SPUP Sipup Corporation (CE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars)

NOTE 1 – GENERAL

Sipup Corporation Inc. (the “Company” or “Sipup”) is a Nevada Corporation incorporated on October 31, 2012.

On April 25, 2021, the Company entered into a Stock Exchange Agreement (the “Agreement”) with VeganNation Services Ltd., a company formed under the laws of the State of Israel (“VeganNation”) and the shareholders of VeganNation pursuant to which VeganNation would become a wholly owned subsidiary of the Company. The transaction closed on September 30,. 2021. See B below.

VeganNation wholly-owns, VeganNation Finance Services, Ltd. (the “VNFS”), a company organized under the laws of the State of United Kingdom. VeganNation and VNFS together the “Group”.

The intellectual property is developed by the Company and the technology related to the GreenCoin has been licensed to VNFS under a cost-plus arrangement.

The group is a global B2B2C (i.e., business-to-business-to-consumer) business that operates a proprietary platform (the “Platform”) which intends to establish both a directory and marketplace connecting conscious consumers, businesses and organizations. The Group’s Platform is designed to empower individuals, businesses and organizations that wish to transact business within the confines of a sustainable online marketplace (the “Marketplace”) committed to making plant-based products and offerings affordable, and globally accessible.

In addition to the foregoing, the Group envisions making its Platform a highly sought-after resource for the global plant-based community by continually disseminating content and educational materials, while facilitating meet-up opportunities, either virtually or in person.

Appreciating the criticality of integrity and transparency within the global sustainable plant-based community, the Company seeks to develop a unique decentralized approval system by employing smart contracts where vegans will have the opportunity to validate the authenticity of a vegan-friendly product manufacturer or establishment.

Finally, all transactions within the Platform may be settled using either fiat or VeganNation’s Green Token, a cryptocurrency specifically designed for users of the Platform issued by VNFS.

The Share Exchange Agreement closed on September 30, 2021. At the closing, pursuant to the Agreement, Sipup will issue an aggregate of 41,062,240 shares of Common Stock to the VeganNation shareholders in exchange for 100 Ordinary Shares, par value NIS 1.00 per share, of VeganNation, constituting 100% of the issued and outstanding shares of VeganNation, resulting in VeganNation becoming a wholly-owned subsidiary of Sipup.

SIPUP CORPORATION INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars)

NOTE 1 – GENERAL (continue)

In connection with the anticipated closing of the Share Exchange Agreement with VeganNation, in April 2021, the Company commenced a private placement to accredited and offshore investors of units of the Company securities (the “2021 Private Placement”) whereby each unit comprised of (i) one share of Common Stock of the Company at a per share purchase price of $0.35, (ii) a common stock purchase warrant for an additional share of Common Stock exercisable over a one (1) year period at a per share exercise price of $1.00 (the “Series A Warrant”) and (iii) a common stock purchase warrant for an additional share of Common Stock exercisable over a two year period at a per share exercise price of $1.50 (the “Series B Warrant”; together with the Series A Warrants, collectively, the “Warrants”). Through the end of the reporting period, the Company received, in a third party escrow account, approximately $1,788,783 pending the closing of the Share Exchange Agreement. The investors have agreed that pending the closing of the Share Exchange Agreement with VeganNation, the Company is authorized to utilize up to 10% of the amount in escrow to cover operating costs and costs related to the closing of the Share Exchange Agreement. As of September 30, 2021 the Company utilized $329,791 from proceeds of the 2021 Private Placement. Following the closing of the Share Exchange Agreement on September 30, 2021, aggregate gross proceeds of approximately $1,788,783 were released to the Company from the 2021 Private Placement. In connection therewith, the Company issued to the 2021 Private Placement investors an aggregate of 5,095,640 shares of Common Stock and Series A and Series B Warrants, in each case for the purchase of up to an additional 5,095,640 shares of Common Stock.

The transaction was accounted for as a reverse asset acquisition in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Under this method of accounting, VeganNation was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Merger: (i) VeganNation’s stockholders owned a substantial majority of the voting rights in the combined company, (ii) VeganNation designated a majority of the members of the initial board of directors of the combined company, and (iii) VeganNation’s senior management holds all key positions in the senior management of the combined company. As a result of the Recapitalization Transaction, the shareholders of VeganNation received the largest ownership interest in the Company, and VeganNation was determined to be the “accounting acquirer” in the Recapitalization Transaction. As a result, the historical financial statements of Sipup were replaced with the historical financial statements of VeganNation. The number of shares prior to the reverse capitalization have been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction.

SIPUP CORPORATION INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars)

NOTE 1 – GENERAL (continue)

Between 2018 and June 30,2021, the Group entered into several Early Contribution Agreements (each, an “ECA”) with purchasers of its Green Token. During the years ended December 31, 2020 and nine months ended September 30, 2021, the Group received contributions in the aggregated amounts of $53,206 and $54,350, respectively (collectively, the “Contributions”). In consideration for the Contributions received by VFNS from purchasers under the ECAs, VFNS issued such purchasers the following aggregate Green Tokens: (i) 17,972,120 Green Tokens, 360,400 Green Tokens and 502,457 Green Tokens, reflecting the numbers of virtual Ethereum blockchain smart contract protocol (the “Green Tokens” or “VeganCoin”) based the Contributions received divided by the product of the highest purchase price for the Green Token at the time of sale (the “Token Generation Event”) multiplied by the discount rate as signed in the ECA’s. As of September 30, 2021, the Company had $1,041,822 of receivables from sales of digital tokens under ECA agreements from which contributions have not been collected. In addition, as of September 30, 2021, the Company received contributions amounting to $945,849, to which the Company is committed to issue Green Tokens.

The Company committed to using the Contributions for the following purposes: preliminary funding of the Green Token generation event, research and development, coding, execution and launch of the Company’s Platform, other operational and day-to-day activities carried out by the Company.

As agreed in the ECA’s, each token is subject to a lock-up period and are released: (i) 20% to be released upon the Token Generation Event and (ii) the remaining on a quarterly basis. As of September 30, 2021, the Token Generation Event has not been reached, therefore all Green Tokens issued are subject to lock-up.

Based on the above, the Company has determined that the issuance of Green Tokens in the ECA represented an implied obligation to perform research and development services, and therefore, has accounted for the proceeds received in the various ECAs in accordance with ASC 730-20, Research and Development Arrangements. Pursuant to ASC 730-20, all proceeds received from the ECAs are recorded as deferred revenues. Due to the difficulty at the time of the ECA in estimating the timing and success of outcome of the development of the Platform, all development costs were expensed as incurred.

Deferred revenues are recognized as income over the period of development in an amount equal to the operational expenditures incurred by the Company with no profit margin (net 0), which treatment shall remain until the completion of the expected development. As of September 30, 2021 the development of the Platform is neither complete nor fully functioning.

SIPUP CORPORATION INC.

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(U.S. dollars)

NOTE 1 – GENERAL (continue)

In late 2019, a novel strain of COVID-19, also known as Coronavirus, was reported in Wuhan, China. While initially the outbreak was largely concentrated in China, it has since spread to Israel and the United States, and infections were reported globally. Many countries around the world, including in Israel, had significant governmental measures implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. These measures resulted in work stoppages and other disruptions. The extent to which the coronavirus impacts our operations is very minimal. The pandemic has adversely affected the global economy, and although multiple vaccines have been approved and released globally, the continued spread of the Coronavirus globally continues to create uncertainty and instability across many regions. The extent to which the Coronavirus has impacted the Company’s operations to date is relatively minimal, though the ongoing pandemic may have a material adverse impact on the Company’s operations and workforce, including its ability to raise additional capital, which in turn could have a material adverse impact on the Company’s business, financial condition and results of operation

Since inception, the Company has devoted substantially all its efforts to research and development. The Company is still in its development stage and the extent of the Company’s future operating losses and the timing of becoming income able, if ever, are uncertain. As of September 30, 2021 the Company had $1,461,304 in cash and cash equivalents, 1,304,427 net loss and accumulated deficit of 2,856,087.

The Company will need to secure additional capital in the future in order to meet its anticipated liquidity needs required to meet Company’s undertaking to develop and market its Platform , primarily through the sale of additional Common Stock or other equity securities and/or debt financing and/or sales of its Green Tokens. Funds from these sources may not be available to the Group on acceptable terms, if at all, and the Company cannot give assurance that it will be successful in securing such additional capital.

These conditions raise substantial doubt about the Company’s ability to continue to operate as a “going concern.” The Company’s ability to continue operating as a going concern is dependent on several factors, among them is the ability to raise sufficient additional funding.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company face a number of risks, including uncertainties regarding finalization of the development process, demand and market acceptance of the Company’s products, the effects of technological changes, competition and the development of products by competitors. Additionally, other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Company’s future results.  In addition, the Company expects to continue incurring significant operating costs and losses in connection with the development of its products and marketing efforts. The Company has not yet generated cash from its operations to fund its activities and its undertaking to develop and market its Platform, and therefore the continuance of its activities as a going concern depends on the receipt of additional funding from its current stockholders and investors or from third parties.

SIPUP CORPORATION INC.

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(U.S. dollars)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiary, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q. In the opinion of management, the financial statements presented herein have not been audited by an independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the for nine and three months ended September 30, 2021. However, these results are not necessarily indicative of results for any other interim period or for the year ended December 31, 2020. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates.

Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Current Report on Form 8-K filed on October 6, 2021 with the Securities and Exchange Commission relating to the Agreement.

The accompanying consolidated financial statements includes the accounts of the company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation. The Company is not involved with variable interest entities.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates. The most significant accounting estimates inherent in the preparation of the Company’s financial statements includes the valuation of Green Token issued for service providers.

SIPUP CORPORATION INC.

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(U.S. dollars)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)

A substantial portion of the Company’s financing activities, including equity transactions and cash investments, are incurred in U.S. dollars. The Company’s management believes that the U.S. dollar is the currency of the primary economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the U.S. dollar.

A subsidiary’s functional currency is the currency of the primary economic environment in which the subsidiary operates; normally, that is the currency of the environment in which a subsidiary primarily generates and expends cash.

In making the determination of the appropriate functional currency for a subsidiary, the Company considers cash flow indicators, local market indicators, financing indicators and the subsidiary’s relationship with both the parent company and other subsidiaries. For subsidiary that are primarily a direct and integral component or extension of the parent entity’s operations, the U.S. dollar is the functional currency.

The Company has determined the functional currency of its foreign subsidiary is the U.S. dollar. The foreign operation is considered a direct and integral part or extension of the Company’s operations. The day-to-day operations of the foreign subsidiary are dependent on the economic environment of the U.S. dollar. Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are re-measured into U.S. dollars in accordance with Statement of the Accounting Standard Codification (“ACS”) No. 830 “Foreign Currency Matters” (“ASC No. 830”). All transaction gains and losses of the re- measured monetary balance sheet items are reflected in the statements of operations as financial income or expenses as appropriate.

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments.

With respect to the Cash and Cash Equivalents, the concentration and minimization of credit risk is facilitated by maintaining cash and cash equivalents with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation.

Receivables are recorded at the owed amount, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its receivables and adjusts credit limits based upon payment history and the customer’s current credit worthiness; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

SIPUP CORPORATION INC.

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(U.S. dollars)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)

The Company is subject to concentration of credit risk with respect to their cash and cash equivalents, which the Company attempts to minimize by maintaining cash and cash equivalents with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the funds are held. The Company has no financial instruments with off-balance sheet risk of loss.

The Company evaluates the recoverability of tangible and intangible assets periodically by considering events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

The Company has determined that the issuance of Green Tokens in the ECA represented an implied obligation to perform (i) research and development services, (ii) sales and marketing activities, and (iii) general and administration activities, and therefore accounts for the proceeds received in the ECA in accordance with ASC 730-20, “Research and Development Arrangements.” At the time of, and in conjunction with the Green Token issuances, the Company’s undertook to develop and market its Platform. Due to the significant hurdles in developing the Platform, all of the Company’s development costs were expensed. Pursuant to ASC 730-20, all proceeds received from the ECA are recorded as deferred revenues.

Issuances of Green Tokens for services are initially recorded as deferred revenues and are recorded to revenues at zero margin based on the related services which are calculated on an accrual basis based on the service period.

SIPUP CORPORATION INC.

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(U.S. dollars)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)

Company’s liability for employee rights upon retirement with respect to its Israeli employees is calculated, pursuant to Israeli severance pay law, based on the most recent salary of each employee multiplied by the number of years of employment, as of the balance sheet date. Employees are entitled to one month’s salary for each year of employment, or a portion thereof.

The Company accounts for its contingent liabilities in accordance with ASC No. 450, “Contingencies”. A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. The Company is not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense.

SIPUP CORPORATION INC.

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NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)

The Company measures and discloses the fair value of financial assets and liabilities in accordance with ASC Topic 820, “Fair Value Measurement.” Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable inputs that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data are available.

The Company has no components of comprehensive loss other than net loss. Thus, comprehensive loss is the same as net loss for the period presented.

In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”).  The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU 2020-06 also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets.  The amendments in ASU 2020-06 are effective for the Company for fiscal years beginning after December 15, 2021. Early adoption is permitted.  The guidance must be adopted as of the beginning of the fiscal year of adoption.  The Company is currently evaluating the impact of this new guidance, but does not expect it to have a material impact on its financial statements.

SIPUP CORPORATION INC.

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(U.S. dollars)

NOTE 3 – SHAREHOLDERS’ EQUITY

Common stock:

On May 10, 2019 VeganNation entered into a Share Purchase Agreement with an investor pursuant to which VeganNation agreed to issue the investor 349,192 VeganNation ordinary shares, representing 1% of VeganNation’s equity as of such date on a fully diluted basis for total consideration of $60,000 of which the investors provided VeganNation with approximately $56,000. The shares were exchanged as part of the Agreement with the Company as described above.

On November 25, 2019 VeganNation agreed to issue 115,233 ordinary shares for total consideration of $50,000. The shares were exchanged as part of the Agreement as described above.

On January 15, 2020 VeganNation entered into a Share Purchase Agreement with an investor pursuant to which VeganNation agreed to issue the investor 780,140 ordinary shares of the Company, representing 2% of |VeganNation’ss equity as of such date on a fully diluted basis for total consideration of $150,000 of which the investors provided VeganNation with approximately $143,925. The shares were exchanged as part of the Agreement as described above.

On June 30, 2020 VeganNation entered into a letter of understanding with an investor pursuant to which VeganNation agreed to issue to the investor 195,035 ordinary shares of representing 0.5% of VeganNation’s equity as of such date for total consideration of $36,000. The shares were exchanged as part of the Agreement as described above.

On April 20, 2021 VeganNation entered into a Share Purchase Agreement with an investor pursuant to which the Company agreed to issue the investor 390,070 ordinary shares, representing 1% of |VeganNation’s equity as of such date on a fully diluted basis as well as 500,000 Green Tokens for total consideration of $200,000. VeganNation valued the Green Tokens at a price of $0.22 per Green Token and allocated $110,000 of the purchase price to the value of the Green Tokens and the remaining $90,000 to equity. The shares were exchanged as part of the Agreement as described above.

As detailed in note 1 above, On September 30, 2021, the Company completed the Share Exchange Agreement. Pursuant to the Agreement, Sipup will issue an aggregate of 41,062,240 shares of Common Stock to the former VeganNation shareholders in exchange for 100 Ordinary Shares, par value NIS 1.00 per share, of VeganNation, constituting 100% of the issued and outstanding shares of VeganNation, resulting in VeganNation becoming a wholly-owned subsidiary of Sipup.

NOTE 4 – INCOME TAXES

The VeganNation records income tax expense related to profits realized in Israel, and realized by its subsidiary in the United Kingdom.

The VeganNation tax accounts are based on enacted legislation in effect as of the year end in accordance with GAAP and do not include any potential effects of proposed legislation that has yet to be enacted. Such proposals may have a significant effect of taxes due in the future.

Income of the Israeli company is taxable from 2018 onwards, at corporate tax rate of 23%.

The Company and subsidiaries has not received final tax assessments since its inception.

SIPUP CORPORATION INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars, except share and per share data)