This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of
the Securities Act of 1934, as amended, that involve substantial risks and
uncertainties. These forward-looking statements are not historical facts, but
rather are based on current expectations, estimates and projections about our
industry, our beliefs and our assumptions. Words such as "anticipate,"
"expects," "intends," "plans," "believes," "seeks" and "estimates" and
variations of these words and similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other factors, some of
which are beyond our control and difficult to predict and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this Form 10-
17 Table of Contents DESCRIPTION OF COMPANY
The Company has also been working on launching an RX Vitality wallet digital offering and mobile app which, once implemented and live, the Company's digital healthcare wallet will be able to be accessed by customers via mobile wallet on both the Apple iOS and Android App Stores. The Company intends to have a physical healthcare card as well.
On
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The following Management Discussion and Analysis should be read in conjunction with the financial statements and accompanying notes included in this Form 10-K.
COMPARISON OF THE YEAR ENDED
Results of Operations
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and notes
thereto for the years ended
Our financial statements are stated in
Going Concern Qualification
Several conditions and events cast substantial doubt about the Company's ability
to continue as a going concern. The Company has incurred cumulative net losses
of
18 Table of Contents Operating Results Our operating results for the years endedJune 30, 2022 and 2021, and the changes between those periods for the respective items, are summarized as follows: Year Ended June 30, Change 2022 2021 Amount Operating loss$ (18,258,093 ) $ (708,875 ) $ (17,549,218 ) Other income (expense) 199,739 (2,556,082 ) 2,755,821 Net loss$ (18,058,354 ) $ (3,264,957 ) $ (14,793,397 ) Revenues
Our revenue increased to
Year Ended June 30, Change 2022 2021 Amount
Patient fees
Operating Loss Our loss from operations increased to$18,258,093 during the year endedJune 30, 2022 , from an operating loss of$708,875 in the comparative year endedJune 30, 2021 . The following table presents operating expenses for the years endedJune 30, 2022 and 2021: Year Ended June 30, Change 2022 2021 Amount Percentage General and administrative$ 933,268 $ 295,475 $ 637,793 215.85 % Salaries and wages 921,022 197,883 723,139 365.44 % Licensing fees 750,000 - 750,000 100 % Consulting fees 16,838,885 305,000 16,533,885 5,420.95 % Legal and professional fees 112,531 259,660 (147,129 ) (56.66 %) Total operating expenses$ 19,555,706 $ 1,058,018 $ 18,497,688 1,748.33 % 19 Table of Contents
The Company recorded
Other Income (Expense) The following table presents other income and expenses for the year endedJune 30, 2022 and 2021: Year EndedJune 30 2022 2021
Loss on extinguishment of debt $ -
- (806,690 ) Interest expense, related parties (8,972 ) - Interest expense (182,500 ) (172,286 ) Impairment of ROU asset (84,364 ) -
Change in fair value of derivatives 28,115 (223,264 ) Gain on disposal of fixed assets
- 2,695 Other income 180,820 131,740 Gain on PPP loan forgiveness 266,640 172,520 Total other income (expense)$ 199,739 $ (2,556,082 )
During the year ended
Net Loss
The Company incurred a
Liquidity and Capital Resources
Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
20 Table of Contents Working Capital The following table presents our working capital position as ofJune 30, 2022 and 2021: Year Ended June 30, Change 2022 2021 Amount Percentage Cash$ 301,337 $ 433,435 $ (132,098 ) (30.48%) Accounts receivable 186,285 178,555 7,730 4.33 % Deposits and Prepaid expenses - 1,745 - 0.00 % Notes receivable 27,289 48,987 (21,698 ) (79.51 %) Current Assets 514,911 662,722 (147,811 ) (28,71 %) Current Liabilities 3,852,427 2,792,271 1,060,156 37.97 % Working Capital (Deficit)$ (3,337,516 ) $ (2,129,549 ) $ 1,207,967 56.72 %
The change in working capital during the year ended
Cash Flow The following tables presents our cash flow for the year endedJune 30, 2022 and 2021: Year ended 30-June 2022 2021
Cash from operating activities
21 Table of Contents
Cash Flows from Operating Activities
For the year ended
Cash Flows from Investing Activities
For the year ended
Cash Flows from Financing Activities
For the year ended
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. The ownership interest of consolidated entities not wholly-owned by the Company are presented as noncontrolling interests in the accompanying consolidated financial statements. Intercompany balances and transactions have been eliminated in consolidation, and net income (loss) is reduced by the portion of net income (loss) attributable to noncontrolling interests. The Company reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting.
22 Table of Contents
The Company evaluates its potential variable interest entity ("VIE")
relationships under certain criteria as provided for in
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.
Cash and Cash Equivalents
The Company maintains cash balances in a non-interest bearing account that
sometimes exceeds over
Earnings Per Share Calculation
Basic earnings per common share ("EPS") is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per shares is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued.
Revenue Recognition Participant Fees
Resident fee revenue is reported at the amount that reflects the consideration the Company expects to receive in exchange for the services provided. These amounts are due from participants or third-party payors and include variable consideration for retroactive adjustments from estimated reimbursements, if any, under reimbursement programs. Performance obligations are determined based on the nature of the services provided. Resident fee revenue is recognized as performance obligations are satisfied.
Under the Company's day care agreements, which are generally for a contractual term of 30 days to one year, the Company provides services to participants for a stated daily or monthly fee. The Company has elected the lessor practical expedient within ASC 842, Leases ("ASC 842") and recognizes, measures, presents, and discloses the revenue for services under the Company's senior living residency agreements based upon the predominant component, either the lease or nonlease component, of the contracts. The Company has determined that the services included under the Company's independent living, assisted living, and memory care residency agreements have the same timing and pattern of transfer and are performance obligations that are satisfied over time. The Company recognizes revenue under ASC 606, Revenue Recognition from Contracts with Customers ("ASC 606") for its participants agreements for which it has estimated that the nonlease components of such agreements are the predominant component of the contract.
The Company enters into contracts to provide home assisted health, and certain outpatient services. Each service provided under the contract is capable of being distinct, and thus, the services are considered individual and separate performance obligations. The performance obligations are satisfied as services are provided and revenue is recognized as services are provided.
23 Table of Contents
The Company receives payment for services under various third-party payor
programs which include Medicaid,
Billings for services under third-party payor programs are recorded net of
estimated retroactive adjustments, if any. Retroactive adjustments are accrued
on an estimated basis in the period the related services are rendered and
adjusted in future periods or as final settlements are determined. Contractual
or cost related adjustments from Medicaid or
Franchise Fees
The Company franchises a number of its locations under franchise contracts which provide periodic franchise fee payments to the Company and reimbursement for costs and expense related to such franchises. Our franchisees pay us a variety of royalties and fees, including an agreed upon percentage of gross revenues (as defined in the franchise agreement). The Company estimates the amount of franchise fee revenue expected to be earned, if any, during the annual contract period and revenue is recognized as services are provided. The Company's estimate of the transaction price for the franchise services also includes the amount of reimbursement due from the franchises for services provided and related costs incurred. Such revenue is included in "revenues" on the consolidated statements of operations. The related costs are included in "operating expenses" on the consolidated statements of operations.
Income Taxes
The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements.
Leases
In
24 Table of Contents
Fair value of financial instruments
The Company's financial instruments include cash and cash equivalents, accounts payable, accrued liabilities, and debt. Derivative liabilities were adjusted to fair market value at the end of each reporting period, using Level 3 inputs. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on 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 fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
· Level 1 - Quoted prices in active markets for identical assets or liabilities. · Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. · Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.
The carrying amounts of the Company's financial assets and liabilities, such as cash, accounts payable and accrued expenses, accrued interest, certain notes payable and notes payable - due to related parties, approximate their fair values because of the short maturity of these instruments.
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under Level 3 (See Note 6).
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under Accounting Standards Codification ("ASC") 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial feature.
Derivative Financial Instruments
When the Company issues debt that contains a conversion feature, it first evaluates whether the conversion feature meets the requirements to be treated as a derivative: a) one or more underlying, typically the price of the Company's stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares.
If the conversion feature within convertible debt meet the requirements to be treated as a derivative, the Company estimates the fair value of the derivative liability using the Monte Carlo Simulation Model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative liability is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the statements of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreement are classified on the balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the balance sheet date.
The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 "Derivatives and Hedging" (provides comprehensive guidance on derivative and hedging transactions) whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.
25 Table of Contents
Debt Issue Costs and Debt Discount
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Recently Issued Accounting Pronouncements
As of and for the year ended
Seasonality
We do not expect our sales to be impacted by seasonal demands for our products and services.
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