The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition for the periods presented. The following selected financial information is derived from our historical consolidated financial statements and should be read in conjunction with such consolidated financial statements and notes thereto set forth elsewhere herein and the "Forward-Looking Statements" explanation included herein.
Background
Since 2016, under current management, we have sought revenue generating activities in various industries. Since then, we have made acquisitions in different industries, some of which have been disposed.
Over the last five years, we have been unable to sustain any material income from our operations, have incurred recurring losses, have been unsuccessful at raising material capital, either through debt or equity financing arrangements, and we have disposed of our beverage industry business line. These factors provide substantial doubt about our ability to continue as a going concern.
Despite these challenges, we have been un able to continue as a going concern
but have achieved certain operational successes during our fiscal years ended
· In
the disposal, we eliminated approximately$250,000 of outstanding obligations in exchange for a right to receive royalties on future uncertain beverage sales in the highly competitive craft beer market. The disposal did not result in significant usage of cash resources.
· For the two fiscal years ended 6/30/21, we settled convertible notes and
accrued interest totaling approximately
shares of common stock.
· For the two fiscal years ended 6/30/21, we raised cash proceeds totaling
approximately
notes payable.
· In
and its wholly owned subsidiaries via the issuance of equity, which provides an opportunity to generate material operational revenues from in and out-patient rehabilitation services.
· We raised
issuance of a non-controlling interest in its previously wholly owned subsidiary,VBH Kentucky, Inc. Plan of Operations
Subsequent to the entry into the rehabilitation services industry, primarily through the acquisition of Vital Behavioral and subsidiaries, we initiated the following plan of operations.
Capital Raising Activities (Current Commitments, Future Plans, Estimated Timelines)
· In late
promissory notes (2 notes total) with a new investor. The convertible notes
automatically convert at maturity in
· On
Note, interest payable monthly, and a maturity date of
principal balloon payment on
the Note, we also issued the lender One Million Warrants exercisable into One
Million Common Stock Shares at an exercise price of
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Operational Accomplishments/Paths to Revenue (Licensing Timelines, Additional Facilities, Future Acquisitions):
· On
are intended to provide sober living accommodations for patients for the outpatient facility of our subsidiaryVBH Kentucky Inc. inFrankfort, Kentucky . Each unit will accommodate multiple patients on a weekly pay basis, We expect 80% capacity and cash flow positive byNovember 30, 2021 .
· On
first license to operate an intensive outpatient facility for the treatment of substance use disorders inKentucky . Substantially all costs to fit, finish, and outfit the facility have been expended.
· In
Fayetteville, GA with an initial base rent of$13,617 per month for an initial term of 18 months with a 5-year extension option. The facility will ultimately be used for in-patient detox and mental health services. Initial conversations with county and adjacent city government authorities were positive, and no impediments to licensing were reported. The license application is in the process of being drafted with submission intended byOctober 31, 2021 , and approval anticipated within 3-6 months thereafter. The cost to fit, finish, and outfit the facility is anticipated to be$250,000 , with the majority of those funds to be expended 30-45 days prior to the anticipated date of inspection prior to licensure. The facility is expected to be at 80% capacity 30-60 days after licensure and cash flow positive 60-90 days after licensure.
· All facilities are intended to accept Medicaid and Medicare, out-of-network
insurance, and private pay patients. RESULTS OF OPERATIONS
Revenue and Cost of Revenue
We generated no revenue for the years ended
Professional Fees
We incurred professional fees of
As funding permits, we expect to incur higher professional fees associated with on-going development of our brand, customers, and other relationship development.
General and Administrative Expenses
For the fiscal years ended
We expect our expenses to increase over the next several periods should we be successful in our new business plan, which will primarily consist of facilities costs, management and other salaries, travel, and other corporate overhead.
Interest Expense
Interest expense was
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We expect our interest expense to increase in fiscal 2022, initially as a result
of the
Change in Fair Value of Derivative Liabilities
During the fiscal year ended
Discontinued Operations
On
Liquidity and Capital Resources
As of
For the year ended
Our investing activities consisted of acquiring property and equipment totaling
approximately
During the year ended
Off-Balance Sheet Arrangements
During the fiscal years ended
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires our management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by our management for changes in facts and circumstances, and material changes in these estimates could occur in the future.
40 Table of Contents Business Combinations
Business combinations are accounted for at fair value. Acquisition costs are expensed as incurred and recorded in general and administrative expenses; previously held equity interests are valued at fair value upon the acquisition of a controlling interest; restructuring costs associated with a business combination are expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date affect income tax expense. Measurement period adjustments are made in the period in which the amounts are determined, and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. All changes that do not qualify as measurement period adjustments are also included in current period earnings. The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements could result in a possible impairment of goodwill or the recognition of additional consideration which would be expensed. The fair value of contingent consideration is remeasured each period based on relevant information and changes to the fair value are included in the operating results for the period.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary in order to reduce deferred tax assets to the amounts expected to be recovered.
The Company has established a valuation allowance for its deferred tax assets that are not recoverable from taxable temporary differences because the Company is unable to conclude that future utilization of a portion of its NOL carryforwards and other deferred tax assets is more likely than not.
The calculation of the Company's tax positions involves dealing with uncertainties in the application of complex tax regulations in several different state tax jurisdictions. The Company is periodically reviewed by tax authorities regarding the amount of taxes due. These reviews include inquiries regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. The Company records estimated reserves for exposures associated with positions that it takes on its income tax returns that do not meet the more likely than not standards.
Embedded Conversion Features and Other Equity-linked Instruments (Derivative Liabilities)
The Company classifies all of its embedded debt conversion features, and other
derivative financial instruments as equity if the contracts (1) require physical
settlement or net-share settlement or (2) give the Company a choice of net-cash
settlement or settlement in its own shares (physical settlement or net-share
settlement). The Company classifies as assets or liabilities any contracts that
(1) require net-cash settlement (including a requirement to net cash settle the
contract if an event occurs and if that event is outside the control of the
Company), (2) give the counterparty a choice of net-cash settlement or
settlement in shares (physical settlement or net-share settlement), or (3)
contracts that contain reset provisions. The Company assesses classification of
its equity-linked instruments at each reporting date to determine whether a
change in classification between equity and liabilities (assets) is required. As
of
The Company accounts for contracts convertible into common stock in excess of
its authorized capital as derivative as liabilities. The derivative liabilities
are remeasured at fair value with the changes in the value reported as a
component of other income (expense) in the accompanying consolidated results of
operations. The derivative liabilities are measured at fair value using a Black
Scholes option pricing model. The model is based on assumptions including quoted
market prices and estimated volatility factors based on historical quoted market
prices for the Company's common stock, and are classified within Level 3 of the
fair value hierarchy as established by US GAAP. As of
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