six months Ended
                                   January 31, 2020      January 31, 2020
License income - related party   $           10,015     $        23,302
Royalty income - related party               34,233              38,073
Total revenues                   $           44,248     $        61,375

For the three and six months ended January 31, 2020, we generated revenue of $44,248 and $61,375, respectively, mainly due to an agreement related to licensing and royalty with a related party.





Operating Expenses:

For the three and six months ended January 31, 2020, we incurred operating expenses which consisted of the following:





                                                     Three months
                                                        Ended              Six months Ended
                                                     January 31,
                                                         2020              January 31, 2020
Compensation                                        $      6,000          $          56,682
Consulting fee - related parties                          52,450                    117,755
Professional and consulting fees                       1,579,770                  3,432,383
Other selling, general and administrative
expenses                                                   8,479                     32,723
Total                                               $  1,646,699          $       3,639,543




Compensation expense:

For the six months ended January 31, 2020, we incurred compensation expense of $56,682 which was primarily due to compensation of $46,682 to a former Director and $10,000 to our CEO. For the three months ended January 31, 2020, we incurred compensation expense of $6,000 which was primarily due to compensation to our CEO.

Consulting fee - related parties:

For the three and six months ended January 31, 2020, we incurred consulting fees from related parties of $52,450 and $117,755, respectively, primarily due to consulting fees to a director and an affiliated entity.





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Professional and consulting fees:

For the three and six months ended January 31, 2020, we incurred professional and consulting fees of $1,579,770 and $3,432,383, respectively. The increase during the six months ended January 31, 2020 primarily due to stock-based compensation of approximately $3,253,000, other consulting and investor relation fees of approximately $36,000, legal fees of approximately $50,000, marketing services of approximately $58,000 and accounting fee of approximately $35,000. The increase during the three months ended January 31, 2020 primarily due to stock-based compensation of approximately $1,508,000, other consulting and investor relation fees of approximately $24,000, legal fees of approximately $9,000, marketing services of approximately $18,000 and accounting fee of approximately $20,000.

Other selling, general and administrative expenses:

For the three and six months ended January 31, 2020, we incurred general and administrative expenses of $8,479 and $32,723, respectively, primarily due to general office expenses.





Operating Loss:

For the three and six months ended January 31, 2020, we incurred a loss from operations of $1,602,451 and $3,578,168, respectively, resulting from the discussion above.





Other Income (Expenses):

For the three and six months ended January 31, 2020, we incurred total other income (expense) of ($146,752) and $34,469, respectively. During the six months ended January 31, 2020 other income (expense) primarily consisted of gain from change in fair value of conversion option liability of $229,996, gain on debt extinguishment of $453 offset by decrease in loss from foreign currency transaction of $5,435 and interest expense of $190,545. During the three months ended January 31, 2020 primarily consisted of loss from change in fair value of conversion option liability of $129,613, loss from foreign currency transaction of $2,399 and interest expense of $14,740.





Net Loss:

For the three months ended January 31, 2020, we incurred a net loss of $1,749,203 or $0.00 per common share and for the six months ended January 31, 2020, we incurred a net loss of $3,543,699 or $0.01 per common share, resulting from the discussion above.

Liquidity, Capital Resources, and Off-Balance Sheet Arrangements

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 $(632,235) and cash of $985 at January 31, 2020 and working capital of $741,974 and cash of $66,112 at July 31, 2019.

The increase in working capital deficit was primarily attributable to decrease prepaid expenses of $830,059 offset by increase in convertible notes payable and derivative liabilities obtained in recapitalization of $473,004 and $208,252, respectively.





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Cash flows for the six months ended January 31, 2020:





                                              Six months ended January 31, 2020
Net Cash Used in Operating Activities       $                       (586,035 )
Net Cash Used in Investing Activities                                (10,985 )
Net Cash Provided by Financing Activities                            531,893
Net Decrease in Cash                        $                        (65,127 )

Net Cash Used in Operating Activities:

During the six months ended January 31, 2020, net cash flow used in operating activities was $586,035, primarily reflected a net loss of $3,543,699 and the add-back of non-cash items consisting of stock-based compensation of $3,253,736, stock-based conversion fees of $1,000, accretion of premium on convertible note of $147,688, amortization of debt discounts of $26,662 and offset by gain from change in fair value of conversion option liability of $229,996, gain on extinguishment of debt of $453, changes in operating assets and liabilities of $(240,973), primarily related to increase in accounts receivable- related party $10,141, prepaid expense of $27,250, decrease in total accounts payable of $98,780, increase in accrued interest of $17,486, and decrease in accrued expense of $122,288.

Net Cash Used in Investing Activities:

During the six months ended January 31, 2020, net cash flow used ininvesting activities was $10,985 , attributed to proceeds from the acquisition of a subsidiary on August 21, 2019, collection of related party advances of $152,947 offset by advances to related party of $211,755.

Net Cash Provided by Financing Activities:

During the six months ended January 31, 2020, net cash provided by financing activities was $531,893, attributed to net proceeds from issuance of convertible notes of $299,917, proceeds from sale of Series B preferred stock for $223,119, collection of related party advances of $152,947, and collection of subscription receivable of $8,857 offset by advances to related party of $211,755.





Cash Requirements

Our management does not believe that our current capital resources will be adequate to continue operating our company and maintaining our business strategy for much more than 12 months. At the date hereof, we have minimal cash at hand. We require additional capital to implement our business and fund our operations.

Since inception we have funded our operations primarily through equity financings and we expect that we will continue to fund our operations through the equity and debt financing, either alone or through strategic alliances. Additional funding may not be available on favorable terms, if at all. We intend to continue to fund our business by way of equity or debt financing until natural revenues can support the Company. If we raise additional capital through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant dilution. In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common stock. We cannot assure you that we will be able to raise the working capital as needed in the future on terms acceptable to us, if at all.

If we are unable to raise capital as needed, we are required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results, or cease our operations entirely, in which case, you will lose all of your investment.





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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.

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