UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(Mark One)

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

For the quarterly period ended September 30, 2017March 31, 2019

or

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

Commission File Number: 333-185083

VAPIR ENTERPRISES,GRATITUDE HEALTH, INC.

(Exact Name of Registrant as Specified in Its Charter)

3511 Ryder St.,11231 US Highway One

Santa Clara, California 95051Suite 200

Telephone: (800) 841-1022North Palm Beach, Fl. 33408

(Address andof Principal Executive Offices, Zip Code)

Registrant’s telephone number, of Registrant’s principal executive offices)including area code: (561) 227-2727

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐  No ☒

Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ☒  No ☐

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.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

Securities registered pursuant to Section 12(b) of the Act:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 15, 2017,May 10, 2019, there were 49,766,81916,832,065 shares of common stock, par value $0.005,$0.001, outstanding.

VAPIR ENTERPRISES,GRATITUDE HEALTH, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Period Ended September 30, 2017March 31, 2019

TABLE OF CONTENTS

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

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.

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 potential acquisition or merger targets; 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.

CERTAIN TERMS USED IN THIS REPORT

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Vapir Enterprises, Inc.GRATITUDE HEALTH, INC. “SEC” refers to the Securities and Exchange Commission.

PART 1 - FINANCIAL INFORMATION

VAPIR ENTERPRISES,GRATITUDE HEALTH, INC. AND SUBSIDIARYSUBSIDIARIES

For the quarterly period ended September 30, 2017FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

INDEX TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

VAPIR ENTERPRISES,GRATITUDE HEALTH, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to the unaudited condensed consolidated financial statements.

VAPIR ENTERPRISES,GRATITUDE HEALTH, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to the unaudited condensed consolidated financial statements.

VAPIR ENTERPRISES,GRATITUDE HEALTH, INC. AND SUBSIDIARY

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

For the Three Months Ended March 31, 2019 and 2018

(Unaudited)

See accompanying notes to the unaudited condensed consolidated financial statements.

GRATITUDE HEALTH, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to the unaudited condensed consolidated financial statements.

Vapir Enterprises, Inc. and SubsidiaryGRATITUDE HEALTH, INC. AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2019

Note 1 - Organization and Operations

Gratitude Health, Inc., (the “Company”, formerly Vapir Enterprises, Inc.

Vapir Enterprises Inc. (“Vapir Enterprises” or the “Company”) 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. 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 principalformer business iswas focused on inventing, developing and producing aromatherapy devices and vaporizers.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 aromatherapy devices utilize heattrademark.

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 convection airall 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 thereby extract natural essences and produce fresh fragrances.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. (“Vapir”) is a wholly owned subsidiary of the Company and was incorporated 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 Statedisposition of California in October 2006. the Vapir business on the date of merger.

Note 2 - Significant and Critical Accounting Policies and Practices

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information, which includes condensed consolidated financial statements and present the consolidated financial statements of the Company and its wholly-owned subsidiary as of September 30, 2017.March 31, 2019. All intercompany transactions and balances have been eliminated. Accordingly, the condensed consolidated financial statements do not include all the information and notes necessary for a comprehensive presentation of financial position and results of operations and should be read in conjunction with the Annual Report, Form 10-Kaudited financial statements of the Company for the year ended December 31, 2016.2018 and included in the form 10-K filed with the SEC on March 25, 2019.  It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statement presentation. Significant intercompany accounts and transactions have been eliminated in consolidation. The results for the interim period are not necessarily indicative of the results to be expected for the year ending December 31, 2017.2019.

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 of revenues and expenses during the reporting period. Actual results could differ from those estimates. In preparing the unaudited condensed consolidated financial statements, management is required 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 allowance for doubtful accounts, inventory obsolescence and markdowns, thevaluation of deferred tax assets, useful life of property and equipment, theinventory reserves, and valuation of deferred tax assets and liabilities, valuation of intangible assets, the assumptions useddebt discounts.

GRATITUDE HEALTH, INC. AND SUBSIDIARY

Notes to calculate fair value of stock options and warrants granted, stock-based compensation and the fair value of common stock issued. Unaudited Condensed Consolidated Financial Statements

March 31, 2019

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 March 31, 2019 and December 31, 2018. 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 September 30, 2017,March 31, 2019 and December 31, 2018, 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.

Accounts receivable and allowance for doubtful accountsFair value of financial instruments

The Company has a policyestimated fair value of providing on allowance for doubtfulcertain financial instruments, including cash, accounts based on its best estimatereceivable, prepaid expenses and other current assets, accounts payable and accrued expenses and accrued salaries and related payroll liabilities are carried at historical cost basis, which approximates their fair values because of the amountshort-term nature of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to bad debt expense and included in the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of September 30, 2017, the Company has included $1,172 in the allowance for doubtful accounts.

Vapir Enterprises, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

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

Inventorythese instruments.

Inventory Valuation

The Company values inventory, consisting of finished goods and raw materials, at the lower of cost or market.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 marketnet realizable value. Factors utilized in the determination of the estimated marketnet realizable value include (i) estimates of future demand, and (ii) competitive pricing pressures. AsThe Company did not record any allowance for slow moving inventory as of September 30, 2017March 31, 2019 and December 31, 2016, the Company had recorded a reserve for slow-moving inventory of $0 and $39,734, respectively.2018.

Inventory Obsolescence and Markdowns

The Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classifies inventory markdowns in the income statement as a component of cost of goods sold pursuant to ASC 420 – “Exit or Disposal Cost Obligations”, to adjust inventory to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.

There was no inventory obsolescence for the nine months ended September 30, 2017 or 2016. There was no lower of cost or market adjustments for the nine months ended September 30, 2017 or 2016.

Advances to suppliers

Advances to a supplier represents the cash paid in advance which is usually in three installment payments for the purchase of inventory. The advances to a supplier are interest free and unsecured. As of September 30, 2017 and 2016, advances to the Company’s major supplier amounted to $45,209 and $103,274, respectively. Upon shipment of the purchase 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.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 losses are included in the consolidated statement of operations.

Revenue recognitionRecognition

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:

Step 1: Identify the contract(s) with a customer.

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 follows ASC 605 – “Revenue Recognition”Company’s performance obligations are satisfied at the point in accounting for revenue related transactions. The Company will recognize revenuetime when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteriaproducts are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendereddelivered to the customer, (iii)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 or delivery of product). The Company primarily receives fixed consideration for sales price is fixed or determinable, and (iv) collectability is reasonably assured.of product.

Consideration paid to promote and sell the Company’s products to customers is typically recorded as marketing costs incurred by the Company. If the amount of consideration paid to customers exceeds the marketing costs, any excess is recorded as a reduction of revenue. The Company follows the requirements of ASC 605-50-45-2, Revenue Recognition—Customer Payments and Incentives.

Cost of Sales

The primary components of cost of sales include the cost of the product, production costs, warehouse storage costs and shipping fees.

GRATITUDE HEALTH, INC. AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2019

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 605.606. While amounts charged to customers for shipping products are included in revenues, the related costs of shipping products to customers are classified in cost of goods soldgeneral and administrative expenses as incurred. Shipping costs included in cost of goods soldgeneral and administrative expense were $61,621$1,006 and $89,074$0 for the ninethree months ended September 30, 2017March 31, 2019 and 2016,2018, respectively.

Vapir Enterprises, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

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

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 $5,437$3,624 and $9,876$0 for the ninethree months ended September 30, 2017March 31, 2019 and 2016, respectively.2018, respectively, and was included in general and administrative expenses.

The amounts paid to customersStock-based compensation

Stock-based compensation is accounted for marketing expenses incurredbased on behalfthe requirements of the Company are recorded as marketing cost and not as a reductionShare-Based Payment Topic of revenue in accordance with ASC 605-50-45-2, Revenue Recognition—Customer Payments and Incentives. For the nine months ended September 30, 2017, the Company did not pay customers for marketing expenses. During the nine months ended September 30, 2016, the Company recorded expenses718, “Compensation — Stock Compensation” (“ASC 718”), which requires recognition in the consolidated financial statements of the cost of 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). ASC 718 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.

Pursuant to ASC Topic 505-50, “Equity Based Payments to Non-employees”, for share-based payments to consultants and other third-parties, compensation expense is determined at the measurement date. The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of $30,000.compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the measurement date.

Income TaxesLeases

The Company discloses tax yearsaccounts for leases under ASU 2016-02. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheets.The Company leases an office space and office equipment used to conduct our business. On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that remain subjectcommenced before the effective date whereby the Company elected to examination by major tax jurisdictionsnot reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. We allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed. We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less.

Operating lease ROU assetsrepresent the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative expenses in the consolidated statements of operations.

Income Taxes

The Company accounts for income taxes pursuant to the provision of ASC Paragraph 740.740-10, “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.

GRATITUDE HEALTH, INC. AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2019

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

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. The Company’s 2016, 2015 and 2014 tax years are still subject to federal and state tax examination.

EarningsBasic and diluted net loss per Shareshare

EarningsBasic 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 for the three months ended March 31, 2019 and 2018 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.

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 is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods and is applied retrospectively.The Company elected to apply the transition provisions as of January 1, 2019, the date of adoption, and recorded lease ROU assets and related liabilities on the consolidated balance sheet related to our operating leases.

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 the amounttriggered. That effect is treated as a dividend and as a reduction of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to ASC 260 – “Earnings per Share”. Pursuant to ASC 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shallshareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features would be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similarsubject to the computationspecialized 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 basic EPS except that the denominator is increased to include the numberthis update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with early adoption permitted. The Company adopted this pronouncement as of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

Pursuant to ASC 260-10-45-45-21 through 260-10-45-45-23, diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs ASC 260-10-45-35 through 45-36 and ASC 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see ASC 260-10-55-23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See ASC 260-10-45-29 and AS 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation. Pursuant to ASC 260-10-45-40 through 45-42 convertible securities shall be reflected in diluted EPS by application of if converted method. The convertible preferred stock or convertible debt shall be assumed to have been converted at the beginning of the period (or at time of issuance, if later). In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. The Company’s contingent shares issuance arrangement, stock options or warrants are as follows which were excluded from the computation of loss per share because their impact was antidilutive: 

fiscal 2017.

Vapir Enterprises, Inc. and SubsidiaryGRATITUDE HEALTH, INC. AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2019

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

Recently Issued Accounting PronouncementsIn 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 July 2017,August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the FASB Accounting Standards Update No. 2017-11 “Derivativeseffectiveness of disclosure requirements for recurring and Hedging (Topic 815)” (“ASU 2017-09”)

The guidance addresses the complexity of accounting for certain financial instruments with down round features on equity-linked instruments (or embedded features) that result in a strike price being reduced on the basis of the pricing of future equity offerings. As a result of this amendment, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability atnonrecurring fair value as a result of the existence of a down round feature. For public business entities, the amendmentmeasurements. 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, 2018.2019. The Company adopted his pronouncement as of Q3 of fiscal 2017.will be evaluating the impact this standard will have on the Company’s consolidated financial statements.

In May 2014, theOther accounting standards that have been issued or proposed by FASB issued the FASB Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”)

This guidance amends the existing FASB Accounting Standards Codification, creatingthat do not require adoption until a new Topic 606,Revenue from Contracts with Customer. The core principle of the guidance is that an entity should recognize revenuefuture date are not expected to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For a public entity, this amendment is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company has assessed the impact of this pronouncement and will continue to evaluate new transactions. The Company has not identified any transactions, and does not expect transactions, that will have a material impact on the consolidated financial statements as a resultupon 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 this pronouncement.operations, cash flows or disclosures.

Note 3 - Going Concern

The Company’s unaudited condensed 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 unaudited condensed consolidated financial statements, the Company has an accumulated deficit of approximately $3.37 million$1,342,000 at September 30, 2017,March 31, 2019, and incurred a net loss of approximately $288,000$227,000 and netused cash used in operating activities of approximately $67,000$200,000 for the ninethree months ended September 30, 2017.March 31, 2019. These factorscircumstances raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is attempting to further implement its business plan and generate sufficient revenue; however,concern for a period of 12 months from the Company’s cash position may not be sufficient to support its daily operations. Management intends to raise additional funds by waydate of a private or public offering. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect.this report. The ability of the Company to continue as a going concern is dependent upon itson the Company’s ability to furtherimplement its business plan, raise capital, and generate sufficient revenues. Currently, management is seeking capital to implement its business plan and generate sufficient revenue and its abilityrevenues. There is no guarantee that the Company will be able to raise additional funds by waysufficient capital or generate a level of a public or private offering.revenues to sustain its operations.  The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary shouldif the Company is unable to continue as a going concern.

Note 4 - Inventory

Inventory consisted of the following:

At March 31, 2019 and December 31, 2018, inventory held at third party locations amounted to $56,210 and $60,116, respectively. During three months ended March 31, 2019 and 2018, there were no inventory write-offs related to spoilage.

GRATITUDE HEALTH, INC. AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2019

Note 45 - Property and Equipment

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

Depreciation expense amounted to $19,542$4,196 and $19,608$1,305 for the ninethree months ended September 30, 2017March 31, 2019 and 2016,2018, respectively.

Note 6 - Operating Lease Right-of-Use Assets and Operating Lease Liabilities

The Company completes its annual impairment testing of propertyOperating lease right-of-use assets and equipment every fourth quarterliabilities are recognized at the present value of the fiscal yearfuture lease payments at the lease commencement date. The interest rate used to evaluatedetermine the recoverabilitypresent value is our incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of propertyour leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. During the three months ended March 31, 2019 and 2018, the Company recorded $5,907 and $0, respectively as operating lease expense which is included in general and administrative expenses on the statements of operations.

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 and subject to annual increases beginning the 2nd and 3rd lease year. In addition to the monthly base rent, we are charged separately for common area maintenance which is considered a non-lease component. These non-lease component payments are expensed as incurred and are not included in operating lease assets or liabilities.

In March 2019, the Company entered into an equipment or whenever events or changes in circumstances indicate thatlease agreement for a copier on March 27, 2019 expiring March 27, 2022 and requiring monthly payments of $145 with an option to purchase the propertyequipment at fair market value at the end of the lease term.

In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and equipment’s carrying amount may not be recoverable.initial direct costs. The Company did not record any impairmentelect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of its property12 month or less. On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and equipment at September 30, 2017 and December 31, 2016, respectively.lease liabilities of $63,566.

Right-of- use assets are summarized below:

Vapir Enterprises, Inc. and SubsidiaryGRATITUDE HEALTH, INC. AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

Note 5 - Intangible Assets

Intangible assets consist of the following:

Customer Relationships are amortized based upon the estimated percentage of annual or period projected cash flows generated by such relationships, to the total cash flows generated over the estimated fifteen-year life of the Customer Relationships.

Legal costs associated with serving and protecting trademarks are being capitalized. The Company filed trademarks for its company logos with an estimated useful life of 15 years. The Company is amortizing the costs of trademarks over their estimated useful lives on a straight-line basis. Amortization of trademarks is included in operating expenses as reflected in the accompanying condensed consolidated statements of operations. The Company assesses fair value for any impairment to the carrying values. The Company did not record any impairment of its intangible assets at September 30, 2017 and 2016, respectively.

Amortization expense was $19,201 and $33,588 for the nine months ended September 30, 2017 and 2016, respectively. Future amortization of intangible assets is as follows:

Note 6 - Loan and Notes Payable

Vapir Enterprises, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial StatementsMarch 31, 2019

Note 6 - LoanOperating Lease Right-of-Use Assets and Notes PayableOperating Lease Liabilities (continued)

Future minimum Loan and Notes Payable principal paymentsOperating Lease liabilities are summarized below:

Maturity of lease liabilities are as follows:

Note 7 - Note payable and Convertible NotesNote Payable

Convertible note payable consisted of the following:

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 a convertible note as discussed below.

On April 3, 2015,March 7, 2019, the Company closed a financing transaction by entering into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with twoan accredited investorsinvestor for an aggregate subscription amountpurchase of $500,000. Pursuant toa promissory note (the “Note” and with other notes issued under the Securities Purchase Agreement, the Company issued 6% Convertible Debentures“Notes”) an aggregate principal amount of $275,000 and warrantsgross cash proceeds of $250,000 (out of an aggregate of up to acquire 500,000 shares$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’s common stockCompany at an exercisea $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 $0.10 per share.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 termsCompany accounted for the beneficial conversion feature based on the intrinsic value on date of the Debenture and the Warrants are as follows:

6% Convertible Debenture

issuance. The total principal amountdebt discount consisted of the Debenture is $500,000. The Debenture accrues interest at 6% per annum and matured on October 3, 2016. The Debenture is convertible any time after its issuance date. The Purchaser has the right to convert the Debenture into sharesbeneficial conversion feature of the Company’s common stock at $0.10 per share. The conversion price, however, is subject to full ratchet anti-dilution in the event that the Company issues any securities at a per share price lower than the conversion price then in effect. The Company paid$13,750, financing costs of $22,500 in connection with this Debenture$7,475 and debt premium of $25,000 which was initially recorded as prepaid financing cost and wasis being amortized over the term of this note. During the Debenture. The note was initially issued on April 3, 2015 at a discount of $500,000. The unpaid principal balance due as of Decemberthree months ended March 31, 20162019 and September 30, 2017 was $500,000.

Debt discount was fully amortized during the year ended December 31, 2016.

On March 23, 2017,2018, the Company completed the extensionrecorded $3,039 and $29,702, respectively, as amortization of its $500,000 6% Senior Convertible Debenture. The Companydebt discount and the investors held on-going discussions prior to and post maturity to extend the original agreement. As a result of the extension, the new maturity date is amended to July 26, 2018. Accordingly, the outstanding Convertible Debenture was classified as a Long-term Liability.

Warrants

In April 2015, the Company issued warrants to acquire 500,000 shares of the Company’s common stock. The Warrants issuedincluded in this transaction are immediately exercisable at an exercise price of $0.10 per share, subject to applicable adjustments including full ratchet anti-dilutioninterest expense in the event that the Company issue any securities at a per share price lower than the exercise price then in effect. The Warrants have an expiration periodconsolidated statements of five years from the date of the original issuance.

Note 7 - Related Party Transactions

Advances from Executive Officer, Significant Stockholder

From time to time, the Company’s Chairman, CEO and significant stockholder advances funds to the Company for working capital purposes. These advances are unsecured, due upon demand and bear interest at 5% per annum.

At September 30, 2017 and December 31, 2016, these advances amounted to $878,756 and $831,084, respectively. Included in the advances are accrued interest due to the Company’s CEO totaling $66,824 and $37,583, at September 30, 2017 and December 31, 2016, respectively.operations.

Vapir Enterprises, Inc. and Subsidiary

GRATITUDE HEALTH, INC. AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2019

Note 8 - Derivative LiabilitiesStockholders’ Equity (Deficit)

Shares Authorized

The authorized capital of the Company appliesconsists 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 provisionsCompany designated 520,000 shares of ASC Topic 815-40, Contracts in Entity’s Own Equity, under whichSeries A Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) Each share of Series A Preferred Stock is convertible instrumentsinto shares of the Company’s common stock with a stated value of $10 per share of Series A Preferred Stock and warrants, which contain terms that protect holders from declinesthe conversion price of $0.10 per share, subject to adjustment in the event of stock price (reset provisions), may not be exempt from derivative accounting treatment. As a result, warrantssplit, stock dividends, and embedded conversion options are recorded as a liability and are revalued at fair value at each reporting date.recapitalization or otherwise. The Company has 501,263 warrants with repricing options and $5,525,385 of convertible debt qualifying for derivative accounting at December 31, 2016. The Company calculates the estimated fair valuesholders of the liabilities for warrantSeries 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 embedded conversion option derivative instruments at each quarter-end using the Black Scholes Model. unpaid dividends thereon and any other fees due and owing.

In July 2017,On March 19, 2018, the FASB issued Accounting Standards Update No. 2017-11 Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815) (“ASU 2017-11”), which changes the classification analysisCompany designated 500,000 shares of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrumentSeries B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”) Each share of Series B Preferred Stock is indexed to an entity’s own stock. ASU 2017-11 also clarifies existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a resultconvertible into shares of the existenceCompany’s common stock with a stated value of a down round feature. For freestanding equity classified financial instruments, ASU 2017-11 requires entities that present earnings$10 per share (EPS)of Series B Preferred Stock and conversion price of $0.10 per share of common stock, subject to adjustment in accordancethe event of stock split, stock dividends, and recapitalization or otherwise. The Series B Preferred Stock votes with ASC Topic 260the 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 recognize the effectreceive in cash out of assets of the down round feature when it is triggered. That effect is treated as a dividendCompany 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 as a reduction of income available to common shareholders in basic EPS.  Forunpaid dividends thereon and any other fees due and owing.

On August 1, 2018, the Company ASU 2017-11designated 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 effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts ASU 2017-11 in an interim period, any adjustments should be reflected asconvertible into shares of the beginningCompany’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 fiscal year that includes that interim period in eitherCompany 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 following ways:1. RetrospectivelyCompany approved and authorized an amendment to outstanding financial instruments with a down round feature by meansincrease the number of a cumulative-effect adjustment to the statement of financial position asdesignated authorized shares of the beginning of the first fiscal year and interim period(s) in which ASU 2017-11 is effective or 2. RetrospectivelySeries C preferred stock from 1,000 to outstanding financial instruments with a down round feature2,500 shares.

Common Stock Options

Stock option activity for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.  The Company has elected to adopt ASU 2017-11 during the three months ended September 30, 2017 by applying ASU 2017-11 retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the Company’s beginning accumulated deficit as of January 1, 2017March 31, 2019 is summarized as follows:

If the comparative prior period financial statementsAs of March 31, 2019, all outstanding options are fully vested and there were prepared using the newly adopted standard, the derivative liabilities would be zero and the change$0 unrecognized compensation expense in fair value of derivative instruments would be zero. The following is a roll forward for the nine months ended September 30, 2017 of the fair value liability of price adjustable derivative instruments:connection with unvested stock options.