UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

~~[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

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

For the quarterly period ended~~July~~March 31, ~~2012~~2022

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

~~[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
For the transition period from __________ to __________

Commission File Number:~~000~~~~-51390~~000-51390

~~Fresh Harvest Products, Inc.~~

~~(Exact name of registrant as specified in its charter)~~

	Innovative MedTech, Inc.
~~New Jersey~~(Exact name of registrant as specified in its charter)

Delaware		33-1130446
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~280 Madison Avenue,~~2310 York St., Suite ~~1005, New York, New York~~200 Blue Island, IL	~~10016~~	60406
(Address of principal executive offices)	~~(Zip Code)~~	(Zip Code)

~~(917) 652-8030~~(708) 925-9424

(Registrant’s telephone number, including area code)

~~N/A~~
~~(Former name, former address and former fiscal year, if changed since last report)~~Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Not applicable.

Note applicable.

Not applicable.

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. x☒ Yes o☐ 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). xYes o☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange ~~Act.~~Act:


Large accelerated filero	☐	Accelerated filero	☐
Non-accelerated ~~filer~~ o~~(Do not check if a smaller reporting company.)~~Filer	☒	Smaller reporting companyx	☒
		Emerging growth company	☐

Indicate by check mark whether the ~~Registrant~~registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act)o. Yes x☐ No ☒

As of ~~September 17, 2012, the registrant had 1,068,943,779~~May 23, 2022, there were 21,157,327 shares of ~~common stock outstanding.~~

Common Stock, $0.000001 par value per share, issued and outstanding

NOTE REGARDING FORWARD-LOOKING STATEMENTS

~~FORWARD LOOKING STATEMENTS.~~

Unless stated otherwise or the context otherwise requires, the words “we,” “us,” “our,” the ~~“Company”~~“Company,” “Innovative MedTech” or ~~“Fresh Harvest”~~“Innovative” in this ~~Quarterly~~“Quarterly Report on Form 10-Q collectively refers to ~~Fresh Harvest Products,~~Innovative MedTech, Inc., a ~~New Jersey~~Delaware corporation (the “Parent Company”), and its subsidiaries. The information in this Quarterly Report on Form 10-Q contains “forward-looking statements” relating to the ~~Company.~~Company, within the meaning of 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”). In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These ~~“forward looking statements” represent~~statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

This report contains information that may be deemed forward-looking, that is based largely on the Company’s current expectations, ~~or beliefs including, but not limited~~and is subject to statements concerning the Company’s operations, performance, financial condition and growth. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” or the negative or other comparable terminology are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements by their nature involve substantialcertain risks, trends and uncertainties such as our ability to obtain additional working capital, the affect of general economic and business conditions, our ability to implement our business and acquisition strategy, our ability to effectively integrate our acquisitions, competition, availability of key personnel, changes in, or the failure to comply with government regulations, and other risks detailed from time-to-time in the Company’s reports filed with the Securities and Exchange Commission, including in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2011, certain of which are beyond the Company’s control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and resultsthat could ~~differ materially from those indicated in the forward-looking statements.~~

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those anticipated.

Among such risks, trends and other uncertainties, which in some instances are beyond its control, may be the Company’s ability to generate cash flows and maintain liquidity sufficient to service its debt, and comply with or obtain amendments or waivers of the financial covenants contained in ~~any~~its credit facilities, if necessary. Other risks and uncertainties include the impact of continuing adverse economic conditions, potential changes in the adult day care industry, energy costs, interest rates and the availability of credit, labor costs, legislative and regulatory rulings and other results of operations or financial conditions, increased capital and other costs, competition and other risks detailed from time to time in the Company’s publicly filed documents.

The words “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions generally identify forward-looking statements.

Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this report. The Company does not undertake to publicly update or revise its forward-looking statements.

INNOVATIVE MEDTECH, INC.

FORM 10-Q

INDEX

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

INNOVATIVE MEDTECH, INC.

(FORMERLY FRESH HARVEST PRODUCTS, INC.

~~FORM 10-Q~~)

~~INDEX~~ AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31, 2022			June 30, 2021
	(Unaudited)			(Audited)
Assets
Current assets
Cash	$	258,376		$	433,435
Accounts receivable, net		182,413			178,555
Notes receivable		27,289			48,987
Prepaid expenses		39,747			1,745
Total current assets		507,825			662,722

Notes receivable, non-current		5,997			14,466
Deposits		6,716			10,331
Right-of-use asset		632,921			757,313
Finance lease asset, net		85,746			0
Property, plant and equipment, net of accumulated depreciation		296,850			325,788
Intangible assets		2,991,655			0
Goodwill		460,264			3,473,264
Total Assets	$	4,987,974		$	5,243,884

Liabilities & Stockholders’ Deficit
Current liabilities
Accounts payable and accrued expenses	$	786,938		$	775,969
Accrued interest		561,689			520,205
Accrued interest, related parties		36,180			9,459
Notes payable, related parties, current		514,438			514,438
Notes payable, current		151,960			200,705
Convertible notes payable, current		349,900			349,900
Derivative liability		262,247			254,700
Finance lease liability		57,706			0
Operating lease liability		180,440			166,895
Total current liabilities		2,901,498			2,792,271

Royalty liability		1,500,000			1,500,000
Finance lease liability, non-current		143,269
Operating lease liability, non-current		453,369			590,418
Paycheck protection loan		0			266,640
SBA Loan		350,000			150,000
Total Liabilities		5,348,136			5,299,329

Commitments and contingencies (Note 14)

Stockholders’ Deficit
Series A Preferred stock, $0.000001 par value; 500,000 authorized: 317,500 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively		0			0
Common stock, $0.000001 par value; 130,000,000 shares authorized; 15,657,327 and 15,557,327 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively		16			16
Additional paid in capital		14,935,551			14,860,551
Accumulated deficit		(15,295,729	)		(14,916,012	)
Total Stockholders’ Deficit		(360,162	)		(55,445	)
Total Liabilities and Stockholders’ Deficit	$	4,987,974		$	5,243,884

~~PART I - FINANCIAL INFORMATION~~
4

~~Item 1. Financial Statements~~
4

~~Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations~~
20

~~Item 3. Quantitative and Qualitative Disclosures about Market Risk~~
26

~~Item 4. Controls and Procedures~~
26

~~PART II - OTHER INFORMATION~~
28

~~Item 1. Legal Proceedings.~~
28

~~Item 1A. Risk Factors.~~
28

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~
32

~~Item 3. Defaults Upon Senior Securities.~~
32

~~Item 4. Mine Safety Disclosure~~
32

~~Item 5. Other Information.~~
32

~~Item 6. Exhibits.~~
33

~~SIGNATURES~~
34

~~PART I - FINANCIAL INFORMATION~~

~~Item 1. Financial Statements~~

FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

As of

As of

July 31, 2012

October 31, 2011

(Unaudited)

(Audited)
ASSETS
Current assets

Cash
$
-

-
Accounts receivable, net

107,700

76,109
Inventory

12,629

7,385
Total current assets

120,329

86,038

Fixed assets

Equipment, net

-

2,544

Total assets
$
120,329

86,038

LIABILTIES AND DEFICIENCY IN ASSETS
Current liabilities

Accounts payable and accrued expenses
$
1,383,450
$
1,664,972
Notes payable, related parties, current

29,583

-
Notes payable, current

690,956

815,998
Total current liabilities

2,103,989

2,480,970

Commitments and Contingencies

-

-

Deficiency in assets

Common stock - $0.0001 par value, 1,068,943,779 and 506,885,209 shares outstanding and 2,000,000,000 and 200,000,000 authorized, respectively

106,894

50,689
Convertible Preferred Stock - $0.0001 par value, 0 shares outstanding; 5,000,000 authorized

-

-
Additional paid in capital

6,126,745

5,207,208
Accumulated deficit

(8,217,299)

(7,652,829)
Total deficiency in assets

(1,983,660)

(2,394,932)

Total liabilities and deficiency in assets
$
120,329
$
86,038
See accompanying notes to financial statements

FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations

For the
For the
For the
For the

three months ended
three months ended
nine months ended
nine months ended

July 31, 2012
July 31, 2011
July 31, 2012
July 31, 2011

(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenue
$            117,318
$            100,335
$            538,671
$            503,063
Returns and allowances
(24,376)
-
(116,507)
-
Revenue, net
92,941
100,335
422,164
503,063

Cost of goods sold
126,329
82,973
316,915
385,908

Gross profit
(33,388)
17,361
105,249
117,154

Operating expenses

Salaries and wages
36,000
36,000
108,000
132,000
Sales and marketing
2,659
38,008
244,950
184,249
Legal and professional fees
35,450
76,981
102,650
280,749
General and administrative
55,447
30,537
328,118
325,483
Total operating expenses
129,556
181,526
783,718
922,481

Income (loss) from operations
(162,944)
(164,165)
(678,468)
(805,327)

Other income (expense)

Interest expense
(17,939)
(23,056)
(58,069)
(70,386)
Gain (loss) on disposal of assets
-
1,226
-
(597)
Fair value adjustment for stock issued
-
300,000
-
300,000
Settlement agreement expenses
-
(73,105)
-
(73,105)
Depreciation expense
(113)
-
(2,544)
-
Income from forgiveness of debt
-
-
234,221
-
Total other income (expenses)
(18,052)
205,065
173,607
155,912

Income (loss) before provision for income taxes
(180,996)
40,901
(504,861)
(649,414)
Provision for income taxes
-
-
-
-

Net income (loss)
$            (180,996)
$            40,901
$            (504,861)
$            (649,414)

Basic and diluted loss per common share
$               (0.000)
$              0.000
$                (0.000)
$                (0.000)

Weighted average common shares outstanding (basic and diluted)
828,517,229
200,000,000
724,521,655
200,000,000

See accompanying notes to financial statements

FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows

For the

For the

nine months ended

nine months ended

July 31, 2012

July 31, 2011
Cash flows from operating activities

Net loss
$
(504,861)
$
(649,414)
Adjustments to reconcile net loss to cash flows

  from operating activities:

Stock issued for services

642,670
Depreciation

2,544

3,018
Fair value adjustment for stock issued

-

(300,000)
(Increase) decrease in assets and liabilities:

   Accounts receivable, net

(31,591)

87,750
   Inventory

(5,244)

13,491
   Accounts payable and accrued expenses

281,522

87,343
Cash flows from operating activities

(257,630)

(115,142)

Cash flows from financing activities

Loan repayments

(35,615)
Proceeds from issuances of notes payable, related parties

26,287

-
Proceeds from issuance of notes payable

228,024

135,000
Cash flows from financing activities

257,607

99,385

Change in cash

(23)

(15,757)

Cash and cash equivalents, beginning of period

23

16,711

Cash and cash equivalents, end of period
$
-
$
954

Supplemental disclosure of cash flow information:

Taxes paid
$
-
$
-
Interest paid
$
-
$
3,516

Non-cash financing activities:

Stock issued for conversion of debt
$
626,490
$
667,343

See accompanying notes to unaudited consolidated financial ~~statements.~~statements

4
Table of Contents

INNOVATIVE MEDTECH, INC.

6

(FORMERLY FRESH HARVEST PRODUCTS, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED

For the three months ended

For the nine months ended

March 31,

March 31,

2022

2021

2022

2021

Revenue:

Participant fees

$ 175,167

$ 38,506

$ 572,174

$ 38,506

Franchise fees

116,620

32,695

366,887

32,695

291,787

71,201

939,061

71,201

Operating expenses:

General and administrative

218,066

268,410

675,605

358,294

Salaries and wages

220,015

23,619

671,805

23,619

Consulting fees

16,000

0

154,525

0

Legal and professional fees

31,880

185,462

75,328

205,502

Total operating expenses

485,961

477,491

1,577,263

587,415

Loss from operations

(194,174 )

(406,290 )

(638,202 )

(516,214 )

Other income (expense):

Interest expense, related parties

0

0

(8,972 )

0

Interest expense

(28,580 )

(15,390 )

(78,455 )

(162,793 )
Loss on extinguishment of debt

0

(1,660,797 )

0

(1,660,797 )
Change in fair value of derivatives

26,271

(85,004 )

(7,547 )

(217,549 )
Gain on forgiveness of PPP loan

266,640

0

266,640

0

Other income

8,300

0

86,819

0

Total other income (expense)

272,631

(1,761,191 )

258,485

(2,041,139 )

Net income loss

$ 78,457

$ (2,167,481 )

$ (379,717 )

$ (2,557,353 )

Basic and diluted earnings per share on net loss

$ 0.01

$ (6.89 )

$ (0.02
)

$ (1.21 )

Weighted average shares outstanding - basic and diluted

15,657,327

314,453

15,616,343

2,117,130

See accompanying notes to unaudited consolidated financial statements
5
Table of Contents
INNOVATIVE MEDTECH, INC.
(FORMERLY FRESH HARVEST PRODUCTS, INC.)
AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
UNAUDITED
For the nine months ended March 31, 2022

Additional

Series A Preferred Stock

Common Stock

Common Stock To Be Issued

Paid-in

Accumulated

Stockholders’

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

Deficit

Balance, June 30, 2021

317,500

$ 0

15,557,327

$ 16

-

$ 0

$ 14,860,551

$ (14,916,012 )

$ (55,445 )

Issuance of common stock for services

-

0

100,000

0

-

0

75,000

0

75,000

Net loss

-

0

-

0

-

0

0

(259,318 )

(259,318 )

Balance, September 30, 2021

317,500

0

15,657,327

16

-

0

14,935,551

(15,175,330 )

(239,763 )

Net loss

-

0

-

0

-

0

0

(198,856 )

(198,856 )

Balance, December 31, 2021

317,500

0

15,657,327

16

-

0

14,935,551

(15,374,186 )

(438,619 )

Net income

-

0

-

0

-

0

0

78,457

78,457

Balance, March 31, 2022

317,500

$ 0

15,657,327

$ 16

-

$ 0

$ 14,935,551

$ (15,295,729 )

$ (360,162 )
See accompanying notes to unaudited consolidated financial statements
6
Table of Contents
INNOVATIVE MEDTECH, INC.
(FORMERLY FRESH HARVEST PRODUCTS, INC.)
AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
UNAUDITED
For the nine months ended March 31, 2021

Additional

Series A Preferred Stock

Common Stock

Common Stock To Be Issued

Paid-in

Accumulated

Total

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

Balance, June 30, 2020 (Audited)

47,400,000

$ 47

294,216

$ 0

50,000

$ 0

$ 7,562,391

$ (11,651,055 )

$ (4,088,617 )

Common stock issued which was committed in 2020

-

0

50,000

0

(50,000 )

0

50,000

0

50,000

Sale of common stock

-

0

7,885,755

8

-

0

397,894

0

397,902

Sales of Series A Convertible Preferred Stock

317,500

0

-

0

-

-

1,602,097

0

1,602,097

Conversion of notes and accrued interest into common stock

-

0

6,003,356

6

-

0

4,998,124

0

4,998,130

Conversion of accounts payable into common stock

-

0

850,000

1

-

0

249,999

0

250,000

Conversion of Series Convertible Preferred Stock into common stock

(47,400,000 )

47 )

474,000

1

-

0

46

0

0

Net loss

-

0

-

0

-

0

0

(2,557,353 )

(2,557,353 )

Balance, March 31, 2021

317,500

$ 0

15,557,327

$ 16

-

$ 0

$ 14,860,551

$ (14,208,408 )

$ 652,159

See accompanying notes to unaudited consolidated financial statements
7
Table of Contents
INNOVATIVE MEDTECH, INC.
(FORMERLY FRESH HARVEST PRODUCTS, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED

For the nine months ended

March 31,

2022

2021

Cash Flows from Operating Activities

Net Loss

$ (379,717 )

$ (2,557,353 )

Adjustments to reconcile net loss to net cash used by operating activities:

Depreciation & Amortization

51,171

2,738

Stock compensation

75,000

0

Loss on modification of debt

0

1,660,797

Change in fair value of derivatives

7,547

217,549

Gain on forgiveness of PPP loan

(266,640 )

0

Right-of-use

124,392

0

Expenses paid via notes payable

0

158,503

Changes in operating assets & liabilities

Accounts receivable

(3,858 )

(84,959 )
Notes receivable

30,167

0

Prepaid expenses

(38,002 )

0

Deposits

3,615

154

Accounts payable and accrued liabilities

10,969

386,023

Accrued interest, related party

26,721

0

Accrued interest

41,484

0

Related party advances

0

165,140

Net cash used by operating activities

(317,151 )

(51,428 )

Cash Flows from Investing Activities

Cash acquired in business combination

0

412,276

Purchase of subsidiary

0

(2,000,110 )
Acquisition of fixed assets

(9,163 )

Net cash used by investing activities

(9,163 )

(1,587,834 )

Cash Flows from Financing Activities

Proceeds from convertible notes payable

0

51,500

Proceeds from SBA loan

200,000

0

Proceeds from notes payable

39,000

0

Payments on notes payable

(87,745 )

0

Proceeds from sale of common stock

0

2,000,000

Net cash provided by financing activities

151,255

2,051,500

Increase in Cash

(175,059 )

412,238

Cash at beginning of period

433,435

766

Cash (and equivalents) at end of period

$ 258,376

$ 413,004

Supplemental Cash Flow Information

Cash paid for interest

$ 0

$ 0

Cash paid for income taxes

$ 0

$ 0

Non-cash investing and financing activities:

      Conversion of notes and accrued interest into common stock

$
0

$
4,998,129

      Conversion of accounts payable into common stock

$
0

$
250,000

See accompanying notes to unaudited consolidated financial statements
8
Table of Contents
INNOVATIVE MEDTECH, INC.
(FORMERLY FRESH HARVEST PRODUCTS, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
~~July~~FOR THE PERIOD ENDED MARCH 31, ~~2012~~2022

UNAUDITED

NOTE 1.
GENERAL ORGANIZATION AND BUSINESS

Innovative MedTech, Inc. (the “Company”), a Delaware corporation, is a provider of health and wellness services. On February 1, 2021, the Company filed all required Form 10-Q’s and 10-K’s to be up to date with its filings which should have been filed before the Company filed its Form 15-12G on November 7, 2014. On February 11, 2021, the Company filed with FINRA to effectuate a reverse stock split, change its name from Fresh Harvest Products, Inc. to Innovative MedTech, Inc. and change its stock symbol from ‘FRHV’ to ‘IMTH’. FINRA permitted these corporate actions on March 8, 2021. The 10,000:1 reverse split and the name change from Fresh Harvest Products, Inc., ~~a New Jersey corporation (the “Parent Company”)~~to Innovative MedTech, Inc. corporate actions took effect at the open of business on March 9, 2021.
On March 25, 2021, the Company acquired two companies, Sarah Adult Day Services, Inc., and ~~its subsidiaries (collectively referred to as the “Company”~~Sarah Day Care Centers, Inc. (“SarahCare”), ~~are engaged~~an adult day care center franchisor and provider, for a total of $3,718,833; $2,000,110 was paid in ~~the proprietary development, sales and marketing of organic and natural food products.~~

On December 16, 2005, the Parent Company entered into an Agreement and Plan of Acquisition and Merger (the “Merger Agreement”) with Fresh Harvest Products, Inc., a New York corporation (“New York FHP”), Michael Friedman, Marcia Roberts and Illuminate, Inc. The Merger Agreement contemplates the merger of the Parent Company and New York FHP (the “Merger”). Although the Parent Company has operated as if the Merger was consummated in December 2005, it has come to the Parent Company’s attention that certain required filings were not made in the State of New Jerseycash and the ~~State of New York~~Company assumed approximately $393,885 in debt due to ~~properly consummate~~sellers, and the ~~Merger.   As~~remaining is payable through a result, as of the date of this Quarterly Report on Form 10-Q, the Parent Company and New York FHP had not completed the Merger. In order to complete the Merger, the Parent Company and New York FHP plan to take the following steps:

~~1. Pay all taxes owed by New York FHP to the State of New York. As of October 31, 2011, New York FHP owed New York State payroll related taxes~~royalty fee liability due in the amount of $1,500,000, less legal fees of approximately ~~$30,145 plus applicable interest~~$175,000. With 28 centers (2 corporate and ~~penalties.~~26 franchise locations) located in 13 states, SarahCare offers seniors daytime care and activities ranging from meeting their physical and medical needs, on a daily basis, ranging from nursing care to salon services and providing meals, to offering engaging and enriching activities to allow them to continue to lead active and engaged lives.
~~2. File an application on behalf~~
On March 25, 2021 the Company received a $2 million investment in the form of a private investment in public equity (“PIPE”) from several investors. For the $2 million PIPE, the investors received a combination of common stock and Series A Preferred Stock which together constitute ownership of 84.11% of the ~~Parent~~ Company, for authority to do business in the State of New York with the Secretary of State of the State of New York, which application requires the consent of the New York State Tax Commission, and pay any applicable late filing penalties. 83.00% on a fully diluted basis.
~~3. File a final franchise tax return with the State of New York with respect to New York FHP.~~
~~4. File a Certificate of Merger with the Secretary of State of the State of New Jersey.~~
~~5. File a Certificate of Merger with the Secretary of State of the State of New York.~~

The Parent Company intends to take the steps required to complete the Merger, however, the Parent Company cannot forecast when it will pay the amounts owed to the State of New York, make the indicated filings or otherwise complete the Merger. In addition, there is a risk that the State of New York and the State of New Jersey may require the Parent Company and New York FHP to take additional actions thatOn April 21, 2021, the Company ~~is not presently contemplating. If~~formed ten wholly-owned limited liability companies which will operate ten additional SarahCare facilities. As of March 31, 2022, the ~~Parent Company and New York FHP~~newly formed entities are ~~unable~~non-operating. Operations expect to complete the above described steps and to consummate the Merger, then there is a risk that the Parent Company’s acquisition of New York FHP could be challenged which could seriously harm the Parent Company’s business, financial condition, results of operations and cash flows. If the Parent Company and New York FHP are unable to consummate the Merger, the value of the Parent Company’s shares held by the Parent Company’s shareholders could significantly decline.begin in November 2022.

The Company sells its products to consumers through local, regional and national supermarkets, retailers, distributors, brokers and wholesalers. In August 2009, the Parent Company formed a wholly-owned subsidiary, Wings of Nature, LLC. On March 2, 2010, the Parent Company entered into the Asset Purchase Agreement (the “~~Asset Purchase Agreement~~”) with Take and Bake, Inc., doing business as A.C. LaRocco Pizza Company. In April 2010, the Parent Company formed a wholly-owned subsidiary, New A.C. LaRocco, for the purpose of implementing its new pizza business. On May 4, 2011, the Parent Company, New York FHP, New A.C. LaRocco, the Seller, Clarence Scott and Karen Leffler entered into a Settlement Agreement and Release (the “~~Settlement Agreement”), which was effective on May 11, 2011.~~

~~Going Concern~~

The Company continues to have limited capital resources and has experienced net losses and negative cash flows from operations and expects these conditions to continue for the foreseeable future. As of ~~July~~March 31, ~~2012,~~2022, the Company ~~has limited~~had $258,376 cash available for operations and ~~has~~had an accumulated deficit of ~~$8,217,299.~~$15,295,729. Management believes that cash on hand as of ~~July~~March 31, ~~2012~~2022 is not sufficient to fund operations ~~for the next year.~~through June 30, 2022. The Company will be required to raise additional funds to meet its short and long-term planned goals. There can be no assurance that such funds, if available at all, can be obtained on terms reasonable to the Company.

IfNOTE 2. LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business.
For the nine months ended March 31, 2022 and 2021, the Company reported a net loss of $379,717 and $2,557,353, respectively.
As of March 31, 2022, the Company maintained total assets of $4,987,974, total liabilities including long-term debt of $5,348,136 along with an accumulated deficit of $15,295,729.
The Company believes that additional capital will be required to fund operations through June 30, 2022 and beyond, as it attempts to generate increasing revenue, and develop new products. The Company intends to attempt to raise capital through additional equity offerings and debt obligations. There can be no assurance that the Company will be successful in obtaining financing ~~is not available~~at the level needed or ~~not available~~ on terms acceptable to us, our ability to fund our operations or otherwise respond to competitive pressures may be significantly impaired. We could also be forced to curtail our business operations, reduce our investments, decrease or eliminate capital expenditures and delay the ~~execution of our business plan, including, without limitation, all aspects of our operations, which would have a material adverse affect on our business. The items discussed~~Company. These conditions raise substantial doubt about ~~our~~the Company’s ability to continue as a going concern. We cannot assure you that we can achieve or sustain profitability in the future. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. Revenues and profits, if any, will depend upon various factors, including whether our products achieve market acceptance and whether we obtain additional

7

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

~~financing. We may not achieve our business objectives and the failure to achieve such goals would have a materially adverse impact on us.~~

The accompanying consolidated financial statements ~~have been prepared assuming~~do not include any adjustments that might result from the ~~Company will continue as a going concern, which contemplates the realization~~outcome of assets and the liquidation of liabilities in the normal course of business. However, the Company has limited revenue and without realization of additional capital, it would be highly unlikely for the Company to continue as a going concern.

~~Special Meeting and Shareholder Meeting~~this uncertainty.

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The Parent Company held a special meeting of shareholders on September 2, 2011. At this meeting, the holders of the Parent Company’s common stock and Series A Preferred Stock voted, as a single class, to approve an increase in the number of authorized shares of the Parent Company’s common stock from 200,000,000 to 2,000,000,000 shares and to authorize the filing of an amendment to the Parent Company’s Certificate of Incorporation with respect to such change.  On September 6, 2011, the Parent Company filed the amendment with the Secretary of State of the State of New Jersey

~~Settlement Agreements~~

On December 2, 2011, the Parent Company, New York FHP, and a certain creditor of the Company entered into a Settlement Agreement and Release (the “Second Settlement Agreement”), which was effective on December 9, 2011.

~~The terms of the Second Settlement Agreement include, among others:~~

~~(i)~~
~~The Parent Company shall issue 2,500,000 shares of common stock to the Settler, which shares have been issued;~~
~~(ii)~~
~~Prior to the effective date of the Second Settlement Agreement, Fresh Harvest would pay to Settler an aggregate $5,000, which amount as been paid;~~
~~(iii)~~
each of the Settler, the Company acknowledged and agreed that upon receipt of the share and payment by the Parent Company all amounts owed by Fresh Harvest to the Settler in connection with the Settler’s employment agreement or any other dispute with Fresh Harvest or otherwise shall be deemed satisfied and paid in full.

~~The Second Settlement Agreement also provides for a mutual release of claims by the parties.~~

On May 4, 2011, the Parent Company, New York FHP, New A.C. LaRocco, the Seller, Clarence Scott and Karen Leffler entered into a Settlement Agreement and Release (the “Settlement Agreement”), which was effective on May 11, 2011.

~~The terms of the Settlement Agreement include, among others:~~

~~(i)~~
~~The Parent Company shall issue an additional 150,000 shares of Series A Convertible Preferred Stock to the Seller (the “Share Payment”), which shares have been issued;~~
~~(ii)~~
~~during the 90 day period following the effective date of the Settlement Agreement, Fresh Harvest would pay to the Seller an aggregate of $23,000, which amount has been paid;~~
~~(iii)~~
~~neither Mr. Scott nor Ms. Leffler would be restricted from accepting employment with, consulting with or investing in any business in competition with Fresh Harvest or its subsidiaries;~~

8

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

~~(iv)~~
each of the Seller, Mr. Scott and Ms. Leffler acknowledged and agreed that upon receipt of the Share Payment by the Parent Company and compliance by New A.C. LaRocco with the provisions of Section 2(b) of the Settlement Agreement (i.e., payment of $23,000 to the Seller), all amounts owed by Fresh Harvest and/or New A.C. LaRocco to the Seller, Mr. Scott and Ms. Leffler in connection with the Asset Acquisition, pursuant to the Transaction Documents (including the employment agreements between Fresh Harvest and each of Mr. Scott and Ms. Leffler) or otherwise shall be deemed satisfied and paid in full;
~~(v)~~
each of the Seller, Mr. Scott and Ms. Leffler acknowledged and agreed that on March 2, 2010, the Parent Company acquired allright, title and interest in (collectively, the “Acquired Assets”) allof the property and assets, real, personal or mixed, tangible and intangible, of every kind and description of the Seller, except for: (1) receivables due to the Seller on March 2, 2010, (2) cash and cash equivalent items on hand at the close of business on March 2, 2010, (3) accounts receivable earned from the operation of the Seller’s business during the period beginning sixty (60) days prior to March 2, 2010 and ending on March 2, 2010, (4) accounts receivable as to litigation commenced prior to March 2, 2010 against a debtor for purposes of collection, (5) all judgments in favor of the Seller in connection with the collection of accounts receivable as of March 2, 2010 and (6) all checkbooks, stubs, books of account, ledgers and journals related to the prior operation of the Seller’s business prior to March 2, 2010;
~~(vi)~~
each of the Seller, Mr. Scott and Ms. Leffler further acknowledged and agreed that the only liability assumed by Fresh Harvest from the Seller pursuant to the Transaction Documents was the assumption of that certain Secured Promissory Note dated July 6, 2007 in the original principal amount of $218,356.94 (and with a principal balance of $129,384.59 on March 2, 2010) owed by the Seller to a specified creditor;
~~(vii)~~
New A.C. LaRocco agreed to transfer to the Seller certain specified assets and any rights and obligations of New A.C. LaRocco and/or Fresh Harvest with respect to the facility located in Spokane, Washington; and,
~~(viii)~~
~~subject to certain conditions, the domain name healthypizzarevolution.com, will be the property of Mr. Scott.~~

~~The Settlement Agreement also provides for a mutual release of claims by the parties.~~

Settlement Summary

Equipment returned to Seller

$          6,062
(1)
Cash paid to Seller

23,000

Note payable to Seller relieved through issuance of Preferred Stock

(102,160)
(2)
Accrued expenses relieved

(10,797)

Preferred Stock - 150,000 shares of the Company (see Note 11)

180,000
(3)
Net cost of settlement

$        96,105

~~Explanation:~~

~~(1)~~
~~Assets located in the Spokane, Washington office that were released in the Settlement Agreement dated May 4, 2011.~~
~~(2)~~
~~Balance of the Note Payable owed to Take and Bake, Inc. that was released in the Settlement Agreement dated May 4, 2011.~~
~~(3)~~
150,000 shares of convertible preferred stock (15,000,000 shares of common stock) at a per common share price of $.012; per share price of the common stock was determined to be the closing price of the shares on the date of issuance.

NOTE 2.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the ~~years~~nine months ended ~~October~~March 31, ~~2011~~2022 and ~~2010.~~2021.
~~Reclassifications~~

Principles of Consolidation
~~These~~
The Company has two wholly-owned operating subsidiaries; Sarah Adult Day Services, Inc., and Sarah Day Care Centers, Inc. The consolidated financial statements, which include reclassification adjustments as of October 31, 2011 to “accounts payable and accrued expenses” and “accrued expenses, related party, current” for comparison purposes, as well as breaking out depreciation expense in the ~~statement of operations. These amounts have been reclassified on the balance sheet and statement of operations~~accounts of the Company ~~accordingly. These reclassifications did not~~and its two wholly-owned operating subsidiaries, are prepared in conformity with GAAP. All significant intercompany balances and transactions have ~~any effect on~~been eliminated. The consolidated financial statements, which include the ~~reported net income (loss) for~~accounts of the ~~quarters ended July 31, 2012~~Company and ~~July 31, 2011 or for~~its wholly-owned operating subsidiaries, and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The consolidated financial statements have been prepared using the accrual basis of accounting in accordance with GAAP and presented in US dollars. The fiscal year ~~ended October 31, 2011.~~end is June 30.

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~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

Use of Estimates

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~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~~non-interest-bearing account that currently does not exceed ~~federally insured limits.~~$250,000 at March 31, 2022. For the purpose of the consolidated statements, ~~of cash flows,~~ all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of ~~July~~March 31, ~~2012.~~2022 and June 30, 2021.

As of July 31, 2012, the bank account located in Spokane, Washington that the Parent Company was using (and no longer uses) for the operations of the New A.C. LaRocco is in the name of Take and Bake, Inc. dba AC LaRocco Pizza.

~~As of July 31, 2012 and October 31, 2011, the Company had zero cash balances.~~

~~Net Income (Loss)~~Earnings Per Share Calculation

Basic ~~net loss~~earnings per common share ~~("EPS"~~(“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 share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued.

~~The weighted-average number~~Intangible Assets
Certain intangible assets arose from the acquisition of ~~common shares outstanding for computing basic EPS for the three months ended July 31, 2012~~Sarah Adult Day Services, Inc., and ~~2011 were 1,068,943,779~~Sarah Day Care Centers, Inc. on March 25, 2021 and ~~200,000,000 respectively. The weighted-average number of common shares outstanding for computing basic EPS for the nine months ended July 31, 2012 were 724,521,655 and 200,000,000, respectively.~~

~~Revenue Recognition and Sales Incentives~~

Sales are recognized when the earnings process is complete, which occurs when products are shipped in accordance with terms of agreements, title and risk of loss transfer to customers, collection is probable and pricing is fixed or determinable. Sales are reported net of sales incentives, which include trade discounts and promotions and certain coupon costs. Shipping and handling costs billed to customers are included in reported sales. Allowances for cash discounts are recorded in the period in which the related sale is recognized.

~~Concentrations of Credit Risk~~

~~Financial instruments which potentially subject the Company to concentrations of credit risk~~ consist of ~~accounts receivable.~~

~~For~~ the ~~quarter ended July 31, 2012, the Company earned revenue from three customers~~following, which ~~represented approximately 83.71% of total revenue and at July 31, 2012, three customers had accounts receivable balances representing 78.14% of the gross accounts receivable balance.~~

~~Accounts Receivable~~

The Company performs ongoing credit evaluations on existing and new customers daily. When it is determined that an amount included in accounts receivable is uncollectible it is written off as uncollectible.

~~As of July 31, 2012 and October 31, 2011, the allowance for doubtful accounts was $0 and $76,109, respectively.~~

~~Inventory~~

~~Inventory is valued at the lower of actual cost~~have been or market, utilizing the first-in, first-out method. The Company provides write-downs for finished goods expected to become non-saleable due to age and specifically identifies and provides for slow moving products and packaging.

10

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

~~As of July 31, 2012 and October 31, 2011, the Company’s obsolete inventory was $12,629 and $40,676, respectively.~~

~~Property and Equipment~~

~~Property and equipment is carried at cost and depreciated or~~are being amortized on a straight-line basis over ~~their~~the following estimated useful ~~life. The Company believes the~~lives unless they have an indefinite life:
Estimated
Asset
Useful Life
Customer Relationships
3
Trademarks
Indefinite
Non-Compete Agreement
3
CARF Accreditation
3
Franchise Agreements
Indefinite
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An intangible asset lives assigned to its property and equipment is within the ranges/guidelines generally used in food manufacturing and distribution businesses. Depreciation is provided for on a straight-line basis over thewith an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the ~~assets~~asset. Subsequent reversal of ~~five years. Ordinary repairs and maintenance are expensed as incurred.~~

~~For the three months ended July 31, 2012 and 2011, depreciation expense was $113 and $12,176, respectively.~~impairment losses is not permitted. For the nine months ended ~~July~~March 31, ~~2012~~2022 and ~~2011, depreciation expense was $2,544~~2021, there were no impairment losses.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and ~~$3,018, respectively.~~

(v) recognition of revenue when (or as) the Company satisfies each performance obligation.
~~Dividends~~

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct.
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. 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.
The Company receives payment for services under various third-party payor programs which include Medicaid, Veterans Affairs and other third-party payors. The Company determines the transaction price based on the terms of the contract with the payor, correspondence with the payor, and historical payment trends.
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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 Veterans Affairs are accrued when assessed (without regard to when the assessment is paid or withheld). Subsequent adjustments to these accrued amounts are recorded in net revenues when known.
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. The Company’s franchisees pay 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.
SarahCare, as the franchisor, supplies the Franchisee’s with initial assistance and approval with the following: (1) Providing the site selection criteria for the SARAH Business and, upon a potential Franchisee’s request, provide input regarding possible sites. The Company does not ~~yet adopted~~own and lease any ~~policy regarding payment~~site to franchisees. After the franchise selects and the Company approves a site, the Company will designate the geographic area within which they may establish the SARAH Business; (2) Approve the signage; (3) Identify the standards and specifications for products, services, and materials that comply with the System, and, if the Company requires, the approved suppliers of ~~dividends. No dividends have been paid during 2011~~these items. The Company will furnish a potential Franchisee with the listing of the package of initial franchise items as detailed in the Operations Manual. Neither the Company or its affiliate provide, deliver, or install any of these items; (4) Provide an Initial Training Program; and ~~2012.~~

(5) Provide an Operations Training Program.
Once the Franchisee’s SarahCare business is operational, the Company will: (1) Issue and modify System standards for SARAH Businesses; (2) Provide access to a copy of the Company’s Operations Manual as they make available through our intranet. The Operations Manual contains mandatory and suggested specifications, standards and operating procedure; (3) Provide additional or special guidance and assistance and training as the Company deem appropriate and for which a potential Franchisee are financially responsible; (4) Inspect and observe the operation of the SARAH Business to help a potential Franchisee comply with the Franchise Agreement and all System standards; (5) Let the Franchisee use the confidential information; and, (6) Let the Franchisee use the Marks (trademarks, trade names, service marks, and logos).
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
The Company accounts for leases in accordance with Accounting Standards Update ASU 2016-02, “Leases” (Topic 842). Based on this standard, the Company determines if an agreement is a lease at inception. Leases are included – right to use, current portion of lease liability, and operating lease liability, less current portion in the Company’s consolidated balance sheets. Finance leases are included in property, plant and equipment, net current portion of long-term debt, net and long-term debt, less current portion and debt issuance costs in the Company’s consolidated balance sheets.
Fair ~~Value~~value of ~~Financial Instruments~~financial instruments

The Company’s financial instruments ~~including~~include cash ~~accounts receivable,~~ and cash equivalents, accounts payable, ~~are reflected in the accompanying consolidated financial statements at~~accrued expenses, and debt. The carrying value ~~which~~of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. The carrying amount of the debt approximates fair value, because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company. The Company’s derivative liabilities were adjusted to fair market value at the end of each reporting period, using Level 3 inputs.
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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 ~~short-term~~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, accrued expenses and 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 11).
~~Impairment~~
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under 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 ~~Long-Lived Assets~~any beneficial feature.

~~Long-lived assets such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate~~Derivative financial instruments
When the Company issues debt that contains a conversion feature, it first evaluates whether the ~~carrying amount of an asset may not be recoverable. Recoverability of assets~~conversion feature meets the requirements to be ~~held and used is measured by~~treated as a ~~comparison~~derivative: a) one or more underlying, typically the price of the ~~carrying~~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 ~~an asset to~~convertible debt generally means the ~~estimated undiscounted future cash flows expected~~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 features within convertible debt meet the requirements to be ~~generated by~~treated as a derivative, the ~~asset.~~Company estimates the fair value of the derivative liability using the Monte Carlo Simulation Model upon the date of issuance. If the ~~carrying~~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 ~~of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by~~recorded as a debt discount, which offsets the carrying amount of the ~~asset exceeds~~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 consolidated statements of operations. The debt discount is amortized through interest expense over the life of the ~~asset.~~

~~Assets to~~debt. Derivative instrument liabilities and the host debt agreement are classified on the consolidated balance sheets as current or non-current based on whether settlement of the derivative instrument could be ~~disposed~~required within twelve months of ~~would be separately presented in~~ the balance sheet ~~and reported~~date.
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The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option at ~~the lower~~their fair values as of the ~~carrying amount or~~inception date of the agreement and at fair value ~~less costs to sell,~~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 ~~are no longer depreciated. The assets~~Hedging” (provides comprehensive guidance on derivative and ~~liabilities of a disposal group~~hedging transactions) whereby all future instruments may be classified as ~~held for sale would~~a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.
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 ~~presented separately~~paid in the ~~appropriate asset and liability sections~~form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the ~~balance sheet.~~debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

~~For the three months ended July 31, 2012~~Recently Issued Accounting Pronouncements
As of and ~~2011, the Company recognized a loss on the disposal of assets of $0 and $1,226 respectively. For~~for the nine months ended ~~July~~March 31, ~~2012 and 2011,~~2022, the Company ~~recognized~~does not expect any of the recently issued accounting pronouncements to have a ~~loss~~material impact on ~~the disposal~~its financial condition or results of ~~assets of $0 and $24,760 respectively.~~operations.

~~Share-based compensation~~

The Company accounts for common stock issued to employees, directors, and consultants in accordance with the provisions of Stock Compensation. The compensation cost relating to share-based payment transactions will be recognized in the consolidated financial statements. The cost associated with common stock issued to employees, directors and consultants will recognized, at fair value, on the date issued. Awards granted to non-employee consultants will be subsequently re-measured to current fair value until performance is completed or a performance commitment exists.

For the three months ended July 31, 2012 and 2011, the Company recognized $0 and $0 in stock issued for services. For the nine months ended July 31, 2012 and 2011, the Company recognized $378,714 and $301,091 in stock issued for services.

11

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

~~Accounting for Uncertain Tax Positions~~
The Parent Company and or its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, and local jurisdictions. The Company is no longer subject to U.S. federal income tax examination by tax authorities for the years prior to October 31, 2005. With respect to state and local jurisdictions, with limited exception, the Parent Company and or its subsidiaries are no longer subject to income tax audits prior October 31, 2005. In the normal course of business, the Company is subject to examination by various taxing authorities. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result from these open tax years. Management has evaluated tax positions in accordance with FASB ASC 740, ~~Income Taxes~~~~, and has not identified any other tax positions that require disclosure.~~

Subsequent Events

In accordance with ASC 855,Subsequent Events, the Company evaluated subsequent events through ~~September 20, 2012,~~ the date of this ~~filing;~~report; the date the consolidated financial statements were available for issue. As
14
Table of Contents
NOTE 4. BUSINESS ACQUISITION
On March 25, 2021 the Company acquired two companies, Sarah Adult Day Services, Inc., and Sarah Day Care Centers, Inc. (“SarahCare”), an adult day care center franchisor and provider. The combined purchase price was $3,718,833. The purchase price was paid as follows: (i) $2,000,110 was paid in cash, (ii) the Company assumed $393,885 in debt due to sellers, and (iii) the remaining is payable through a royalty fee liability due in the amount of $1,500,000.
The Company completed its accounting for the acquisition on March 25, 2022. The purchase price allocation is as follows:
Consideration

Cash

$ 2,000,110

Legal fees

(175,162 )
Notes payable due to sellers

393,885

Royalty fee liability

1,500,000

Total consideration

$ 3,718,833

Fair value of net identifiable assets (liabilities) acquired

Cash

$ 412,276

Accounts receivable

84,674

Deposits and prepaid expenses

15,139

Notes receivable

110,510

Property, plant and equipment

335,426

Right of use asset

796,771

Total fair value of net identifiable assets

$ 1,754,796

Accounts payable and accrued expenses

$ 625,462

Notes payable, current, net of debt discount

454,524

PPP Loan

439,160

Lease Liability

796,771

Total fair value of net identifiable liabilities

$ 2,315,917

Fair value of net identifiable assets (liabilities) acquired

$ (561,121 )

Excess (consideration given minus fair value of identifiable net assets and liabilities)

$ 4,279,954

Intangible assets:

Customer relationships

$ 39,000

Trademarks

390,000

Non-Compete Agreement

1,000

CARF Accreditation

23,000

Franchise Agreements

2,560,000

Total intangible assets

$ 3,013,000

Goodwill (excess minus values assigned to intangible assets)

$ 1,266,954

Minus (goodwill impaired in prior period)

(806,690 )
Remaining Goodwill

$ 460,264

15
Table of Contents
The Company analyzed the acquisition under applicable guidance and determined that the acquisition should be accounted for as a business combination.
On June 30, 2021, the Company performed a test to determine if goodwill should be impaired. The test determined that the fair value of the ~~date~~reporting units was less than its carrying value. As such the Company recorded a loss on impairment of ~~filing of these financial statements, the following subsequent events that were required to be recorded or disclosed~~goodwill in the ~~accompanying~~amount of $806,690.
Pro Forma Disclosures
The following unaudited pro forma financial ~~statements for~~results reflects the ~~quarter ended July 31, 2012.~~

~~On September 11, 2012, Dominick Cingari, a Director~~historical operating results of the Company, ~~since December 16, 2005, submitted an email~~including the unaudited pro forma results of ~~resignation,~~Sarah Adult Day Services, Inc., and ~~stated that a letter~~Sarah Day Care Centers, Inc. for the year ended June 30, 2021, as if each of ~~resignation was forthcoming, and which letter has not yet been received by the Company.Mr. Cingari is owed compensation of $14,000~~these business combinations had occurred only as of July 1, 2020. The pro forma financial information set forth below reflects adjustments to the historical data of the Company to give effect to each of these acquisitions and the related equity issuances as if each had occurred on July 1, 2020 The pro forma information presented below does not purport to represent what the actual results of operations would have been for the periods indicated, nor does it purport to represent the Company’s future results of operations. The following table summarizes on an unaudited pro forma basis the Company’s results of operations for the year ended June 30, 2021:

2021

Net revenue

$ 677,997

Net loss

$ (3,513,187 )
Net loss per share- basic and diluted

$ (0.60 )
Weighted average number of shares of common

stock outstanding- basic and diluted

2,117,130

The calculations of pro forma net revenue and pro forma net loss give effect to the business combinations for the period from July 1, 2020 until the respective closing dates for (i) the historical net revenue and net income (loss), as applicable, of the acquired businesses, (ii) incremental depreciation and amortization for each business combination based on the fair value of property, equipment and identifiable intangible assets acquired and the related estimated useful lives, and (iii) recognition of accretion of discounts on obligations with extended payment terms that were assumed in the business combinations.
16
Table of Contents
NOTE 5. NOTES RECEIVABLE
The Company’s wholly-owned subsidiary Sarah Adult Day Services, Inc., has notes receivables from two franchises, which were previously converted from trade receivables. They are as follows:

March 31,

June 30,

2022

2021

Notes receivable from a franchise, due in monthly installments of $5,000, no interest, maturing December 2021

$ 0

$ 21,468

Notes receivable from a franchise, due in monthly installments of $1,999, no interest, maturing March 2023

23,992

41,985

Note receivable from related party (see Note 17), due in six months, with no installments, 5% interest maturing March 2022

9,294

0

Total notes receivable

33,285

63,453

Less long-term

(5,997 )

(14,466 )
Total short term notes receivable

$ 27,289

$ 48,987

Principal to be collected during the next three years is as follows:
2022

$ 5,997

2022

27,288

$ 33,285

NOTE 6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at March 31, ~~2012. This~~2022 and June 30, 2021:

March 31,
2022

June 30,
2021

Leasehold improvements

$ 294,864

$ 294,864

Vehicles

22,554

22,554

Computer equipment

19,915

12,553

Furniture and fixtures

7,256

5,455

344,589

335,426

Less: Accumulated depreciation

(47,739 )

(9,638 )
Property, plant and equipment - net

$ 296,850

$ 325,788

The property, plant and equipment was acquired in the acquisition discussed in Note 4. Depreciation expense was $29,826 and $2,738 for the nine months ended March 31, 2022 and 2021. Depreciation expense was $4,757 and $2,738 for the three months ended March 31, 2022 and 2021.
17
Table of Contents
NOTE 7. INTANGIBLE ASSETS

March 31,

2022

Customer relationships

$ 39,000

Trademarks

390,000

Non-Compete Agreement

1,000

CARF Accreditation

23,000

Franchise Agreements

2,560,000

Less: accumulated amortization

(21,345 )
Intangible assets - net

$ 2,991,655

The Company recently finalized the purchase accounting for the Sarah Care Acquisition as described further in Note 4. As a result, the intangible assets (i.e. customer relationships, trademarks, non-compete agreement, CARF Accreditation and Franchise Agreements) arose from the acquisition. The Company is amortizing these intangible over their respective remaining useful lives. The Company is recording amortization expense in the amount ~~has~~of $21,345 for the nine months ended March 31, 2022.

As of

March 31, 2022

Year ending June 30, 2022

$ 5,178

Year ending June 30, 2023

20,942

Year ending June 30, 2024

15,534

Total

$ 41,654

NOTE 8. NOTES PAYABLE, CURRENT
As of March 31, 2022 and June 30, 2021, the Company had $151,960 and $200,705, respectively, in outstanding notes payable. All of these notes were assumed in connection with the acquisition on March 25, 2021.
Ref No.

Date of Note Issuance

Original
Principal
Balance

Maturity Date

Interest
Rate %

Principal
Balance
03/31/22

Principal
Balance
6/30/21

1

12/25/2020

$ 146,021

12/15/2020 (in default)

10

$ 112,960

$ 137,755

2

3/25/2021

37,949

6/3/2021

10

0

37,950

3

5/10/2021

20,000

11/10/2021

5

0

20,000

4

6/29/2021

5,000

12/29/2021

5

0

5,000

5

3/24/2022

39,000

9/24/2022

6

39,000

Total

$ 151,960

$ 200,705

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Table of Contents
NOTE 9. NOTES PAYABLE, RELATED PARTIES, IN DEFAULT
As of March 31, 2022 and June 30, 2021, the Company had $514,438 in outstanding notes payable, related parties. As of March 31, 2022 and June 30, 2021, the Company had $36,180 and $9,459, respectively, in accrued interest related to these notes. All of these notes were assumed in connection with the acquisition on March 25, 2021.
Ref No.

Date of Note Issuance

Original
Principal
Balance

Maturity Date

Interest
Rate %

Principal
Balance
03/31/22

Principal
Balance
6/30/21

1

3/25/2021

308,500

6/3/2021

10

308,500

308,500

2

3/25/2021

47,436

6/3/2021

10

47,435

47,435

3

3/25/2021

158,503

6/3/2021

10

158,503

158,503

Total

$
514,438

$
514,438

NOTE 10. CONVERTIBLE NOTES PAYABLE, IN DEFAULT
As of March 31, 2022 and June 30, 2021, the convertible notes payable were as follows:
Date of Note Issuance

Original
Principal
Balance

Maturity Date

Interest Rate %

Conversion Rate

Principal
Balance
3/31/22

Principal
Balance
6/30/21

8/26/14

50,000

2/26/14

10 %

$ 0.0001

50,000

50,000

6/15/12

8,000

12/15/12

10 %

$ 0.000350

8,000

8,000

10/18/11

1,900

10/18/11

8 %

25% discount to market

6,900

6,900

10/3/10

20,000

10/3/12

10 %

lesser $0.01 or 20% discount to market

20,000

20,000

10/31/09

4,000

10/31/10

8 %

25% discount to average of previous 5 days closing price

4,000

4,000

8/31/09

5,000

8/31/12

12 %

lesser $0.01 or 20% discount to market

5,000

5,000

8/26/09

20,000

8/26/12

12 %

lesser $0.01 or 20% discount to market

20,000

20,000

8/25/09

20,000

8/25/12

12 %

lesser $0.01 or 20% discount to market

20,000

20,000

2/26/07

30,000

2/26/09

12 %

lesser $0.50 or 35% discount to market

30,000

30,000

4/17/07

20,000

4/17/09

10 %

lesser $0.45 or 35% discount to market

20,000

20,000

6/14/07

15,000

6/15/09

10 %

lesser $0.50 or 25% discount to market

15,000

15,000

1/29/07

15,000

1/29/09

10 %

$ 0.95

15,000

15,000

4/17/07

15,000

4/17/09

10 %

lesser $0.45 or 35% discount to market

15,000

15,000

12/23/06

18,000

12/23/08

10 %

$ 0.95

18,000

18,000

11/30/06

50,000

11/30/08

10 %

$ 0.85

50,000

50,000

9/16/06

100,000

9/9/08

12 %

35% discount to market

38,000

38,000

10/1/05

15,000

4/1/07

10 %

$ 0.50

15,000

15,000

Total

$ 349,900

$ 349,900

19
Table of Contents
NOTE 11. NOTES PAYABLE, LONG TERM
PPP Loans
On April 21, 2020 and February 10, 2021, the Company received loan proceeds in the amount of approximately $82,600 and $85,920 for a ~~conversion option into~~total of $168,520 through Sarah Adult Days Services, Inc. under the Paycheck Protection Program (“PPP”) prior to the March 25, 2021 acquisition. On April 14, 2020 and February 10, 2021, the Company received loan proceeds in the amount of approximately $199,367 and $180,720 for a total of $380,087 through Sarah Day Care Centers, Inc. under the Paycheck Protection Program (“PPP”) prior to the March 25, 2021 acquisition. The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after twenty-four weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the period.
The unforgiven portion of the PPP loan is payable over five years at an interest rate of 1%, with a deferral of payments for the first twelve months. The Company was granted forgiveness of $89,920 in PPP loans through Sarah Day Care Centers, Inc. and $82,600 through Sarah Adult Days Services, Inc. As a result, the Company recorded a gain on PPP forgiveness in the amount of $172,520, during the year ended June 30, 2021. On January 20, 2022, the remaining balance of $266,640 on the PPP loan was forgiven. During the nine months ended March 31, 2022 and March 31, 2021, the Company recorded $665 and $0, respectively, in accrued interest related to the PPP loan.
SBA Loan
On June 25, 2020 and January 6, 2021, the Company’s wholly-owned subsidiary, Sarah Day Care Centers, Inc. received proceeds of $150,000 and $200,000, respectively, in the form of an SBA loan. Installment payments, including principal and interest of $1,746 are due monthly beginning on December 22, 2021. The balance of principal and interest is payable thirty years from the promissory note date. The interest accrues at a rate of 3.75% per annum. During the nine months ended March 31, 2022 and March 31, 2021, the Company recorded $1,402 and $0 in accrued interest related to the SBA loan.
NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS
The following tables summarize the components of the Company’s derivative liabilities and linked common shares As of March 31, 2022 and June 30, 2021 the amounts that were reflected in income related to derivatives for the nine months ended March 31, 2022 and 2021:

March 31, 2022

Indexed

Fair

The financings giving rise to derivative financial instruments

Shares

Values

Compound embedded derivative

705,173

$ (262,247 )

June 30, 2021

Indexed

Fair

The financings giving rise to derivative financial instruments

Shares

Values

Compound embedded derivative

405,106

$ (254,700 )
20
Table of Contents
The following tables summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the nine months ended March 31, 2022 and 2021:
The financings giving rise to derivative financial instruments and the income effects:

Nine Months Ended

March 31,
2022

March 31,
2021

Compound embedded derivative

$ (7,547 )

$ (217,549 )
Day one derivative loss

0

0

Total derivative gain (loss)

$ (7,547 )

$ (217,549 )
The Company’s Convertible Notes gave rise to derivative financial instruments. The Notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.
Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. In addition, the standards do not permit an issuer to account separately for individual derivative terms and features embedded in hybrid financial instruments that require bifurcation and liability classification as derivative financial instruments. Rather, such terms and features must be bundled together and fair valued as a single, compound embedded derivative. The Company has selected the Monte Carlo Simulations valuation technique to fair value the compound embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Monte Carlo Simulations technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.
Significant inputs and results arising from the Monte Carlo Simulations process are as follows for the compound embedded derivative that has been bifurcated from the Convertible Notes and classified in liabilities:

March 31,

December 31,

Inception

2022

2021

Quoted market price on valuation date

$ 0.01

$ 0.80

$ 1.01

Contractual conversion rate

$
0.0054 - $0.0081

$
0.52 - $0.64

$
0.486 - $0.817

Range of effective contractual conversion rates

-

-

-

Contractual term to maturity

1.00 Year

$
0.25 Years

0.25 Years

Market volatility:

Volatility

138.28%-238.13
%

138.28%-238.13
%

138.28%-238.13
%
Contractual interest rate

5%-12
%

5%-12
%

5%-12
%
21
Table of Contents
The following table reflects the issuances of compound embedded derivatives and changes in fair value inputs and assumptions related to the compound embedded derivatives during the periods ended March 31, 2022 and June 30, 2021.

March 31,
2022

June 30,
2021

Beginning balance

$ 254,700

$ 257,493

Issuances:

Convertible Note Financing

0

0

Removals

0

0

Changes in fair value inputs and assumptions reflected

7,547

223,264

Conversions

0

(226,057 )
Ending balance

$ 262,247

$ 254,700

The fair value of the compound embedded derivative is significantly influenced by the Company’s trading market price, the price volatility in trading and the interest components of the Monte Carlo Simulation technique.
NOTE 13. STOCKHOLDERS’ EQUITY
On February 11, 2021, the Company filed with FINRA to effectuate a 10,000:1 reverse stock split. FINRA permitted this corporate actions on March 8, 2021. The 10,000:1 reverse split took effect at the ~~option and by~~open of business on March 9, 2021.
Common Stock
On February 19, 2021, pre-reverse stock split, the Company decreased its authorized shares to 500,000,000 shares of common stock, par value, $0.000001 per share
On September 15, 2021 the Company issued 100,000 common stock, par value, $0.000001 per share, to a ~~majority vote~~consultant for services rendered to the Company.
Conversion of Notes Payable to Common Shares
On December 31, 2020 (prior to the Company’s reverse split) the Company issued 1,050,000,000 common shares (which was the equivalent of 105,000 post-split common shares) for services rendered to the Company. On December 31, 2020 five (5) Noteholders, including the Company’s Board of ~~Directors.~~

~~NOTE 3.~~ ~~ACCOUNTS PAYABLE~~

AsDirector Members, converted a total of ~~July 31, 2012 and October 31, 2011, the accounts payable was as follows:~~

July 31, 2012

October 31, 2011
Account payable - trade
$
817,119
$
1,234,765
Accrued salaries and wages

303,936

195,936
Accrued payroll taxes/penalties and interest

262,395

228,034
Total
$
1,383,450
$
1,658,735

12

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

~~NOTE 4.~~ ~~NOTES PAYABLE - RELATED PARTIES~~

As$1,965,460 of ~~July 31, 2012 and October 31, 2011, the~~convertible promissory notes ~~payable – related parties were as follows:~~

July 31, 2012

October 31, 2011

Twelve convertible notes for expenses paid on behalf of the Parent Company with original principal balances ranging between $500 and $2,000, with various maturity dates between July 26, 2012 and January 31, 2013. Some of these notes are currently in default. The notes have an interest rate of 10%. The notes are convertible into common shares at any time at the option of the lender at a 25% discount to the market price.
$
29,583
$
-

Total
$
29,583
$
-
Less: long-term portion

-

-

-

-
Total notes payable - related parties, current
$
29,583
$
-

~~NOTE 5.~~ ~~NOTES PAYABLE~~

~~As of July 31, 2012 and October 31, 2011, the notes payable were as follows:~~

July 31,

October 31,

2012

2011
Convertible note, including accrued interest, dated October 1, 2005 with an original principal balance of $15,000 with a maturity date of April 1, 2007; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.50 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.
(1)
$
26,992
$
25,022
Convertible note, including accrued interest, dated September 19, 2006 with an original principal balance of $100,000 with a maturity date of September 19, 2008; annual interest at a rate of 12%. The note is convertible into common shares at any time at the option of the lender or the Company. As of July 31, 2012, this note is in default for the breach of certain covenants.

-

116,150
Convertible note, including accrued interest, dated November 30, 2006 with an original principal balance of $50,000 with a maturity date of November 30, 2008; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.85 per share. On May 4, 2012, the Company and Holder entered into a Modified Note Agreement, in which the parties agree that the note shall paid by the Company over a 24-month payment schedule. As of July 31, 2012, the Company is in default of the Modified Loan Agreement for the breach of certain covenants.

81,430

77,415
Convertible note, including accrued interest, dated December 23, 2006 with an original principal balance of $18,000 with a maturity date of December 23, 2008; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.95 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

30,056

27,877
Convertible note, including accrued interest, dated January 29, 2007 with an original principal balance of $15,000 with a maturity date of January 29, 2009; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.95 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

25,046

23,231
Convertible note, including accrued interest, dated February 26, 2007 with an original principal balance of $30,000 with a maturity date of February 26, 2009; annual interest at a rate of 12%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.50 per share or a 35% discount of the market price of the Company's common shares. As of July 31, 2012, this note is in default for the breach of certain covenants.

50,678

46,276

13

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

July 31,

October 31,

2012

2011
Convertible note, including accrued interest, dated April 17, 2007 with an original principal balance of $20,000 with a maturity date of April 17, 2009; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.45 per share of a 35% discount of the market price of the Company's common shares. As of July 31, 2012, this note is in default for the breach of certain covenants.

32,220

29,868
Convertible note, including accrued interest, dated April 17, 2007 with an original principal balance of $15,000 with a maturity date of April 17, 2009; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.45 per share or a 35% discount of the market price of the Company's common shares. As of July 31, 2012, this note is in default for the breach of certain covenants.

24,152

22,401
Convertible note, including accrued interest, dated June 14, 2007 with an original principal balance of $15,000 with a maturity date of June 14, 2009; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.50 per share or a 25% discount of the market price of the Company's common shares As of July 31, 2012, this note is in default for the breach of certain covenants.

23,559

22,401
Note payable, including accrued interest, dated July 6, 2007 with an original principal balance of $218,357 and a principal balance on March 2, 2010 of $129,385 with a maturity date of August 26, 2012; annual interest at a rate of 6% and no conversion pricing. As of July 31, 2012, this note is in default for the breach of certain covenants.

10,370

47,490
Unreimbursed advances, including accrued interest, in June and July 2009 with an original amount of $4,000. There are no formal note agreements. The Company is accruing interest at an annual interest at a rate of 10%.

5,472

5,077
Convertible note, including accrued interest, dated August 26, 2009 with an original principal balance of $20,000 with a maturity date of August 26, 2012; annual interest at a rate of 12%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.01 per share or a 20% discount of the market price of the Company's common shares. The lender received 500,000 shares of restricted common stock of the Company. As of July 31, 2012, this note is in default for the breach of certain covenants.
(1)

28,540

26,078
Convertible note, including accrued interest, dated August 26, 2009 with an original principal balance of $20,000 with a maturity date of August 26, 2012; annual interest at a rate of 12%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.01 per share or a 20% discount of the market price of the Company's common shares. As of July 31, 2012, this note is in default for the breach of certain covenants.
(1)

28,540

26,078
Convertible note, including accrued interest, dated August 31, 2009 with an original principal balance of $15,000 with a maturity date of August 31, 2012; annual interest at a rate of 12%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.01 per share or a 20% discount of the market price of the Company's common shares. As of July 31, 2012, this note is in default for the breach of certain covenants.
(1)

9,918

9,199
Convertible note, including accrued interest, dated September 17, 2010 with an original principal balance of $10,000 with a maturity date of September 17, 2011; annual interest at a rate of 8%. The note is convertible into common shares at any time at the option of the lender or the Company at a 50% discount of the average previous 10 days of the market price of the Company's common shares. As of July 31, 2012, this note is in default for the breach of certain covenants.

-

10,943
Convertible note, including accrued interest, dated December 3, 2010 with an original principal balance of $20,000; maturity date of December 2, 2012; annual interest rate of 10%. The note is convertible into common shares at any time at the option of lender or the Company at a 20% discount to the average closing price on the previous five trading days, not including the conversion date. As of July 31, 2012, this note is in default for the breach of certain covenants.

24,165

21,851

14

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

July 31,

October 31,

2012

2011
Convertible note, including accrued interest, dated February 11, 2011 with an original principal balance of $100,000; maturity date of August 10, 2011; annual interest rate of 12%. The principal amount of the note and accrued and unpaid interest is automatically convertible into common shares of the Company upon the due date at $0.005 per share, subject to adjustments. As of July 31, 2012, this note is in default for the breach of certain covenants.

70,207

109,151
Convertible note, including accrued interest, dated May 23, 2011 with an original principal balance of $7,500; maturity date of November 19, 2011; annual interest rate of 12%. The note is convertible into common shares at the maturity date of the Note at $0.005 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

-

7,917
Convertible note, including accrued interest, dated May 23, 2011 with an original principal balance of $7,500; maturity date of November 19, 2011; annual interest rate of 12%. The note is convertible into common shares at the maturity date of the Note at $0.005 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

-

7,917
Convertible note, including accrued interest, dated August 10, 2011 with an original principal balance of $30,000; maturity date of February 10, 2012; annual interest rate of 12%. The note will convert into common shares at the maturity date of the Note at $0.005 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

-

30,848
Convertible note, including accrued interest, dated August 10, 2011 with an original principal balance of $10,000; maturity date of February 10, 2012; annual interest rate of 12%. The note will convert into common shares at the maturity date of the Note at $0.005 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

-

10,283
Convertible note, including accrued interest, dated August 25, 2011 with an original principal balance of $108,101; maturity date is January 25, 2012; annual interest rate is 10 %. The note is convertible into common shares at the maturity date of the Note at $0.01 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

2,754

108,101
Convertible note, including accrued interest, dated October 11, 2011 with an original principal balance of $30,000; maturity date of April 11, 2012; annual interest rate of 12%. The note is convertible into common shares at the maturity date of the Note at $0.0039 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

2,538

2,517
Convertible note, including accrued interest, dated October 18, 2011 with an original principal balance of $1,907; maturity date of April 18, 2012; annual interest rate of 12%. The note is convertible into common shares at the maturity date of the Note at $0.005 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

7,345

1,907
Convertible note, including accrued interest, dated December 5, 2011 with an original principal balance of $43,300; maturity date is June 5, 2012; annual interest rate is 10 %. The note is convertible into common shares at the maturity date of the Note at $0.01 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.

65,533

-
Convertible note, including accrued interest, dated January 26, 2012 with an original principal balance of $65,595; maturity date is July 26, 2012; annual interest rate is 10 %. The note will be converted into common shares at the maturity date of the Note at 25% discount to the market price per share.. As of July 31, 2012, this note is in default for the breach of certain covenants.

28,898

-
Convertible note, including accrued interest, dated February 10, 2012 with an original principal balance of $25,000; maturity date is August 10, 2012; annual interest rate is 10 %. The note will be converted into common shares at the maturity date of the Note at 30% discount to the market price per share.

26,218

-
Convertible note, including accrued interest, dated March 10, 2012 with an original principal balance of $25,000; maturity date is September 10, 2012; annual interest rate is 10 %. The note will be converted into common shares at the maturity date of the Note at a 25% discount to the market price per share.

25,977

-
Convertible note, including accrued interest, dated March 15, 2012 with an original principal balance of $50,000; maturity date is September 15, 2012; annual interest rate is 10 %. The note will be converted into common shares at the maturity date of the Note at a price of $0.002 price per share.

51,860

Total

690,956

815,998
Less: long - term portion

-

-
Total notes payable, current

$
690,956
$
815,998

~~(1) As of July 31, 2012 and October 31, 2011, the CEO~~into 40,702,104,817 common shares of the ~~Parent~~ Company, ~~has personally guaranteed $170,249 and $133,868, respectively~~pre-reverse stock split.
On December 31, 2020, the Company’s two Board of Director Members converted a total of $1,644,825 of convertible promissory notes into a total of 34,267,187,500 common shares. The Company’s Board of Director Members control approximately 87.32% of the ~~outstanding~~voting rights of the Company. The 3 (three) Noteholders converted a total of $325,666 of convertible promissory notes ~~payable.~~into a total of 6,439,917,317 common shares, pre-reverse stock split.

15

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

~~NOTE 6.~~
~~STOCKHOLDERS’ EQUITY~~

~~Common Stock~~

AsOn February 2, 2021 eleven (11) Noteholders converted a total of ~~July 31, 2012 the Parent Company had authorized 2,000,000,000 and issued 1,068,943,779~~$833,790 of convertible promissory notes into 14,586,720,714 common shares of ~~Common Stock at par value~~the Company, pre-reverse stock split.
On March 19, 2021 the Company’s Board of ~~$0.0001 per share and at October 31, 2011, the Parent Company had authorized 2,000,000,000 and issued 506,889,209 shares~~Directors converted all 47,400,000 of ~~Common Stock at par value of $0.0001 per share.~~

their Series A Preferred Stock

~~Certificate~~ into 474,000 shares of ~~Designations~~

~~On February 23, 2011,~~Common Stock. There was no Series A Preferred Stock outstanding after these conversions, until March 25, 2021, when the ~~Parent~~ Company ~~filed a Certificate of Designations~~issued 317,500 shares of Series A ~~Convertible~~ Preferred Stock ~~(the “Certificate~~to 7 investors as part of ~~Designations”) with~~their $1,602,097 cash investment for Series A Preferred Stock, pre-reverse stock split.
22
Table of Contents
Series A Preferred Stock & Series B Preferred Stock
As of March 31, 2022, the ~~Secretary~~Company had 500,000 shares of State of the State of New Jersey. The Certificate of Designations, subject to the requirements of New Jersey law, states the designation, number of shares, powers, preferences, rights, qualifications, limitations and restrictions of the Parent Company’s Series A Convertible Preferred Stock, par value, ~~$0.0001~~$0.000001 per share. Each share of Series A Convertible Preferred Stock is convertible into 100 shares of the Company’s common stock. The Company no longer authorized any Series B Convertible Preferred Stock.
On December 21, 2020, the Company increased its authorized shares to 1 Trillion shares of common stock, par value, $0.000001 per share, ~~(the “~~and 5 Billion shares of Series A Preferred Stock,” par value, $0.000001 per share, and 5 Billion Shares of Series B Preferred Stock, par value, $0.000001 per share. Each share of Series A and Series B Preferred Stock is convertible into 100 shares of the Company’s common stock, pre-reverse stock split.
On December 21, 2020, the Company increased its authorized Preferred Series A and Series B shares to 5 Billion shares of Series A Preferred Stock, par value, $0.000001 per share, and 5 Billion Shares of Series B Preferred Stock, par value, $0.000001 per share (together the “Preferred Stock”)~~. In summary, the~~, pre-reverse stock split.
Series A Preferred Stock & Series B Preferred Stock – Certificate of Designations ~~provides:~~

~~Number~~The Preferred Shares each have Certificate of Designations, which designate as follows:

~~5,000,000~~Number
500,000 shares of the Parent Company’s Preferred Stock are designated as shares of Series A Convertible Preferred ~~Stock.~~Stock, par value $0.000001 per share.

Dividends

Any dividends (other than dividends on common stock payable solely in common stock or dividends on the Series A Convertible Preferred Stock payable solely in Series A Convertible Preferred Stock or dividends on the Series B Preferred Convertible Stock payable solely in Series B Convertible Preferred Stock) declared or paid in any fiscal year will be declared or paid among the holders of the Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and common stock then outstanding in proportion to the greatest whole number of shares of common stock which would be held by each such holder if all shares of Series A Preferred Stock and Series B Convertible Preferred Stock were converted into shares of common stock pursuant to the terms of the Certificate of Designations. The Parent Company’s Board of Directors is under no obligation to declare dividends on the Series A Convertible Preferred Stock or Series B Convertible Preferred Stock.

Conversion

Each share of ~~Series A~~ Preferred Stock is ~~generally~~ convertible ~~(subject to an increase in the number of shares of the Parent Company’s authorized common stock (the “Conversion Amendment”))~~ into 100 shares of the Parent Company’s common stock (the “Conversion Rate”).

Subject to the prior increase in the number of the Parent Company’s authorized shares of common stock, each share of Series A Preferred Stock would automatically be converted into shares of common stock at the then effective Conversion Rate for such share immediately upon the election of the Parent Company. On September 6, 2011, the authorized number of shares of the Parent Company’s common stock was increased to 2,000,000,000 shares and the Parent Company has elected to cause the conversion of outstanding shares of Series A Preferred Stock into shares of common stock. As a result, 2,350,003 shares of Series A Convertible Preferred Stock converted into an aggregate of 235,000,300 shares of common stockLiquidation

~~Liquidation~~

In the event of any liquidation, dissolution or winding up of the Parent Company, the assets of the Parent Company legally available for distribution by the Parent Company would be distributed with equal priority and pro rata among the holders of the ~~Series A~~ Preferred Stock and common stock in proportion to the number of shares of common stock held by them, with the shares of ~~Series A~~ Preferred Stock being treated for this purpose as if they had been converted to shares of common stock at the then applicable Conversion Rate.

16Voting

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

~~Voting~~

On any matter presented to the stockholders of the Parent Company for their action or consideration at any meeting of stockholders of the Parent Company (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of ~~Series A~~ Preferred Stock would be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of ~~Series A~~ Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. For purposes of the foregoing sentence, the Conversion Amendment shall be deemed to be in full force and all shares of Series A Preferred Stock would be considered to be fully convertible into shares of Common Stock without restriction. Except as provided by law or by the other provisions of the Parent Company’s Certificate of Incorporation, holders of ~~Series A~~ Preferred Stock vote together with the holders of common stock as a single class.

23
Table of Contents
~~Issuance to Take and Bake, Inc.~~

On March 2, 2011, in lieu of the 15,000,000 shares of common stock described in the Asset Purchase Agreement, the Parent Company issued 150,000 shares of Series A Preferred Stock to the Seller, which shares have been converted into 15,000,000 shares of the Parent Company’s common stock. On May 27, 2011, the Parent Company issued an additional 150,000 shares of Series A Preferred Stock to the Seller pursuant to the terms of the Settlement Agreement, which shares have been converted into 15,000,000 shares of the Parent Company’s common stock.

~~Other Issuances of Series A Preferred Stock~~

On March 4, 2011, the Parent Company entered into a letter agreement with Michael J. Friedman, the Parent Company’s President and Chief Executive Officer, pursuant to which the Parent Company and Mr. Friedman agreed that an aggregate of $228,008 of accrued, but unpaid compensation would be converted into 268,244 shares of Series A Preferred Stock. Such shares of Series A Preferred Stock have been converted into 26,824,400 shares of the Parent Company’s common stock.

On March 4, 2011, the Parent Company issued 100,000 shares of Series A Preferred Stock to each of Michael Friedman, Jay Odintz and Dominick Cingari as a fee for their service on the Parent Company’s Board of Directors. Such shares of Series A Preferred Stock have been converted into an aggregate of 30,000,000 shares of the Parent Company’s common stock.

~~On March 8, 2011, the Parent Company and Jumpstart Marketing, Inc. (“Jumpstart~~”) entered into a letter agreement pursuant to which the Parent Company and Jumpstart agreed that all amounts owed by the Parent Company to Jumpstart under the Marketing Agreement dated November 20, 2009 (the “~~Marketing Agreement~~”) between the Parent Company and Jumpstart (pursuant to which Jumpstart provided certain marketing services to the Parent Company) would be converted into 99,000 shares of Series A Preferred Stock and that the Parent Company would not have any further obligations to Jumpstart under the Marketing Agreement or otherwise. Such shares of Series A Preferred Stock have been converted into 9,900,000 shares of the Parent Company’s common stock.

~~On March 8, 2011, the Parent Company and 5W Public Relations, LLC (“~~5W~~”) entered into a letter agreement pursuant to which the Parent Company and 5W agreed that that all amounts owed by the Parent Company to 5W under the letter agreement dated May 25, 2010 (the “5W Agreement~~”) between the Parent Company and 5W (pursuant to which 5W provided certain public relations services to the Parent Company) would be converted into 90,000 shares of Series A Preferred Stock and that the Parent Company would not have any further obligations to 5W under the 5W Agreement or otherwise. Such shares of Series A Preferred Stock have been converted into 9,000,000 shares of the Parent Company’s common stock.

Between March 3, 2011 and March 8, 2011, the Parent Company entered into letter agreements with certain creditors of the Parent Company pursuant to which such creditors agreed to convert an aggregate debt of approximately $686,914 into an aggregate of approximately 1,232,759 shares of Series A Preferred Stock. Such shares of Series A Preferred Stock have been converted into 123,275,900 shares of the Parent Company’s common stock.

On May 4, 2011, the Parent Company issued 60,000 shares of Series A Preferred Stock for consulting services rendered on behalf of the Company. Such shares of Series A Preferred Stock have been converted into 6,000,000 shares of the Parent Company’s common stock.

17

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

~~Other Issuances~~

In addition to the issuances described above, during the quarter year ended January 31, 2012, the Parent Companyentered into agreements with certain creditors and consultants of the Parent Company and converted an aggregate of $290,500 owed by the Company to such persons into an aggregate of 72,804,770 shares of the Company’s common stock.

NOTE 7.
14. PROVISION FOR CORPORATE INCOME TAXES

The Company provides for income taxes by the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. This also requires the reduction of deferred tax assets by a valuation allowance if, based on 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 has approximately $2,400,000 in gross deferred tax assets at July 31, 2012, resulting from net operating loss carry forwards.  A~~ valuation allowance ~~has been recorded to fully offset these deferred tax assets because the future realization of the related income tax benefits is uncertain. Accordingly, the net provision for income taxes is zero~~at March 31, 2022 was $2,872,502 and as of ~~July~~June 30, 2021 was $2,792,070. The net change in allowance during the nine months ended March 31, ~~2012.~~2022 was $80,432.

As of ~~July~~March 31, ~~2012,~~2022, the Company has federal net operating loss carry forwards of approximately ~~$5,400,000~~$13,679,000 available to offset future taxable income through ~~2031.~~2040. The Company may be able to utilize its NOLs to reduce future federal and state income tax liabilities. However, these NOLs are subject to various limitations under Internal Revenue Code (“IRC”) Section 382. IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of more than 50 percentage points. In addition, the NOL carry-forwards are subject to examination by the taxing authority and could be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC Section 382 analysis, it is possible that the utilization of the NOLs could be substantially limited. The Company has no tax provision for the nine months ended March 31, 2022 and 2021 due to losses and full valuation allowances against net deferred tax assets.

As of ~~July~~March 31, ~~2012,~~2022 and June 30, 2021, the difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to loss before income taxes is as follows (in percentages):

Statutory federal income tax rate

~~-34~~
(21
)%
State taxes – net of federal benefits

-5
(5
)%
Valuation allowance

39
26
%
Income tax rate – net

0
%

FASB Interpretation No. 48 (Fin 48) - Accounting for Uncertain Tax Positions
The Company files income tax returns in the U.S. federal jurisdiction and various state, and local jurisdictions. The Company is no longer subject to U.S. federal income tax examination by tax authorities, with limited exception, for the years prior to June 30, 2014. With respect to state and local jurisdictions, with limited exception, the Company is no longer subject to income tax audits prior to June 30, 2014. In the normal course of business, the Company is subject to examination by various taxing authorities. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result from these open tax years.
Based on management’s review of the Company’s tax position, the Company had no significant unrecognized corporate tax liabilities as of March 31, 2022 and June 30, 2021 payable to the Internal Revenue Service due to the net operating loss carry-forward, however, the Company had yet to file its 2005 through 2009 and 2012 through 2020 Federal, New Jersey nor New York Corporate Income Tax Returns.
NOTE 8.
15. UNPAID PAYROLL TAXES

As of ~~July~~March 31, ~~2012,~~2022and June 30, 2021, the Company owed the Internal Revenue Service and New York State payroll related taxes in the amounts of ~~$118,101~~$60,402 and ~~$30,145,~~$17,401, respectively, ~~plus applicable~~subject to further interest and penalties. The total amount due to both taxing authorities including penalties and interest as of ~~July~~March 31, ~~2012~~2022and June 30, 2021 was approximately ~~$244,000~~$77,803 subject to further penalties and ~~interest plus accruals~~interest. This is included in accounts payable and accrued expenses on ~~unpaid wages~~the Company’s consolidated balance sheets.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Rent
As of March 31, 2022, the Company maintains its corporate address in at 2310 York Street, Suite 200, Blue Island, IL, 60406. This space is provided by the Company’s Chairman, Charles Everhardt, a related party, on a rent free basis at the present time. The Company does not currently have a lease for this space but expects to enter into a month-to-month office lease for this space.
24
Table of Contents
SarahCare leases three properties for its corporate office and its two corporate owned centers. SarahCare’s corporate office is approximately 3,470 square feet and is located at 4580 Stephen Circle NW, Canton, Ohio, 44718. The lease began in 2017 and ends in 2023.
SarahCare’s lease for its first corporate-owned SarahCare location is for approximately 5,300 square feet located at 6199 Frank Ave. NW, North Canton, Ohio, 44720. The lease began in 2018 and ends in 2026.
SarahCare’s lease for its second corporate-owned SarahCare location is for approximately 6,000 square feet located at SarahCare of Stow, 4472 Darrow Road, Stow, Ohio, 44224. The lease began in 2018 and ends in 2026.
On April 21, 2021, the Company, through ten newly-formed, wholly-owned limited liability companies, entered into lease agreements with entities controlled by our Chairman, Charles Everhardt, for ten additional SarahCare locations to be operated by the Company. All of the leases are for a ~~total~~ten-year period beginning on July 1, 2021, and ending on June 30, 2031, with a 5-year renewal option. The rent for each location is $7,500 per month. As of ~~$300,000.~~ June 30, 2021, the Company has amended the leases to delay commencement until November 1, 2021. On October 29, 2021 the Company amended the leases to delay commencement until May 1, 2022. On April 29, 2022 the Company amended the leases to delay commencement until November 1, 2022.
IRS Tax Lien
The Internal Revenue Service has placed a federal tax lien on all of the assets of the Company.
NOTE 17. LEASES
Operating Leases
Stow Professional Lease
In connection with the acquisition of Sarah Adult Day Centers, Inc. on March 25, 2021, the Company acquired a facilities lease with 6,000 square feet at 4472 Darrow Road, Stow, Ohio 44224. The lease expires on December 31, 2025 and the lease payments are as follows:

Monthly Rent Payments

Base Rent

Covid-19
Recoup*

Total Rent

April 1, 2021

$ 6,369

$ 983

$ 7,352

May 1, 2021 to December 31, 2021

$ 6,369

$ 621

$ 6,990

January 1, 2022 to December 31, 2022

$ 6,433

$ 621

$ 7,054

January 1, 2023 to December 31, 2023

$ 6,497

$ 621

$ 7,118

January 1, 2024 to December 31, 2024

$ 6,562

$ 621

$ 7,183

January 1, 2025 to December 31, 2025

$ 6,628

$ 621

$ 7,249

*The Company has ~~designated~~to repay the ~~balance owed~~lessor monthly payments as ~~uncollectible~~a result of COVID relief.
Harbor Lease
In connection with the acquisition of Sarah Adult Day Centers, Inc. on March 25, 2021, the Company acquired a facilities lease with 3,469 square feet at ~~this~~4580 Stephen Circle NW. Canton, OH 44718. The monthly lease payments are $4,500 and the lease expires on December 31, 2023.
In connection with the acquisition of Sarah Day Care Centers, Inc. on March 25, 2021, the Company acquired a facilities lease with 5,300 square feet in Jackson, Ohio. The monthly lease payments are $7,910, which includes monthly payments of $603 as repayments for COVID relief. The lease expires on July 1, 2026.
25
Table of Contents
S. Frank Professional Lease
Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of the Company’s leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in general and administrative expenses on the consolidated statements of operations.
Right-of-use asset is summarized below:

March 31, 2022

Stow Professional Center Lease

Harbor Lease

S. Frank Professional Lease

Total

Office lease

$ 282,371

$ 130,441

$ 412,770

$ 825,582

Less: accumulated amortization

(60,472 )

(54,888 )

(77,301 )

(192,661 )
Right-of-use asset, net

$ 221,899

$ 75,553

$ 335,469

$ 632,921

Operating lease liability is summarized below:

March 31, 2022

Stow Professional Center Lease

Harbor Lease

S. Frank Professional Lease

Total

Office lease

$ 222,784

$ 75,553

$ 335,469

$ 633,806

Less: current portion

(66,235 )

(49,105 )

(65,097 )

(180,437 )
Long term portion

$ 156,549

$ 26,448

$ 270,372

$ 453,369

Maturity of the lease liability is as follows:

March 31, 2022

Stow Professional Center Lease

Harbor Lease

S. Frank Professional Lease

Total

Year ending June 30, 2022

$ 21,160

$ 40,500

$ 23,731

$ 85,391

Year ending June 30, 2023

85,026

40,500

94,923

220,449

Year ending June 30, 2024

85,802

0

94,923

180,725

Year ending June 30, 2025

64,840

0

94,923

159,763

Year ending June 30, 2026

0

0

94,923

94,923

Year ending June 30, 2027

0

0

7,910

7,910

Present value discount

(34,044 )

(5,447 )

(75,864 )

(115,355 )
Lease liability

$ 222,784

$ 75,553

$ 335,469

$ 633,806

26
Table of Contents
Finance leases
The Company leases office equipment under two finance leases with combined monthly payments of $5,897. The leases mature on March 1, 2024 and December 1, 2026.
Finance right of use assets are summarized below:

As of

March 31, 2022

Equipment lease

$ 127,979

Less accumulated amortization

(42,233 )
Finance right of use asset

$ 85,746

Amortization expense was $42,233 for the nine months ended March 31, 2022 and 2021, respectively.
Finance lease liabilities are summarized below:

As of

March 31, 2022

Equipment lease

$ 200,975

Less: current portion

(57,706 )
Long term portion

$ 143,269

Equipment Lease

Year Ended June 30, 2022

$ 18,516

Year Ended June 30, 2023

70,761

Year Ended June 30, 2024

61,167

Year Ended June 30, 2025

32,388

Year Ended June 30, 2026

32,388

Year Ended June 30, 2027

16,194

Total future minimum lease payments

231,414

Less imputed interest

(30,439 )
PV of payments

$ 200,975

27
Table of Contents
NOTE 18. RELATED PARTY TRANSACTIONS
During the nine months ended March 31, 2022 and 2021, there were no certain relationships nor related party transactions, except for the following:
As of March 31, 2022, the Company maintains its corporate address in at 2310 York Street, Suite 200, Blue Island, IL, 60406. This space is provided by the Company’s Chairman, Charles Everhardt, a related party, on a rent free basis at the present time. The Company does not currently have a lease for this space but expects to enter into a month-to-month office lease for this space.
On September 28, 2021, the Company signed a note receivable of $50,000 from a company founded and partially owned by the Company’s Chairman, Charles Everhardt.
On September 8, 2021 the Company signed a note receivable of $29,294 from a company founded and partially owned by the Company’s Chairman, Charles Everhardt.
On April 21, 2021, the Company, through ten newly-formed, wholly-owned limited liability companies, entered into lease agreements with entities controlled by our Chairman, Charles Everhardt, for ten additional SarahCare locations to be operated by the Company. All of the leases are for a ten-year period beginning on July 1, 2021, and ending on June 30, 2031, with a 5-year renewal option. The rent for each location is ~~currently negotiating~~$7,500 per month. In July 2021, the Company has amended the leases to delay commencement until November 1, 2021. On October 29, 2021 the Company amended the leases to delay commencement until May 1, 2022. The newly formed entities have no other activity aside from the lease activity described above.
On March 25, 2021, the Company issued 2,476,212 shares of restricted common stock in exchange for $250,000 which were issued at $0.0503 per share and the Company issued 100,542 shares of Series A Preferred Stock in exchange for $508,834, which were issued at $5.06 per share, to an investor, the son of Charles Everhardt, the Company’s Chairman. Additionally, Mr. Everhardt owns 50% of DE Holdings 20, LLC which converted $114,244 in convertible notes and accrued interest for 114,244 shares of restricted common shares, at a ~~payment plan with~~price of $1.00 per share. On that same day, Mr. Everhardt became Chairman of the ~~State~~Board of ~~New York.~~the Company.

AsOn March 19, 2021, the Company issued 426,000 shares of ~~July 31, 2012, the New A.C. LaRocco had not filed to do business in the State of Washington and had unpaid payroll taxes payable~~restricted common stock to the ~~Internal Revenue Service~~Company’s then CEO and ~~the State of Washington in an approximate amount of $35,000 including estimated penalties and interest for non-filing and non-payment.~~

~~NOTE 9.~~
~~OPERATING LEASES~~

~~Rent~~

As of July 31, 2012, the Parent Company maintains its office New York, New York.   There is no written office lease, however, the rent is approximately $1,050 per month for our current office location located in New York. The Company maintains a limited amount of office equipment and does not lease any vehicles. For the quarter ended July 31, 2012 and 2011, rent expense was $3,150 and $0, respectively.

18

~~FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~July 31, 2012~~

~~NOTE 10.~~
~~THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS~~

~~Recently Issued Accounting Pronouncements~~

~~As of and~~Chairman, Michael J Friedman, for the ~~quarter ended July 31, 2012,~~conversion 42,600,000 shares of Series A Convertible Preferred Stock.
On March 19, 2021, the Company ~~does not expect any~~issued 48,000 shares of ~~the recently issued accounting pronouncements~~restricted common stock to ~~have~~Jay Odintz, a ~~material impact on its financial condition or results of operations.~~

~~NOTE 11.~~
~~LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN~~

The accompanying financial statements have been prepared on a going-concern basis, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business.

~~For the quarters ended July 31, 2012 and 2011, the Company reported a net loss of $180,996 and net income of $40,901, respectively.~~

~~As of July 31, 2012, the Company maintained total assets of $120,329, total liabilities including long-term debt of $2,103,968 along with an accumulated deficit of $8,217,299.~~

Management believes that additional capital will be required to fund operations through the year ended October 31, 2012 and beyond, as it attempts to generate increasing revenue, and develop new products. Management intends to attempt to raise capital through additional equity offerings and debt obligations. The Company’s ability to raise additional common equity capital is dependent on the approvalMember of the Company’s ~~shareholders~~Board of ~~an increase~~Directors, for the conversion 4,800,000 shares of Series A Convertible Preferred Stock.
On December 30, 2020, the Company issued 29,749,125,000 shares of restricted common stock for the conversion of notes payable in the ~~authorized~~amount of $1,427,958, to the Company’s then CEO and Chairman, Michael J. Friedman. These shares were valued by the Company at $0.000048 per share, pre-reverse stock split.
On December 30, 2020, the Company issued 4,518,062,500 shares of restricted common stock for the conversion of notes payable in the amount of $216,867, to a Board of Director Member, Jay Odintz. These shares were valued by the Company at $0.000048 per share, pre-reverse stock split.
NOTE 19. SUBSEQUENT EVENTS
The Company has evaluated subsequent events for recognition and disclosure through May 19, 2022, the date the financial statements were available to be issued, and determined that there were no such events requiring adjustment to, or disclosure in, the accompanying consolidated financial statements except as described below.
On or about April 26, 2022, the Company entered into an Agreement for Share Exchange (the “Share Exchange Agreement”) to purchase (the “Purchase”) 10,500,000 shares of common stock of Vitality RX, Inc., a Delaware corporation (“Vitality”), representing 100% ownership of Vitality, from Vitality’s five shareholders identified in the ~~Company. There can be no assurance that~~Share Exchange Agreement (the “Sellers”), in consideration of the issuance by the Company ~~will be successful in obtaining financing at the level needed or on terms acceptable~~ to the ~~Company. These conditions raise substantial doubt~~Sellers of 5,500,000 shares of Innovative common stock, and 50,000 shares of Series A Convertible Preferred Stock (which preferred stock is convertible into 5,000,000 shares of common stock) (such shares of common stock and preferred stock collectively the “Shares”). On or about April 28, 2022, the Purchase was closed, Innovative acquired Vitality from the Sellers, and Innovative issued the Shares to the Sellers.
Pro Forma Disclosures
The acquisition was a new company, formed in April 2022, with no activity and the pro forma disclosures are the same as the disclosed numbers for the Company’s ~~ability to continue as a going concern. The accompanying annual~~consolidated financial ~~statements do not include any adjustments that might result from the outcome of this uncertainty.~~statements.
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Table of Contents

The Company’s operations are subject to certain additional risks and uncertainties including, among others, dependence on outside suppliers and manufacturers, competition, dependence on its exclusive license and relationship with the licensor, uncertainties regarding patents and proprietary rights, dependence on key personnel, and other business risks. In addition, there is no assurance, assuming the Company is successful in raising additional capital that the Company will be successful in achieving profitability or positive cash flow.

Item 2. ~~Management's Discussion and Analysis of Financial Conditions and Results of Operations~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Forward Looking Statements

Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as ~~"may," "will," "expect," "anticipate," "believe," "estimate"~~“may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and ~~"continue,"~~“continue,” or similar words.

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this Quarterly Report on Form 10-Q.

Unless stated otherwise, the words “we,” “us,” “our,” “the Company” or ~~“Fresh Harvest”~~“Innovative MedTech” in this Quarterly Report on Form 10-Q collectively refers to ~~Fresh Harvest Products,~~Innovative MedTech, Inc., a ~~New Jersey~~Delaware corporation (the “Parent Company”), and subsidiaries.

Overview

~~Fresh Harvest Products,~~Innovative MedTech, Inc. (the “Company”), a ~~New Jersey~~Delaware corporation, ~~(the “Parent Company”),~~is a provider of health and ~~its subsidiaries (collectively referred to as~~wellness services. On March 25, 2021, the ~~“Company”), are engaged~~Company acquired SarahCare for a total of $3,718,833; $2,000,110 was paid in ~~the proprietary development, sales and marketing of organic and natural food products.~~

On December 16, 2005, the Parent Company entered into an Agreement and Plan of Acquisition and Merger (the “Merger Agreement”) with Fresh Harvest Products, Inc., a New York corporation (“New York FHP”), Michael Friedman, Marcia Roberts and Illuminate, Inc. The Merger Agreement contemplates the merger of the Parent Company and New York FHP (the “Merger”). Although the Parent Company has operated as if the Merger was consummated in December 2005, it has come to the Parent Company’s attention that certain required filings were not made in the State of New Jerseycash and the ~~State of New York~~Company assumed approximately $393,885 in debt due to ~~properly consummate~~sellers, and the ~~Merger.   As~~remaining is payable through a result, as of the date of this Quarterly Report on Form 10-Q, the Parent Company and New York FHP had not completed the Merger. In order to complete the Merger, the Parent Company and New York FHP plan to take the following steps:

~~1. Pay all taxes owed by New York FHP to the State of New York. As of October 31, 2011, New York FHP owed New York State payroll related taxes~~royalty fee liability due in the amount of $1,500,000, less legal fees of approximately ~~$30,145 plus applicable interest~~$175,000. With 26 centers (2 corporate and ~~penalties.~~24 franchise locations) located in 13 states, SarahCare offers seniors daytime care and activities focusing on meeting their physical and medical needs on a daily basis, and ranging from nursing care to salon services and providing meals, to offering engaging and enriching activities to allow them to continue to lead active and engaged lives. We are now focusing all of our efforts on our senior care operations and development of a digital healthcare debit card and wallet, which will have a loyalty program and offer discounts and savings.
~~2. File an application on behalf~~
As of the Parent Company for authority to do business in the State of New York with the Secretary of State of the State of New York, which application requires the consent of the New York State Tax Commission, and pay any applicable late filing penalties.
~~3. File a final franchise tax return with the State of New York with respect to New York FHP.~~
~~4. File a Certificate of Merger with the Secretary of State of the State of New Jersey.~~
~~5. File a Certificate of Merger with the Secretary of State of the State of New York.~~

The Parent Company intends to take the steps required to complete the Merger, however, the Parent Company cannot forecast when it will pay the amounts owed to the State of New York, make the indicated filings or otherwise complete the Merger. In addition, there is a risk that the State of New York and the State of New Jersey may require the Parent Company and New York FHP to take additional actions thatMarch 31, 2022, the Company is not presently contemplating. If the Parent Company and New York FHP are unable to complete the above described steps and to consummate the Merger, then there is a risk that the Parent Company’s acquisitionhad current assets of New York FHP could be challenged which could seriously harm the Parent Company’s business, financial condition, results of operations and cash flows. If the Parent Company and New York FHP are unable to consummate the Merger, the value of the Parent Company’s shares held by the Parent Company’s shareholders could significantly decline.

$507,825. The Company sells its products to consumers through local, regional and national supermarkets, retailers, distributors, brokers and wholesalers. In August 2009, the Parent Company formed a wholly-owned subsidiary, Wings of Nature, LLC. On March 2, 2010, the Parent Company entered into the Asset Purchase Agreement (the “~~Asset Purchase Agreement~~”) with Take and Bake, Inc., doing business as A.C. LaRocco Pizza Company. In April 2010, the Parent Company formed a wholly-owned subsidiary, New A.C. LaRocco, for the purpose of implementing its new pizza business. On May 4, 2011, the Parent Company, New York FHP, New A.C. LaRocco, the Seller, Clarence Scott and Karen Leffler entered into a Settlement Agreement and Release (the “~~Settlement Agreement”), which was effective on May 11, 2011.~~

On September 11, 2012, Dominick Cingari, a Director of the Company since December 16, 2005, submitted an email of resignation and stated that a letter of resignation was forthcoming, and which letter has not yet been received by the Company. Mr. Cingari is owed compensation of $14,000 as of July 31, 2012. This amount has a ~~conversion option into common shares at the option~~limited amount of liquid cash and ~~by a majority vote of the Company’s Board of Directors.The Company will file any such letter with the Commission as an exhibit by amendment to this Report on Form 8-K within two business after receipt by the Registrant.~~

The resignation was accepted by the Board of Directors effective immediately. The Resignation Email does not reference any disagreements with Registrant, but does reference a lack of communication and information with the Registrant’s management, specifically during the past four months. The Registrant disagrees with the reference and claims made in the Resignation E-mail. The Registrant’s Board of Directors currently does not now have, nor did it have during the time of Mr. Cingari’s tenure as a director, have any committees.

The Company continues to have limited capital resources and has experienced net losses and negative cash flows from operations and expects these conditions to continue for the foreseeable future. As of July 31, 2012, the Company has limited cash available for operations and has an accumulated deficit of $8,217,299. Management believes that cashno other liquid assets on hand as of ~~July~~March 31, ~~2012~~2022, and this is not sufficient to fund operations ~~through October 31, 2012. The Company~~for the next 12 months. Accordingly, we will be required to raise additional funds to meet ~~its~~our short and long-term planned goals. There can be no assurance that such funds, if available at all, can be obtained on terms reasonable to us. In this regard, we have obtained and will continue to attempt to obtain (short and long term) loans for inventory purchases, new product development, expansion, advertising and marketing. We cannot assure you that we will be successful in obtaining the ~~Company.~~   aforementioned financings (either debt or equity) on terms acceptable to us, or otherwise.

~~The~~Our unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q have been prepared ~~assuming that the Company will continue as~~on a going concern basis, which ~~contemplates the realization of~~assumes that we will be able to realize our assets and ~~the liquidation of liabilities~~discharge our obligations in the normal course of business. ~~However, the Company has limited revenue and without realization of additional capital, it would be highly unlikely for the Company to continue as a going concern.~~

Results of Operations for the Three Months Ended ~~July~~March 31, ~~2012~~2022 and ~~July 31, 2011~~2021

For the ~~three months~~quarter ended~~July~~March 31, 2022, ~~2012,~~ we recorded ~~net~~gross revenues of ~~$92,941,~~$291,787, versus ~~$100,335~~$71,201 for the quarter ended March 31, 2021. This increase is due to an increase in participants returning to our centers.
For the quarter ended March 31, 2022, operating expenses increased to $485,961 from $477,491, a ~~decrease of $7,394~~$8,470 increase, or ~~7.36%~~1.77%, over the ~~three months~~quarter ended~~July~~ March 31, 2021. The increase is due to an increase in operating expenses for SarahCare’s operational expenses in 2022.
For the quarter ended March 31, 2022, ~~2011. The Company believes that~~interest expense on our convertible notes payable increased to $28,580 from $15,390, an increase of 85.71% over the ~~decrease~~quarter ended March 31, 2021. This increase is primarily due to an increase in the ~~cyclical nature~~amount of convertible notes taken in by the ~~revenues of the New AC LaRocco’s products.~~   Company.

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Table of Contents
For the ~~three months~~quarter ended~~July~~March 31, 2022, ~~2012, cost~~we realized a net income of ~~goods sold was $126,329 versus $82,973~~$78,457 as compared to a net loss of $2,167,481 for ~~a decrease of $132,607 or 52.25% over~~ the ~~three months~~quarter ended~~July~~ March 31,~~, 2011.~~ 2021. The decrease in ~~the cost~~our net loss of ~~goods sold is~~$2,245,938 was primarily due to ~~a decrease in returns~~the loss on extinguishment of debt and ~~allowances, off-invoice promotions, manufacturer charge-backs,~~gain on forgiveness of PP loan.
Results of Operations for the Nine months ended March 31, 2022 and ~~freight and shipping related expenses.~~2021

For the ~~three~~nine months ended~~July~~ March 31,~~, 2012,~~ 2022, we recorded gross ~~profit was $(33,388)~~revenues of $939,061, versus ~~$17,361~~$71,201 for the nine months ended March 31, 2021. This increase is due to an increase ~~of $50,749 or 292.31% over the three months endedJuly 31, 2011. The increase~~ in ~~gross profit is primarily due~~participants returning to ~~a decrease in off-invoice promotions, manufacturer charge-backs, and freight and shipping related expenses.~~our centers

For the ~~three~~nine months ended~~July~~ March 31, 2022, operating expenses increased to $1,577,263 from $587,415, a $993,141 increase, or 168.51%, ~~2012, gross profit in percentages was 67% versus 11.9%~~ over the ~~three~~nine months ended~~July~~ March 31,~~, 2011.~~ 2021. The ~~change in gross profit~~increase is ~~primarily~~ due to ~~a decrease~~an increase in ~~off-invoice promotions and manufacturer charge-backs of our natural and organic pizza sold under the brand name of AC LaRocco.~~expenses due to SarahCare’s operational expenses in 2022.

For the ~~three~~nine months ended~~July~~ March 31,, 2012, operating expenses decreased to $360,062 from $409,702 or 12.11% over the three months ended July 31, 2011. The decrease is primarily due to decrease in general and administrative, legal, and sales and marketing expenses.

~~For the three months endedJuly 31, 2012,~~ 2022, interest expense on our convertible notes payable decreased to ~~$17,939~~$78,455 from ~~$23,056, or 25% over the three months endedJuly 31, 2011. This decrease is primarily due to the decrease in notes payable.~~

~~For the three months endedJuly 31~~, 2012, we realized a net loss of $180,996 as compared to a net gain of $40,901 for the three months ended July 31,2011. The decrease of $24,433 is primarily due to transactions related to decreases in expenses.

~~Results of Operations for the Nine Months Ended July 31, 2012 and July 31, 2011~~

~~For the six months endedJuly 31, 2011, we recorded net revenues of $503,063 versus $422,164 for~~$162,793, a decrease of ~~$80,899 or 16.08%~~51.81% over the nine months ended~~July~~ March 31,~~, 2012. The Company believes that the~~ 2021. This decrease ~~is primarily due to the cyclical nature of the revenues of the New AC LaRocco and that Wings of Nature did not sell any of it products.~~

~~For the nine months endedJuly 31, 2012, cost of goods sold was $316,915 versus $385,908 for a decrease of $68,993 or 17.88% over the nine months endedJuly 31, 2011. The decrease in the cost of goods sold~~ is primarily due to a decrease in ~~returns~~interest expense and ~~allowances, off-invoice promotions, manufacturer charge-backs,~~fair value of derivatives, because of the conversions of a majority of the outstanding convertible notes to common stock, and ~~freight and shipping related expenses.~~due to an increase in other income.

For the nine months ended~~July~~ March 31,~~, 2012, gross profit was $105,249 versus $117,154 for an increase of $11,905 or 10.16% over the nine months endedJuly 31, 2011. The increase in gross profit is primarily due to a decrease in off-invoice promotions, manufacturer charge-backs, and freight and shipping related expenses.~~

~~For the nine months endedJuly 31, 2012, gross profit in percentages was 42.11% versus 24.78% over the three months endedJuly 31, 2011. The change in gross profit is primarily due to a decrease in off-invoice promotions and manufacturer charge-backs of our natural and organic pizza sold under the brand name of AC LaRocco.~~

~~For the nine months endedJuly 31, 2012, operating expenses decreased to $783,718 from $922,481 or 15.34% over the nine months endedJuly 31, 2011. The decrease is primarily due to decrease in general and administrative, legal and sales and marketing expenses..~~

~~For the nine months endedJuly 31, 2012, interest expense on our convertible notes payable decreased to $58,069 from $70,386, or 17.5% over the nine months endedJuly 31, 2011. This decrease is primarily due to the decrease in notes payable.~~

~~For the nine months endedJuly 31, 2012,~~ 2022, we realized a net loss of ~~$504,861~~$379,717 as compared to a net loss of ~~$649,414~~$2,557,353 for the ~~three~~nine months ended~~July~~ March 31,~~,2011.~~ 2021. The decrease in our net loss of ~~$146,224 is~~$2,177,636 was primarily due to ~~transactions related to decreases~~the loss on extinguishment of debt, a gain on forgiveness of PP loan, and a decrease in ~~expenses.~~interest expense and fair value of derivatives.

Liquidity and Capital Resources

~~Since inception, we have not been able to finance~~Based upon our business from cash flows from operations and have been reliant upon loans and proceeds from the sale of equity which may not be available to us in the future, or if available, on reasonable terms. Accordingly, if we are unable to obtain funding from loans and the sale of our equity, it is unlikely that we will be able to continue as a going concern.

~~As ofJuly 31, 2012, we had~~ current ~~assets of $120,329 including $0 cash, inventory of $12,629 and net accounts receivable of $107,700. We had fixed assets with a net book value of $0 and we had total liabilities of $2,103,968.~~

~~Currently,~~financial condition, we do not have sufficient ~~financial resources~~cash to ~~implement or complete~~operate our business ~~plan. We anticipate that we will need a minimum of approximately $600,000 to satisfy our cash requirements over~~at the current level for the next 12twelve months. We ~~cannot be assured that revenue from operations will be sufficient~~intend to fund ~~our activities during the next 12 months. Accordingly, we will have~~operations through debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek ~~alternate sources of capital. We~~additional financing in a private equity offering to secure funding for operations. There can ~~offer~~be no assurance that we will be successful in raising additional funding. If we are not able to ~~raise~~secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such ~~funds~~additional financing will be available to us on acceptable terms ~~to us~~ or ~~otherwise. If we are unsuccessful in our attempts to raise sufficient capital, we may have to cease operations or postpone our plans to initiate or complete our business plan.~~

If we are unable to raise the required financing, we may have to cease operations. Currently, we have a limited credit history with vendors, suppliers, manufacturers, packagers and food producers; we must pay for our purchases “up front” and are not granted credit terms. This will continue until we have established a satisfactory credit history. We cannot estimate, with any certainty, how long this may take, or if it will occur at all. Our inability to obtain credit from such providers has a significant impact upon our liquidity and our ability to utilize funds for other purposes. Similarly, if and when we hire additional personnel, including management and sales personnel, the cost related to such hiring will have a significant impact on our liquidity and deployment of funds.

The food producer of our natural and organic pizza line under the brand name of AC LaRocco has a lock box agreement on the cash collected from accounts receivable. After they are paid for their invoices and the monthly payment requirement on the outstanding note payable owed to them, we receive the balance of the cash collections. This will continue until we are able to satisfy the balance of the note and negotiate an alternative acceptable payment arrangement with them.

~~Since March 2, 2010 throughJuly 31, 2012, the food producer of our natural and organic pizza line has been paid approximately $80,000 of principal on the note payable we assumed in the Asset Acquisition.~~

For the Nine months ended

July 31, 2012

July 31, 2011
Net cash from operating activities

$
171,716

$
(115,142)
Net cash from financing activities

$
(172,658)

$
99,385
Net change in cash and cash equivalents

$
(942)

$
(15,757)
Cash and cash equivalents, beginning of period

$
942

$
16,711
Cash and cash equivalents, end of period

$
-

$
954

As of July 31, 2012, the Company owed the Internal Revenue Service and New York State payroll related taxes in the amounts of $118,101 and $30,145, respectively, plus applicable interest and penalties. The total amount due to both taxing authorities including penalties and interest as of July 31, 2012, was approximately $244,000, subject to further penalties and interest plus accruals on unpaid wages for a total of $300,000. The Internal Revenue Service has placed a federal tax lien on all of the assets of the Company and has designated the balance owed as uncollectible at this time. The Company is currently negotiating a payment plan with the State of New York.

As of July 31, 2012, the New A.C. LaRocco had not filed to do business in the State of Washington and had unpaid payroll taxes payable to the Internal Revenue Service and the State of Washington in an approximate amount of $35,000 including estimated penalties and interest for non-filing and non-payment.

~~Material Agreements~~

~~Settlement Agreements~~

On December 2, 2011, the Parent Company, New York FHP, and a certain creditor of the Company entered into a Settlement Agreement and Release (the “Second Settlement Agreement”), which was effective on December 9, 2011.

~~The terms of the Second Settlement Agreement include, among others:~~

~~(i)~~
~~The Parent Company shall issue 2,500,000 shares of common stock to the Settler, which shares have been issued;~~
~~(ii)~~
~~Prior to the effective date of the Second Settlement Agreement, Fresh Harvest would pay to Settler an aggregate $5,000, which amount as been paid;~~
~~(iii)~~
each of the Settler, the Company acknowledged and agreed that upon receipt of the share and payment by the Parent Company all amounts owed by Fresh Harvest to the Settler in connection with the Settler’s employment agreement or any other dispute with Fresh Harvest or otherwise shall be deemed satisfied and paid in full.

~~The Settlement Agreement also provides for a mutual release of claims by the parties.~~

~~Settlement Agreement~~

On May 4, 2011, the Parent Company, New York FHP, New A.C. LaRocco, the Seller, Clarence Scott and Karen Leffler entered into a Settlement Agreement and Release (the “Settlement Agreement”), which was effective on May 11, 2011.

~~The terms of the Settlement Agreement include, among others:~~

~~(i)~~
~~The Parent Company shall issue an additional 150,000 shares of Series A Convertible Preferred Stock to the Seller (the “Share Payment”), which shares have been issued;~~
~~(ii)~~
~~during the 90 day period following the effective date of the Settlement Agreement, Fresh Harvest would pay to the Seller an aggregate of $23,000, which amount has been paid;~~
~~(iii)~~
~~neither Mr. Scott nor Ms. Leffler would be restricted from accepting employment with, consulting with or investing in any business in competition with Fresh Harvest or its subsidiaries;~~
~~(iv)~~
each of the Seller, Mr. Scott and Ms. Leffler acknowledged and agreed that upon receipt of the Share Payment by the Parent Company and compliance by New A.C. LaRocco with the provisions of Section 2(b) of the Settlement Agreement (i.e., payment of $23,000 to the Seller), all amounts owed by Fresh Harvest and/or New A.C. LaRocco to the Seller, Mr. Scott and Ms. Leffler in connection with the Asset Acquisition, pursuant to the Transaction Documents (including the employment agreements between Fresh Harvest and each of Mr. Scott and Ms. Leffler) or otherwise shall be deemed satisfied and paid in full;
~~(v)~~
each of the Seller, Mr. Scott and Ms. Leffler acknowledged and agreed that on March 2, 2010, the Parent Company acquired allright, title and interest in (collectively, the “Acquired Assets”) allof the property and assets, real, personal or mixed, tangible and intangible, of every kind and description of the Seller, except for: (1) receivables due to the Seller on March 2, 2010, (2) cash and cash equivalent items on hand at the close of business on March 2, 2010, (3) accounts receivable earned from the operation of the Seller’s business during the period beginning sixty (60) days prior to March 2, 2010 and ending on March 2, 2010, (4) accounts receivable as to litigation commenced prior to March 2, 2010 against a debtor for purposes of collection, (5) all judgments in favor of the Seller in connection with the collection of accounts receivable as of March 2, 2010 and (6) all checkbooks, stubs, books of account, ledgers and journals related to the prior operation of the Seller’s business prior to March 2, 2010;
~~(vi)~~
each of the Seller, Mr. Scott and Ms. Leffler further acknowledged and agreed that the only liability assumed by Fresh Harvest from the Seller pursuant to the Transaction Documents was the assumption of that certain Secured Promissory Note dated July 6, 2007 in the original principal amount of $218,356.94 (and with a principal balance of $129,384.59 on March 2, 2010) owed by the Seller to a specified creditor;
~~(vii)~~
New A.C. LaRocco agreed to transfer to the Seller certain specified assets and any rights and obligations of New A.C. LaRocco and/or Fresh Harvest with respect to the facility located in Spokane, Washington; and,
~~(viii)~~
~~subject to certain conditions, the domain name healthypizzarevolution.com, will be the property of Mr. Scott.~~

~~The Settlement Agreement also provides for a mutual release of claims by the parties.~~

Settlement Summary

Equipment returned to Seller

$          6,062
(1)
Cash paid to Seller

23,000

Note payable to Seller relieved through issuance of Preferred Stock

(102,160)
(2)
Accrued expenses relieved

(10,797)

Preferred Stock - 150,000 shares of the Company (see Note 11)

180,000
(3)
Net cost of settlement

$       96,105

~~Explanation:~~

~~(1)~~
~~Assets located in the Spokane, Washington office that were released in the Settlement Agreement dated May 4, 2011.~~
~~(2)~~
~~Balance of the Note Payable owed to Take and Bake, Inc. that was released in the Settlement Agreement dated May 4, 2011.~~
~~(3)~~
150,000 shares of convertible preferred stock (15,000,000 shares of common stock) at a per common share price of $.012; per share price of the common stock was determined to be the closing price of the shares on the date of issuance.

~~Certificate of Designations~~
~~On February 23, 2011, the Parent Company filed a Certificate of Designations of Series A Convertible Preferred Stock (the “Certificate of Designations~~”) with the Secretary of State of the State of New Jersey. The Certificate of Designations, subject to the requirements of New Jersey law, states the designation, number of shares, powers, preferences, rights, qualifications, limitations and restrictions of the Parent Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “~~Series A Preferred Stock”). In summary, the Certificate of Designations provides:~~

~~Number~~

~~5,000,000 shares of the Parent Company’s Preferred Stock are designated as shares of Series A Convertible Preferred Stock.~~

~~Dividends~~

Any dividends (other than dividends on common stock payable solely in common stock or dividends on the Series A Preferred Stock payable solely in Series A Preferred Stock) declared or paid in any fiscal year will be declared or paid among the holders of the Series A Preferred Stock and common stock then outstanding in proportion to the greatest whole number of shares of common stock which would be held by each such holder if all shares of Series A Preferred Stock were converted into shares of common stock pursuant to the terms of the Certificate of Designations. The Parent Company’s Board of Directors is under no obligation to declare dividends on the Series A Preferred Stock.

~~Conversion~~

~~Each share of Series A Preferred Stock is generally convertible (subject to an increase in the number of shares of the Parent Company’s authorized common stock (the “Conversion Amendment”)) into 100 shares of the Parent Company’s common stock (the “Conversion Rate”).~~

Subject to the prior increase in the number of the Parent Company’s authorized shares of common stock, each share of Series A Preferred Stock will automatically be converted into shares of common stock at the then effective Conversion Rate for such share immediately upon the election of the Parent Company. On September 6, 2011, the authorized number of shares of the Parent Company’s common stock was increased to 2,000,000,000 shares. The Parent Company subsequently elected to cause the conversion of all shares of Series A Preferred Stock outstanding on September 16, 2011 into shares of common stock. As a result, 2,350,003 shares of Series A Convertible Preferred Stock converted into an aggregate of 235,000,300 shares of common stock.

~~Liquidation~~

In the event of any liquidation, dissolution or winding up of the Parent Company, the assets of the Parent Company legally available for distribution by the Parent Company would be distributed with equal priority and pro rata among the holders of the Series A Preferred Stock and common stock in proportion to the number of shares of common stock held by them, with the shares of Series A Preferred Stock being treated for this purpose as if they had been converted to shares of common stock at the then applicable Conversion Rate.

~~Voting~~

On any matter presented to the stockholders of the Parent Company for their action or consideration at any meeting of stockholders of the Parent Company (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock would be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. For purposes of the foregoing sentence, the Conversion Amendment shall be deemed to be in full force and all shares of Series A Preferred Stock would be considered to be fully convertible into shares of Common Stock without restriction. Except as provided by law or by the other provisions of the Parent Company’s Certificate of Incorporation, holders of Series A Preferred Stock vote together with the holders of common stock as a single class.

~~Issuance to Take and Bake, Inc.~~

On March 2, 2011, in lieu of the 15,000,000 shares of common stock described in the Asset Purchase Agreement, the Parent Company issued 150,000 shares of Series A Preferred Stock to the Seller, which shares have been converted into 15,000,000 shares of the Parent Company’s common stock. On May 27, 2011, the Parent Company issued an additional 150,000 shares of Series A Preferred Stock to the Seller pursuant to the terms of the Settlement Agreement, which shares have been converted into 15,000,000 shares of the Parent Company’s common stock.

~~Other Issuances of Series A Preferred Stock~~

On March 4, 2011, the Parent Company entered into a letter agreement with Michael J. Friedman, the Parent Company’s President and Chief Executive Officer, pursuant to which the Parent Company and Mr. Friedman agreed that an aggregate of $228,008 of accrued, but unpaid compensation would be converted into 268,244 shares of Series A Preferred Stock. Such shares of Series A Preferred Stock have been converted into 26,824,400 shares of the Parent Company’s common stock.

On March 4, 2011, the Parent Company issued 100,000 shares of Series A Preferred Stock to each of Michael Friedman, Jay Odintz and Dominick Cingari as a fee for their service on the Parent Company’s Board of Directors. Such shares of Series A Preferred Stock have been converted into an aggregate of 30,000,000 shares of the Parent Company’s common stock.

~~On March 8, 2011, the Parent Company and Jumpstart Marketing, Inc. (“Jumpstart~~”) entered into a letter agreement pursuant to which the Parent Company and Jumpstart agreed that all amounts owed by the Parent Company to Jumpstart under the Marketing Agreement dated November 20, 2009 (the “~~Marketing Agreement~~”) between the Parent Company and Jumpstart (pursuant to which Jumpstart provided certain marketing services to the Parent Company) would be converted into 99,000 shares of Series A Preferred Stock and that the Parent Company would not have any further obligations to Jumpstart under the Marketing Agreement or otherwise. Such shares of Series A Preferred Stock have been converted into 9,900,000 shares of the Parent Company’s common stock.

~~On March 8, 2011, the Parent Company and 5W Public Relations, LLC (“~~5W~~”) entered into a letter agreement pursuant to which the Parent Company and 5W agreed that that all amounts owed by the Parent Company to 5W under the letter agreement dated May 25, 2010 (the “5W Agreement~~”) between the Parent Company and 5W (pursuant to which 5W provided certain public relations services to the Parent Company) would be converted into 90,000 shares of Series A Preferred Stock and that the Parent Company would not have any further obligations to 5W under the 5W Agreement or otherwise. Such shares of Series A Preferred Stock have been converted into 9,000,000 shares of the Parent Company’s common stock.

Between March 3, 2011 and March 8, 2011, the Parent Company entered into letter agreements with certain creditors of the Parent Company pursuant to which such creditors agreed to convert an aggregate debt of approximately $686,914 into an aggregate of approximately 1,232,759 shares of Series A Preferred Stock. Such shares of Series A Preferred Stock have been converted into 123,275,900 shares of the Parent Company’s common stock.

On May 4, 2011, the Parent Company issued 60,000 shares of Series A Preferred Stock for consulting services rendered on behalf of the Company. Such shares of Series A Preferred Stock have been converted into 6,000,000 shares of the Parent Company’s common stock.

~~Other Issuances~~

In addition to the issuances described above, during the quarter year ended January 31, 2012, the Parent Companyentered into agreements with certain creditors and consultants of the Parent Company converted an aggregate of $290,500 owed by the Company to such persons into an aggregate of 72,804,770 shares of the Company’s common stock.

~~Letter Agreement – Vikas Patel~~

On September 20, 2011, the Parent Company and Vikas Patel entered into a letter agreement pursuant to which, among other things, the Parent Company and Mr. Patel agreed to convert $100,000 owed to Mr. Patel by the Parent Company pursuant to a consulting agreement into 25,000,000 shares of the Parent Company’s common stock.

Off Balance Sheet Arrangements

We ~~do not~~currently have ~~any off balance~~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 ~~expenditures.~~resources.

~~Principal Commitments~~

As of July 31, 2011, we did not have any material commitments that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

Critical Accounting Policies

~~Our interim unaudited condensed consolidated~~The preparation of financial statements ~~as of July 31, 2011 have been prepared~~ in ~~accordance~~conformity with accounting principles generally accepted in the United States of ~~America. The preparation of financial statements in accordance with generally accepted accounting principles~~America requires ~~our management~~us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities ~~including the recoverability of tangible~~ and ~~intangible assets,~~ disclosure of contingent assets and liabilities ~~as of~~at the date of the financial ~~statements,~~statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the ~~periods covered.~~

A summary of accounting policies that have been applied to the interim unaudited condensed consolidated financial statements can be found in Note No. 2 to our interim unaudited condensed consolidated financial statements.

~~We evaluate our estimates on an on-going basis. The most significant estimates relate to accounts receivable and the fair value of financial instruments.~~reporting period. We base our estimates on historical ~~company and industry experience~~experiences and on various other assumptions that we believe to be reasonable under the ~~circumstances, the results of which, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual~~circumstances. Actual results may differ materially from ~~those estimates.~~these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

Inflation

We do not believe that inflation had a significant impact on our results of operations for the periods presented.

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Item 3. ~~Quantitative and Qualitative Disclosures about Market Risk~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company, as defined byin Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information ~~required~~ under this item.

Item 4. ~~Controls and Procedures~~CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of ~~July~~March 31, ~~2012.~~2022. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures werenot effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and that such information was not accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.

~~Material Weakness~~Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the principal executive officer and the principal financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:
●
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;
●
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the board of directors; and
●
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2022, based on criteria established in Internal ~~Controls Over Financial Reporting~~

~~As previously reported in~~Control – Integrated Framework issued by the ~~Company’s Annual Report on Form 10-K for~~Committee of Sponsoring Organizations of the ~~fiscal year ended October 31, 2011, the Company’s management has~~Treadway Commission, which assessment identified material weaknesses in internal control over financial reporting. A material weakness is a control deficiency, or a combination of deficiencies in internal control over financial reporting that creates a reasonable possibility that a material misstatement in annual or interim financial statements will not be prevented or detected on a timely basis. ~~Management has concluded that~~Since the ~~Company~~’sassessment of the effectiveness of our internal control over financial reporting ~~had the following deficiency:~~did identify a material weakness, management considers its internal control over financial reporting to be ineffective.

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~~We were unable to maintain any segregation~~Table of duties within our business operations due to our reliance on a single individual fulfilling the role of sole officer. This control deficiency did result in adjustments to our 2011 and 2010 interim and annual financial statements. Accordingly we have determined that this control deficiency constitutes a material weakness.
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To the extent reasonably possible, given our limited resources, our goal is, upon sufficient operating cash flow and/or capital, to separate the responsibilities of principal executive officer and principal financial officer, intending to rely on two or more individuals. We will also seek to expand our current board of directors to include additional individuals willing to perform directorial functions. Since the recited remedial actions will require that we hire or engage additional personnel, this material weakness may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants.

This Quarterly Report on Form 10-Q does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this Quarterly Report on Form 10-Q.
Changes in Internal ~~Control Over~~Controls over Financial Reporting

~~There were~~During the quarter ended March 31, 2022, there has been no ~~changes~~change in ~~the Company’s~~ internal control over financial reporting that ~~occurred during the three months ended July 31, 2012 that have~~has materially affected, or ~~are~~is reasonably likely to materially affect ~~the Company’s~~our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

~~None.~~From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other than as disclosed herein, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

As of March 31, 2022, Innovative MedTech, Inc. was not a party to any material legal proceedings. We currently have seventeen (17) convertible promissory notes that are in default, and we may be subject to legal proceedings or lawsuits from any number of those convertible noteholders, including the Notice of Commencement of Action Subject to Mandatory Electronic Filing described below.
On April 7, 2013, three note holders (Brook Hazelton, Benjamin M. Manalaysay, Jr., and Diego McDonald, the “Plaintiffs”), whom together invested a total principal amount of $45,000 in the form of Convertible Promissory Notes (the “Notes”) to the Company, together filed a “Notice of Commencement of Action Subject to Mandatory Electronic Filing” in the Supreme Count of the State of New York, County of New York. The Plaintiffs alleged that the Company breached their contracts with the Plaintiffs and included causes of action for unjust enrichment and related claims, seeking repayment of each of their respective convertible promissory notes plus interest. Since the initial filing, the Plaintiffs have not proceeded with the case.
Item 1A. Risk Factors.

We are subject to various risks that may materially harm our business, financial condition and results of operations. An investor should carefully consider the risks and uncertainties described below and the other information in this Quarterly Report on Form 10-Q before deciding to purchase our ~~common stock.~~securities. If any of these risks or uncertainties actually occurs, our business, financial condition or operating results could be materially harmed. In that case, the trading price of our common stock could decline or we may be forced to cease operations.

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RISKS RELATED TO OUR BUSINESS

RISKS RELATED TO OUR FINANCIAL CONDITION AND CAPITAL REQUIREMENTS
We have limited capital resources and have experienced net losses and negative cash flows and we expect these conditions to continue for the foreseeable future, as such we expect that we will need to obtain additional financing to continue to operate our business. Such financing may be unavailable or available only on disadvantageous terms, which could cause the Company to curtail its business operations and delay the execution of its business plan.

To date, we have not generated significant revenues. Our net ~~losses~~income for the ~~quarter~~three months ended ~~July~~March 31, ~~2012~~2022 and ~~the year ended October 31, 2011~~2021 were ~~$180,966~~$78,457 and ~~$1,047,113~~a net loss of $2,167,481 respectively. As of ~~July~~March 31, ~~2012,~~2022, we realized an accumulated deficit of ~~$8,217,299~~$15,295,729 and we had ~~little~~$258,376 cash on hand. Our revenues have not been sufficient to sustain our operations and we expect that our revenues will not be sufficient to sustain our operations for the foreseeable future. As such, we expect that we will continue to need significant financing to operate our business. Furthermore, there can be no assurance that additional financing will be available or that the terms of such additional financing, if available, will be acceptable to us. If additional financing is not available or not available on terms acceptable to us, our ability to fund our operations or otherwise respond to competitive pressures may be significantly impaired. We could also be forced to curtail our business operations, reduce our investments, decrease or eliminate capital expenditures and delay the execution of our business plan, including, without limitation, all aspects of our operations, which would have a material adverse affect on our business. The items discussed above raise substantial doubt about our ability to continue as a going concern. We cannot assure you that we can achieve or sustain profitability in the future. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable. Revenues and profits, if any, will depend upon various factors, including whether our products achieve market acceptance and whether we obtain additional financing. We may not achieve our business objectives and the failure to achieve such goals would have a materially adverse impact on us.

We ~~are currently~~have experienced recurring losses from operations and negative cash flows from operatingactivities andanticipate that we will continue to incur operating losses in ~~default with respect to various outstanding debt obligations, which if we fail to repay, could result in foreclosure upon our assets.~~the future.

We ~~are currently in default with respect~~have experienced recurring losses from operations and negative cash flows from operating activities. We expect to ~~a number~~continue to incur significant expenses related to our ongoing operations and generate operating losses for the foreseeable future. The size of our ~~debt obligations. In~~losses will depend, in part, on the ~~event~~rate of future expenditures and our ability to generate revenues. We incurred net income of $78,457 for the quarter ended March 31, 2022, and our accumulated deficit was $15,295,729 as of March 31, 2022.
We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our financial condition. Our prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. If our products do not achieve sufficient market acceptance and our revenues do not increase significantly, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the value of our company could cause you to lose all or part of your investment.
If we are unable to ~~repay~~continue as a going concern, our securities will have little or no value.
Although our audited financial statements for the year ended June 30, 2021, were prepared under the assumption that we would continue our operations as a going concern, the report of our independent registered public accounting firm that accompanies our financial statements for the year ended June 30, 2021, contains a going concern qualification in which such ~~debt obligations,~~firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, we ~~could~~have experienced recurring losses from operations and negative cash flows from operating activities, and we expect to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. In addition, as noted above, continued operations and our ability to continue as a going concern may be dependent on our ability to obtain additional financing in the near future and thereafter, and there are no assurances that such financing will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through sales of our products, financings or from other sources or transactions, we will exhaust our resources and will be unable to continue operations. If we cannot continue as a going concern, our shareholders would likely lose most or all of their investment in us.
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The benefits we have realized and may continue to realize from participating in relief programs provided under the CARES Act may not be sufficient to enable us to withstand the current economic conditions and any extended economic downturn or recession which may result from the Pandemic.
We have received funds under the CARES Act, and have benefited from other relief measures pursuant to the CARES Act and other government stimulus, including the deferral of employer payroll taxes. Receipt of additional government funds and other benefits from the CARES Act is subject to, in certain circumstances, a detailed application and approval process and it is unclear whether we will meet any eligibility requirements, receive any funds and the extent to which these funds may offset our ~~assets~~Pandemic-related cash flow disruptions. Additionally, retaining these funds subjects us to various terms and ~~be forced~~conditions. While we have taken steps to ~~cease our operations.~~

~~Third Parties~~ensure compliance with these terms and conditions, any violation may ~~have certain rights to A.C. LaRocco’s Assets.~~

~~The Asset Purchase Agreement provides that the Parent Company acquired~~trigger repayment of some or all of the ~~Seller’s right, title and interest~~funds received. Further, funds we have received or may receive, either directly through participation in ~~agreements relating~~government programs, or indirectly through increased revenues attributable to ~~the Seller’s business~~a possible economic recovery generated in whole or ~~assets. The Company believes that certain of these agreements may have provided third parties rights~~ in ~~the assets that the Company acquired from the Seller. To the extent that the assets acquired~~part by the ~~Company from~~CARES Act, may not be sufficient to mitigate the ~~Seller remain subject to such agreements any attempt by such third parties to enforce such agreements could seriously harm~~impact of the ~~Company’s business, financial condition, results of operations and cash flow.~~Pandemic.

We may be required to raise additional financing by issuing new securities with terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock and our business.

We will require additional financing to fund future operations. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current stockholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities may similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially adverse affect on our business.

We are currently in default with respect to various outstanding debt obligations, which if we fail to repay, could result in foreclosure upon our assets.
We are currently in default with respect to a number of our debt obligations. In the event we are unable to repay such debt obligations, we could lose all of our assets and be forced to cease our operations.
We currently have Accrued and Unpaid Payroll ~~Taxes~~Taxes.

As of ~~July~~March 31, ~~2012,~~2022 and June 30, 2021, the Company owed the Internal Revenue Service and New York State payroll related taxes in the amounts of ~~$118,101~~$60,402 and ~~$30,145,~~$17,401, respectively, plus applicable interest and penalties. The total amount due to both taxing authorities including penalties and interest asa of ~~July~~March 31, ~~2012,~~2022 and June 30, 2021 was approximately ~~$244,000~~$77,803 subject to further penalties and interest plus accruals on unpaid ~~wages for a total of approximately $300,000.~~

wages. The Internal Revenue Service has placed a federal tax lien on all of the assets of the ~~Company and has designated the balance owed as uncollectible at this time. The Company is currently negotiating a payment plan with the State of New York.~~

As of July 31, 2012, the New A.C. LaRocco had filed to do business in the State of Washington and had unpaid payroll taxes payable to the Internal Revenue Service and the State of Washington of approximately $35,000 including estimated penalties and interest for non-filing and non-payment. The New A.C. LaRocco has filed all of the 2011 quarterly unemployment reports and has not made the requisite tax payments to the State of Washington.
As of July 31, 2012, New A.C. LaRocco continued to have unpaid payroll taxes payable to the Internal Revenue Service. As of July 31, 2012, the New A.C. LaRocco does not have any payroll as all employees have been terminated.

Company. If we are unable to resolve these tax liabilities such failure could have a material adverse effect on our business, ~~consolidated~~ financial condition, results of operations or liquidity.

We may fail to comply with the terms of our promissory note agreements.
Our promissory note agreements include various conditions, covenants and events of default. We may not be able to satisfy all of these conditions or may default on some of these covenants for various reasons, including for reasons beyond our control. Our ability to comply with such covenants will depend upon our ability to operate our business profitably. If the recent trends in occupancy, rates and employment and other costs and expenses continue or increase, we may incur operating losses. Complying with these covenants may limit our ability to take actions that may be beneficial to us and our security holders.
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If we default under our promissory note agreements, our lenders may demand immediate payment. Any default under our promissory note agreements that results in acceleration of our obligations to repay outstanding indebtedness would likely have ~~not yet completed~~serious adverse consequences to us and would likely cause the value of our ~~merger with New York FHP.~~securities to decline.

~~On December 16, 2005,~~In the ~~Parent Company entered into an Agreement~~future, we may obtain additional debt financing, and ~~Plan~~the covenants and conditions that apply to any such additional debt may be more restrictive than the covenants and conditions that are contained in our promissory note agreements.
Our level of ~~Acquisition~~debt could impair our financial condition and ~~Merger (the “Merger Agreement”) with Fresh Harvest Products, Inc., a New York corporation (“New York FHP”), Michael Friedman, Marcia Roberts~~ability to operate.
In order to increase our cash position and ~~Illuminate, Inc. The Merger Agreement contemplates~~preserve financial flexibility in responding to the ~~merger~~impacts of the ~~Parent Company and New York FHP (the “Merger”). Although~~COVID-19 pandemic on our business, we secured $266,640 in loans under the ~~Parent Company~~CARES Act Paycheck Protection Program, which has ~~operated as if~~since been forgiven. In the ~~Merger was consummated in December 2005, it has come~~event we elect or are required to repay the PPP loan, our liquidity will be reduced by the amount of the repayment. Our level of debt could have important consequences to investors, including:
·
requiring a portion of our cash flows from operations be used for the payment of interest on our debt, thereby reducing the funds available to us for our operations or other capital needs;
·
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate because our available cash flow, after paying principal and interest on our debt, may not be sufficient to make the capital and other expenditures necessary to address these changes;
·
increasing our vulnerability to general adverse economic and industry conditions, since we will be required to devote a proportion of our cash flow to paying principal and interest on our debt during periods in which we experience lower earnings and cash flow, such as during the current COVID-19 pandemic;
·
limiting our ability to obtain additional financing in the future to fund working capital, capital expenditures, acquisitions, and general corporate requirements; and
·
placing us at a competitive disadvantage to other relatively less leveraged competitors that have more cash flow available to fund working capital, capital expenditures, acquisitions, and general corporate requirements.
If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results, prevent fraud, or maintain investor confidence.
We are subject to the ~~Parent Company’s attention that certain required filings were not made in the State~~internal control requirements of ~~New Jersey and the State of New York to properly consummate the Merger.   As a result, as~~Section 404 of the ~~date~~Sarbanes-Oxley Act of ~~this~~2002, which require management to assess the effectiveness of our internal control over financial reporting. Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer a “non-accelerated filer.”
We previously reported in our Annual Report on Form 10-K as of June 30, 2021, a material weakness in internal control related to not presently having a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors. Nor do we have an audit committee or financial expert. Completion of remediation does not provide assurance that our remediation or other controls will continue to operate properly. If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.
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Our balance sheet includes intangible assets and goodwill. A decline in the ~~Parent~~estimated fair value of an intangible asset or a reporting unit could result in an impairment charge recorded in our operating results, which could be material.
Goodwill is tested for impairment annually and between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. If the carrying amount of our goodwill or another intangible assets were to exceed its fair value, the asset would be written down to its fair value, with the impairment charge recognized as a noncash expense in our operating results. Adverse changes in future market conditions or weaker operating results compared to our expectations, including, for example, as a result of the current COVID-19 pandemic, may impact our projected cash flows and estimates of weighted average cost of capital, which could result in a potentially material impairment charge if we are unable to recover the carrying value of our goodwill and other intangible assets.
Insurance may not adequately cover our losses, and the cost of obtaining such insurance may continue to increase.
We purchase certain third party insurance coverage for our business and properties, including for casualty, liability, malpractice, fire, extended coverage and rental or business interruption loss insurance. Pursuant to our Franchise Agreements, we are obligated to maintain certain insurance coverage for our adult day care centers. Recently, the costs of insurance have increased significantly, and these increased costs have had an adverse effect on us and the operating results for our adult day care centers. The increased costs of insurance may negatively impact the financial results at the adult day care centers if the EBITDA at those managed adult day care centers decrease. Losses of a catastrophic nature, such as those caused by hurricanes, flooding, volcanic eruptions and earthquakes, or losses from terrorism, may be covered by insurance policies with limitations such as large deductibles or co-payments that we or the owner may not be able to pay. Insurance proceeds may not be adequate to restore an affected property to its condition prior to loss or to compensate us for our losses, including lost revenues or other costs. Certain losses, such as losses we may incur as a result of known or unknown environmental conditions, are not covered by our insurance. Market conditions or our loss history may limit the scope of insurance or coverage available to us on economic terms. If an uninsured loss or a loss in excess of insured limits occurs, we may have to incur uninsured costs to mitigate such losses or lose all or a portion of the capital invested in a property, as well as the anticipated future revenue from the property.
We are subject to limitations on our ability to use our net operating loss and tax credit carryforwards.
Our ability to deduct pre-2020 net operating loss carryforwards and tax credit carryforwards are subject to a significant annual limitation on account of the ownership changes resulting from the March 25, 2021 investments and change in control of the Company, as described in Note 1 to our Consolidated Financial Statements included in this Form 10. Losses and ~~New York FHP had~~credits that arise after January 1, 2021, the effective date of the Restructuring Transactions, which currently are expected to be utilized to offset future taxable income, will not ~~completed the Merger. In order to complete the Merger, the Parent Company and New York FHP plan to take the following steps:~~

1.
~~Pay all taxes owed by New York FHP~~be subject to the ~~State~~limitations resulting from the Restructuring Transactions, but futurechanges in ownership may result in limitations on usage or elimination of ~~New York. As~~those future losses and credits. Moreover, net operating losses and other carryforwards are subject to other limitations under the United States Internal Revenue Code of ~~October 31, 2011, New York FHP owed New York State payroll related~~1986, as amended, or the IRC, including provisions generally restricting carryforwards of net operating losses arising in taxable years beginning after 2017 from offsetting more than 80% of the current year’s taxable income, which could affect our ability to utilize all of our existing net operating loss and tax credit carryforwards in a given year.
Changes in our effective tax rate may impact our results of operations.
We are subject to taxes in the ~~amount~~U.S. and other jurisdictions. Tax rates in these jurisdictions may be subject to significant change due to economic and/or political conditions. A number of ~~approximately $30,145 plus applicable interest and penalties.~~other factors may also impact our future effective tax rate including:
2.
•
the jurisdictions in which profits are determined to be earned and taxed;
•
the resolution of issues arising from tax audits with various tax authorities;
•
changes in valuation of our deferred tax assets and liabilities;
•
increases in expenses not deductible for tax purposes, including write-offs of acquired intangibles and impairment of goodwill in connection with acquisitions;
•
changes in availability of tax credits, tax holidays, and tax deductions;
•
changes in share-based compensation; and
•
changes in tax laws or the interpretation of such tax laws and changes in generally accepted accounting principles.
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~~File an application on behalf~~In December 2017, enacted legislation in the United States significantly revised the Internal Revenue Code. The enacted federal income tax law, among other things, contained significant changes to corporate taxation, including reduction of the ~~Parent Company~~corporate tac rate from a top marginal rate of 35% to a flat rate of 21% beginning in 2018, limitation of the tax deduction for ~~authority~~interest expense to do30% of adjusted earnings, limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the ~~State~~testing of ~~New York with~~certain drugs for rare diseases or conditions).
Notwithstanding the ~~Secretary of State~~reduction in the corporate income tax rate, the overall impact of the ~~State~~new federal tax law remains uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law. The impact of ~~New York, which application requires the consent~~this tax reform on holders of ~~the New York State Tax Commission,~~our common stock is also uncertain and ~~pay any applicable late filing penalties.~~
3.
~~File a final franchise~~could be adverse. We urge shareholders to consult with their legal and tax ~~return with the State of New York~~advisors with respect to ~~New York FHP.~~this legislation and the potential tax consequences of investing in or holding our common stock.
4.
~~File~~Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.
The United States generally accepted accounting principles and related pronouncements, implementation guidelines and interpretations with regard to a ~~Certificate~~wide variety of ~~Merger~~matters that are relevant to our business, such as, but not limited to, stock-based compensation, trade spend and promotions, and income taxes are highly complex and involve many subjective assumptions, estimates and judgments by our management. Changes to these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported results.
Changes in market interest rates may adversely affect us.
Interest rates are at relatively low levels on a historical basis, and the U.S. Federal Reserve System has indicated that it does not expect to raise interest rates in response to the Pandemic and current market conditions until at least the end of 2023. There can be no assurance, however, that the U.S. Federal Reserve System will not raise rates prior to that time. Any increases in market interest rates may materially and negatively affect us in several ways, including:
·
increases in interest rates could adversely impact the housing market and reduce demand for our services and occupancy at our adult day care centers, which could reduce the likelihood that we will earn incentive fees at our managed adult day care centers if the EBITDA we realize at our managed and franchised adult day care centers declines as a result;
·
an increase in interest rates could negatively impact the market value of our adult day care centers and limit our ability to sell or franchise any additional adult day care centers. Increased interest rates would increase our costs for, and may limit our or our franchisee’s, ability to obtain, mortgage financing.
Conversely, low market interest rates, particularly if they remain over a sustained period, may increase our use of debt capital to fund property acquisitions, lower capitalization rates for property purchases and increase competition for property purchases, which may reduce opportunities for us to operate additional communities.
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Subsequent to consummation of any acquisition, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business with ~~the Secretary of State~~which we acquire, we cannot assure you that this examination will uncover all material risks that may be presented by a particular target business, or that factors outside of the ~~State~~target business and outside of our control will not later arise. Even if our due diligence successfully identifies the principal risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. As a result, from time to time we may be forced to write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing.
RISKS RELATED TO OPERATING OUR BUSINESS
We may fail to operate profitably and grow our revenues.
Most of our adult day care centers are franchised, and we operate those adult day care centers pursuant to Franchise Agreements. We earn base management fees based on a fixed percentage of revenues at those adult day care centers. As a result, our ability to grow our revenues from managing those adult day care centers will be limited to the applicable fee percentages related to the growth of revenues from those adult day care centers, subject to any incentive fees we may earn. In addition, some of our costs are fixed or cannot be, or may be delayed in being, proportionally adjusted in response to any decline in fees and other revenues we may experience. As a result, a small percentage decline in our revenues or increase in our expenses could have a material adverse impact on our operating results.
In addition to franchising adult day care centers, we own two adult day care centers outright, as well as providing other services, such as rehabilitation, wellness and home health services. We may grow these businesses or engage in new or additional businesses in the future. If we do not profitably operate our businesses, the losses we may incur from these businesses, together with corporate and general and administrative expenses we may incur, may exceed the fees we earn from franchising adult day care centers and we may incur operating losses as a result.
Our failure to manage our growth effectively could harm our business and operating results; and our growth strategy may not succeed.
We intend to continue to grow our business by entering into additional Franchise Agreements for adult day care centers and growing the ancillary services we provide in which account for a portion of revenues. Our business plans include seeking to take advantage of expected long-term increases in demand for adult day care centers and health and wellness services. Our growth strategy is subject to risks, including, but not limited to, the following:
·
we may not be an attractive business partner given our operating history;
·
we may be unable to identify, acquire, franchise or newly manage or lease additional adult day care centers and wellness services on acceptable terms;
·
we may be unable to access the capital required to manage additional adult day care centers and wellness services or grow ancillary services;
·
we may be unable to effectively enhance our existing center management systems, administrative staff, financial and management controls and information systems, procedures and controls and to hire, train and retain managers and team members;
·
we may not achieve the operating results we expect from adult day care centers we operate or any wellness or other services we may provide;
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·
we may not respond quickly enough to the changing demands that our expansion will impose on our management, center teams and existing infrastructure;
·
it may take a period of time to stabilize the operations of adult day care centers after we acquire, or commence managing or leasing, them;
·
integrating the operations of newly managed adult day care centers and wellness services we commence operating, or other wellness services we may provide, may disrupt our existing operations, or may cost more than anticipated;
·
we may fail to realize any expected operating or cost efficiencies from any future additional adult day care centers and wellness services we operate;
·
we may commence operating adult day care centers that are subject to unknown liabilities and without any recourse, or with limited recourse, such as liability for the cleanup of undisclosed environmental contamination or for claims by participants, vendors or other persons related to actions taken by former owners or operators of the communities;
·
any failure to comply with licensing requirements at our adult day care centers, and wellness services or elsewhere may prevent our franchisees from obtaining or renewing licenses needed to conduct and grow our businesses; and
·
adult day care centers and wellness services that we commence operating, and any new or expanded wellness services we may seek to provide might require significant management attention that would otherwise be devoted to our other business activities.
For these reasons, among others, our growth strategy may not succeed or may cause us to experience losses.
Our expansion into new markets may be more costly and difficult than we currently anticipate which would result in slower growth than we expect.
Centers we open in new markets may take longer to reach expected sales and profit levels on a consistent basis and may have higher construction, occupancy, marketing or operating costs than centers we open in existing markets, thereby affecting our overall profitability. New ~~Jersey.~~markets may have competitive conditions, consumer tastes and discretionary spending patterns that are more difficult to predict or satisfy than our existing markets. We may need to make greater investments than we originally planned in advertising and promotional activity in new markets to build brand awareness. We may find it more difficult in new markets to hire, motivate and keep qualified employees who share our vision and culture. We may also incur higher costs from entering new markets, particularly with company-owned or operated centers if, for example, we hire and assign regional managers to manage comparatively fewer centers than in more developed markets. For these reasons, both our new franchised centers and our new company-owned or managed centers may be less successful than our existing franchised centers or may achieve target rates of patient visits at a slower rate. If we do not successfully execute our plans to enter new markets, our business, financial condition and results of operations could be materially adversely affected.
5.
~~File a Certificate of Merger with the Secretary of State of the State of New York.~~Opening new centers in existing markets may negatively affect revenue at our existing centers.

The ~~Parent Company intends~~target area of our centers varies by location and depends on a number of factors, including population density, other available retail services, area demographics and geography. As a result, the opening of a new center in or near markets in which we already have centers could adversely affect the revenues of those existing centers. Existing centers could also make it more difficult to ~~take~~build our patient base for a new center in the ~~steps required~~same market. Our business strategy does not entail opening new centers that we believe will materially affect revenue at our existing centers, but we may selectively open new centers in and around areas of existing centers that are operating at or near capacity to ~~complete~~effectively serve our patients. Revenue “cannibalization” between our centers may become significant in the ~~Merger, however,~~future as we continue to expand our operations and could affect our revenue growth, which could, in turn, adversely affect our business, financial condition and results of operations.
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Termination of adult day care participant Consent to Service Agreements and participant attrition could adversely affect our revenues and earnings.
State regulations governing adult day care centers typically require that adult day care center participants have the ~~Parent Company cannot forecast when it will pay~~right to terminate their adult day care Consent to Service agreements for any reason on reasonable (30 to 60 days’) notice. Some of our franchisee request two weeks notice for termination, but this is not a requirement. Should a large number of our participants elect to terminate their Consent to Service agreements at or around the ~~amounts owed to the State of New York, make the indicated filings or otherwise complete the Merger.~~same time, our revenues and earnings could be materially and adversely affected. In addition, ~~there is a risk that~~ the ~~State~~advanced ages of ~~New York~~our adult day care participants may result in high participant turnover rates.
Current and future trends in healthcare and the ~~State~~needs and preferences of ~~New Jersey~~older adults could have a material adverse effect on our business, financial condition and results of operations.
The healthcare industry is dynamic. The needs and preferences of older adults have generally changed over the past several years, including preferences for older adults to reside in their homes permanently or to delay attending adult day care centers until they require greater care. Further, adults moving to adult day care facilities and other similar services are increasingly available and being provided to older adults on an outpatient basis or in older adults’ personal residences, which may ~~require~~cause older adults to delay attending adult day care centers. Such delays may result in decreases in our occupancy rates and increases in our turnover rates. Moreover, older adults who do eventually go to adult day care centers may have greater care needs and acuity, which may increase our cost of doing business, expose us to additional liability or result in lost business and shorter stays at our adult day care centers. These trends may negatively impact our occupancy rates, revenues, cash flows and results of operations.
Additionally, if we fail to identify and successfully act upon future changes and trends in healthcare and the ~~Parent Company~~needs and New York FHP to take additional actions that the Company is not presently contemplating. If the Parent Company and New York FHP are unable to complete the above described steps and to consummate the Merger, then there is a risk that the Parent Company’s acquisitionpreferences of ~~New York FHP could be challenged which could seriously harm the Parent Company’s~~older adults, our business, financial condition, results of operations and prospects will be adversely impacted.
We rely on private pay participants and circumstances that adversely affect the ability of the seniors to pay for our services could have a material adverse effect on us.
Some of our total revenues from communities that we operated were attributable to private pay sources and some of our revenues from these communities were attributable to reimbursements from Medicaid and Managed Care Organizations (MCO), in each case, during fiscal year 2021. We expect to continue to rely primarily on the ability of participants to pay for our services from their own or family financial resources. Unfavorable economic conditions in the housing, financial, and credit markets, inflation, or other circumstances that adversely affect the ability of seniors to pay for our services could have a material adverse effect on our business, financial condition, cash ~~flows.~~flows, and results of operations.
Under our Medicaid contracts, we assume all of the risk that the cost of providing services will exceed our compensation.
Some of the revenue of our operational subsidiary acquired in March 2021, is derived from capitation agreements with government payors in which we receive fixed-price-per-participating-member-per-month (“PMPM”) fees. While there are variations in payment specific to each agreement, we generally contract with government payors to receive a fixed per member, per month fee to provide transportation, meals and daycare services a participant may require while assuming financial responsibility for the totality of our participants’ daycare expenses. This type of contract is often referred to as an “at-risk” or a “capitation” contract. To the extent that our participants require more care than is anticipated and/or the cost of care increases, aggregate fixed capitated payments may be insufficient to cover the costs associated with treatment. If medical costs and expenses exceed the ~~Parent Company~~underlying capitation payment received, we may not be able to correspondingly increase our capitation payments received, and we could suffer losses with respect to such agreements.
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Our revenues and operations are dependent upon a limited number of government payors, particularly Medicaid and Veterans Affairs.
Our operations are dependent on a limited number of government payors, particularly Medicaid and Veterans Affairs (the “VA”), with whom we directly contract to provide services to participants. For at least the next fiscal quarter, a majority of our revenues will continue to be derived primarily from Medicaid and VA payments through several states, which may terminate their contracts with us upon the occurrence of certain events. The sudden loss of our government contracts or the renegotiation of our contracts could adversely affect our operating results. In the ordinary course of business, we engage in active discussions and renegotiations with government payors in respect of the services we provide and the terms of our agreements. If government payors respond to market dynamics and financial pressures, and make strategic budgetary decisions in respect of the programs in which they participate, government payors may seek to renegotiate or terminate their agreements with us. Any reduction in the governmental budgetary appropriations to pay for our services, whether as a result of fiscal constraints due to recession, emergency situations such as the COVID-19 pandemic, changes in policy or otherwise, could result in a reduction in our capitated fee payments and possibly loss of contracts. These discussions could result in reductions to the fees and changes to the scope of services contemplated by our original contract and consequently could negatively impact our revenues, business and prospects.
Because we rely on state Medicaid agencies for a significant portion of our current revenues, we depend on federal funding. Government-funded daycare programs face a number of risks, including higher than expected health care costs and lack of predictability of tax basis and budget needs.
The adult day care services industry is very competitive and some competitors may have substantially greater financial resources than us.
There are approximately 5,685 adult day care centers (according to AgingInPlace.org) in the U.S. may be part of stand-alone adult centers specifically set up to provide day care to seniors, 70 percent are affiliated with or operate within senior centers, churches, medical centers or residential care facilities. Two of our larger competitors include Active Day, with approximately 100 locations, and Easter Seals, a non-profit with 69 affiliates. Programs run from several hours to a full day. Participants may attend daily, a few times a week, weekly, or just for special activities. Weekend and evening care are less common, although this is changing as demand for adult day care rises. We also compete with home care and in-home medical care professionals and enterprises.
Some of our competitors are larger and have greater financial resources than us and some are not for profit entities that have endowment income and may not face the same financial pressures that we do. The adult day care services industry is highly competitive, and we expect that all segments of the industry will become increasingly competitive in the future. We compete with other companies providing independent living, adult day care, home health care and other similar services and care alternatives. We also compete with other health care businesses with respect to attracting and retaining nurses, technicians, aides and other high quality professional and non-professional employees and managers. Although we believe there is a need for adult day care centers in the markets where we operate, we expect that competition will increase from existing competitors and new market entrants, some of whom may have substantially greater financial resources than us.
In addition, some of our competitors operate on a not-for-profit basis or as charitable organizations and have the ability to finance capital expenditures on a tax-exempt basis or through the receipt of charitable contributions, neither of which are available to us. Furthermore, if the development of new adult day care centers outpaces the demand for those communities in the markets in which we have adult day care centers, those markets may become saturated. Regulation in the independent and adult day care industry is substantial. Consequently, development of new adult day care centers could outpace demand. An oversupply of those communities in our markets could cause us to experience decreased occupancy, reduced operating margins and lower profitability.
In recent years, a significant number of new adult day care centers have been developed. Although there are indications that the rate of newly started developments has recently declined and further slowed due to the Pandemic, new inventory is expected to still hit the market in the near term due to the increased development of adult day care centers in the past several years, and this increased supply of adult day care centers has increased and will continue to increase competitive pressures on us, particularly in certain geographic markets where we operate adult day care centers, and we expect these competitive challenges to continue for the foreseeable future. These competitive challenges may prevent us from maintaining or improving occupancy and rates at our adult day care centers, which may adversely affect their profitability and, therefore, negatively impact our revenues, cash flows and results from operations.
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New ~~York FHP~~centers, once opened, may not be profitable, and the increases in average center sales and comparable center sales that we have experienced in the past may not be indicative of future results.
We cannot assure you that centers we open in the future will demonstrate sales growth. In new markets, the length of time before average sales for new centers stabilize is less predictable and can be longer than we expect because of our limited knowledge of these markets and consumers’ limited awareness of our brand. New centers may not be profitable and their sales performance may not follow historical patterns. In addition, our average center sales and comparable center sales for existing centers may not increase at the rates achieved over the past several years. Our ability to franchise new centers profitably and increase average center sales and comparable center sales will depend on many factors, some of which are beyond our control, including:
·
consumer awareness and understanding of our brand;
·
general economic conditions, which can affect center traffic, local rent and labor costs and prices we pay for the supplies we use;
·
changes in consumer preferences and discretionary spending;
·
competition, from our competitors in the industry;
·
the identification and availability of attractive sites for new facilities and the anticipated commercial, residential and infrastructure development near our new facilities;
·
changes in government regulation;
·
in certain regions, decreases in demand for our services due to inclement weather; and
·
other unanticipated increases in costs, any of which could give rise to delays or cost overruns.
If our new centers do not perform as planned, our business and future prospects could be harmed. In addition, if we are unable to ~~consummate~~achieve our expected average centers sales, our business, financial condition and results of operations could be adversely affected.
Our long-term strategy involves opening new, company-owned or franchised centers and is subject to many unpredictable factors.
One component of our long-term growth strategy is to open new franchise centers and to operate those centers on a profitable basis, often in untested geographic areas. As of March 31, 2022, we owned or franchise 26 centers. We have limited or no prior experience operating in a number of geographic areas. We may encounter difficulties, including reduced patient volume related to inclement weather, as we attempt to expand into those untested geographic areas, and we may not be as successful as we are in geographic areas where we have greater familiarity and brand recognition. We may not be able to open new company-owned or franchised centers as quickly as planned. In the ~~Merger, the value~~past, we have experienced delays in opening some franchised and company-owned or franchised centers, for various reasons, including construction permitting, landlord responsiveness, and municipal approvals. Such delays could affect future center openings. Delays or failures in opening new centers could materially and adversely affect our growth strategy and our business, financial condition and results of ~~the Parent Company’s shares held by the Parent Company’s shareholders could significantly decline.~~operations.

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In addition, we face challenges locating and securing suitable new center sites in our target markets. Competition for those sites is intense, and other retail concepts that compete for those sites may have unit economic models that permit them to bid more aggressively for those sites than we can. There is no ~~assurance~~guarantee that a sufficient number of suitable sites will be available in desirable areas or on terms that are acceptable to us in order to achieve our growth plan. Our ability to open new centers also depends on other factors, including:
·
negotiating leases with acceptable terms;
·
identifying, hiring and training qualified employees in each local market;
·
identifying and entering into management or franchise agreements in certain target markets;
·
timely delivery of leased premises to us from our landlords and punctual commencement and completion of construction;
·
managing construction and development costs of new centers, particularly in competitive markets;
·
obtaining construction materials and labor at acceptable costs, particularly in urban markets;
·
unforeseen engineering or environmental problems with leased premises;
·
generating sufficient funds from operations or obtaining acceptable financing to support our future development;
·
securing required governmental approvals, permits and licenses (including construction permits and operating licenses) in a timely manner and responding effectively to any changes in local, state or federal laws and regulations that adversely affect our costs or ability to open new centers; and
·
the impact of inclement weather, natural disasters and other calamities.
Circumstances that adversely affect the ~~market will~~ability of older adults or their families to pay for our services could cause our revenues and results of operations to decline.
We expect to continue to ~~accept~~rely on our ~~products which~~participants’ ability to pay for our services from their private resources. Economic downturns, lower levels of consumer confidence, stock market volatility and/or changes in demographics could adversely affect the ability of older adults to afford our participant fees. Our prospective participants frequently use the proceeds from their home sales to pay our entrance and participant fees. Downturns or stagnation in the U.S. housing market could adversely affect the ability, or perceived ability of older adults to afford these fees. Also, recent high unemployment as a result of the Pandemic may reduce the ability of family members to assist their older relatives in paying these fees. If we are unable to retain and/or attract older adults with sufficient income, assets or other resources required to pay the fees associated with independent and adult day care services and other service offerings, our revenues and results of operations could decline.
Our business requires us to make significant capital expenditures to maintain and improve our adult day care centers and to retain our competitive position in the adult day care industry.
Our adult day care centers sometimes require significant expenditures to address required ongoing maintenance or to make them more attractive to participants. Various government authorities mandate certain physical characteristics of adult day care centers; changes in these regulations may require us to make significant expenditures. In addition, we are often required to make significant capital expenditures when we acquire or newly lease adult day care centers. Our available financial resources may be insufficient to fund these expenditures. We incur capital costs for adult day care centers we own or lease and for our other businesses and corporate level activities. Further, increases in capital costs at our managed and franchised adult day care centers may negatively impact the financial metrics at our adult day care centers and our potential to earn incentive fees for these adult day care centers. Our failure to make certain capital expenditures may result in our adult day care centers being less competitive and in our earning less management fees.
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The geographic concentration of our adult day care centers exposes us to changes in market conditions in those areas.
Our adult day care centers are located in the following geographic areas: California, Connecticut, Florida, Georgia, Idaho, Indiana, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, and Texas. As a result of these locations, the conditions of local economies and real estate markets, changes in governmental rules and regulations, acts of nature and other factors that may result in a decrease in demand for our services in these states could have an adverse ~~affect~~effect on our ~~business.~~revenues, results of operations and cash flow. In addition, we are particularly susceptible to revenue loss, cost increases or damage caused by severe weather conditions or natural disasters such as hurricanes, wildfires, earthquakes or tornadoes in those areas.

~~There can be no assurance that~~Changes in the reimbursement rates, methods, or timing of payment from government programs, including Medicaid, or other reductions in reimbursement for adult day care and healthcare services could adversely impact our ~~food products will be perceived as being superior~~revenues.
Our revenues rely in part on reimbursement from government programs and third party payers for the adult day care and rehabilitation services we provide. The healthcare industry in the United States is subject to ~~existing products~~continuous reform efforts and pressures to reduce costs. Our SarahCare business receives some revenues from Medicaid and from Managed Care Organizations. The rates and amounts of payments under these programs are subject to periodic adjustment and there have been numerous recent legislative and regulatory actions or ~~new products being developed by competing companies or that such products will otherwise be accepted by consumers.~~proposed actions with respect to Medicaid payments, insurance and healthcare delivery. These private third party payers continue their efforts to control healthcare costs and decrease payments for our services through direct contracts with healthcare providers, increased utilization review practices and greater enrollment in managed care programs and preferred provider organizations. Any reduction in the payments we receive from Medicaid, MCO’s and third party payers could result in the failure of those reimbursements to cover our costs of providing required services to our participants and could have a material adverse effect on our business, financial condition and results of operations.
Increases in our labor costs and staffing turnover may have a material adverse effect on us.
The success of our adult day care centers depends on our ability to attract and retain team members for the day-to-day operations of those communities. We continue to face upward pressure on wages and benefits due to high competition for qualified personnel in our industry, low unemployment prior to the onset of the Pandemic and recent proposed and enacted legislation to increase the minimum wage in certain jurisdictions. The market ~~prices~~ for regional and executive directors at our ~~products~~communities, and qualified nurses, therapists and other healthcare professionals is highly competitive, and periodic or geographic area shortages of such healthcare professionals, as well as the added pressure of the Pandemic, may ~~exceed~~require us to increase the ~~prices~~wages and benefits we offer to our team members in order to attract and retain them or to utilize temporary personnel at an increased cost. In addition, employee benefit costs, including health insurance and workers’ compensation insurance costs, have materially increased in recent years.
Our labor costs have increased because of the Pandemic, including because of increased protocols, staffing needs and team member exposure to COVID-19. Many new protocols were put into place for all centers including new infection control standards and procedures, screening process for staff and participants including the administration of COVID tests for staff and participants, additional training programs for staff, purchase of PPE and acrylic dividers for tables and entryways, purchase of air purifiers in corporate centers and in some franchise centers. All centers followed the guidelines as established by the CDC and their state. If they had any questions or concerns, they contacted their local Health Departments and followed their instructions as required by the CDC.
Staffing turnover at our adult day care centers is common and has increased as a result of the Pandemic, the current competitive ~~products. There can be no assurance~~labor market conditions and the competitive environment in the adult day care industry. We have had to rely on more expensive agency help or pay overtime to adequately staff our communities and clinics. Labor unions may attempt to organize our team members from time to time; if our team members were to unionize, it could result in business interruptions, work stoppages, the degradation of service levels due to work rules, or increased operating expenses that may adversely affect our results of operations.
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Additionally, our operations are subject to various employment related laws and regulations, which govern matters such as minimum wages, the ~~prices~~Family and Medical Leave Act, overtime pay, compensable time, recordkeeping and other working conditions, and a variety of similar laws that govern these and other employment related matters. We are currently subject to employment related claims in connection with our operations. These claims, lawsuits and proceedings are in various stages of adjudication or investigation and involve a wide variety of claims and potential outcomes. Because labor represents a significant portion of our ~~products will~~operating expenses, compliance with these evolving laws and regulations could substantially increase our cost of doing business, while failure to do so could subject us to significant back pay awards, fines and lawsuits and could have a material adverse effect on our business, financial condition and results of operations.
Any significant failure by us to control labor costs or to pass any increases on to participants through rate increases could have a material adverse effect on our business, financial condition and results of operations. Further, increased costs charged to our participants may reduce our occupancy and growth.
We depend on the continued services of our Chairman and our President of SarahCare, and the loss of key personnel could affect our ability to successfully grow our business.
We are highly dependent upon the services of Mr. Everhardt, our Chairman, and Dr. Merle Griff, the President of SarahCare. The permanent loss of Mr. Everhardt or Dr. Griff could have a material adverse effect upon our operating results. We may not be ~~perceived by consumers as cost-effective or that the prices of such products will be competitive with existing or new competing products. If consumers~~able to locate a suitable replacement if their services were lost. We do not ~~accept~~maintain key man life insurance on either of them. Our future success will also depend, in part, upon our ~~products, we may be unable~~ability to ~~achieve profitability.~~

~~Other companies, many of which have greater resources than we have, may develop competing products which may~~attract and retain highly qualified personnel. Our inability to retain additional key executives and to attract new, qualified personnel could cause ~~our products~~us to ~~become noncompetitive which could have an adverse affect on our business.~~

We will be competing with firms that sell organic food products. In addition, additional potential competitors may enter the market in the future. Some of these current and potential competitors have longer operating histories, greater name recognition, access to larger customer bases, well-established business organizations and product lines and significantly greater resources. There can be no assurance that one or more such companies will not succeed in developing or marketing products that will render our products noncompetitive. If we fail to compete successfully,curtail our business ~~would suffer.~~operations.

We may suffer the loss of key personnel or may be unable to attract and retain qualified personnel to maintain and expand our business which have a material adverse affect on our business.

Our success is highly dependent on the continued services of certain skilled management and personnel. The loss of any of these individuals could have a material adverse effect on us. In addition, our success will depend upon, among other factors, the recruitment and retention of additional highly skilled and experienced management and personnel. There can be no assurance that we will be able to retain existing employees or to attract and retain additional personnel on acceptable terms given the competition for such personnel and our limited financial resources. In addition, we are highly dependent on the services of our ~~President and Chief Executive Officer, Michael Friedman,~~Chairman, Charles Everhardt, and Mr. ~~Friedman~~Everhardt devotes a portion of his time to unrelated business ~~interests.~~interests, and Dr. Merle Griff, President of SarahCare.

The Board of Directors cannot guarantee that its relationship with the Company does not create conflicts of interest.
The relationship of the Board of Directors to the Company could create conflicts of interest. While the Board has a fiduciary duty to the Company, it also determines its compensation from the Company. The Board’s compensation from the Company has not been determined pursuant to arm’s-length negotiation.
Any acquisitions that we make could disrupt our business and harm our financial condition.
From time to time, we may evaluate potential strategic acquisitions of existing franchised centers to facilitate our growth. We may not be successful in identifying acquisition candidates. In addition, we may not be able to continue the operational success of any franchised centers we acquire or successfully integrate any businesses that we acquire. We may have potential write-offs of acquired assets and an impairment of any goodwill recorded as a result of acquisitions. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations or may result in conflicts with our business. Any acquisition may not be successful, may reduce our cash reserves and may negatively affect our earnings and financial performance. We cannot ensure that any acquisitions we make will not have a material adverse effect on our business, financial condition and results of operations.
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Our expansion into new markets may be more costly and difficult than we currently anticipate which would result in slower growth than we expect.
Centers we open in new markets may take longer to reach expected sales and profit levels on a consistent basis and may have higher construction, occupancy, marketing or operating costs than centers we open in existing markets, thereby affecting our overall profitability. New markets may have competitive conditions, consumer tastes and discretionary spending patterns that are more difficult to predict or satisfy than our existing markets. We may need to make greater investments than we originally planned in advertising and promotional activity in new markets to build brand awareness. We may find it more difficult in new markets to hire, motivate and keep qualified employees who share our vision and culture. We may also incur higher costs from entering new markets, particularly with company-owned or operated centers if, for example, we hire and assign regional managers to manage comparatively fewer centers than in more developed markets. For these reasons, both our new franchised centers and our new company-owned or franchised centers may be less successful than our existing franchised centers or may achieve target rates of patient visits at a slower rate. If we do not successfully execute our plans to enter new markets, our business, financial condition and results of operations could be materially adversely affected.
Opening new centers in existing markets may negatively affect revenue at our existing centers.
The target area of our centers varies by location and depends on a number of factors, including population density, other available retail services, area demographics and geography. As a result, the opening of a new center in or near markets in which we already have centers could adversely affect the revenues of those existing centers. Existing centers could also make it more difficult to build our patient base for a new center in the same market. Our business strategy does not entail opening new centers that we believe will materially affect revenue at our existing centers, but we may selectively open new centers in and around areas of existing centers that are operating at or near capacity to effectively serve our patients. Revenue “cannibalization” between our centers may become significant in the future as we continue to expand our operations and could affect our revenue growth, which could, in turn, adversely affect our business, financial condition and results of operations.
Increased competition for, or a shortage of, personnel, and wage pressures resulting from increased competition, low unemployment levels, minimum wage increases, changes in overtime laws, and union activity may have an adverse effect on our business, results of operations and cash flow.
Our success depends on our ability to retain and attract qualified management and other personnel who are responsible for the day-to-day operations of each of our communities. Each center has an Executive Director responsible for the overall day-to-day operations of the center, including quality of care and service, social services and financial performance. Depending upon the size of the center, each Executive Director is supported by key leaders, a Health and Wellness Director (or nursing director) and/or a Sales Director. The Health and Wellness Director or nursing director is directly responsible for day-to-day care of participants. The Sales Director oversees the center’s sales, marketing and center outreach programs. Other key positions supporting each center may include individuals responsible for food service, healthcare services, activities, housekeeping, and maintenance.
We compete with various healthcare service providers, other adult day care providers and hospitality and food services companies in retaining and attracting qualified personnel. Increased competition for, or a shortage of, nurses, therapists or other personnel, low levels of unemployment, or general inflationary pressures have required and may require in the future that we enhance our pay and benefits package to compete effectively for such personnel. In addition, we have experienced and may continue to experience wage pressures due to minimum wage increases mandated by state and local laws and the proposed increase to the salary thresholds for overtime exemptions under the Fair Labor Standards Act, which the Department of Labor is currently contemplating. It is unclear what rule changes the Department of Labor will adopt. If such rule changes result in higher operating costs, we may not be able to offset the added costs resulting from competitive, inflationary or regulatory pressures by increasing the rates we charge to our participants or our service charges, which would negatively impact our results of operations and cash flow.
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Turnover rates of our personnel and the magnitude of the shortage of nurses, therapists or other personnel varies substantially from market to market. If we fail to attract and retain qualified personnel, our ability to conduct our business operations effectively, our overall operating results and cash flow could be harmed.
In addition, efforts by labor unions to unionize any of our center personnel could divert management attention, lead to increases in our labor costs and/or reduce our flexibility with respect to certain workplace rules. If we experience an increase in organizing activity, if onerous collective bargaining agreement terms are imposed upon us, or if we otherwise experience an increase in our staffing and labor costs, our results of operations and cash flow would be negatively affected.
Significant changes in our personnel, and more could occur in the future. Changes to operations, policies and procedures, which can often occur with the appointment of new personnel, can create uncertainty, may negatively impact our ability to execute quickly and effectively, and may ultimately be unsuccessful. In addition, transition periods are often difficult as the new Company personnel gain detailed knowledge of our operations, and friction can result from changes in strategy and management style. Employee turnover inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution. Until we integrate new personnel, and unless they are able to succeed in their positions, we may be unable to successfully manage and grow our business, and our financial condition and profitability may suffer.
Further, to the extent we experience additional personnel turnover, our operations, financial condition and employee morale could be negatively impacted. If we are unable to attract and retain qualified management and sales personnel, our business could suffer. Moreover, our operations could be negatively affected if employees are quarantined as the result of exposure to a contagious illness such as COVID-19.
Damage to our reputation or our brand in existing or new markets could negatively impact our business, financial condition and results of operations.
We believe we have built our reputation on high quality, empathetic patient care, and we must protect and grow the value of our brand to continue to be successful in the future. Our brand may be diminished if we do not continue to make investments in areas such as marketing and advertising, as well as the day-to-day investments required for facility operations, equipment upgrades and staff training. Any incident, real or perceived, regardless of merit or outcome, that erodes our brand, such as failure to comply with federal, state or local regulations including allegations or perceptions of non-compliance or failure to comply with ethical and operating standards, could significantly reduce the value of our brand, expose us to adverse publicity and damage our overall business and reputation. Further, our brand value could suffer and our business could be adversely affected if patients perceive a reduction in the quality of service or staff.
Our potential need to raise additional capital to accomplish our objectives of expanding into new markets and selectively developing company-owned, franchised or franchised centers exposes us to risks including limiting our ability to develop or acquire centers and limiting our financial flexibility.
If we do not have sufficient cash resources, our ability to develop, franchise and/or acquire centers could be limited unless we are able to obtain additional capital through future debt or equity financing. Using cash to finance development and acquisition of centers could limit our financial flexibility by reducing cash available for operating purposes. Using debt financing could result in lenders imposing financial covenants that limit our operations and financial flexibility. Using equity financing may result in dilution of ownership interests of our existing stockholders. We may also use common stock as consideration for the future acquisition of centers. If our common stock does not maintain a sufficient market value or if prospective acquisition candidates are unwilling to accept our common stock as part of the consideration for the sale of their centers or businesses, we may be required to use more of our cash resources or greater debt financing to complete these acquisitions.
Our marketing programs may not be successful.
We incur costs and expend other resources in our marketing efforts to attract and retain patients. Our marketing activities are principally focused on increasing brand awareness and driving patient volumes. As we open new or franchised centers, we undertake aggressive marketing campaigns to increase center awareness about our growing presence. We plan to continue to utilize targeted marketing efforts within local neighborhoods through channels such as radio, digital media, center sponsorships and events, and a robust online/social media presence. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenue. Our ability to market our services may be restricted or limited by federal or state law.
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We will be subject to all of the risks associated with leasing space subject to long-term non-cancelable leases for centers that we intend to operate.
We do not currently own any of the real property where our company-owned or franchised centers operate. In the future, we may own some of the real property where our company-owned or franchised centers operate. We expect the spaces for the company-owned or franchised centers we intend to open in the future will be leased. We anticipate that our leases generally will have an initial term of five or ten years and generally can be extended only in five-year increments (at increased rates). We expect that all of our leases will require a fixed annual rent, although some may require the payment of additional rent if center sales exceed a negotiated amount. We expect that our leases will typically be net leases, which require us to pay all of the costs of insurance, taxes, maintenance and utilities, and that these leases will not be cancellable by us. If a future company-owned or managed center is not profitable, resulting in its closure, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In addition, we may fail to negotiate renewals as each of our leases expires, either on commercially acceptable terms or at all, which could cause us to pay increased occupancy costs or to close centers in desirable locations. These potential increases in occupancy costs and the cost of closing company-owned or franchised centers could materially adversely affect our business, financial condition or results of operations.
RISKS RELATED TO USE OF THE FRANCHISE BUSINESS MODEL
Our dependence on the success of our franchisees exposes us to risks including the loss of royalty revenue and harm to our brand.
A substantial portion of our revenues comes from royalties generated by our franchised centers, which royalties are based on the revenues generated by those centers. We anticipate that franchise royalties will represent a substantial part of our revenues in the future. As of March 31, 2022, we had franchisees operating or managing 24 centers. We rely on the performance of our franchisees in successfully opening and operating their centers and paying royalties and other fees to us on a timely basis. Our franchise system subjects us to a number of risks as described here and in the next four risk factors. These risks include a significant decline in our franchisees’ revenue, which has occurred as a result of the current COVID-19 pandemic. Furthermore, we have taken actions to support our franchisees experiencing challenges during the COVID-19 pandemic, further reducing our royalty revenues and other fees from franchisees. These actions included a waiver of the minimum royalty requirement for any centers that were closed because of government orders, until they were able to re-open. We may need to re-implement, expand or extend these accommodations to franchisees, further reducing our revenues from franchised centers. These accommodations, the decline in our franchisees’ revenue and the occurrence of any of the other events described here and in the next four risk factors could impact our ability to collect royalty payments from our franchisees, harm the goodwill associated with our brand, and materially adversely affect our business and results of operations.
Our franchisees are independent operators over whom we have limited control.
Franchisees are independent operators, and their employees are not our employees. Accordingly, their actions are outside of our control. Although we have developed criteria to evaluate and screen prospective franchisees, we cannot be certain that our franchisees will have the business acumen or financial resources necessary to operate successful franchises in their approved locations, and state franchise laws may limit our ability to terminate or modify these franchise agreements. Moreover, despite our training, support and monitoring, franchisees may not successfully operate centers in a manner consistent with our standards and requirements, or may not hire and adequately train qualified personnel. The failure of our franchisees to operate their franchises successfully and the actions taken by their employees could have a material adverse effect on our reputation, our brand and our ability to attract prospective franchisees, and on our business, financial condition and results of operations.
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We are subject to the risk that our franchise agreements may be terminated or not renewed.
Our franchise agreements typically have a 10-year initial term with a 5-year renewal. Each franchise agreement is subject to termination by us as the franchisor in the event of a default, generally after expiration of applicable cure periods, although under certain circumstances a franchise agreement may be terminated by us upon notice without an opportunity to cure. The default provisions under the franchise agreements are drafted broadly and include, among other things, any failure to meet operating standards and actions that may threaten our intellectual property. In addition, each franchise agreement has an expiration date. Upon the expiration of the franchise agreement, we or the franchisee may, or may not, elect to renew the franchise agreement. If the franchise agreement is renewed, the franchisee will receive a new franchise agreement for an additional term. Such option, however, is contingent on the franchisee’s execution of the then- current form of franchise agreement (which may include increased royalty payments, advertising fees and other costs) and the payment of a renewal fee. If a franchisee is unable or unwilling to satisfy any of the foregoing conditions, we may elect not to renew the expiring franchise agreement, in which event the franchise agreement will terminate upon expiration of its term. The termination or non-renewal of a franchise agreement could result in the reduction of royalty payments we receive.
Our franchisees may not meet timetables for opening their centers, which could reduce the royalties we receive.
Our franchise agreements specify a timetable for opening the center. Failure by our franchisees to open their centers within the specified time limit would result in the reduction of royalty payments we would have otherwise received and could result in the termination of the franchise agreement. As of March 31, 2022, we had 24 active franchise locations.
The substantial majority of the adult day care centers are franchised locations and our business is substantially dependent on our franchisees.
Of the 26 adult day care centers we operate, 24 are franchised locations. Our franchisees may terminate the Franchise Agreements in certain circumstances, including if the EBITDA we generate at our adult day care centers does not exceed target levels or for our uncured material breach. The loss of the franchisees, or a material change to their terms less favorable to us, could have a material adverse effect on our business, financial condition or results of operations.
RISKS RELATED TO THE ENVIRONMENT AND COVID-19
The Pandemic has had, and may continue to have, a materially adverse effect on our business, operations, financial results and liquidity and its duration is unknown.
The Pandemic has had a negative impact on the global economy, including certain industries in the U.S. economy that are primarily focused on personal services.
These conditions have had, and will likely continue to have, a material and adverse impact on our business, results of operations and liquidity. Occupancy at our adult day care centers has continually declined during the Pandemic and we expect these declines may continue for a sustained period of time, which we expect would have a significant adverse impact on our financial results. Although the rates we charge participants has not changed significantly to date as a result of the Pandemic, that could change if the Pandemic continues or economic conditions worsen. We earn franchise fees based on a percentage of revenues generated at the adult day care centers that we franchise; therefore, declines in occupancy, restrictions on admitting new participants and the closure or curtailment of operations of adult day care centers we franchise, without sufficient offsets from increased rates or other revenues, and vice versa, have and likely will continue to reduce the franchise fees we earn. Also, there were not any new franchise openings in 2020 as a result of the pandemic. In addition, the Pandemic may further adversely impact our business if shortages in the materials we need to operate our adult day care centers or staffing shortages result. Additionally, the Pandemic could continue to significantly increase certain operating costs for our adult day care centers, including labor costs due to agency usage or overtime pay and our costs to obtain PPE, to incorporate enhanced infection control measures and to implement quarantines for participants. Also, we believe that our insurance costs may continue to rise as a result of claims or litigation associated with the Pandemic. In addition, as a result of the Pandemic, SarahCare has been forced to close certain locations temporarily and we have significantly reduced the number of new locations (both corporate and franchise) we planned to open during 2021. As a result, revenues from our SarahCare business have been, and may continue to be, negatively impacted.
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Although immunization against COVID-19 is in process, it is expected to continue through 2022 with considerable effort and expense, for all of the participants and team members in our adult day care centers to be vaccinated and even longer for the vaccines to be produced, distributed and administered to a sufficient number of people to enable the cessation of the Pandemic. In addition, we may be subject to claims by participants and team members related to vaccine administration by us or the care provided by us following administration of the vaccine and we cannot be sure we will be protected from liability as a result of being a “Covered Person” under the Public Readiness and Emergency Preparedness Act.
We cannot predict the extent and duration of the Pandemic or its economic impact, but we expect the adverse consequences will be substantial. Further, the extent and strength of any economic recovery after the Pandemic abates is uncertain and subject to various factors and conditions. Our business, operations and financial position may continue to be negatively impacted after the Pandemic abates and may remain at depressed levels compared to prior to the outbreak of the Pandemic for an extended period.
The high levels of infected COVID-19 patients and deaths at adult day care centers and resulting negative publicity may have a long-term significant detrimental impact on the adult day care industry.
COVID-19 has been particularly harmful to seniors and persons with pre-existing health conditions. If the adult day care industry continues to experience high levels of COVID-19 infections among participants and related deaths, and news accounts emphasize these experiences, seniors may delay or forgo moving into adult day care centers or using other services provided by adult day care operators. As a result, our adult day care centers’ business and our results of operations may experience a long-term significant detrimental impact. Of the participants who attended our centers through March 31, 2022 less than 1% contracted COVID and no one passed away.
Major public health concerns, including the outbreak of epidemic or pandemic contagious disease such as COVID-19, may adversely affect revenue at our centers and disrupt financial markets. In the case of COVID-19, revenue at our centers has been adversely affected and financial markets have been disrupted, both of which are likely to continue.
In January 2020, the World Health Organization declared that the COVID-19 outbreak, which began in China and has since spread to other areas, as a global health emergency. In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The COVID-19 pandemic continues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. The spread of the virus in the U.S. or a similar public health threat, or fear of such an event, may result in (and in the case of the COVID-19 pandemic, has resulted in), among other things, a reduced willingness of patients to visit our centers or the shopping centers in which they are located out of concern over exposure to contagious disease, closed centers, reduced business hours, and a decline in revenue. A prolonged outbreak, resulting in reduced patient traffic and continued disruptions to capital and financial markets, could have (and in case of the COVID-19 pandemic, has resulted in) a material adverse impact on our business, financial condition, results of operations, and the market price of our stock.
Widespread illnesses due to a severe cold or flu season or a pandemic (like COVID-19) could adversely affect the occupancy of our adult day care centers.
Our revenues are dependent on occupancy at our adult day care centers. If a severe cold or flu season, an epidemic or any other widespread illnesses, like COVID-19, were to occur in locations where our adult day care centers are located, our revenues from those communities would likely be significantly adversely impacted. During such occasions, we may experience a decline in occupancy due to participants leaving our communities and, we may be required, or we may otherwise determine that it would be prudent, to quarantine some or all of the adult day care center and not permit new participants during that time. Further, depending on the severity of the occurrence, we may be required to incur costs to identify, contain and remedy the impacts of those occurrences at those adult day care centers. As a result, these occurrences could significantly adversely affect our results of operations.
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Global economic, political, social and other conditions, including the COVID-19 pandemic, may continue to adversely impact our business and results of operations.
The health and wellness industry, can be affected by macro-economic factors, including changes in national, regional, and local economic conditions, unemployment levels and consumer spending patterns, which together may impact the willingness of consumers to purchase our products as they adjust their discretionary spending. Adverse economic conditions may adversely affect the ability of our distributors to obtain the credit necessary to fund their working capital needs, which could negatively impact their ability or desire to continue to purchase products from us in the same frequencies and volumes as they have done in the past. If we experience similar adverse economic conditions in the future, sales of our products could be adversely affected, collectability of accounts receivable may be compromised and we may face obsolescence issues with our inventory, any of which could have a material adverse impact on our operating results and financial condition.
Additionally, while the extent of the impact on our business and financial condition is unknown at this time, we may be negatively affected by COVID-19 and actions taken to address and limit the spread of COVID-19, such as travel restrictions, event cancellations, and limitations affecting the supply of labor and the movement of raw materials and finished products. If available manufacturing capacity is reduced as a result of the COVID-19, it could negatively affect the timely supply, pricing and availability of finished products. Moreover, we will also be negatively impacted by current and future closures of restaurants, independent accounts, convenience chains, and retail store chains resulting from the COVID-19 outbreak. The current closures of businesses will negatively affect our revenues and cash flows and the future closure of businesses will also adversely impact our business and financial condition.
Overall, the Company does not yet know the full extent of potential delays or impacts on its business, financing activities, or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of third parties on which we rely.
Our business and future operating results may be adversely affected by changes in economic conditions, adverse weather and other unforeseen conditions or events that are beyond our control could materially affect our ability to maintain or increase sales at our centers or open new centers.
Our services emphasize adult day care, which is generally not a medical necessity, and should be viewed as a discretionary medical expenditure. The United States in general or the specific markets in which we operate may suffer from depressed economic activity, recessionary economic cycles, higher fuel or energy costs, low consumer confidence, high levels of unemployment, reduced home values, increases in home foreclosures, investment losses, personal bankruptcies, reduced access to credit or other economic factors that may affect consumer discretionary spending. Traffic in our centers could decline if consumers choose to reduce the amount they spend on non-critical medical procedures. Negative economic conditions might cause consumers to make long-term changes to their discretionary spending behavior, including reducing medical discretionary spending on a permanent basis. In addition, given our geographic concentrations in the Midwest, Southeast, and mid-Atlantic regions of the United States, economic conditions in those particular areas of the country could have a disproportionate impact on our overall results of operations, and regional occurrences such as local strikes, terrorist attacks, increases in energy prices, adverse weather conditions, pandemics, tornadoes, earthquakes, hurricanes, floods, droughts, power loss, telecommunications failures, fires, the economic consequences of military action and the associated political instability, and the effect of heightened security concerns on domestic and international travel and commerce, or other natural or man-made disasters could materially adversely affect our business, financial condition and results of operations.
Severe weather may have an adverse effect on adult day care centers we operate. Flooding caused by rising sea levels and severe weather events, including hurricanes, tornadoes and widespread fires have had and may have in the future an adverse effect on adult day care centers we operate and result in significant losses to us and interruption of our business. When major weather or climate-related events occur near our adult day care centers, we may relocate the participants of those adult day care centers to alternative locations for their safety and close or limit the operations of the impacted adult day care centers until the event has ended and the center is ready for operation. We may incur significant costs and losses as a result of these activities, both in terms of operating, preparing and repairing our adult day care centers in anticipation of, during, and after a severe weather or climate-related event and in terms of potential lost business due to the interruption in operating our adult day care centers. Our insurance may not adequately compensate us for these costs and losses.
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Further, concerns about climate change have resulted in various treaties, laws and regulations that are intended to limit carbon emissions and address other environmental concerns. These and other laws may cause energy or other costs at our adult day care centers to increase. In the long-term, we believe any such increased operating costs will be passed through and paid by our participants in the form of higher charges for our services. However, in the short-term, these increased costs, if material in amount, could adversely affect our financial condition and results of operations and cause the value of our securities to decline.
Climate change may negatively affect our business.
There is growing concern that a gradual increase in global average temperatures may cause an adverse change in weather patterns around the globe resulting in an increase in the frequency and severity of natural disasters. While warmer weather has historically been associated with increased sales of our products, changing weather patterns could have a negative impact on agricultural productivity, which may limit availability or increase the cost of certain key ingredients such as sugar cane, natural flavors and supplements used in our products. Also, increased frequency or duration of extreme weather conditions may disrupt the productivity of our facilities, the operation of our supply chain or impact demand for our products. In addition, the increasing concern over climate change may result in more regional, federal and global legal and regulatory requirements and could result in increased production, transportation and raw material costs. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations.
RISKS RELATED TO OTHER LEGAL AND REGULATORY MATTERS
We are subject to ethical guidelines and operating standards which, if not complied with, could adversely affect our business.
Those who work in our system are subject to ethical guidelines and operating standards of professional and trade associations and private accreditation agencies. Compliance with these guidelines and standards is often required by our contracts with our patients and franchise owners (and their contractual relationships) or to maintain our reputation. The guidelines and standards governing the provision of healthcare services may change significantly in the future. New or changed guidelines or standards may materially and adversely affect our business. In addition, a review of our business by accreditation authorities could result in a determination that could adversely affect our operations.
We, along with our franchisees, are subject to malpractice and other similar claims and may be unable to obtain or maintain adequate insurance against these claims.
The provision of adult day care services entails an inherent risk of potential malpractice and other similar claims. While we do not have responsibility for compliance with regulatory and other requirements directly applicable to claims, suits or complaints relating to services provided at the offices of our franchisees may be asserted against us. As we develop company-owned or franchised centers, our exposure to malpractice claims will increase. We have experienced a number of malpractice claims since our founding in 1985, which we have defended or are vigorously defending and do not expect their outcome to have a material adverse effect on our business, financial condition or results of operations. The assertion or outcome of these claims could result in higher administrative and legal expenses, including settlement costs or litigation damages. Our current minimum professional liability insurance coverage required for our franchisees and company-owned centers is $1.0 million per occurrence and $2.0 million in annual aggregate; as well as professional liability insurance of not less than $1,000,000. If we are unable to obtain adequate insurance, our franchisees fail to name the Company as an additional insured party, or if there is an increase in the future cost of insurance to us there may be a material adverse effect on our business and financial results.
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There is an inherent risk of liability in the provision of personal and health care services, not all of which may be covered by insurance.
The provision of personal and health care services in the adult day care industry entails an inherent risk of liability. In recent years, participants in the long-term care industry have become subject to an increasing number of lawsuits alleging negligence or related legal theories, many of which involve large claims and result in the incurrence of significant defense costs. Moreover, adult day care centers offer participants a greater degree of independence in their daily living. This increased level of independence may subject the participant and, therefore, us to risks that would be reduced in more institutionalized settings. We currently maintain insurance in amounts we believe are comparable to those maintained by other adult day care companies based on the nature of the risks, our historical experience and industry standards, and we believe that this insurance coverage is adequate. However, we may become subject to claims in excess of our insurance or claims not covered by our insurance, such as claims for punitive damages, terrorism and natural disasters. A claim against us not covered by, or in excess of, our insurance could have a material adverse effect upon our business, financial condition, cash flows, and results of operations.
In addition, our insurance policies must be renewed annually. Based upon poor loss experience and the impact of the COVID-19 pandemic, insurers for the adult day care industry have become increasingly wary of liability exposure. A number of insurance carriers have stopped writing coverage to this market or reduced the level of coverage offered, and those remaining have increased premiums and deductibles substantially. The COVID-19 pandemic may also adversely affect our ability to obtain insurance coverage or increase the costs of doing so. Therefore, we cannot assure that we will be able to obtain liability insurance in the future or that, if that insurance is available, it will be available on acceptable economic terms.
Provisions of the ACA could reduce our income and increase our costs.
The ACA regulates insurance, payment and healthcare delivery systems that have affected, and will continue to affect our revenues and costs. The ACA provides for multiple reductions to the annual market updates for inflation that may result in reductions in payment rates. The ACA includes other provisions that may affect us, such as enforcement reforms and Medicaid program integrity control initiatives, new compliance, ethics and public disclosure requirements, initiatives to encourage the development of home and center based long-term care services rather than institutional services under Medicaid, value based purchasing plans program to develop and evaluate making a bundled payment for services provided during an episode of care. We are unable to predict the impact on us of the insurance, payment, and healthcare delivery systems provisions contained in and to be developed pursuant to the ACA. In addition, maintaining compliance with the ACA requires us to expend management time and financial resources.
We are subject to governmental regulations and compliance, some of which are burdensome and some of which may change to our detriment in the future.
Federal and state governments regulate various aspects of our business. The development and operation of adult day care centers and the provision of health care services are subject to federal, state and local licensure, certification and inspection laws that regulate, among other matters, the provision of services, the distribution of pharmaceuticals, billing practices and policies, equipment, staffing (including professional licensing), operating policies and procedures, fire prevention measures, environmental matters, and compliance with building and safety codes. Failure to comply with these laws and regulations could result in the denial of reimbursement, the imposition of fines, temporary suspension of admission of new participants, suspension or decertification from the Medicaid program, restrictions on the ability to acquire new communities or expand existing communities and, in extreme cases, the revocation of a center’s license or closure of a center. We believe that such regulation will increase in the future and we are unable to predict the content of new regulations or their effect on our business, any of which could materially adversely affect our business, financial condition, cash flows, and results of operations.
Various states, including several of the states in which we currently operate, control the supply of adult day care centers through a CON requirement or other programs. In those states, approval is required for the addition of some capital expenditures at those communities. To the extent that a CON or other similar approval is required for the acquisition or construction of new communities, the expansion of services, or existing communities, we could be adversely affected by our failure or inability to obtain that approval, changes in the standards applicable for that approval, and possible delays and expenses associated with obtaining that approval. In addition, in most states, the closure of a center requires the approval of the appropriate state regulatory agency, and, if we were to seek to close a center, we could be adversely affected by a failure to obtain or a delay in obtaining that approval.
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Federal and state anti-remuneration laws, such as “anti-kickback” laws, govern some financial arrangements among health care providers and others who may be in a position to refer or recommend patients to those providers. These laws prohibit, among other things, some direct and indirect payments that are intended to induce the referral of patients to, the arranging for services by, or the recommending of, a particular provider of health care items or services. Federal anti-kickback laws have been broadly interpreted to apply to some contractual relationships between health care providers and sources of patient referral. Similar state laws vary, are sometimes vague, and seldom have been interpreted by courts or regulatory agencies. Violation of these laws can result in loss of licensure, civil and criminal penalties, and exclusion of health care providers or suppliers from participation in the Medicaid program. There can be no assurance that those laws will be interpreted in a manner consistent with our practices.
Under the Americans with Disabilities Act of 1990, all places of public accommodation are required to meet federal requirements related to access and use by disabled persons. A number of additional federal, state and local laws exist that also may require modifications to existing and planned communities to create access to the properties by disabled persons. Although we believe that our communities are substantially in compliance with present requirements or are exempt therefrom, if required changes involve a greater expenditure than anticipated or must be made on a more accelerated basis than anticipated, additional costs would be incurred by us. Further legislation may impose additional burdens or restrictions with respect to access by disabled persons, the costs of compliance with which could be substantial.
HIPAA, in conjunction with the federal regulations promulgated thereunder by the Department of Health and Human Services, has established, among other requirements, standards governing the privacy of certain protected and individually identifiable health information that is created, received or maintained by a range of covered entities. HIPAA has also established standards governing uniform health care transactions, the codes and identifiers to be used by the covered entities and standards governing the security of certain electronic transactions conducted by covered entities. Penalties for violations can range from civil money penalties for errors and negligent acts to criminal fines and imprisonment for knowing and intentional misconduct. HIPAA is a complex set of regulations and many unanswered questions remain with respect to the manner in which HIPAA applies to businesses such as those operated by us.
In addition, some states have begun to enact more comprehensive privacy laws and regulations addressing consumer rights to data protection or transparency. For example, the California Consumer Privacy Act became effective in 2020, and we expect additional federal and state legislative and regulatory efforts to regulate consumer privacy protection in the future. Compliance with such legislative and regulatory developments could be burdensome and costly, and the failure to comply could have a material adverse effect on our business, financial condition, cash flows and results of operations.
An increasing number of legislative initiatives have been introduced or proposed in recent years that would result in major changes in the health care delivery system on a national or a state level. Among the proposals that have been introduced are price controls on hospitals, insurance market reforms to increase the availability of group health insurance to small businesses, requirements that all businesses offer health insurance coverage to their employees and the creation of government health insurance plans that would cover all citizens and increase payments by beneficiaries. We cannot predict whether any of the above proposals or other proposals will be adopted and, if adopted, no assurances can be given that their implementation will not have a material adverse effect on our business, financial condition or results of operations.
We are required to indemnify our directors and officers.
The Articles of Incorporation and Bylaws provide that we will indemnify its officers and directors to the maximum extent permitted by Delaware law, provided that the officer or director acted in bad faith or breached his or her duty to us or our stockholders, that the officer or director acted in bad faith, or that it is more likely than not that it will ultimately be determined that the officer or director has not met the standards of conduct which make it permissible for under Delaware law for the Company to indemnify the officer or director. If we were called upon to indemnify an officer or director, then the portion of its assets expended for such purpose would reduce the amount otherwise available for the Company’s business.
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If we fail to protect our trademarks and trade secrets, we may be unable to successfully market our products and compete effectively.
We rely on a combination of trademark and trade secrecy laws, confidentiality procedures and contractual provisions to protect our intellectual property rights. Failure to protect our intellectual property could harm our brand and our reputation, and adversely affect our ability to compete effectively. Further, enforcing or defending our intellectual property rights, including our trademarks and trade secrets, could result in the expenditure of significant financial and managerial resources. We regard our intellectual property, particularly our trademarks and trade secrets, as crucial to our business and our success. However, the steps taken by us to protect these proprietary rights may not be adequate and may not prevent third parties from infringing or misappropriating our trademarks, trade secrets or similar proprietary rights. In addition, other parties may seek to assert infringement claims against us, and we may have to pursue litigation against other parties to assert our rights. Any such claim or litigation could be costly. In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands, profitably exploit our products or recoup our associated research and development costs.
Events or rumors relating to our brand names or our ability to defend successfully against intellectual property infringement claims by third parties could significantly impact our business.
Recognition of our brand names, and the association of those brands with quality, convenient and inexpensive adult day care, are an integral part of our business. The occurrence of any events or rumors that cause patients to no longer associate the brands with quality, convenient and affordable adult day care may materially adversely affect the value of the brand names and demand for services at our franchisees.
Our ability to compete effectively depends in part upon our intellectual property rights, including but not limited to our trademarks. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property rights may not be adequate. Litigation may be necessary to enforce our intellectual property rights, or to defend against claims by third parties that the conduct of our businesses or our use of intellectual property infringes upon such third party’s intellectual property rights. Any intellectual property litigation or claims brought against us, whether or not meritorious, could result in substantial costs and diversion of our resources, and there can be no assurances that favorable final outcomes will be obtained in all cases. Our business, financial condition or results of operations could be adversely affected as a result.
The nature of our business exposes us to litigation and regulatory and government proceedings.
We have been, are currently, and expect in the future to be, involved in claims, lawsuits and regulatory and government audits, investigations and proceedings arising in the ordinary course of our business, some of which may involve material amounts. The defense and resolution of such claims, lawsuits and other proceedings may require us to incur significant expenses.
In several well publicized instances, private litigation by participants of adult day care centers for alleged abuses has resulted in large damage awards against other adult day care companies. As a result, the cost of our liability insurance continues to increase. Medical liability insurance reforms have not generally been adopted, and we expect our insurance costs may continue to increase.
Litigation may subject us to adverse rulings and judgments that may materially impact our business, operating results and liquidity. In addition, defending litigation distracts the attention of our management and may be expensive. For more information regarding certain of the litigation matters, our legal contingencies and past legal and compliance matters, see Item 8 of this Form 10.
Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.
We may become party to litigation claims and legal proceedings. Litigation involves significant risks, uncertainties and costs, including distraction of management attention away from our business operations. We evaluate litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves and disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from those envisioned by our current assessments and estimates. Our policies and procedures require strict compliance by our employees and agents with all U.S. and local laws and regulations applicable to our business operations, including those prohibiting improper payments to government officials. Nonetheless, our policies and procedures may not ensure full compliance by our employees and agents with all applicable legal requirements. Improper conduct by our employees or agents could damage our reputation or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines, as well as disgorgement of profits.
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Our operations are subject to environmental risks and liabilities.
We are required to comply with various environmental laws governing the use, management and disposal of, and human exposure to, hazardous and toxic substances. If we fail to comply with such laws, or if the properties we own, operate or use for disposal are contaminated by such substances, we may be subject to penalties or other corrective action requirements and liabilities, including the costs to investigate or remediate such contamination. These laws also expose us to claims by third parties for costs and damages they may incur in connection with hazardous substances related to our activities and properties. If we experience these environmental liabilities and costs, they could have a material impact on our operating results and financial condition.
RISKS RELATED TO INFORMATION TECHNOLOGY, CYBERSECURITY AND DATA PRIVACY
We are subject to the data privacy, security and breach notification requirements of HIPAA and other data privacy and security laws, and the failure to comply with these rules, or allegations that we have failed to do so, can result in civil or criminal sanctions.
HIPAA required the United States Department of Health and Human Service, or HHS, to adopt standards to protect the privacy and security of certain health-related information. The HIPAA privacy regulations contain detailed requirements concerning the use and disclosure of individually identifiable health information and the grant of certain rights to patients with respect to such information by “covered entities.” As a provider of healthcare who conducts certain electronic transactions, each of our centers is considered a ~~“penny stock”~~covered entity under HIPAA. We have taken actions to comply with the HIPAA privacy regulations and ~~as a result, related broker-dealer~~believe that we are in compliance with those regulations. Oversight of HIPAA compliance involves significant time, effort and expense.
In addition to the privacy requirements, ~~may hamper its trading~~HIPAA covered entities must implement certain administrative, physical and ~~liquidity.~~

~~Our common stock is considered~~technical security standards to protect the integrity, confidentiality and availability of certain electronic health-related information received, maintained or transmitted by covered entities or their business associates. We have taken actions in an effort to be in compliance with these security regulations and believe that we are in compliance, however, a ~~“penny stock” since~~security incident that bypasses our information security systems causing an information security breach, loss of protected health information or other data subject to privacy laws or a material disruption of our operational systems could result in a material adverse impact on our business, along with fines. Ongoing implementation and oversight of these security measures involves significant time, effort and expense.
The Health Information Technology for Economic and Clinical Health Act, or HITECH, as implemented in part by an omnibus final rule published in the Federal Register on January 25, 2013, further requires that patients be notified of any unauthorized acquisition, access, use, or disclosure of their unsecured protected health information, or PHI, that compromises the privacy or security of such information. HHS has established the presumption that all unauthorized uses or disclosures of unsecured protected health information constitute breaches unless the covered entity or business associate establishes that there is a low probability the information has been compromised. HITECH and implementing regulations specify that such notifications must be made without unreasonable delay and in no case later than 60 calendar days after discovery of the breach. If a breach affects 500 patients or more, it ~~meets~~must be reported immediately to HHS, which will post the name of the breaching entity on its public website. Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS of such breaches at least annually. These breach notification requirements apply not only to unauthorized disclosures of unsecured PHI to outside third parties, but also to unauthorized internal access to or use of such PHI.
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HITECH significantly expanded the scope of the privacy and security requirements under HIPAA and increased penalties for violations. The amount of penalty that may be assessed depends, in part, upon the culpability of the applicable covered entity or business associate in committing the violation. Some penalties for certain violations that were not due to “willful neglect” may be waived by the Secretary of HHS in whole or in part, to the extent that the payment of the penalty would be excessive relative to the violation. HITECH also authorized state attorneys general to file suit on behalf of participants of their states. Applicable courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. HITECH also mandates that the Secretary of HHS conduct periodic compliance audits of a cross-section of HIPAA covered entities and business associates. Every covered entity and business associate is subject to being audited, regardless of the entity’s compliance record.
States may impose more protective privacy restrictions in laws related to health information and may afford individuals a private right of action with respect to the violation of such laws. Both state and federal laws are subject to modification or enhancement of privacy protection at any time. We are subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA. These statutes vary and could impose additional requirements on us and more severe penalties for disclosures of health information. If we fail to comply with HIPAA or similar state laws, including laws addressing data confidentiality, security or breach notification, we could incur substantial monetary penalties and our reputation could be damaged.
In addition, states may also impose restrictions related to the confidentiality of personal information that is not considered “protected health information” under HIPAA. Such information may include certain identifying information and financial information of our patients. Theses state laws may impose additional notification requirements in the event of a breach of such personal information. Failure to comply with such data confidentiality, security and breach notification laws may result in substantial monetary penalties.
Our business model depends on proprietary and third-party management information systems that we use to, among other things, track financial and operating performance of our centers, and any failure to successfully design and maintain these systems or implement new systems could materially harm our operations.
We depend on integrated management information systems, some of which are provided by third parties, and standardized procedures for operational and financial information, patient records and billing operations. We may from time to time replace and/or upgrade our management information systems, and any delays in implementation of a new system or problems with system performance after implementation could cause disruptions in our business operations, given the pervasive impact of a new system on our processes. In general, we may experience unanticipated delays, complications, data breaches or expenses in replacing, upgrading, implementing, integrating, and operating our systems. Our management information systems regularly require modifications, improvements or replacements that may require both substantial expenditures as well as interruptions in operations. Our ability to implement these systems is subject to the availability of skilled information technology specialists to assist us in creating, implementing and supporting these systems. Our failure to successfully design, implement and maintain all of our systems could have a material adverse effect on our business, financial condition and results of operations.
If we fail to properly maintain the integrity of our data or to strategically implement, upgrade or consolidate existing information systems, our reputation and business could be materially adversely affected.
We increasingly use electronic means to interact with our participants and collect, maintain and store individually identifiable information, including, but not limited to, personal financial information and health-related information. Despite the security measures we have in place to ensure compliance with applicable laws and rules, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of cyber terrorism, vandalism or theft, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. Additionally, the collection, maintenance, use, disclosure and disposal of individually identifiable data by our businesses are regulated at the federal and state levels as well as by certain financial industry groups, such as the Payment Card Industry organization. Federal, state and financial industry groups may also consider from time to time new privacy and security requirements that may apply to our businesses. Compliance with evolving privacy and security laws, requirements, and regulations may result in cost increases due to necessary systems changes, new limitations or constraints on our business models and the development of new administrative processes. They also may impose further restrictions on our collection, disclosure and use of individually identifiable information that is housed in one or more of our databases. Noncompliance with privacy laws, financial industry group requirements or a security breach involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive and/or confidential information, whether by us or by one of our vendors, could have material adverse effects on our business, operations, reputation and financial condition, including decreased revenue; material fines and penalties; increased financial processing fees; compensatory, statutory, punitive or other damages; adverse actions against our licenses to do business; and injunctive relief whether by court or consent order.
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If our security systems are breached, we may face civil liability and public perception of our security measures could be diminished, either of which would negatively affect our ability to attract and retain patients.
We rely on information technology and systems, including the Internet and cloud-based infrastructures, commercially available software and our internally developed applications, to process, transmit, store and safeguard information and to manage or support a variety of our business processes, including managing our building systems, financial transactions and maintenance of records, which may include personally identifiable information or protected health information of team members and participants. If we or our third party vendors experience material security or other failures, inadequacies or interruptions, we could incur material costs and losses and our operations could be disrupted. We take various actions, and incur significant costs, to maintain and protect the operation and security of our information technology and systems, including the data maintained in those systems. However, these measures may not prevent the systems’ improper functioning or a compromise in security.
Techniques used to gain unauthorized access to corporate data systems are constantly evolving, and we may be unable to anticipate or prevent unauthorized access to data pertaining to our patients, including credit card and debit card information and other personally identifiable information. Our systems, which are supported by our own systems and those of third-party vendors, are vulnerable to computer malware, trojans, viruses, worms, break-ins, phishing attacks, denial-of-service attacks, attempts to access our servers in an unauthorized manner, or other attacks on and disruptions of our and third-party vendor computer systems, any of which could lead to system interruptions, delays, or shutdowns, causing loss of critical data or the unauthorized access to personally identifiable information. If an actual or perceived breach of security occurs on our systems or a vendor’s systems, we may face civil liability and reputational damage, either of which would negatively affect our ability to attract and retain patients. We also would be required to expend significant resources to mitigate the breach of security and to address related matters.
We may not be able to effectively control the unauthorized actions of third parties who may have access to the patient data we collect. Any failure, or perceived failure, by us to maintain the security of data relating to our patients and employees, and to comply with our posted privacy policy, laws and regulations, rules of self-regulatory organizations, industry standards and contractual provisions to which we may be bound, could result in the loss of confidence in us, or result in actions against us by governmental entities or others, all of which could result in litigation and financial losses, and could potentially cause us to lose patients, revenue and employees.
Security breaches, computer viruses, attacks by hackers, and online fraud schemes can create significant system disruptions, shutdowns, fraudulent transfer of assets or unauthorized disclosure of confidential information. The cybersecurity risks to us and our third-party vendors are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities against us, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in our or third parties’ information technology networks and systems or operations. Any failure by us or our third party vendors to maintain the security, proper function and availability of information technology and systems could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
We are subject to a number of risks related to credit card and debit card payments we accept.
We accept payments through credit and debit card transactions. For credit and debit card payments, we pay interchange and other fees, which may increase over time. An increase in those fees would require us to either increase the prices we charge for our services, which could cause us to lose patients and revenue, or absorb an increase in our operating expenses, either of which could harm our operating results.
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If we or any of our processing vendors have problems with our billing software, or the billing software malfunctions, it could have an adverse effect on patient satisfaction and could cause one or more of the ~~definitions~~major credit card companies to disallow our continued use of their payment products. In addition, if our billing software fails to work properly, and as a result, we do not automatically process monthly membership fees to our patients’ credit cards on a timely basis or at all, or there are issues with financial insolvency of our third-party vendors or other unanticipated problems or events, we could lose revenue, which would harm our operating results.
We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it more difficult for us to comply. Based on the self-assessment completed as of March 31, 2022, we are currently in ~~Rules 15g-2 through 15g-6 promulgated under Section 15(g)~~compliance with the Payment Card Industry Data Security Standard, or PCI DSS, the payment card industry’s security standard for companies that collect, store or transmit certain data regarding credit and debit cards, credit and debit card holders and credit and debit card transactions. There is no guarantee that we will maintain PCI DSS compliance. Our failure to comply fully with PCI DSS in the future could violate payment card association operating rules, federal and state laws and regulations and the terms of our contracts with payment processors and merchant banks. Such failure to comply fully also could subject us to fines, penalties, damages and civil liability and could result in the suspension or loss of our ability to accept credit and debit card payments. Although we do not store credit card information and we do not have access to our patients’ credit card information, there is no guarantee that PCI DSS compliance will prevent illegal or improper use of our payment systems or the theft, loss, or misuse of data pertaining to credit and debit cards, credit and debit card holders and credit and debit card transactions.
If we fail to adequately control fraudulent credit card transactions, we may face civil liability, diminished public perception of our security measures and significantly higher credit card-related costs, each of which could adversely affect our business, financial condition and results of operations. If we are unable to maintain our chargeback or refund rates at acceptable levels, credit and debit card companies may increase our transaction fees, impose monthly fines until resolved or terminate their relationships with us. Any increases in our credit and debit card fees could adversely affect our results of operations, particularly if we elect not to raise our rates for our service to offset the increase. The termination of our ability to process payments on any major credit or debit card would significantly impair our ability to operate our business.
We may fail to comply with laws governing the privacy and security of personal information, including relating to health.
We are required to comply with federal and state laws governing the privacy, security, use and disclosure of personally identifiable information and protected health information, including HIPAA and the HITECH Act, as updated by the Omnibus Rule. If we fail to comply with applicable federal or state standards, we could be subject to civil sanctions and criminal penalties, which could materially and adversely affect our business, financial condition and results of operations.
Our business and operations would be adversely impacted in the event of a failure or interruption of our information technology infrastructure or as a result of a cybersecurity attack.
The proper functioning of our own information technology (IT) infrastructure is critical to the efficient operation and management of our business. We may not have the necessary financial resources to update and maintain our IT infrastructure, and any failure or interruption of our IT system could adversely impact our operations. In addition, our IT is vulnerable to cyberattacks, computer viruses, worms and other malicious software programs, physical and electronic break-ins, sabotage and similar disruptions from unauthorized tampering with our computer systems. We believe that we have adopted appropriate measures to mitigate potential risks to our technology infrastructure and our operations from these IT-related and other potential disruptions. However, given the unpredictability of the ~~Exchange Act. These include but are not limited~~timing, nature and scope of any such IT failures or disruptions, we could potentially be subject to downtimes, transactional errors, processing inefficiencies, operational delays, other detrimental impacts on our operations or ability to provide products to our participants, the compromising of confidential or personal information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.
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RISKS RELATED TO OUR COMMON STOCK
The price of our common stock may be volatile, and a shareholder’s investment in our common stock could suffer a decline in value.
There has been significant volatility in the volume and market price of our common stock, and this volatility may continue in the future. In addition, factors such as quarterly variations in our operating results, litigation involving us, general trends relating to the ~~following: (i)~~beverage industry, actions by governmental agencies, national economic and stock market considerations as well as other events and circumstances beyond our control, including the effects of the COVID-19 outbreak, could have a significant impact on the future market price of our common stock ~~trades at~~and the relative volatility of such market price.
A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. If we are unable to raise the funds required for all of our planned operations and key initiatives, we may be forced to allocate funds from other planned uses, which may negatively impact our business and operations, including our ability to develop new products and continue our current operations.
We may need additional financing in the future, which may not be available when needed or may be costly and dilutive.
We will require additional financing to support our working capital needs in the future. The amount of additional capital we may require, the timing of our capital needs and the availability of financing to fund those needs will depend on a number of factors, including our strategic initiatives and operating plans, the performance of our business and the market conditions for debt or equity financing. Additionally, the amount of capital required will depend on our ability to meet our sales goals and otherwise successfully execute our operating plan. We believe it is imperative that we meet these sales objectives in order to lessen our reliance on external financing in the future. We intend to continually monitor and adjust our operating plan as necessary to respond to developments in our business, our markets and the broader economy. Although we believe various debt and equity financing alternatives will be available to us to support our working capital needs, financing arrangements on acceptable terms may not be available to us when needed. Additionally, these alternatives may require significant cash payments for interest and other costs or could be highly dilutive to our existing shareholders. Any such financing alternatives may not provide us with sufficient funds to meet our long-term capital requirements. If necessary, we may explore strategic transactions that we consider to be in the best interest of the company and our shareholders, which may include, without limitation, public or private offerings of debt or equity securities, a rights offering, and other strategic alternatives; however, these options may not ultimately be available or feasible when needed.
Our common stock is traded on the OTC Link ATS, which may have an unfavorable impact on our stock price and liquidity.
Our stock is traded on the OTC Link Alternative Trading System (ATS) operated by OTC Markets Group, Inc. The OTC Link ATS is a significantly more limited market than the national securities exchanges such as the New York Stock Exchange, or Nasdaq stock exchange, and there are lower financial or qualitative standards that a company must meet to have its stock quoted on the OTC Link ATS. The OTC Link ATS is an inter-dealer quotation system much less regulated than the major exchanges, and trading in our common stock may be subject to abuses, volatility and shorting, which may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. The Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require a broker-dealer to have reasonable grounds for believing an investment is suitable for that customer when recommending an investment to a customer. FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for some customers and may make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may result in a limited ability to buy and sell our stock. We currently do not meet applicable listing standards of a market senior to the OTC Link ATS, and we may never apply or qualify for future listing on Nasdaq or a senior market or national securities exchange.
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Our common shares are subject to the “Penny Stock” rules of the SEC, and the trading market in our securities will likely be limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per ~~share; (ii) the common stock is not traded on a “recognized” national exchange;~~share or ~~(iii) the common stock is issued by a company~~ with ~~average revenues~~an exercise price of less than ~~$6.0 million~~$5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
•
That a broker or dealer approve a person’s account for transactions in penny stocks; and
•
The broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quality of the penny stock to be purchased.
In order to approve a person’s account for the past three (3) years. The principal result or effect of being designated a “penny stock” is that securities broker-dealers cannot recommend our common stock to investors, thus hampering its liquidity.

~~Section 15(g) and Rule 15g-2 require broker-dealers dealing~~transactions in penny stocks, ~~to provide potential investors with documentation disclosing~~ the ~~risks of penny stocks~~broker or dealer must:
•
Obtain financial information and investment experience objectives of the person; and
•
Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to ~~obtain a manually signed and dated written receipt of the documents before effecting~~ any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
•
Sets forth the basis on which the broker or dealer made the suitability determination; and
•
That the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for ~~the investor’s account. Potential~~ investors into dispose of our common stock ~~are urged to obtain~~ and ~~read such disclosure carefully before purchasing any~~cause a decline in the market value of our ~~shares.~~stock.

~~Moreover, Rule 15g-9 requires broker-dealers~~Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to ~~approve~~both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account ~~of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires~~and information on the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactionslimited market in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives.stocks.

We may have difficulty raising necessary capital to fund operations as a result of market price volatility for our shares of common stock.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including:

·
new products by us or our competitors;
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additions or departures of key personnel;
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sales of our common stock;
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our ability to integrate operations and products;
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our ability to execute our business plan;
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operating results below expectations;
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industry developments;
·
economic and other external factors; and
·
period-to-period fluctuations in our financial results.
~~• new products by us or our competitors;~~
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~~• additions or departures of key personnel;~~
~~• sales of our common stock;~~
~~• our ability to integrate operations and products;~~
~~• our ability to execute our business plan;~~
~~• operating results below expectations;~~
~~• industry developments;~~
~~• economic and other external factors; and~~
~~• period-to-period fluctuations in our financial results.~~

Because we have limited revenues to date, you may consider any one of these factors to be material. Our stock price may fluctuate widely as a result of any of the above listed factors. In recent years, the securities markets in the U.S. have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not

necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our shares of common stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If our business development plans are successful, we may require additional financing to continue to develop our products and to expand into new markets. The success of our products may, therefore, be dependent upon our ability to obtain financing through debt and equity or other means.

~~We will not pay cash dividends and investors may have to sell their shares in order to realize their investment.~~

We do not intend to pay any cash dividends on our shares of common stock in the near future, so our shareholders will not be able to receive a return on their shares unless they sell their shares.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and marketing of our products. As a result, investors may have to sell their shares of common stock to realize their investment.

~~Our business and future operating results may be adversely affected by events that are outside of our control.~~

Our business and operating results are vulnerable to interruption by events outside of our control, such as earthquakes, fire, power loss, telecommunications failures and uncertainties arising out of terrorist attacks throughout the world, the economic consequences of military action and the associated political instability, and the effect of heightened security concerns on domestic and international travel and commerce.

~~RISKS RELATING TO OUR INDUSTRY~~

~~We may be subject to significant liability which could materially harm our business should the consumption of any of our products cause illness or physical harm.~~

The sale of food products for human consumption involves the risk of injury or illness to consumers. Such injuries may result from inadvertent mislabeling, tampering by unauthorized third parties or product contamination or spoilage. Under certain circumstances, we may be required to recall or withdraw products, which may lead to a material adverse effect on our business. Even if a situation does not necessitate a recall or market withdrawal, product liability claims might be asserted against us. While we are subject to governmental inspection and regulations and believe our facilities and those of our co-packers comply in all material respects with all applicable laws and regulations, if the consumption of any of our products causes, or is alleged to have caused, a health-related illness in the future we may become subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or physical harm could adversely affect our reputation with existing and potential customers and consumers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered by insurance or by any rights of indemnity or contribution that we may have against others. A product liability judgment against us or a product recall could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

~~We rely on independent certification for a number of our food products, the loss of which could materially harm our business.~~

We rely on independent certification, such as certifications of our products as “organic”, to differentiate our products from others. The loss of any independent certifications could adversely affect our market position as a natural and organic food company, which could harm our business.

We must comply with the requirements of independent organizations or certification authorities in order to label our products as certified. For example, we can lose our “organic” certification if a manufacturing plant becomes contaminated with non-organic materials, or if it is not properly cleaned after a production run. In addition, all raw materials must be certified organic.

~~Consumer concern regarding the safety and quality of food products or health concerns could adversely affect sales of certain of our products.~~

If consumers in our principal markets lose confidence in the safety and quality of our food products, even without a product liability claim or a product recall, our business could be adversely affected. Consumers have been increasingly focused on food safety and health and wellness with respect to the food products that they buy. The food industry is also subject to scrutiny relating to genetically modified organisms and the health implications of obesity. We have been and will continue to be impacted by publicity concerning the health implications of food products generally, which could negatively influence consumer perception and acceptance of our products and marketing programs. Developments in any of these areas could cause our results to differ materially from results that are reflected in forward-looking statements herein.

~~The cost of compliance with organic regulations may adversely impact our profitability.~~

Our products are organic and are required to meet the standards set forth in the Organic Foods Production Act and the regulations adopted by the National Organic Standards Board. These regulations require strict methods of production for organic food products

and limit the ability of food processors to use non-organic or synthetic materials in the production of organic foods or in the raising of organic livestock. Compliance with these regulations will increase our cost of product, which we may be unable to offset with price increases. Accordingly, compliance with these regulations may adversely affect our profitability.

Sales of our products will depend, in part, on the performance of local, regional and national supermarkets, retailers, distributors, brokers and wholesalers, and should they perform poorly or give higher priority to other brands or products, our business could be adversely affected.
~~In addition to our online web-store, we sell our products to consumers principally through local, regional and national supermarkets, retailers, distributors, brokers and wholesalers.~~ There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless we pay dividends, our shareholders will not be able to ~~maintain~~receive a return on their shares unless they sell such ~~distribution outlets. The poor~~shares.
A small group of Company officers and directors hold a substantial amount of the control of the Company.
As of March 31, 2022 the Company’s executive officers and directors owned approximately 27.79% of the Company’s outstanding common stock and 27.36% of the Company’s outstanding Preferred Stock. By virtue of such stock ownership, the principal shareholders are able to substantially affect the election of the members of the Company’s Board of Directors and to generally exercise control over the affairs of the Company. Such concentration of ownership could also have the effect of delaying, deterring or preventing a change in control of the Company that might otherwise be beneficial to stockholders. There can be no assurance that conflicts of interest will not arise with respect to such directors or that such conflicts will be resolved in a manner favorable to the Company.
We may engage in business transaction with one or more businesses that have relationships with or are controlled by one or more of our officers or directors and which may raise actual or potential conflicts of interest.
We may decide to acquire or enter into other contractual relationships with one or more businesses affiliated with, controlled by or at least partially owned by certain officers, directors or significant shareholders of the Company or by affiliates of such parties. Certain of our directors also serve as officers, board members or otherwise control other entities which we may decide to acquire or enter into other contractual relationships with. Such relationships will create conflicts of interest for such officers or directors. We have no formal process for vetting such conflicts of interest.
Certain officers or directors of the Company are involved in or have a financial interest in the performance byof other entities with which we may acquire or enter into other contractual relationships with, and such ~~distributors,~~involvement may create conflicts of interest in making decisions on our behalf.
Certain of our officers and directors may be subject to a variety of conflicts of interest relating to their, or their affiliates’ responsibilities to or ownership interests in other entities. Such responsibilities or ownership interests may create a conflict between the advice and investment opportunities provided to such entities and the responsibilities owed to us. Furthermore, holding a financial interest in any such entity will create an actual conflict of interest for such officers or directors. We have no formal process for vetting such conflicts of interest.
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Our directors are anticipated to allocate their time to other businesses, thereby causing conflicts of interest in their determination as to how much time to devote to our ~~inability~~affairs.
None of our directors are required to, ~~collect accounts receivable from~~and none will, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations. Each of our directors is engaged in other business endeavors for which such person may be entitled to substantial compensation or have significant financial incentive to assist, and our directors are not obligated to contribute any specific number of hours per week to our affairs. If our directors’ other business affairs require or incentivize them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could ~~materially~~limit their ability to devote time to our affairs which may have a negative impact on our ability to execute our business plan. We have no formal process for vetting such conflicts of interest.
Even if a market develops for our shares, our shares may be thinly traded with wide share price fluctuations, low share prices and ~~adversely affect~~minimal liquidity.
If an established market for our shares develops, the share price may be volatile with wide fluctuations in response to several factors, including: potential investors’ anticipated feeling regarding our results of ~~operations~~operations; increased competition; and ~~financial condition.~~our ability or inability to generate future revenues. In addition, our share price may be affected by factors that are unrelated or disproportionate to our operating performance. Our share price might be affected by general economic, political, and market conditions, such ~~distributors offer branded~~as recessions, interest rates, commodity prices, or international currency fluctuations. Additionally, stocks traded on the OTC Link are usually thinly traded, highly volatile and ~~private label products that compete directly with~~not followed by analysts. These factors, which are not under our ~~products for retail shelf space and consumer purchases. Accordingly, there is a risk that our distributors~~control, may give higher priority to their own products or to the products of our competitors. In the future, our customers may not continue to purchase our products or provide our products with adequate levels of promotional support.

~~Our co-packers are subject to numerous laws and governmental regulations, exposing them to potential claims and compliance costs that could adversely affect our business~~

Our co-packers are subject to extensive regulation by the U.S. Food and Drug Administration (FDA), the U.S. Department of Agriculture (USDA) and other national, state and local authorities. For example, our co-packers are subject to the Food, Drug and Cosmetic Act and regulations promulgated by the FDA. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, packaging and safety of foods. Under this program the FDA regulates manufacturing practices for foods through our current "good manufacturing practices" regulations and specifies the recipes for certain foods. Furthermore, our co-packers’ processing facilities and products are subject to periodic inspection by federal, state and local authorities. Any changes in these laws and regulations could increase the cost of developing and distributing our products and otherwise increase the cost of conducting our business, which would adversely affect our financial condition and results of operations. In addition, failure by our co-packers to comply with applicable laws and regulations, including future laws and regulations, could subject them to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material ~~adverse~~ effect on our ~~supply of products, our business, consolidated financial condition, results of operations or liquidity.~~share price.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~See~~During the ~~disclosure under Notes Nos. 4, 5 and 6 to~~fiscal quarter ended March 31, 2022, the ~~Company's interim unaudited condensed consolidated financial statements with respect to the Company's~~Company did nothave any unregistered sales of any equity ~~securities and use of proceeds.~~securities.

Item 3. Defaults Upon Senior Securities.

~~See~~During the ~~disclosure~~fiscal quarter ended March 31, 2022, the Company was in default under ~~Notes No. 5 to~~ the ~~Company's interim unaudited condensed consolidated financial statements with respect to the Company's past due loans.~~majority of its outstanding legacy convertible notes.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information.

~~Changes in Registrant’s Certifying Accountant.~~

None.
~~Dismissal of Santora CPA Group~~
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On December 29, 2011, the Fresh Harvest Products, Inc. (“Fresh Harvest” or the “Company”) Board of Directors authorized the dismissal of its then independent registered public accounting firm, Santora CPA Group (“Santora”), who had originally been retained by the Company on February 24, 2011. The Company’s Board of Directors dismissed Santora because of the Company’s cost reduction efforts. Santora had not been engaged long enough to perform an audit or issue a report on the Company’s financial statements. The Company does not have an audit committee.

Representatives of the Company and Santora had a conversation on December 27, 2011 discussing the Company’s intention of dismissing Santora for its services.   On December 30, 2011, Santora furnished the Company with the letter attached hereto as Exhibit 16.1, a copy of which was sent to the Securities and Exchange Commission (“SEC”), stating the client-auditor relationship had ceased. On January 4, 2012, the Company provided Santora with a copy of the disclosure contained in this Current Report on Form 8-K.

During the term of Santora’s engagement (from February 24, 2011 through December 30, 2011) and prior to the dismissal of Santora, there were no disagreements with Santora on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Santora would have caused it to make reference to the subject matter of the disagreements in connection with its report.

The SEC permits companies to issue condensed information in Quarterly Reports on Form 10-Q, which information must be reviewed by such company’s outside auditor. Since the information may be condensed, the SEC also allows the auditor to not issue a review report unless the company states in the filing that the information was reviewed by the outside auditor. As the Company’s auditor, Santora had previously completed the necessary steps to issue reports with respect to the Company’s financial information for the first three fiscal quarters of the 2011 fiscal year, but did not issue such reports for the above described reason. Santora has informed the Company, that if such reports had been issued, Santora would have expressed substantial doubt about the Company’s ability to continue as a going concern.

The Company has requested that Santora furnish it with another letter, addressed to the Securities and Exchange Commission stating whether or not it agrees with the Company’s statements in this Item 4.01, and, if not, stating the respects in which it does not agree.

~~Appointment of Accell Audit & Compliance, PA~~

On December 28, 2011, the Company engaged Accell Audit & Compliance, PA (“Accell”), an independent registered public accounting firm, as the Company’s principal independent accountant with the approval of the Company’s Board of Directors. The Company has not consulted with Accell Audit & Compliance, PA on any accounting issues prior to engaging them as the Company’s new auditors.

During the Company’s two most recent fiscal years and the interim period prior to December 28, 2011, neither the Company nor anyone on the Company’s behalf has consulted with Accell Audit & Compliance, PA regarding either:

~~1. The application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements; or;~~

2. Any matter that was either the subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instruction to Item 304 of Regulation S-K, or a reportable event, as that term is described in Item 304(a)(1)(v) of Regulation S-K.

Item 6. Exhibits.

Exhibit

Description
~~Exhibit~~ 3.1
~~Description~~
Certificate of Incorporation (New Jersey) (incorporated by reference to the Company’s Form 10SB filed with the SEC on June 29, 2005)
313.2
~~Certification pursuant~~
Bylaws (incorporated by reference to ~~Section 302 of~~ the ~~Sarbanes-Oxley Act of 2002~~Company’s Form 10SB filed with the SEC on June 29, 2005)
323.3
~~Certification pursuant~~
Certificate of Amendment of Certificate of Incorporation (incorporated by reference to ~~18 U.S.C. Section 1350, as adopted pursuant to Section 906 of~~ the ~~Sarbanes-Oxley Act of 2002~~Company’s Current Report on Form 8 K filed with the SEC on January 27, 2006)
101*3.4
~~The following materials from~~
Certificate of Incorporation (Delaware) (incorporated by reference to the Company’s ~~Quarterly~~Registration Statement on Form 10 filed with the SEC on July 30, 2021)
3.5
Certificate of Merger (redomiciling from New Jersey to Delaware) (incorporated by reference to the Company’s Registration Statement on Form 10 filed with the SEC on July 30, 2021)
3.6
Certificate of Amendment to Certificate of Incorporation (incorporated by reference to the Company’s Registration Statement on Form 10 filed with the SEC on July 30, 2021)
3.7
Certificate of Designation of Series A Convertible Preferred Stock (incorporated by reference to the Company’s Registration Statement on Form 10 filed with the SEC on July 30, 2021)
10.1
Standard Office Lease by and between DeVille Developments, LLC, and Sarah Adult Day Services, Inc., dated June 2, 2017 (incorporated by reference to the Company’s Registration Statement on Form 10 filed with the SEC on July 30, 2021)
10.2
Lease by and between Stow Professional Center, LLC, and Sarah Day Care Centers, Inc., dated September 4, 2014 (incorporated by reference to the Company’s Registration Statement on Form 10 filed with the SEC on July 30, 2021)
10.3
Lease Agreement by and between S. Frank Prof. Bldg., LLC, and Sarah Day Care Centers, Inc., dated March 20, 2018 (incorporated by reference to the Company’s Registration Statement on Form 10 filed with the SEC on July 30, 2021)
10.4
Stock Purchase Agreement by and among Innovative MedTech, Inc., Sarah Adult Day Services, Inc., Sarah Day Care Centers, Inc., The Sellers Named Herein, Dr. Merle Griff, as the Seller Representative, and Veteran Services LLC, dated as of March 25, 2021 (incorporated by reference to the Company’s Registration Statement on Form 10 filed with the SEC on July 30, 2021)
10.5
Share Exchange Agreement, by and between Innovative MedTech, Inc., VC Bin, LLC, Webb Media, LLC, Melides Capital, LLC, Ronald Schreiber, and Dovner Holdings, LLC, dated April 26, 2022 (incorporated by reference to the Company’s Current Report on Form ~~10-Q for~~8-K filed with the ~~period ended July 31, 2012 formatted~~SEC on April 28, 2022)
14.1
Code of Ethics (Incorporated by reference to the Company’s Form SB-2 filed with the SEC on May 12, 2006)
31.1 *
Certification by the Principal Executive Officer
31.2 *
Certification by the Principal Accounting Officer
32.1 *
Certification by the Principal Executive Officer
32.2 *
Certification by the Principal Accounting Officer
101.INS
Inline XBRL Instance Document (the instance document does not appear in ~~Extensible Business Reporting Language (XBRL):~~
~~(i)~~   the ~~Consolidated Balance Sheets,~~
~~(ii)~~Interactive Data File because its XBRL tags are embedded within the ~~Consolidated Statements of Operations,~~
~~(iii) the Consolidated Statements of Cash Flows and~~
~~(iv) related notes.~~Inline XBRL document)
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* ToFiled herewith
+ Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) and/or Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be ~~filed by amendment.~~furnished supplementally to the Commission upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Innovative MedTech, Inc.
(Registrant)
/s/ Michael Jordan Friedman
Michael Jordan Friedman,
President, Chief Executive Officer
and Chief Financial Officer
Date: May 23, 2022
~~Fresh Harvest Products, Inc.~~
~~(Registrant)~~

~~/s/ Michael Jordan Friedman~~
~~Michael Jordan Friedman, President, Chief Executive Officer and Chief Financial Officer~~

~~Date: September 19, 2012~~

34

66

PART I - FINANCIAL INFORMATION		4

Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	31

PART II - OTHER INFORMATION		33

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3.	Defaults Upon Senior Securities	64
Item 4.	Mine Safety Disclosure	64
Item 5.	Other Information	64
Item 6.	Exhibits	65

SIGNATURES		66


FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
		As of		As of
		July 31, 2012		October 31, 2011
		(Unaudited)		(Audited)
ASSETS
Current assets
Cash	$	-		-
Accounts receivable, net		107,700		76,109
Inventory		12,629		7,385
Total current assets		120,329		86,038

Fixed assets
Equipment, net		-		2,544

Total assets	$	120,329		86,038

LIABILTIES AND DEFICIENCY IN ASSETS
Current liabilities
Accounts payable and accrued expenses	$	1,383,450	$	1,664,972
Notes payable, related parties, current		29,583		-
Notes payable, current		690,956		815,998
Total current liabilities		2,103,989		2,480,970

Commitments and Contingencies		-		-

Deficiency in assets
Common stock - $0.0001 par value, 1,068,943,779 and 506,885,209 shares outstanding and 2,000,000,000 and 200,000,000 authorized, respectively		106,894		50,689
Convertible Preferred Stock - $0.0001 par value, 0 shares outstanding; 5,000,000 authorized		-		-
Additional paid in capital		6,126,745		5,207,208
Accumulated deficit		(8,217,299)		(7,652,829)
Total deficiency in assets		(1,983,660)		(2,394,932)

Total liabilities and deficiency in assets	$	120,329	$	86,038
See accompanying notes to financial statements


FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations

	For the	For the	For the	For the
	three months ended	three months ended	nine months ended	nine months ended
	July 31, 2012	July 31, 2011	July 31, 2012	July 31, 2011
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Revenue	$ 117,318	$ 100,335	$ 538,671	$ 503,063
Returns and allowances	(24,376)	-	(116,507)	-
Revenue, net	92,941	100,335	422,164	503,063

Cost of goods sold	126,329	82,973	316,915	385,908

Gross profit	(33,388)	17,361	105,249	117,154

Operating expenses
Salaries and wages	36,000	36,000	108,000	132,000
Sales and marketing	2,659	38,008	244,950	184,249
Legal and professional fees	35,450	76,981	102,650	280,749
General and administrative	55,447	30,537	328,118	325,483
Total operating expenses	129,556	181,526	783,718	922,481

Income (loss) from operations	(162,944)	(164,165)	(678,468)	(805,327)

Other income (expense)
Interest expense	(17,939)	(23,056)	(58,069)	(70,386)
Gain (loss) on disposal of assets	-	1,226	-	(597)
Fair value adjustment for stock issued	-	300,000	-	300,000
Settlement agreement expenses	-	(73,105)	-	(73,105)
Depreciation expense	(113)	-	(2,544)	-
Income from forgiveness of debt	-	-	234,221	-
Total other income (expenses)	(18,052)	205,065	173,607	155,912

Income (loss) before provision for income taxes	(180,996)	40,901	(504,861)	(649,414)
Provision for income taxes	-	-	-	-

Net income (loss)	$ (180,996)	$ 40,901	$ (504,861)	$ (649,414)

Basic and diluted loss per common share	$ (0.000)	$ 0.000	$ (0.000)	$ (0.000)

Weighted average common shares outstanding (basic and diluted)	828,517,229	200,000,000	724,521,655	200,000,000

See accompanying notes to financial statements


FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows


		For the		For the
		nine months ended		nine months ended
		July 31, 2012		July 31, 2011
Cash flows from operating activities
Net loss	$	(504,861)	$	(649,414)
Adjustments to reconcile net loss to cash flows
from operating activities:
Stock issued for services				642,670
Depreciation		2,544		3,018
Fair value adjustment for stock issued		-		(300,000)
(Increase) decrease in assets and liabilities:
Accounts receivable, net		(31,591)		87,750
Inventory		(5,244)		13,491
Accounts payable and accrued expenses		281,522		87,343
Cash flows from operating activities		(257,630)		(115,142)

Cash flows from financing activities
Loan repayments				(35,615)
Proceeds from issuances of notes payable, related parties		26,287		-
Proceeds from issuance of notes payable		228,024		135,000
Cash flows from financing activities		257,607		99,385

Change in cash		(23)		(15,757)

Cash and cash equivalents, beginning of period		23		16,711

Cash and cash equivalents, end of period	$	-	$	954


Supplemental disclosure of cash flow information:
Taxes paid	$	-	$	-
Interest paid	$	-	$	3,516

Non-cash financing activities:
Stock issued for conversion of debt	$	626,490	$	667,343

	For the three months ended						For the nine months ended
	March 31,						March 31,
	2022			2021			2022			2021
Revenue:
Participant fees	$	175,167		$	38,506		$	572,174		$	38,506
Franchise fees		116,620			32,695			366,887			32,695
		291,787			71,201			939,061			71,201

Operating expenses:
General and administrative		218,066			268,410			675,605			358,294
Salaries and wages		220,015			23,619			671,805			23,619
Consulting fees		16,000			0			154,525			0
Legal and professional fees		31,880			185,462			75,328			205,502
Total operating expenses		485,961			477,491			1,577,263			587,415

Loss from operations		(194,174	)		(406,290	)		(638,202	)		(516,214	)

Other income (expense):
Interest expense, related parties		0			0			(8,972	)		0
Interest expense		(28,580	)		(15,390	)		(78,455	)		(162,793	)
Loss on extinguishment of debt		0			(1,660,797	)		0			(1,660,797	)
Change in fair value of derivatives		26,271			(85,004	)		(7,547	)		(217,549	)
Gain on forgiveness of PPP loan		266,640			0			266,640			0
Other income		8,300			0			86,819			0
Total other income (expense)		272,631			(1,761,191	)		258,485			(2,041,139	)

Net income loss	$	78,457		$	(2,167,481	)	$	(379,717	)	$	(2,557,353	)

Basic and diluted earnings per share on net loss	$	0.01		$	(6.89	)	$	(0.02	)	$	(1.21	)

Weighted average shares outstanding - basic and diluted		15,657,327			314,453			15,616,343			2,117,130

													Additional
	Series A Preferred Stock				Common Stock				Common Stock To Be Issued				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance, June 30, 2021		317,500	$	0		15,557,327	$	16		-	$	0	$	14,860,551	$	(14,916,012	)	$	(55,445	)

Issuance of common stock for services		-		0		100,000		0		-		0		75,000		0			75,000

Net loss		-		0		-		0		-		0		0		(259,318	)		(259,318	)

Balance, September 30, 2021		317,500		0		15,657,327		16		-		0		14,935,551		(15,175,330	)		(239,763	)

Net loss		-		0		-		0		-		0		0		(198,856	)		(198,856	)

Balance, December 31, 2021		317,500		0		15,657,327		16		-		0		14,935,551		(15,374,186	)		(438,619	)

Net income		-		0		-		0		-		0		0		78,457			78,457

Balance, March 31, 2022		317,500	$	0		15,657,327	$	16		-	$	0	$	14,935,551	$	(15,295,729	)	$	(360,162	)


Settlement Summary
Equipment returned to Seller	$ 6,062	(1)
Cash paid to Seller	23,000
Note payable to Seller relieved through issuance of Preferred Stock	(102,160)	(2)
Accrued expenses relieved	(10,797)
Preferred Stock - 150,000 shares of the Company (see Note 11)	180,000	(3)
Net cost of settlement	$ 96,105

		Estimated
Asset		Useful Life
Customer Relationships		3
Trademarks		Indefinite
Non-Compete Agreement		3
CARF Accreditation		3
Franchise Agreements		Indefinite

Consideration
Cash	$	2,000,110
Legal fees		(175,162	)
Notes payable due to sellers		393,885
Royalty fee liability		1,500,000
Total consideration	$	3,718,833

Fair value of net identifiable assets (liabilities) acquired
Cash	$	412,276
Accounts receivable		84,674
Deposits and prepaid expenses		15,139
Notes receivable		110,510
Property, plant and equipment		335,426
Right of use asset		796,771
Total fair value of net identifiable assets	$	1,754,796

Accounts payable and accrued expenses	$	625,462
Notes payable, current, net of debt discount		454,524
PPP Loan		439,160
Lease Liability		796,771
Total fair value of net identifiable liabilities	$	2,315,917

Fair value of net identifiable assets (liabilities) acquired	$	(561,121	)

Excess (consideration given minus fair value of identifiable net assets and liabilities)	$	4,279,954
Intangible assets:
Customer relationships	$	39,000
Trademarks		390,000
Non-Compete Agreement		1,000
CARF Accreditation		23,000
Franchise Agreements		2,560,000
Total intangible assets	$	3,013,000

Goodwill (excess minus values assigned to intangible assets)	$	1,266,954
Minus (goodwill impaired in prior period)		(806,690	)
Remaining Goodwill	$	460,264

	2021
Net revenue	$	677,997
Net loss	$	(3,513,187	)
Net loss per share- basic and diluted	$	(0.60	)
Weighted average number of shares of common
stock outstanding- basic and diluted		2,117,130

	March 31,			June 30,
	2022			2021
Notes receivable from a franchise, due in monthly installments of $5,000, no interest, maturing December 2021	$	0		$	21,468

Notes receivable from a franchise, due in monthly installments of $1,999, no interest, maturing March 2023		23,992			41,985

Note receivable from related party (see Note 17), due in six months, with no installments, 5% interest maturing March 2022		9,294			0
Total notes receivable		33,285			63,453
Less long-term		(5,997	)		(14,466	)
Total short term notes receivable	$	27,289		$	48,987

	March 31, 2022			June 30, 2021

Leasehold improvements	$	294,864		$	294,864
Vehicles		22,554			22,554
Computer equipment		19,915			12,553
Furniture and fixtures		7,256			5,455
		344,589			335,426
Less: Accumulated depreciation		(47,739	)		(9,638	)
Property, plant and equipment - net	$	296,850		$	325,788

	As of
	March 31, 2022
Year ending June 30, 2022	$	5,178
Year ending June 30, 2023		20,942
Year ending June 30, 2024		15,534
Total	$	41,654

Ref No.		Date of Note Issuance	Original Principal Balance		Maturity Date	Interest Rate %		Principal Balance 03/31/22		Principal Balance 6/30/21
	1	12/25/2020	$	146,021	12/15/2020 (in default)		10	$	112,960	$	137,755
	2	3/25/2021		37,949	6/3/2021		10		0		37,950
	3	5/10/2021		20,000	11/10/2021		5		0		20,000
	4	6/29/2021		5,000	12/29/2021		5		0		5,000
	5	3/24/2022		39,000	9/24/2022		6		39,000
		Total						$	151,960	$	200,705

	March 31, 2022
	Indexed		Fair
The financings giving rise to derivative financial instruments	Shares		Values
Compound embedded derivative		705,173	$	(262,247	)

	June 30, 2021
	Indexed		Fair
The financings giving rise to derivative financial instruments	Shares		Values
Compound embedded derivative		405,106	$	(254,700	)

	Nine Months Ended
	March 31, 2022			March 31, 2021
Compound embedded derivative	$	(7,547	)	$	(217,549	)
Day one derivative loss		0			0
Total derivative gain (loss)	$	(7,547	)	$	(217,549	)

				March 31,			December 31,
	Inception			2022			2021
Quoted market price on valuation date	$	0.01		$	0.80		$	1.01
Contractual conversion rate	$	0.0054 - $0.0081		$	0.52 - $0.64		$	0.486 - $0.817
Range of effective contractual conversion rates		-			-			-
Contractual term to maturity		1.00 Year		$	0.25 Years			0.25 Years
Market volatility:
Volatility		138.28%-238.13	%		138.28%-238.13	%		138.28%-238.13	%
Contractual interest rate		5%-12	%		5%-12	%		5%-12	%

	March 31, 2022		June 30, 2021
Beginning balance	$	254,700	$	257,493
Issuances:
Convertible Note Financing		0		0
Removals		0		0
Changes in fair value inputs and assumptions reflected		7,547		223,264
Conversions		0		(226,057	)
Ending balance	$	262,247	$	254,700


		July 31, 2012		October 31, 2011
Account payable - trade	$	817,119	$	1,234,765
Accrued salaries and wages		303,936		195,936
Accrued payroll taxes/penalties and interest		262,395		228,034
Total	$	1,383,450	$	1,658,735


		July 31, 2012		October 31, 2011

Twelve convertible notes for expenses paid on behalf of the Parent Company with original principal balances ranging between $500 and $2,000, with various maturity dates between July 26, 2012 and January 31, 2013. Some of these notes are currently in default. The notes have an interest rate of 10%. The notes are convertible into common shares at any time at the option of the lender at a 25% discount to the market price.	$	29,583	$	-


Total	$	29,583	$	-
Less: long-term portion		-		-
		-		-
Total notes payable - related parties, current	$	29,583	$	-


			July 31,		October 31,
			2012		2011
Convertible note, including accrued interest, dated October 1, 2005 with an original principal balance of $15,000 with a maturity date of April 1, 2007; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.50 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.	(1)	$	26,992	$	25,022
Convertible note, including accrued interest, dated September 19, 2006 with an original principal balance of $100,000 with a maturity date of September 19, 2008; annual interest at a rate of 12%. The note is convertible into common shares at any time at the option of the lender or the Company. As of July 31, 2012, this note is in default for the breach of certain covenants.			-		116,150
Convertible note, including accrued interest, dated November 30, 2006 with an original principal balance of $50,000 with a maturity date of November 30, 2008; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.85 per share. On May 4, 2012, the Company and Holder entered into a Modified Note Agreement, in which the parties agree that the note shall paid by the Company over a 24-month payment schedule. As of July 31, 2012, the Company is in default of the Modified Loan Agreement for the breach of certain covenants.			81,430		77,415
Convertible note, including accrued interest, dated December 23, 2006 with an original principal balance of $18,000 with a maturity date of December 23, 2008; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.95 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.			30,056		27,877
Convertible note, including accrued interest, dated January 29, 2007 with an original principal balance of $15,000 with a maturity date of January 29, 2009; annual interest at a rate of 10%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.95 per share. As of July 31, 2012, this note is in default for the breach of certain covenants.			25,046		23,231
Convertible note, including accrued interest, dated February 26, 2007 with an original principal balance of $30,000 with a maturity date of February 26, 2009; annual interest at a rate of 12%. The note is convertible into common shares at any time at the option of the lender or the Company at $0.50 per share or a 35% discount of the market price of the Company's common shares. As of July 31, 2012, this note is in default for the breach of certain covenants.			50,678		46,276


Statutory federal income tax rate	~~-34~~ (21	)%
State taxes – net of federal benefits	-5 (5	)%
Valuation allowance	39 26	%
Income tax rate – net	0	%

	Monthly Rent Payments
	Base Rent		Covid-19 Recoup*		Total Rent
April 1, 2021	$	6,369	$	983	$	7,352
May 1, 2021 to December 31, 2021	$	6,369	$	621	$	6,990
January 1, 2022 to December 31, 2022	$	6,433	$	621	$	7,054
January 1, 2023 to December 31, 2023	$	6,497	$	621	$	7,118
January 1, 2024 to December 31, 2024	$	6,562	$	621	$	7,183
January 1, 2025 to December 31, 2025	$	6,628	$	621	$	7,249

	March 31, 2022
	Stow Professional Center Lease			Harbor Lease			S. Frank Professional Lease			Total
Office lease	$	282,371		$	130,441		$	412,770		$	825,582
Less: accumulated amortization		(60,472	)		(54,888	)		(77,301	)		(192,661	)
Right-of-use asset, net	$	221,899		$	75,553		$	335,469		$	632,921

	As of
	March 31, 2022
Equipment lease	$	127,979
Less accumulated amortization		(42,233	)
Finance right of use asset	$	85,746

	Equipment Lease
Year Ended June 30, 2022	$	18,516
Year Ended June 30, 2023		70,761
Year Ended June 30, 2024		61,167
Year Ended June 30, 2025		32,388
Year Ended June 30, 2026		32,388
Year Ended June 30, 2027		16,194
Total future minimum lease payments		231,414
Less imputed interest		(30,439	)
PV of payments	$	200,975



	For the Nine months ended
	July 31, 2012		July 31, 2011
Net cash from operating activities	$	171,716	$	(115,142)
Net cash from financing activities	$	(172,658)	$	99,385
Net change in cash and cash equivalents	$	(942)	$	(15,757)
Cash and cash equivalents, beginning of period	$	942	$	16,711
Cash and cash equivalents, end of period	$	-	$	954

	●	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;
	●	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the board of directors; and
	●	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.


31

●	~~We were unable to maintain any segregation~~Table of duties within our business operations due to our reliance on a single individual fulfilling the role of sole officer. This control deficiency did result in adjustments to our 2011 and 2010 interim and annual financial statements. Accordingly we have determined that this control deficiency constitutes a material weakness. Contents