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
For the quarterly period endedJuly 31, 2012September 30, 2022
Or
[ ]☐ 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:000-51390000-51390
Fresh Harvest Products, Inc.
(Exact name of registrant as specified in its charter)
Innovative MedTech, Inc. | |
|
Delaware | 33-1130446 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
|
| |
|
| 60406 |
(Address of principal executive offices) |
| (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 filer | ☐ | Accelerated filer | ☐ |
Non-accelerated | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
Indicate by check mark whether the Registrantregistrant 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 1,068,943,779November 21, 2022, there were 21,157,327 shares of common stock outstanding.
Common Stock, $0.000001 par value per share, issued and outstanding
1
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 JerseyDelaware 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” representstatements 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 limitedand 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 anyits 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.
2 |
INNOVATIVE MEDTECH, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
| ||||||||
|
| September 30, 2022 |
|
| June 30, 2022 |
| ||
|
| Unaudited |
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash |
| $ | 129,617 |
|
| $ | 301,337 |
|
Accounts receivable, net |
|
| 185,393 |
|
|
| 186,285 |
|
Notes receivable |
|
| 21,291 |
|
|
| 27,289 |
|
Prepaid expenses |
|
| 23,087 |
|
|
| - |
|
Total current assets |
|
| 359,388 |
|
|
| 514,911 |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| 6,716 |
|
|
| 6,716 |
|
Right-of-use asset |
|
| 544,706 |
|
|
| 589,361 |
|
Finance lease asset, net |
|
| 19,507 |
|
|
| 20,655 |
|
Property and equipment, net of accumulated depreciation |
|
| 326,480 |
|
|
| 332,891 |
|
Intangible assets, net |
|
| 3,152,415 |
|
|
| 3,157,733 |
|
Goodwill |
|
| 177,777 |
|
|
| 177,777 |
|
Total Assets |
| $ | 4,586,989 |
|
| $ | 4,800,044 |
|
|
|
|
|
|
|
|
|
|
Liabilities & Stockholders' Deficit |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 2,423,645 |
|
| $ | 1,594,503 |
|
Accrued interest |
|
| 552,883 |
|
|
| 537,451 |
|
Accrued interest, related parties |
|
| 59,936 |
|
|
| 47,763 |
|
Notes payable, related parties, current |
|
| 732,562 |
|
|
| 732,562 |
|
Notes payable, current |
|
| 108,992 |
|
|
| 108,992 |
|
Convertible notes payable, current |
|
| 304,900 |
|
|
| 304,900 |
|
Derivative liability |
|
| 208,605 |
|
|
| 226,585 |
|
Finance lease liability |
|
| 59,904 |
|
|
| 42,855 |
|
Operating lease liability |
|
| 190,049 |
|
|
| 185,182 |
|
Total current liabilities |
|
| 4,641,476 |
|
|
| 3,780,793 |
|
|
|
|
|
|
|
|
|
|
Royalty liability |
|
| 1,475,261 |
|
|
| 1,459,552 |
|
Finance lease liability, non-current |
|
| 111,931 |
|
|
| 143,269 |
|
Operating lease liability, non-current |
|
| 355,882 |
|
|
| 405,235 |
|
SBA Loan |
|
| 350,000 |
|
|
| 350,000 |
|
Notes Payable |
|
| 63,368 |
|
|
| 71,634 |
|
Total Liabilities |
|
| 6,997,918 |
|
|
| 6,210,483 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit |
|
|
|
|
|
|
|
|
Series A Preferred stock, $0.000001 par value; 500,000,000 authorized: 367,500 and 367,500 shares issued and outstanding at September 30, 2022 and June 30, 2022, respectively |
|
| - |
|
|
| - |
|
Common stock, $0.000001 par value; 130,000,000 shares authorized; 21,157,327 shares issued and outstanding at September 30, 2022 and June 30, 2022 |
|
| 21 |
|
|
| 21 |
|
Additional paid in capital |
|
| 31,563,906 |
|
|
| 31,563,906 |
|
Accumulated deficit |
|
| (33,974,856 | ) |
|
| (32,974,366 | ) |
Total Stockholders' Deficit |
|
| (2,410,929 | ) |
|
| (1,410,439 | ) |
Total Liabilities and Stockholders' Deficit |
| $ | 4,586,989 |
|
| $ | 4,800,044 |
|
INDEX See accompanying notes to unaudited consolidated financial statements
3 |
INNOVATIVE MEDTECH, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
UNAUDITED | ||||||||
|
|
|
|
|
|
| ||
|
| For the three months ended |
| |||||
|
| September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Revenue: |
|
|
|
|
|
| ||
Participant fees |
| $ | 247,021 |
|
| $ | 193,910 |
|
Franchise fees |
|
| 137,129 |
|
|
| 122,656 |
|
|
|
| 384,150 |
|
|
| 316,566 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative |
|
| 259,938 |
|
|
| 237,642 |
|
Salaries and wages |
|
| 261,756 |
|
|
| 226,939 |
|
Licensing fees |
|
| 750,000 |
|
|
| - |
|
Consulting fees |
|
| 46,500 |
|
|
| 102,525 |
|
Legal and professional fees |
|
| 28,964 |
|
|
| 47,617 |
|
Total operating expenses |
|
| 1,347,158 |
|
|
| 614,723 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (963,008 | ) |
|
| (298,157 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense, related parties |
|
| (8,972 | ) |
|
| (8,972 | ) |
Interest expense |
|
| (47,669 | ) |
|
| (17,341 | ) |
Change in fair value of derivatives |
|
| 17,980 |
|
|
| 65,152 |
|
Other income |
|
| 1,179 |
|
|
| - |
|
Total other income (expense) |
|
| (37,482 | ) |
|
| 38,839 |
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (1,000,490 | ) |
| $ | (259,318 | ) |
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share on net loss |
| $ | (0.05 | ) |
| $ | (0.02 | ) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted |
|
| 21,157,327 |
|
|
| 15,574,718 |
|
See accompanying notes to unaudited consolidated financial statements
4 |
INNOVATIVE MEDTECH, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT | ||||||||||||||||||||||||||||
For the three months ended September 30, 2022 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| |||||||||||||||
|
| Series A Preferred Stock |
|
| Common Stock |
|
| Paid-in |
|
| Accumulated |
|
| Stockholders' |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Deficit |
| |||||||
Balance, June 30, 2022 |
|
| 367,500 |
|
| $ | - |
|
|
| 21,157,327 |
|
| $ | 21 |
|
| $ | 31,563,906 |
|
| $ | (32,974,366 | ) |
| $ | (1,410,439 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,000,490 | ) |
|
| (1,000,490 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2022 |
|
| 367,500 |
|
| $ | - |
|
|
| 21,157,327 |
|
| $ | 21 |
|
| $ | 31,563,906 |
|
| $ | (33,974,856 | ) |
| $ | (2,410,929 | ) |
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosure
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
5 |
INNOVATIVE MEDTECH, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT | |||||||||||||||||||||||||||||||||||||
For the three months ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||
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| 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 |
|
| $ | - |
|
|
| 15,557,327 |
|
| $ | 16 |
|
| - |
|
| $ |
|
|
| $ | 14,860,551 |
|
| $ | (14,916,012 | ) |
| $ | (55,445 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Issuance of Common Stock for Services |
|
| - |
|
|
| - |
|
|
| 100,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 75,000 |
|
|
| - |
|
|
| 75,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| (259,318 | ) |
|
| (259,318 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balance, September 30, 2021 |
|
| 317,500 |
|
| $ | - |
|
|
| 15,657,327 |
|
| $ | 16 |
|
| - |
|
| $ |
|
|
| $ | 14,935,551 |
|
| $ | (15,175,330 | ) |
| $ | (239,763 | ) |
See accompanying notes to unaudited consolidated financial statements
6 |
6
INNOVATIVE MEDTECH, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
UNAUDITED | ||||||||
|
|
|
|
|
|
| ||
|
| For the three months ended |
| |||||
|
| September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net Loss |
| $ | (1,000,490 | ) |
| $ | (259,318 | ) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net |
|
|
|
|
|
|
|
|
cash used by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 11,731 |
|
|
| 13,709 |
|
Stock issued for services |
|
| - |
|
|
| 75,000 |
|
Impairment of ROU asset |
|
| - |
|
|
| 360 |
|
Amortization of royalty fee liability discount |
|
| 15,709 |
|
|
| - |
|
Change in fair value of derivatives |
|
| (17,980 | ) |
|
| (65,152 | ) |
Right-of-use |
|
| (12,973 | ) |
|
| - |
|
Changes in operating assets & liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 892 |
|
|
| (9,392 | ) |
Prepaid expenses |
|
| (23,087 | ) |
|
| 1,634 |
|
Accounts payable and accrued liabilities |
|
| 829,141 |
|
|
| 28,205 |
|
Accrued interest, related party |
|
| 12,173 |
|
|
| 8,972 |
|
Accrued interest |
|
| 15,432 |
|
|
| 13,882 |
|
Net cash from operating activities |
|
| (169,452 | ) |
|
| (192,100 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Net payments on notes receivable |
|
| 5,998 |
|
|
| (63,296 | ) |
Net cash from investing activities |
|
| 5,998 |
|
|
| (63,296 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from convertible notes payable |
|
| - |
|
|
| (71,214 | ) |
Payments on notes payable |
|
| (8,266 | ) |
|
| - |
|
Net cash from financing activities |
|
| (8,266 | ) |
|
| (71,214 | ) |
|
|
|
|
|
|
|
|
|
Change in Cash |
|
| (171,720 | ) |
|
| (326,610 | ) |
|
|
|
|
|
|
|
|
|
Cash at beginning of period |
|
| 301,337 |
|
|
| 433,435 |
|
|
|
|
|
|
|
|
|
|
Cash (and equivalents) at end of period |
| $ | 129,617 |
|
| $ | 106,825 |
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | - |
|
| $ | - |
|
Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
See accompanying notes to unaudited consolidated financial statements
FRESH HARVEST PRODUCTS,
7 |
INNOVATIVE MEDTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2012FOR THE PERIOD ENDING SEPTEMBER 30, 2022
NOTE 1.
GENERAL ORGANIZATION AND BUSINESS
Fresh Harvest Products,Innovative MedTech, Inc. (the “Company”), a New JerseyDelaware corporation, (the “Parent Company”),is a provider of health and wellness services, primarily through its subsidiaries (collectively referredwholly owned subsidiary SarahCare, an adult day care franchisor with 26 centers (2 corporate and 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.
The Company has also been working on launching an RX Vitality wallet digital offering and mobile app. Once implemented and live, the Company’s digital healthcare wallet will be accessible by customers via mobile wallet on both the Apple iOS and Android App Stores. The Company intends to have a physical healthcare card as the “Company”), are engaged in the proprietary development, sales and marketing of organic and natural food products. well.
On December 16, 2005,April 1, 2022, the ParentCompany partnered with TruCash Group of Companies Inc. (“TruCash”), a leading global payments provider, to launch an all-in-one Super Healthcare App, called RX Vitality Wallet, that will be designed to cater to consumers, patients, hospitals, Seniors, and governments, with a solid platform of benefits and online banking. The RX Vitality digital healthcare wallet is being designed to offer 20%-75% pharmaceutical discounts at 65,000 pharmacies across the United States, including Walgreens and CVS. In addition, the Company plans to offer health and wellness discounts at 500+ online merchants, as well as earning points on its loyalty program. The Company intends to generate revenue from its digital wallet and mobile app in multiple ways, including but not limited to monthly recurring fees, transfer fees, and the inter-exchange rate. On June 15, 2022, the Company’s RX Vitality digital healthcare wallet became available for download at the Apple iOS App store for Apple iPhone users. The Company’s app has also been approved and is available on the Google Play Store.
On April 5, 2022, the Company engaged mPulse Mobile, a leader in conversational AI and digital engagement solutions for the healthcare industry, to drive engagement with the Company’s digital app and wallet.
On April 28, 2022, the Company entered into an Agreement and Plan of Acquisition and Merger (the “Merger Agreement”a share exchange agreement to acquire RX Vitality, Inc. (“RX Vitality”) with Fresh Harvest Products, Inc., a New York corporation (“New York FHP”), Michael Friedman, Marcia Robertsmedia and Illuminate, Inc. The Merger Agreement contemplatesfinance advisory company.
On May 13, 2022, 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 Jersey and the State of New York to properly consummate the Merger. As 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 in the amount of approximately $30,145 plus applicable interest and penalties.
2. File an application on behalf 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 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 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.
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”)a partnership 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”VSUSA Corp. (“VSUSA”), a non-for-profit organization that empowers Veterans and Seniors by offering services designed to build successful life transitions with access to workforce and independent housing; health services; and social service programs in communities across the United States. The partnership will permit the Company to use the VSUSA logo on the back of its Vitality Debit Card. For this, the Company will give up to 1% of its revenue generated from its Vitality Debit Card to VSUSA. The Company’s Chairman is a principal and co-Founder of VSUSA.
NOTE 2. LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going-concern basis, which was effective on May 11, 2011. contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business.
Going ConcernFor the quarters ended September 30, 2022 and 2021, the Company reported a net loss of $1,000,490 and $259,318 respectively.
As of September 30, 2022, the Company maintained total assets of $4,586,989, total liabilities including long-term debt of $6,997,918 along with an accumulated deficit of $33,974,856.
8 |
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,September 30, 2022, the Company has limitedhad $129,617 cash available for operations and hashad an accumulated deficit of $8,217,299.$33,974,856. Management believes that cash on hand as of July 31, 2012September 30, 2022 is not sufficient to fund operations for the next year.through November 2023. 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.
IfThe Company believes that additional capital will be required to fund operations through November 15, 2023 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 availableat 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 discussedCompany. These conditions raise substantial doubt about ourthe 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 assumingdo not include any adjustments that might result from the Company will continue as a going concern, which contemplates the realizationoutcome 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 Meetingthis uncertainty.
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 yearsthree months ended October 31, 2011September 30, 2022 and 2010.2021.
Reclassifications
Principles of Consolidation
TheseThe Company has two wholly-owned operating subsidiaries; Sarah Adult Day Services, Inc., and Sarah Day Care Centers, Inc., along with non-operating subsidiaries consisting of RX Vitality, Inc. and the 10 newly formed limited liability companies formed for the additional SarahCare location leases. 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 operationsaccounts of the Company accordingly. These reclassifications did notand its two wholly-owned subsidiaries, are prepared in conformity with GAAP pursuant to the rules and regulations of the SEC. All significant intercompany balances and transactions have any effect onbeen eliminated. The consolidated financial statements have been prepared using the reported net income (loss) for the quarters ended July 31, 2012accrual basis of accounting in accordance with GAAP and July 31, 2011 or for thepresented in US dollars. The fiscal year ended October 31, 2011.end is June 30.
9
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 AmericaGAAP 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 bearingnon-interest-bearing account that currently does not exceed federally insured limits.$250,000 at September 30, 2022. For the purpose of the consolidated financial 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 31, 2012.September 30 and June 30, 2022.
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 lossearnings 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 numberIntangible Assets
Certain intangible assets arose from the acquisition of common shares outstanding for computing basic EPS for the three months ended July 31, 2012Sarah Adult Day Services, Inc., and 2011 were 1,068,943,779Sarah 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 customersfollowing, 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 costhave 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 orare being amortized on a straight-line basis over theirthe following estimated useful life.lives, unless they have an indefinite life:
9 |
Asset | Estimated Useful Life | |||
Customer Relationships | 3 | |||
Trademarks | Indefinite | |||
Non-Compete Agreement | 3 | |||
CARF Accreditation | 3 | |||
Franchise Agreements | Indefinite |
An intangible asset with 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 asset. Subsequent reversal of impairment losses is not permitted. For the quarters ended September 30, 2022 and 2021, there were no impairment losses.
Revenue Recognition
Revenue is recognized when a customer obtains services. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company believesapplies the asset lives assignedfollowing five-step model in order 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 the useful lifedetermine this amount: (i) identification of the assetspromised goods in the contract; (ii) determination of five years. Ordinary repairswhether 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 maintenance are expensed as incurred. (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
For the three months ended July 31, 2012 and 2011, depreciation expense was $113 and $12,176, respectively. For the nine months ended July 31, 2012 and 2011, depreciation expense was $2,544 and $3,018, respectively.
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 services it provides 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.
Patient Fees
Participant fee revenue is reported at the amount that reflects the consideration the Company expects to receive in exchange for the services provided. These amounts are due from participants or third-party payors and include variable consideration for retroactive adjustments from estimated reimbursements, if any, under reimbursement programs. Performance obligations are determined based on the nature of the services provided. Resident fee revenue is recognized as performance obligations are satisfied.
Under the Company’s day care agreements, which are generally for a contractual term of 30 days to one year, the Company provides services to participants for a stated daily or monthly fee. The Company has elected the lessor practical expedient within ASC 842, Leases (“ASC 842”) and recognizes, measures, presents, and discloses the revenue for services under the Company’s senior living residency agreements based upon the predominant component, either the lease or nonlease component, of the contracts. The Company has determined that the services included under the Company’s independent living, assisted living, and memory care residency agreements have the same timing and pattern of transfer and are performance obligations that are satisfied over time. The Company recognizes revenue under ASC 606, Revenue Recognition from Contracts with Customers (“ASC 606”) for its participants agreements for which it has estimated that the nonlease components of such agreements are the predominant component of the contract.
10 |
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. Estimates for settlements with third-party payors for retroactive adjustments from estimated reimbursements due to audits, reviews, or investigations are included in the determination of the estimated transaction price for providing services. The Company estimates the transaction price based on the terms of the contract with the payor, correspondence with the payor, and historical payment trends. Changes to these estimates for retroactive adjustments are recognized in the period the change or adjustment becomes known or when final settlements are determined.
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.
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 adoptedown and lease any policy regardingsite 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 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 (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).
Digital Healthcare Wallet & Card
Revenue will be recognized when fees are collected from cardholders at the time the fees are assessed and debited from their account balances. The Company anticipates the card revenues to consist of monthly maintenance fees, new card fees, ATM fees, and other card revenues. The fees will be earned by providing account services to each cardholder over the contract term. Agreements with cardholders are considered daily services contracts.
11 |
The Company intends to earn interchange revenue from fees remitted by the merchant’s bank, which are based on rates established by the payment of dividends. No dividends have been paid during 2011networks, such as Visa, when account holders make purchase transactions using the card products and 2012.
services. The Company intends to recognize revenues at the point in time the transactions occurs.
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 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 Valuevalue of Financial Instrumentsfinancial instruments
The Company’s financial instruments includinginclude cash accounts receivable, and cash equivalents, accounts payable, are reflected in the accompanying consolidated financial statements ataccrued expenses, and debt. The carrying value whichof 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.
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-termassets 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 12).
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 Assetsany beneficial feature.
12 |
Long-lived assets such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicateDerivative 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 assetsconversion feature meets the requirements to be held and used is measured bytreated as a comparisonderivative: a) one or more underlying, typically the price of the carryingCompany’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 toconvertible debt generally means the estimated undiscounted future cash flows expectedstock 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 bytreated 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 carryingfair 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 byrecorded as a debt discount, which offsets the carrying amount of the asset exceedsdebt. 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 todebt. 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 disposedrequired within twelve months of would be separately presented in the balance sheet and reporteddate.
The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option at the lowertheir fair values as of the carrying amount orinception 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 assetsHedging” (provides comprehensive guidance on derivative and liabilities of a disposal grouphedging transactions) whereby all future instruments may be classified as held for sale would be presented separately ina derivative liability with the appropriate assetexception of instruments related to share-based compensation issued to employees or directors.
Debt Issue Costs and liability sections of the balance sheet.
For the three months ended July 31, 2012 and 2011, the Company recognized a loss on the disposal of assets of $0 and $1,226 respectively. For the nine months ended July 31, 2012 and 2011, the Company recognized a loss on the disposal of assets of $0 and $24,760 respectively.
Share-based compensation
Debt Discount
The Company accounts for common stock issued to employees, directors, and consultantsmay record debt issue costs and/or debt discounts in accordanceconnection with raising funds through the provisionsissuance of Stock Compensation. The compensation cost relating to share-based payment transactions willdebt. These costs may be recognizedpaid in the consolidated financial statements. The cost associatedform of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Reclassification of Presentation
Certain prior year amounts have been reclassified to conform with common stock issued to employees, directors and consultants will recognized, at fair value,current year presentation. These reclassifications had no effect 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.reported results of operations.
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
Recently Issued Accounting for Uncertain Tax PositionsPronouncements
The Parent Company anddoes not expect any of the recently issued accounting pronouncements to have a material impact on its financial condition 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 authoritiesresults of operations for the years prior to October 31, 2005. With respect to state and local jurisdictions, with limited exception, the Parent Company andperiod ended as of September 30, 2022 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.
on a going forward basis.
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
13 |
NOTE 4. BUSINESS ACQUISITION
SarahCare
On March 25, 2021 the Company acquired 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 Royalty fee liability has a term 3 years and is to be repaid from any new subsidiary franchisee fees.
The Company completed its accounting for the acquisition on March 25, 2022. The purchase price allocation is as follows:
Intangible assets: |
|
|
| |
Customer relationships |
| $ | 40,000 |
|
Trademarks |
|
| 410,000 |
|
Non-Compete Agreement |
|
| 1,000 |
|
CARF Accreditation |
|
| 23,000 |
|
Franchise Agreements |
|
| 2,710,000 |
|
Total intangible assets |
| $ | 3,184,000 |
|
|
|
|
|
|
Goodwill (excess minus values assigned to intangible assets) |
| $ | 984,467 |
|
Minus (goodwill impaired in prior period) |
|
| (806,690 | ) |
Remaining Goodwill |
| $ | 177,777 |
|
On June 30, 2022, the Company performed a test to determine if goodwill or the indefinite lived intangibles should be impaired. The Company determined that the fair value of the datereporting units was greater than its carrying value. As such, no impairment was recorded for the year ended June 30, 2022.
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:
|
| September 30, |
|
| June 30, |
| ||
|
| 2022 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Notes receivable from a franchise, due in monthly installments of $1,999, no interest, maturing March 2023 |
| $ | 11,997 |
|
| $ | 17,995 |
|
|
|
|
|
|
|
|
|
|
Note receivable from related party (see Note 17), due in six months, with no installments, 5% interest maturing March 2022 |
|
| 9,294 |
|
|
| 9,294 |
|
Total notes receivable |
|
| 21,291 |
|
|
| 27,289 |
|
Less long-term |
|
| - |
|
|
| - |
|
Total short term notes receivable |
| $ | 21,291 |
|
| $ | 27,289 |
|
14 |
Principal to be collected during the next year is as follows:
|
| As of |
| |
|
| September 30, 2022 |
| |
Year ending June 30, 2023 |
| $ | 21,291 |
|
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consisted of filing of these financial statements, the following subsequent events that were required to beat September 30, 2022 and June 30, 2022:
|
| September 30, |
|
| June 30, |
| ||
|
| 2022 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Leasehold improvements |
| $ | 294,864 |
|
| $ | 294,864 |
|
Vehicles |
|
| 67,116 |
|
|
| 67,116 |
|
Computer equipment |
|
| 19,585 |
|
|
| 14,354 |
|
Furniture and fixtures |
|
| 5,455 |
|
|
| 5,455 |
|
|
|
| 387,020 |
|
|
| 381,789 |
|
Less: Accumulated depreciation |
|
| (55,309 | ) |
|
| (48,898 | ) |
Property and equipment – net |
| $ | 326,480 |
|
| $ | 332,891 |
|
Depreciation expense was $6,411 and $13,710 for the three months ended September 30, 2022 and 2021.
NOTE 7. INTANGIBLE ASSETS
|
| September 30, |
|
| June 30, |
| ||
|
| 2022 |
|
| 2022 |
| ||
Customer relationships |
| $ | 40,000 |
|
| $ | 40,000 |
|
Trademarks |
|
| 410,000 |
|
|
| 410,000 |
|
Non-Compete Agreement |
|
| 1,000 |
|
|
| 1,000 |
|
CARF Accreditation |
|
| 23,000 |
|
|
| 23,000 |
|
Franchise Agreements |
|
| 2,710,000 |
|
|
| 2,710,000 |
|
Less: Accumulated Amortization |
|
| (31,585 | ) |
|
| (26,267 | ) |
Intangible assets - net |
| $ | 3,152,415 |
|
| $ | 3,157,733 |
|
The Company recorded or disclosedamortization expense in the accompanying financial statementsamount of $5,318 and $0 for the quarterthree months ended July 31, 2012.September 30, 2022 and 2021.
15 |
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 and by a majority vote of the Company’s Board of Directors.NOTE 8. NOTES PAYABLE
NOTE 3. ACCOUNTS PAYABLE
As of July 31, 2012September 30, 2022 and October 31, 2011,June 30, 2022, the accountsCompany had $172,360 and $180,626, respectively, in outstanding notes 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 |
Ref No. |
|
| Date of Note Issuance |
| Original Principal Balance |
|
| Maturity Date |
| Interest Rate % |
|
| Principal Balance 09/30/22 |
|
| Principal Balance 6/30/22 |
| |||||
| 1 |
|
| 12/25/20 |
| $ | 146,021 |
|
| 8/15/25 |
|
| 10 |
|
| $ | 33,061 |
|
| $ | 33,061 |
|
| 2 |
|
| 2/24/14 |
|
| 5,000 |
|
| * |
|
| 9 |
|
|
| 8,547 |
|
|
| 8,547 |
|
| 3 |
|
| 2/24/14 |
|
| 39,000 |
|
| * |
|
| 9 |
|
|
| 33,687 |
|
|
| 33,687 |
|
| 4 |
|
| 2/24/14 |
|
| 179,124 |
|
| * |
|
| 9 |
|
|
| 33,697 |
|
|
| 33,697 |
|
|
|
|
| Total Current |
|
|
|
|
|
|
|
|
|
|
| $ | 108,992 |
|
| $ | 108,992 |
|
________
12* As of September 30, 2022, these notes are in default.
Ref No. |
|
| Date of Note Issuance |
| Original Principal Balance |
|
| Maturity Date |
| Interest Rate % |
|
| Principal Balance 09/30/22 |
|
| Principal Balance 6/30/22 |
| |||||
| 1 |
|
| 12/25/20 |
| $ | 146,021 |
|
| 8/15/25 |
|
| 10 |
|
| $ | 63,368 |
|
| $ | 71,634 |
|
|
|
|
| Total Long Term |
|
|
|
|
|
|
|
|
|
|
| $ | 63,368 |
|
| $ | 71,634 |
|
FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS* As of September 30, 2022, these notes are in default.
July 31, 2012
NOTE 4. 9. NOTES PAYABLE, - RELATED PARTIES
As of July 31, 2012September 30 and October 31, 2011,June 30, 2022, the Company had $732,562 and $732,562, respectively, in outstanding notes payable, – related partiesparties. As of September 30 and June 30, 2022, the Company had $59,963 and $47,763, respectively, in accrued interest related to these notes. All of these notes were as follows:assumed in connection with the acquisition on March 25, 2021.
|
| 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 | $ | - |
Ref No. |
|
| Date of Note Issuance |
| Original Principal Balance |
|
| Maturity Date |
| Interest Rate % |
|
| Principal Balance 09/30/22 |
|
| Principal Balance 6/30/22 |
| |||||
| 1 |
|
| 3/25/2021 |
|
| 308,500 |
|
| * |
|
| 10 | % |
| $ | 308,500 |
|
|
| 308,500 |
|
| 2 |
|
| 3/25/2021 |
|
| 47,436 |
|
| * |
|
| 10 | % |
|
| 47,435 |
|
|
| 47,435 |
|
| 3 |
|
| 3/25/2021 |
|
| 158,503 |
|
| * |
|
| 10 | % |
|
| 158,503 |
|
|
| 158,503 |
|
| 4 |
|
| 3/24/22 |
|
| 39,000 |
|
| * |
|
| 6 | % |
|
| 39,000 |
|
|
| 39,000 |
|
| 5 |
|
| 5/5/22 |
|
| 179,124 |
|
| 11/5/22 |
|
| 6 | % |
|
| 179,124 |
|
|
| 179,124 |
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
| $ | 732,562 |
|
| $ | 732,562 |
|
* As of September 30, 2022, these notes are in default.
16 |
NOTE 5. 10. CONVERTIBLE NOTES PAYABLE, IN DEFAULT
As of July 31, 2012September 30 and October 31, 2011,June 30, 2022, the convertible 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 |
Date of Note Issuance |
| Original Principal Balance |
|
| Maturity Date |
| Interest Rate % |
|
| Conversion Rate |
|
| Principal Balance 6/30/22 |
|
| 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 of previous 5 days closing price |
|
|
| 4,000 |
|
|
| 4,000 |
| |
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 Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 304,900 |
|
| $ | 304,900 |
|
NOTE 11. SBA LOAN
13
FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIESSBA Loan
NOTES TO CONSOLIDATED
On June 25, 2020 and January 6, 2022, 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 three months ended September 30, 2022 and 2021, the Company recorded $1,402 and $5,779, respectively in interest related to the SBA loans.
17 |
NOTE 12. DERIVATIVE FINANCIAL STATEMENTSINSTRUMENTS
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
(1)The following tables summarize the components of the Company’s derivative liabilities and linked common shares As of July 31, 2012September 30, 2022 and October 31, 2011,June 30, 2022 the CEOamounts that were reflected in income related to derivatives were:
|
| September 30, 2022 |
| |||||
|
| Indexed |
|
| Fair |
| ||
The financings giving rise to derivative financial instruments |
| Shares |
|
| Values |
| ||
Compound embedded derivative |
|
| 232,868 |
|
| $ | 208,605 |
|
|
| June 30, 2022 |
| |||||
|
| Indexed |
|
| Fair |
| ||
The financings giving rise to derivative financial instruments |
| Shares |
|
| Values |
| ||
Compound embedded derivative |
|
| 129,380 |
|
| $ | 226,585 |
|
The following tables summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the Parentderivative financial instruments by type of financing for the quarters ending September 30, 2022 and 2021:
The financings giving rise to derivative financial instruments and the income effects:
|
| Three Months Ended |
| |||||
|
| September 30, |
|
| September 30, |
| ||
|
| 2021 |
| 2022 |
| |||
Compound embedded derivative |
| $ | 17,980 |
|
| $ | 65,152 |
|
Day one derivative loss |
|
| - |
|
|
| - |
|
Total derivative gain (loss) |
| $ | 17,980 |
|
| $ | 65,152 |
|
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.
18 |
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 personally guaranteed $170,249selected 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 $133,868, respectivelyranges 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:
|
|
|
|
| September 30, |
|
| June 30, |
| |||
|
| Inception |
|
| 2022 |
|
| 2022 |
| |||
Quoted market price on valuation date |
| $ | 0.01 |
|
| $ | 1.85 |
|
| $ | 3.49 |
|
Contractual conversion rate |
| $ | 0.0054 - $0.0081 |
|
| $ | 1.21 - $1.39 |
|
| $ | 1.94 - $2.62 |
|
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% |
|
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 September 30, 2022 and June 30, 2022.
|
| September 30, 2022 |
|
| June 30, 2022 |
| ||
|
|
|
|
|
|
| ||
Beginning balance |
| 226,585 |
|
| 254,700 |
| ||
Issuances: |
|
|
|
|
|
| ||
Convertible Note Financing |
|
| - |
|
|
| - |
|
Removals |
|
| - |
|
|
| - |
|
Changes in fair value inputs and assumptions reflected |
|
| (17,980 | ) |
|
| (28,115 | ) |
Conversions |
|
| - |
|
|
| - |
|
Ending balance |
| $ | 208,605 |
|
| $ | 226,585 |
|
The fair value of the outstanding notes payable.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.
19 |
15NOTE 13. STOCKHOLDERS’ DEFICIT
FRESH HARVEST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2012
NOTE 6.
STOCKHOLDERS’ EQUITY
Common Stock
As of July 31, 2012On or about April 26, 2022, the Parent Company had authorized 2,000,000,000 and issued 1,068,943,779entered into an Agreement for Share Exchange (the “Share Exchange Agreement”) to obtain 10,500,000 shares of Common Stock at par valuecommon stock of $0.0001 per share and at October 31, 2011,Vitality RX, Inc., a Delaware corporation (“Vitality”), representing 100% ownership of Vitality, from Vitality’s five shareholders identified in the ParentShare Exchange Agreement (the “Vitality Shareholders”), in consideration of the issuance by the Company had authorized 2,000,000,000 and issued 506,889,209to the Vitality Shareholders of 5,500,000 shares of Common Stock at par value of $0.0001 per share.
Series A Preferred Stock
Certificate of Designations
On February 23, 2011, the Parent Company filed a Certificate of DesignationsInnovative common stock, and 50,000 shares of Series A Convertible Preferred Stock (the “Certificate(which preferred stock is convertible into 5,000,000 shares of Designations”) withcommon stock) (such shares of common stock and preferred stock collectively the Secretary“Shares”). On or about April 28, 2022, the transaction closed, Innovative received the stock of State ofVitality from the State of New Jersey. The Certificate of Designations, subjectVitality Shareholders, and issued the Shares to the requirementsVitality Shareholders. The Company determined that Vitality did not meet the definition of New Jersey law, statesa business under ASC 805, as such, the designation, numberissuance of shares powers, preferences, rights, qualifications, limitationswas treated as stock-based compensation expense.
Common Stock
On or about April 26, 2022, the Company issued the Vitality Shareholders 5,500,000 common shares, par value, $0.000001 per share, to Vitality Shareholders' for consulting services and restrictionstheir expertise in technology, financial services and media related to the Company’s digital healthcare wallet.
Series A Preferred Stock & Series B Preferred Stock
On April 26, 2022, the Company issued the Shareholders of the Parent Company’sVitality 50,000 shares of Series A Convertible Preferred Stock, par value, $0.0001$0.000001 per share, (the “to Vitality’s five shareholder’s for consulting services and their expertise in technology, financial services and media related to the Company’s digital healthcare wallet.
As of September 30, 2022, the Company had 500,000,000 authorized shares of Series A Convertible Preferred Stock, par value, $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.
Series A Preferred Stock”). In summary, the & Series B Preferred Stock – Certificate of Designations provides:
NumberThe Preferred Shares each have Certificate of Designations, which designate as follows:
5,000,000Number
500,000,000 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”).
20 |
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 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.
16
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.
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 zeroat September 30, 2022 was $6,794,427 and as of July 31, 2012.June 30, 2022 was $6,584,324. The net change in allowance during the three months ended September 30, 2022 and 2021 was $210,103 and $54,457, respectively.
As of July 31, 2012,September 30, 2022, the Company has federal net operating loss carry forwards of approximately $5,400,000$32,354,000 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 years ended June 30, 2022 and 2021 due to losses and full valuation allowances against net deferred tax assets.
As of July 31, 2012,September 30, 2022 and June 30, 2022, 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 |
|
|
| )% |
State taxes – net of federal benefits |
|
|
| )% |
Valuation allowance |
|
|
| % |
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.
21 |
|
Based on management’s review of the Company’s tax position, the Company had no significant unrecognized corporate tax liabilities as of September 30, 2022 and June 30, 2022 and 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 2021 Federal, New Jersey nor New York Corporate Income Tax Returns.
NOTE 8.
15. UNPAID PAYROLL TAXES
As of July 31, 2012,September 30 and June 30, 2022, 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 applicablesubject to further interest and penalties. The total amount due to both taxing authorities including penalties and interest as of July 31, 2012September 30, 2022 and June 30, 2022 was approximately $244,000$77,803 subject to further penalties and interest plus accrualsinterest. This is included in accounts payable and accrued expenses on unpaid wages for a total of $300,000. the Company’s consolidated balance sheets.
IRS Tax Lien
The Internal Revenue Service has placed a federal tax lien on all of the assets of the Company.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Licensing Agreement
On March 31, 2022, the Company entered into a management agreement with TruCash Group of Companies, Inc. (“TruCash’) where the Company is licensing from TruCash certain VISA ICAs and BINs to be used by the Company to offer certain pre-paid cards, mobile apps, loyalty programs, and other merchant related services to its potential clients. The Agreement has designateda term of five (5) years and monthly payments due to TruCash of $250,000 (the “Licensing Fee”).
Rent
As of September 30, 2022, the balance owed as uncollectibleCompany maintains its corporate address in at this2310 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.
SarahCare leases three properties for its corporate office and its two corporate owned centers. SarahCare’s corporate office is currently negotiatingapproximately 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 payment planten-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. On April 29, 2022, the Company amended the leases to delay commencement until November 1, 2022. On August 19, 2022, the Company and landlord mutually agreed to terminate one of the leases formed on April 21, 2021.
22 |
NOTE 17. LEASES
Operating Leases
Stow Professional Lease
In connection with the Stateacquisition of New York.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 to repay the lessor monthly payments as 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 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.
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 the 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:
|
| September 30, 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 |
|
| (93,007 | ) |
|
| (78,830 | ) |
|
| (109,039 | ) |
|
| (280,876 | ) |
Right-of-use asset, net |
| $ | 189,364 |
|
| $ | 51,611 |
|
| $ | 303,731 |
|
| $ | 544,706 |
|
23 |
|
| June 30, 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 |
|
| (76,539 | ) |
|
| (66,710 | ) |
|
| (92,972 | ) |
|
| (236,221 | ) |
Right-of-use asset, net |
| $ | 205,832 |
|
| $ | 63,731 |
|
| $ | 319,798 |
|
| $ | 589,361 |
|
Operating lease liability is summarized below:
|
| September 30, 2022 |
| |||||||||||||
|
| Stow Professional Center Lease |
|
| Harbor Lease |
|
| S. Frank Professional Lease |
|
| Total |
| ||||
Office lease |
| $ | 190,586 |
|
| $ | 51,612 |
|
| $ | 303,731 |
|
| $ | 545,929 |
|
Less: current portion |
|
| (70,014 | ) |
|
| (51,612 | ) |
|
| 68,421 | ) |
|
| (190,049 | ) |
Long term portion |
| $ | 120,572 |
|
| $ | - |
|
| $ | 235,310 |
|
| $ | 355,880 |
|
|
| June 30, 2022 |
| |||||||||||||
|
| Stow Professional Center Lease |
|
| Harbor Lease |
|
| S. Frank Professional Lease |
|
| Total |
| ||||
Office lease |
| $ | 206,887 |
|
| $ | 63,732 |
|
| $ | 319,798 |
|
| $ | 590,417 |
|
Less: current portion |
|
| (68,101 | ) |
|
| (50,343 | ) |
|
| (66,738 | ) |
|
| (185,182 | ) |
Long term portion |
| $ | 138,786 |
|
| $ | 13,389 |
|
| $ | 253,060 |
|
| $ | 405,235 |
|
24 |
Maturity of the lease liability is as follows:
|
| September 30, 2022 |
| |||||||||||||
|
| Stow Professional Center Lease |
|
| Harbor Lease |
|
| S. Frank Professional Lease |
|
| Total |
| ||||
Year ending June 30, 2023 |
| $ | 63,866 |
|
| $ | 40,500 |
|
| $ | 71,192 |
|
| $ | 175,558 |
|
Year ending June 30, 2024 |
|
| 85,802 |
|
|
| 13,500 |
|
|
| 94,923 |
|
|
| 194,225 |
|
Year ending June 30, 2025 |
|
| 64,840 |
|
|
| - |
|
|
| 94,923 |
|
|
| 159,763 |
|
Year ending June 30, 2026 |
|
| - |
|
|
| - |
|
|
| 94,923 |
|
|
| 94,923 |
|
Year ending June 30, 2027 |
|
| - |
|
|
| - |
|
|
| 7,910 |
|
|
| 7,910 |
|
Present value discount |
|
| (23,922 | ) |
|
| (2,388 | ) |
|
| (60,140 | ) |
|
| (86,450 | ) |
Lease liability |
| $ | 190,586 |
|
| $ | 51,612 |
|
| $ | 303,731 |
|
| $ | 590,417 |
|
Finance leases
Commencing during the quarter ended September 30, 2022, 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 |
|
| As of |
| ||
|
| September 30, |
|
| June 30, |
| ||
|
| 2022 |
|
| 2022 |
| ||
Equipment lease |
| $ | 24,097 |
|
| $ | 24,097 |
|
Less accumulated amortization |
|
| (4,590 | ) |
|
| (3,442 | ) |
Finance right of use asset |
| $ | 19,507 |
|
| $ | 20,655 |
|
25 |
On October 1, 2021, the Company discontinued use of one of its copiers. As a result, the Company recorded an impairment of assets in the amount of $84,364, during the fiscal quarter ended September 30, 2022. Amortization expense was $3,442 and $0 for the three months ended June 30, 2022 and 2021, respectively.
Finance lease liabilities are summarized below:
|
| As of |
|
| As of |
| ||
|
| September 30, |
|
| June 30, |
| ||
|
| 2022 |
|
| 2022 |
| ||
Equipment lease |
| $ | 186,124 |
|
| $ | 186,124 |
|
Less: current portion |
|
| (59,904 | ) |
|
| (42,855 | ) |
Long term portion |
| $ | 126,220 |
|
| $ | 143,269 |
|
|
| Equipment |
| |
|
| Lease As of September 30, 2022 |
| |
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 |
|
| 212,898 |
|
Less imputed interest |
|
| (26,774 | ) |
PV of payments |
| $ | 186,124 |
|
26 |
NOTE 18. RELATED PARTY TRANSACTIONS
During the fiscal quarter ended September 30, 2022 and 2021, related party transactions were as follows:
As of July 31, 2012,September 30, 2022, the New A.C. LaRocco hadCompany 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 filedcurrently have a lease for this space but expects 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 interestenter into a month-to-month office lease for non-filing and non-payment.this space.
NOTE 9.
OPERATING LEASES
Rent
As of July 31, 2012,September 30, 2022, a company founded and partially owned by the ParentCompany’s Chairman, Charles Everhardt, has paid the Licensing Fees of $1,500,000 on behalf of the Company, maintains its office New York, New York. Therewhich is no written office lease, however,included in accounts payable and accrued liabilities.
On May 5, 2022, the rent is approximately $1,050 per month for our current office location located in New York. Company signed a note receivable of $179,124 from a company founded and partially owned by the Company’s Chairman, Charles Everhardt. The principal amount of $179,124 was due as of September 30 and June 30, 2022.
On March 25, 2022, the Company signed a note receivable of $39,000 from a company founded and partially owned by the Company’s Chairman, Charles Everhardt. The principal amount of $39,000 was due as of September 30 and June 30, 2022.
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. The principal amount of 50,000 was due as of September 30 and June 30, 2022.
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. The principal amount of $29,294 was due as of September 30 and June 30, 2022.
NOTE 19. SUBSEQUENT EVENTS
The Company maintains a limited amount of office equipmenthas evaluated subsequent events for recognition and does not lease any vehicles. Fordisclosure through November 17, 2022, the quarter ended July 31, 2012date the financial statements were available to be issued, and 2011, rent expense was $3,150 and $0, respectively.determined that there were no such events requiring adjustment to, or disclosure in, the accompanying consolidated financial statements except as described below.
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 for the quarter ended July 31, 2012,On November 9, 2022, the Company does not expect anysigned a note receivable of $500 from a company founded and partially owned by the recently issued accounting pronouncements to have a material impact on its financial condition or results of operations.Company’s Chairman, Charles Everhardt.
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,On October 5, 2022, the Company reportedsigned a net lossnote receivable of $180,996$20,000 from a company founded 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 approval ofpartially owned by the Company’s shareholders of an increase in the authorized common stock of the Company. There can be no assurance that the Company will be successful in obtaining financing at the level needed or on terms acceptable to the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying annual financial statements do not include any adjustments that might result from the outcome of this uncertainty.Chairman, Charles Everhardt.
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.
27 |
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of OperationsMANAGEMENT’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 JerseyDelaware corporation (the “Parent Company”), and subsidiaries.
Overview
Fresh Harvest Products,Innovative MedTech, Inc. (the “Company”), a New JerseyDelaware corporation, (the “Parent Company”),is a provider of health and its subsidiaries (collectively referred to aswellness services. On March 25, 2021, the “Company”), are engagedCompany 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 YorkCompany assumed approximately $393,885 in debt due to properly consummatesellers, and the Merger. Asremaining 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 taxesroyalty fee liability due in the amount of approximately $30,145 plus applicable interest$1,500,000. 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.
2. File an application on behalf 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 ParentCompany has also been working on launching an RX Vitality wallet digital offering and mobile app. Once implemented and live, the Company’s digital healthcare wallet will be accessible by customers via mobile wallet on both the Apple iOS and Android App Stores. The Company intends to takehave a physical healthcare card as well.
On April 1, 2022, the steps requiredCompany partnered with TruCash Group of Companies Inc. (“TruCash”), a leading global payments provider, to completelaunch an all-in-one Super Healthcare App, called RX Vitality Wallet, that will be designed to cater to consumers, patients, hospitals, Seniors, and governments, with a solid platform of benefits and online banking. The RX Vitality digital healthcare wallet is being designed to offer 20%-75% pharmaceutical discounts at 65,000 pharmacies across 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.United States, including Walgreens and CVS. In addition, there is a risk that the State of New Yorkwe plan to offer health and wellness discounts at 500+ online merchants, as well as earning points on our Loyalty Program. The Company intends to generate revenue from its digital wallet and mobile app in multiple ways, including but not limited to monthly recurring fees, transfer fees, and the State of New Jersey may requireinter-exchange rate. On June 15, 2022, the Parent CompanyCompany’s RX Vitality digital healthcare wallet became available for download at the Apple iOS App store for Apple iPhone users. The Company’s app has also been approved and New York FHP to take additional actions thatis available on the Google Play Store.
On April 5, 2022, the Company is not presently contemplating. Ifengaged mPulse Mobile, a leader in conversational AI and digital engagement solutions for the Parent Companyhealthcare industry, to drive engagement with the Company’s digital app and New York FHP are unable to completewallet (currently under development).
On April 28, 2022, 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.
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”a share exchange agreement to acquire RX Vitality, Inc. (“RX Vitality”) with Take, a media 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. finance advisory company.
On May 4, 2011,13, 2022, the Parent Company New York FHP, New A.C. LaRocco, the Seller, Clarence Scott and Karen Leffler entered into a Settlement Agreementpartnership with VSUSA Corp. (“VSUSA”), a non-for-profit organization that empowers Veterans and Release (the “Settlement Agreement”), which was effective on May 11, 2011.
On September 11, 2012, Dominick Cingari, a Director ofSeniors by offering services designed to build successful life transitions with access to workforce and independent housing; health services; and social service programs in communities across the United States. The partnership will permit the Company since December 16, 2005, submitted an emailto use the VSUSA logo on the back of resignationits Vitality Debit Card. For this the Company will give up to 1% of its revenue generated from its Vitality Debit Card to VSUSA. The Company’s Chairman is a principal and stated that a letterco-Founder of resignation was forthcoming, and which letter has not yet been received byVSUSA.
As of September 30, 2022, the Company. Mr. Cingari is owed compensationCompany had current assets of $14,000 as of July 31, 2012. This amount$359,388. The Company has a conversion option into common shares at the optionlimited 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 31, 2012September 30, 2022, and this is not sufficient to fund operations through October 31, 2012. The Companyfor the next 12 months. Accordingly, we will be required to raise additional funds to meet itsour 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.
TheOur unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q have been prepared assuming that the Company will continue ason a going concern basis, which contemplates the realization ofassumes that we will be able to realize our assets and the liquidation of liabilitiesdischarge 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.
28 |
Results of Operations for the Three Months Ended July 31, 2012September 30, 2022, and July 31, 2011September 30, 2021
For the three monthsquarter endedJuly 31, 2012, September 30, 2022, we recorded netgross revenues of $92,941,$384,150 versus $100,335$316,566 for the quarter ended September 30, 2021, as a decreaseresult of $7,394the Company’s ability to keep centers open for longer periods of time, and more participants coming to the center more often.
For the quarter ended September 30, 2022, operating expenses increased to $1,347,158 from $614,723, a $732,435 increase, or 7.36%119.51%, over the three monthsquarter endedJuly 31, 2011. September 30, 2021. The Company believes that the decreaseincrease is primarilydue to an increase in expenses due to the cyclical natureCompany’s acquisition of RX Vitality and the revenuesinitiating the development of the New AC LaRocco’s products. its RX Vitality Wallet and debit card.
For the three monthsquarter endedJuly 31, 2012, cost of goods sold was $126,329 versus $82,973 for a decrease of $132,607 or 52.25% over the three months endedJuly 31, 2011. The decrease in the cost of goods sold is primarily due to a decrease in returns and allowances, off-invoice promotions, manufacturer charge-backs, and freight and shipping related expenses.
For the three months endedJuly 31, 2012, gross profit was $(33,388) versus $17,361 for an increase of $50,749 or 292.31% over the three 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 three months endedJuly 31, 2012, gross profit in percentages was 67% versus 11.9% 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 three months endedJuly 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, September 30, 2022, interest expense on our convertible notes payable decreased to $17,939$9,747 from $23,056, or 25%$26,313, a decrease of 62.96% over the three monthsquarter endedJuly 31, 2011. September 30, 2021. This decrease is primarily due to thean decrease in notes payable. interest expense.
For the three monthsquarter endedJuly 31, 2012, September 30, 2022, 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 a decrease of $80,899 or 16.08% over the nine months endedJuly 31, 2012. The Company believes that the 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 and allowances, off-invoice promotions, manufacturer charge-backs, and freight and shipping related expenses.
For the nine months endedJuly 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, we realized a net loss of $504,861$1,000,490 as compared to a net loss of $649,414$259,318 for the three monthsquarter endedJuly 31,2011. September 30, 2021. The decreaseincrease in our net loss of $146,224 is$741,172 was primarily due to transactions relatedan increase in licensing expenses due to decreases in expenses.the Company’s acquisition of RX Vitality and the initiating the development of its RX Vitality Wallet and debit card.
Liquidity and Capital Resources
Since inception, we have not been able to financeBased 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 resourcescash to implement or completeoperate our business plan. We anticipate that we will need a minimum of approximately $600,000 to satisfy our cash requirements overat the current level for the next 12twelve months. We cannot be assured that revenue from operations will be sufficientintend to fund our activities during the next 12 months. Accordingly, we will haveoperations 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. Weadditional financing in a private equity offering to secure funding for operations. There can offerbe no assurance that we will be successful in raising additional funding. If we are not able to raisesecure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such fundsadditional 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 notcurrently have any off balanceno 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 consolidatedThe preparation of financial statements as of July 31, 2011 have been prepared in accordanceconformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in accordance with generally accepted accounting principlesAmerica requires our managementus 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 ofat 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 experienceexperiences 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 actualcircumstances. 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.
29 |
Item 3. Quantitative and Qualitative Disclosures about Market RiskQUANTITATIVE 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 ProceduresCONTROLS 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 31, 2012.September 30, 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 WeaknessManagement’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 September 30, 2022, based on criteria established in Internal Controls Over Financial Reporting
As previously reported inControl – Integrated Framework issued by the Company’s Annual Report on Form 10-K forCommittee of Sponsoring Organizations of the fiscal year ended October 31, 2011, the Company’s management hasTreadway 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. Since the assessment of the effectiveness of our internal control over financial reporting did identify a material weakness, management considers its internal control over financial reporting to be ineffective.
30 |
Management has concluded that the Company’sour internal control over financial reporting had the following deficiency:
| |
● | We were unable to maintain any segregation 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 |
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 OverControls over Financial Reporting
There wereDuring the quarter ended September 30, 2022, there has been no changeschange in the Company’s internal control over financial reporting that occurred during the three months ended July 31, 2012 that havehas materially affected, or areis reasonably likely to materially affect the Company’sour internal control over financial reporting.
31 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
We are subjectFrom time 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. 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 ortime, we may be forcedinvolved in litigation relating to cease operations.
RISKS RELATED TO OUR BUSINESS
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 for the quarter ended July 31, 2012 and the year ended October 31, 2011 were $180,966 and $1,047,113 respectively. As of July 31, 2012, we realized an accumulated deficit of $8,217,299 and we had little 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 aspectsclaims arising out of our operations which wouldin the normal course of business. Other than disclosed herein, there were no pending or threatened lawsuits that could reasonably be expected to have a material adverse affecteffect 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 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 numberresults 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.
Third Parties may have certain rights to A.C. LaRocco’s Assets.
The Asset Purchase Agreement provides that the Parent Company acquired all of the Seller’s right, title and interest in agreements relating to the Seller’s business 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 by the Company from the Seller remain subject to such agreements any attempt by such third parties to enforce such agreements could seriously harm the Company’s business, financial condition, results of operations and cash flow.
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.
Accrued and Unpaid Payroll Taxes
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 approximately $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 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 continuedSeptember 30, 2022, we were not a party to any material legal proceedings. We currently have unpaid payroll taxes payablefourteen (14) 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 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 Internal Revenue Service. AsCompany, together filed a “Notice of July 31, 2012, the New A.C. LaRocco does not have any payroll as all employees have been terminated.
If we are unableCommencement of Action Subject 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 have not yet completed our merger with New York FHP.
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 madeMandatory Electronic Filing” in the StateSupreme Count of New Jersey and the State of New York, to properly consummateCounty of New York. The Plaintiffs alleged that the Merger. 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. On or about February 24, 2014, the three Plaintiffs received judgment against the Company from the court in the amounts of $33,686.82, $8,546.87 and $33,696.69, respectively.
Our wholly owned subsidiary, SarahCare, is not involved in any legal proceedings at this time.
As a result, as of the date of this Annual Report, on Form 10-K, the Parent Company and New York FHP had not completed the Merger. In orderno director, officer or affiliate is (i) a party adverse to complete the Merger, the Parent Company and New York FHP planus in any legal proceeding, or (ii) has an adverse interest 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 taxesus in the amount of approximately $30,145 plus applicable interest and penalties.
2.
File an application on behalf 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 that the Companylegal proceedings. Management 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 acquisitionaware 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.
There is no assurance that the market will continue to accept our products which could have an adverse affect on our business.
There can be no assurance that our food products will be perceived as being superior to existing products or new products being developed by competing companiesany other legal proceedings pending or that such products will otherwise be accepted by consumers. The market prices for our products may exceed the prices of competitive products. There can be no assurance that the prices of our products will 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 do not accept our products, we may be unable to achieve profitability.
Other companies, many of which have greater resources than we have, may develop competing products which may cause our products 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, our business would suffer.
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, and Mr. Friedman devotes a portion of his time to unrelated business interests.
Our common stock is considered a “penny stock” and as a result, related broker-dealer requirements may hamper its trading and liquidity.
Our common stock is considered to be a “penny stock” since it meets one or more of the definitions in Rules 15g-2 through 15g-6 promulgated under Section 15(g) of the Exchange Act. These include but are not limited to the following: (i) the common stock trades at a price less than $5.00 per share; (ii) the common stock is not traded on a “recognized” national exchange; or (iii) the common stock is issued by a company with average revenues of less than $6.0 million 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 in penny stocks to provide potential investors with documentation disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the documents before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any of our shares.
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires 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 transactions 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.
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 bybeen threatened against us or our competitors;properties.
• additions or departures of key personnel;
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• 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 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.Item 1A. Risk Factors.
In additionAs a smaller reporting company, we are not required 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 we will be able to maintain such distribution outlets. The poor performanceprovide the information required by such distributors, or our inability to collect accounts receivable from them, could materially and adversely affect our results of operations and financial condition. In addition, such distributors offer branded and private label products that compete directly with our products for retail shelf space and consumer purchases. Accordingly, there is a risk that our distributors 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.this item.
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
SeeDuring the disclosure under Notes Nos. 4, 5 and 6 tofiscal quarter ended September 30, 2022, the Company's interim unaudited condensed consolidated financial statements with respect to the Company'sCompany did nothave any unregistered sales of any equity securities and use of proceeds.securities.
Item 3. Defaults Upon Senior Securities.
SeeDuring the disclosurefiscal quarter ended September 30, 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 | |
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101.INS* | Inline XBRL Instance Document (the instance document does not appear in
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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/ Merle Griff | ||
Merle Griff Chief Executive Officer | ||
Date: November 21, 2022 |
Fresh Harvest Products, Inc.
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(Registrant)
/s/ Michael Jordan Friedman
Michael Jordan Friedman, President, Chief Executive Officer and Chief Financial Officer
Date: September 19, 2012
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