UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended September 30, 2023

 

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 000-56551

 

THE HEALING COMPANY INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

26-2862618

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

135 W 50th Street, 2nd Floor, New York, New York

 

10020

(Address of principal executive offices)

 

(Zip Code)

 

(866) 241-0670

Registrant’s telephone number   

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

N/A

 

N/A

 

N/A

 

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. Yes No ☐

 

Indicate by check mark whether the registrant has submitted electronically 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). Yes No ☐

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  Yes ☐     No   

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

 

As of November 17, 2023, the Issuer had 58,194,920 common shares issued and outstanding.

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

3

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

28

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

33

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

33

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

35

 

 

 

 

 

 

Item 1A.

Risk Factors

 

35

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

35

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

35

 

 

 

 

 

 

Item 5.

Other Information

 

35

 

 

 

 

 

 

Item 6.

Exhibits

 

36

 

 

 

 

 

 

 

SIGNATURES

 

37

 

 

 
2

Table of Contents

  

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Index to Unaudited Condensed Consolidated Financial Statements

 

 

 

Page

 

 

 

 

 

Condensed Consolidated Balance Sheets at September 30, 2023 (Unaudited) and June 30, 2023 (Audited)

 

F-4

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended September 30, 2023 and 2022

 

F-5

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three Months Ended September 30, 2023 and 2022

 

F-6

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2023 and 2022

 

F-7

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements for the Three Months Ended September 30, 2023

 

F-8 to F-27

 

 

 
3

Table of Contents

 

The Healing Company Inc.

Condensed Consolidated Balance Sheets

(Stated in U.S. Dollars)

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

September 30,

 

 

June 30,

 

 

 

2023

 

 

2023

 

 

 

 

 

(Audited)

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$1,420

 

 

$1,503

 

Accounts receivable, net

 

 

222

 

 

 

161

 

Prepaid expenses

 

 

1,292

 

 

 

1,309

 

Inventory, net

 

 

2,009

 

 

 

2,681

 

Advances to vendors

 

 

9

 

 

 

12

 

Other current assets

 

 

1,894

 

 

 

1,951

 

Total Current Assets

 

 

6,846

 

 

 

7,617

 

 

 

 

 

 

 

 

 

 

Property and equipment

 

 

93

 

 

 

37

 

Goodwill

 

 

5,055

 

 

 

5,036

 

Security deposits

 

 

1

 

 

 

2

 

Deferred income tax

 

 

78

 

 

 

79

 

Total Assets

 

$12,073

 

 

$12,771

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

5,417

 

 

$

5,845

 

Accounts payable - related party

 

 

237

 

 

 

243

 

Contract liabilities

 

 

2,088

 

 

 

2,343

 

Loan

 

 

4,965

 

 

 

5,014

 

Loan payable - related party

 

 

167

 

 

 

172

 

Advances payable - related party

 

 

3

 

 

 

3

 

Other current liability

 

 

857

 

 

 

893

 

Sales tax payable

 

 

161

 

 

 

178

 

Income tax payable

 

 

41

 

 

 

42

 

Total Current Liabilities

 

 

13,936

 

 

 

14,733

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

13,936

 

 

14,733

 

 

 

 

 

 

 

 

 

 

Stockholders’ Deficit

 

 

 

 

 

 

 

 

Seed Preferred Shares - 10,000,000 authorized, $0.001 par value, of which 645,000 and 2,620,000 are issued and outstanding as of September 30, 2023 and June 30, 2023, respectively

 

 

1

 

 

3

 

Common Shares - 290,000,000 authorized, $0.001 par value, 57,474,920 and 55,199,920 shares issued and outstanding as of September 30, 2023 and June 30, 2023, respectively

 

 

57

 

 

 

55

 

Additional Paid-in Capital

 

 

32,350

 

 

 

27,823

 

Accumulated Deficit

 

 

(34,381 )

 

 

(29,900 )

Other Comprehensive Income

 

 

110

 

 

 

57

 

Total Stockholders’ Deficit

 

 

(1,863 )

 

 

(1,962

)

Total Liabilities and Stockholders’ Deficit

 

$12,073

 

 

$12,771

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 

 

 
4

Table of Contents

 

 

The Healing Company Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Stated in U.S. Dollars)

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

For The Three Months Ended

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Revenue

 

$3,091

 

 

$-

 

Cost of revenue

 

 

1,470

 

 

 

-

 

Gross profit

 

 

1,621

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Advertising and marketing

 

 

909

 

 

 

-

 

General and administrative

 

 

2,656

 

 

 

2,249

 

Professional and consulting fees

 

 

1,309

 

 

 

4,057

 

Management fees

 

 

332

 

 

 

370

 

Total operating expenses

 

 

5,206

 

 

 

6,676

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(3,585 )

 

 

(6,676 )

 

 

 

 

 

 

 

 

 

Other expense

 

 

(654 )

 

 

-

 

Interest expense

 

 

(220 )

 

 

(604 )

Foreign currency loss

 

 

(22 )

 

 

-

 

Total Other expense

 

 

(896

)

 

 

(604 )

 

 

 

 

 

 

 

 

 

Provisions for income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(4,481 )

 

$(7,280 )

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

111

 

 

 

12

 

Foreign currency translation adjustment

 

 

(1 )

 

 

-

 

Comprehensive loss

 

$(4,371 )

 

$(7,268 )

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss per Common Share

 

$(0.08 )

 

$(0.16 )

 

 

 

 

 

 

 

 

 

Weighted average number of common shares used in Basic and Diluted per share calculations

 

 

57,387,420

 

 

 

44,125,572

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
5

Table of Contents

 

  The Healing Company Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

 (Stated in U.S. Dollars)

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Stockholders'

 

 

 

Seed Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 Capital

 

 

Income

 

 

Deficit

 

 

(Deficit)

 

Balance June 30, 2023

 

 

2,620,000

 

 

$

3

 

 

 

55,199,920

 

 

$

55

 

 

$

27,823

 

 

$

57

 

 

$

(29,900)

 

(1,962)

Investment at Chopra subsidiary

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

2,500

 

 

 

 -

 

 

 

 -

 

 

 

2,500

 

Shares issued under private placement

 

 

 -

 

 

 

 -

 

 

 

175,000

 

 

 

-

 

 

 

350

 

 

 

 -

 

 

 

 -

 

 

 

350

 

Shares issued under stock awards

 

 

 -

 

 

 

 -

 

 

 

125,000

 

 

 

-

 

 

 

-

 

 

 

 -

 

 

 

 -

 

 

 

-

 

Conversion of Seed Preferred to Common stock

 

 

(1,975,000)

 

 

(2)

 

 

1,975,000

 

 

 

2

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

-

 

Vesting warrants under debt settlement

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

563

 

 

 

 -

 

 

 

 -

 

 

 

563

 

Stock based compensation - stock awards

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

800

 

 

 

 -

 

 

 

 -

 

 

 

800

 

Stock based compensation - stock options

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

314

 

 

 

 -

 

 

 

 -

 

 

 

314

 

Loss for the period

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

(4,481)

 

 

(4,481)

Foreign currency translation

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

53

 

 

 

 -

 

 

 

53

 

Balance September 30, 2023

 

 

645,000

 

 

$1

 

 

 

57,474,920

 

 

$57

 

 

$32,350

 

 

$110

 

 

$(34,381)

 

$(1,863)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

Stockholders'

 

 

 

Seed Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

(Deficit)

 

Balance June 30, 2022

 

 

4,660,000

 

 

5

 

 

 

44,004,920

 

 

44

 

 

14,653

 

 

7

 

 

(8,591)

 

6,118

 

Shares issued under stock awards

 

 

 -

 

 

 

 -

 

 

 

3,700,000

 

 

 

4

 

 

 

(4)

 

 

 -

 

 

 

 -

 

 

 

-

 

Stock based compensation on stock awards

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

1,033

 

 

 

 -

 

 

 

 -

 

 

 

1,033

 

Stock based compensation on stock options

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

795

 

 

 

 -

 

 

 

 -

 

 

 

795

 

Warrants issued as financing cost

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

3,628

 

 

 

 -

 

 

 

 -

 

 

 

3,628

 

Loss for the periods

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

-

 

 

 

 (7,280

 

 

(7,280)

Foreign currency translation

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 11

 

 

 

-

 

 

11

 

Balance September 30, 2022

 

 

4,660,000

 

 

5

 

 

 

47,704,920

 

 

48

 

 

20,105

 

 

18

 

 

(15,871)

 

4,305

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
6

Table of Contents

 

The Healing Company Inc.

Condensed Consolidated Statements of Cash Flows

 (Stated in U.S. Dollars)

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

For the Three Months Ended September 30,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$(4,481)

 

$(7,280)

Adjustments to reconcile net (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

10

 

 

 

-

 

Stock based compensation

 

 

1,114

 

 

 

1,828

 

Vesting warrants under debt settlement

 

 

563

 

 

 

3,628

 

Foreign currency gain

 

 

111

 

 

 

-

 

Change in deferred income taxes

 

 

1

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Vendor cash advances

 

 

3

 

 

 

-

 

Prepaid expenses

 

 

17

 

 

 

(101)

Accounts receivable

 

 

(61)

 

 

-

 

Other current assets

 

 

57

 

 

 

-

 

Sales tax payable

 

 

(17)

 

 

-

 

Inventories

 

 

672

 

 

 

-

 

Accounts payable and accrued expenses

 

 

(465)

 

 

108

 

Accounts payable related party

 

 

(6)

 

 

29

 

Contract liabilities

 

 

(274)

 

 

-

 

 

 

 

 

 

 

 

 

 

Net Cash used in operating activities

 

 

(2,756)

 

 

(1,788)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Other assets – loan acquired as part of acquisition

 

 

-

 

 

 

(2,000)

Refund on trademark registration

 

 

-

 

 

 

2

 

Security deposits

 

 

1

 

 

 

-

 

Purchases of property and equipment

 

 

(66)

 

 

-

 

Net Cash used in investing activities

 

 

(65)

 

 

(1,998)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from sale of Common stock

 

 

350

 

 

 

-

 

Proceeds from investment at Chopra subsidiary

 

 

2,500

 

 

 

 -

 

Payments of loan payable 

 

 

(49)

 

 

-

 

Payments of loan payable - related parties

 

 

(5)

 

 

-

 

Net Cash provided by financing activities

 

 

2,796

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Foreign Exchange Effect on Cash

 

 

(58)

 

 

-

 

 

 

 

 

 

 

 

 

 

DECREASE IN CASH

 

 

(83)

 

 

(3,786)

CASH AT BEGINNING OF PERIOD

 

 

1,503

 

 

 

6,492

 

CASH AT END OF PERIOD

 

$1,420

 

 

$2,706

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

Interest Paid

 

$220

 

 

$-

 

Taxes Paid

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION

 

 

 

 

 

 

 

 

Warrants issued as financing costs

 

$-

 

 

$3,628

 

Common stock awards issued as deferred compensation

 

$469

 

 

$11,990

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
7

Table of Contents

 

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share amount)

September 30, 2023

 

NOTE 1. DESCRIPTION OF BUSINESS, GOING CONCERN AND HISTORY  

 

DESCRIPTION OF BUSINESS AND HISTORY

 

Historical Information

 

The Healing Company Inc. (formerly “Lake Forest Minerals) a Nevada corporation, (the “Company”) was incorporated in the State of Nevada on June 23, 2008. The Company was originally formed to engage in the acquisition, exploration and development of natural resource properties of merit. 

 

Currently, the Company is an emerging health and wellness company that has identified the need for a change to healthcare, where conventional medicine and alternative healing can both be drawn on to provide a world of integrated healing encompassing conventional medicine and alternative medicine.

 

With the acquisition of NOEO GmbH (“NOEO”) on March 10, 2022, and the onboarding of a new management team, the Company commenced operations in the health and wellness sector.

 

On September 9, 2022, the Company entered into a loan purchase and sale agreement (the “Agreement”) with CircleUp Credit Advisors LLC (“Circle Up”) pursuant to which the Company agreed to purchase from CircleUp all loans and loan accommodations (the “Loan” and the obligations thereunder the “Loan Obligations”) made by the CircleUp to Your Superfoods, Inc. and Your Super, Inc. (together, “Your Super Company”). Pursuant to the terms of the Agreement, as consideration for purchase of the Loan, the Company made a cash payment of $2,000 to the CircleUp and issued to CircleUp a warrant to purchase 1,500,000 restricted shares of the Company’s common stock. This warrant began to vest on September 9, 2023 being the one-year anniversary of the closing of the purchase of the Loan with 12.5% of the Warrant amount (187,500 shares) vesting on that date and the remaining portion of the Warrant vesting in seven quarterly installments of 187,500 shares each over the next seven quarters. Vesting of the Warrant will be accelerated upon the occurrence of a sale or merger of the Company. The Warrant will terminate on September 9, 2029 being the seventh anniversary of the closing date and will be subject to customary adjustments of the warrant price and number of shares for splits, stock dividends, recapitalizations and the like.

 

On March 3, 2023, the Company and Chopra HLCO LLC, a Delaware limited liability company and indirect wholly owned subsidiary of the Company (“Chopra HLCO”) (collectively the “Buyer”) entered into and consummated an Asset Purchase Agreement (the “Purchase Agreement”) with Chopra Global, LLC, a Delaware limited liability company (the “Seller”), and solely with respect to certain specified indemnification provisions of the Purchase Agreement, Deepak Chopra, the majority member of the Seller, to acquire (the “Acquisition”) certain assets of the Seller (the “Purchased Assets”) and certain liabilities related to the Seller’s business activities involving Chopra Global Digital, Chopra Global Licensing and Chopra Global Products assets (these business activities are referred to herein as the “Chopra Business”). Following the closing of the acquisition, the Purchased Assets are held by, and the Chopra Business is operated through, Chopra HLCO. 

 

The aggregate consideration paid and payable by the Buyer for the Purchased Assets (the “Purchase Price”) consists of up to $5,000 in cash plus newly issued shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). $1,000 of the cash portion of the Purchase Price was paid to the Seller on March 3, 2023, along with the issuance to the Seller of One Million Four Hundred Thousand (1,400,000) shares of Common Stock (the “Closing Shares”). A deferred cash payment of $2,500 was paid to the Seller prior to March 31, 2023.  In addition, the Seller may receive certain Earnout payments of up to $3,000 by way of cash and shares upon certain terms and conditions.

 

 
8

Table of Contents

 

Basis of Presentation

 

The (a) unaudited condensed consolidated balance sheets as of September 30, 2023, and as of June 30, 2023 , which has been derived from audited consolidated financial statements, and (b) the unaudited condensed consolidated statements of operations, stockholders’ deficit and cash flows of the Company, have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2023 are not necessarily indicative of results that may be expected for the year ending June 30, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended June 30, 2023, filed with the Securities and Exchange Commission (“SEC”) on October 23, 2023.

 

All amounts referred to in the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.

 

Going Concern

 

The Company had a working capital deficit of $7,090 on September 30, 2023. During the year ended June 30, 2022, the Company entered into private placement subscription agreements to raise a total of $10,000 by the sale of seed preferred stock at $2.00 per share, of which the Company has collected $9,660 with $340 remaining to be collected.  During the three months ended September 30, 2023, the Company issued additional shares of common stock at $2.00 per share for total proceeds of $2,850, all of which has been collected to date.

 

The Company commenced operations in the wellness sector initially through the acquisition of NOEO and more recently with the acquisition of the Your Super and Chopra Business assets. During the year ended June 30, 2023, the Company entered into a credit agreement with certain lenders (the “Lenders”) who agreed to extend a credit facility to the Company consisting of up to $150,000 in accordance with the terms of the agreement in aggregate principal amount of term loan commitments (the “Term Loans”)), the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria. To date, the Company has been funded $4,870 under the terms of this agreement to facilitate the purchase of operating assets.  The continuation of the Company as a going concern is dependent upon the ability to attain profitable operations from the Company’s existing and planned future business operations and sufficient financing to carry out those plans. If the Company is unable to obtain adequate capital as needed, or conduct revenue generating operations, the Company may be required to reduce the scope, delay, or eliminate some or all of its existing and planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. 

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principals of Consolidation

 

The consolidated financial statements include the accounts of The Healing Company and its 100% controlled subsidiaries, NOEO GmbH, NOEO, Inc., HLCO Borrower LLC, Your Super HLCO, LLC, and Chopra HLCO LLC. All significant intercompany balances and transactions have been eliminated. “The Healing Company”, the “Company”, “we”, “our” or “us” is intended to mean The Healing Company, including the subsidiaries indicated above, unless otherwise indicated.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of its assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates, and the Company includes any revisions to its estimates in its results for the period in which the actual amounts become known. Significant estimates in the period include the preliminary purchase price allocation with respect to the acquisition of the assets and liabilities of the Chopra Business, the allowance for doubtful accounts on accounts and other receivables, inventory allowance and impairment, valuation and useful lives of fixed assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on due to related parties, and deferred tax valuation allowance.

 

Income and Other Taxes

 

Income taxes are accounted for using the asset and liability method in accordance with ASC 740, Income Taxes (“ASC 740”), and in accordance with taxation principles currently effective in the United States and Germany, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

 

 
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The Company records net deferred tax assets to the extent they believe these assets will more-likely-than-not be realized.  In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.  In the event the Company was to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

 

Net Loss per Common Share

 

The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

The table below reflects the potentially dilutive securities at the end of each reporting period.

 

 

 

September 30,

2023

 

 

June 30,

2023

 

Seed Preferred stock (Convertible to Common stock 1:1)

 

 

645,000

 

 

 

2,620,000

 

Seed Preferred warrants (Convertible to Common stock 1:1)

 

 

1,560,148

 

 

 

1,560,148

 

Common stock warrants

 

 

1,650,000

 

 

 

1,650,000

 

Stock options

 

 

3,091,250

 

 

 

3,091,250

 

Total

 

 

6,946,398

 

 

 

8,921,398

 

 

Stock-based compensation

 

The Company accounts for stock option awards granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model. We recognize compensation expense for stock option awards over the requisite or implied service period of the grant. Compensation expense is recognized on a straight-line method over the requisite service period. Forfeitures are accounted for as they occur.

 

Cash and cash equivalents

 

The Company defines cash and cash equivalents as highly liquid investments with original maturities of 90 days or less at the time of purchase. The Company also considers amounts in transit from payment processors for customer credit card and debit card transactions to be cash and cash equivalents. At September 30, 2023 and June 30, 2023, the Company’s cash and cash equivalents consisted primarily of cash held in checking accounts, and payment in transit from payment processors for customer credit card and debit card transactions. As of September 30, 2023 and June 30, 2023, cash and cash equivalents was $1,420 and $1,503, respectively.

 

Concentration of Risk

 

Financial instruments that subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents.  The Company maintains substantially all of its cash and cash equivalents with three financial institutions, which, at times, may exceed federally insured limits. The Company has not incurred any losses associated with this concentration of deposits.

 

The Company currently has bank deposits with financial institutions in the U.S. which exceed FDIC insurance limits. FDIC insurance provides protection for bank deposits up to $250, so there were cumulative uninsured balances of $1,170 and $1,253 in the parent and its US based subsidiaries as of September 30, 2023 and June 30, 2023, respectively. There were no uninsured bank deposits with a financial institution outside the U.S. All uninsured bank deposits are held at high quality credit institutions.

 

 
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Foreign currency translation and transactions

 

The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s Germany and Netherlands subsidiaries are the local currencies.  The assets and liabilities of the Company’s foreign subsidiaries are translated into US Dollars using exchange rates in effect at the consolidated balance sheet date. Revenues and expenses are translated using the average exchange rates prevailing during the period. Exchange-rate differences resulting from translation adjustments are accounted for as a component of accumulated other comprehensive loss. Borrowings in foreign currencies are recorded at the rate of exchange at the time of the transaction and are adjusted for any exchange rate gains or losses as of the balance sheet date.

 

Translation of amounts from Euro into US$ have been made at the following exchange rates for the periods ended September 30, 2023 and June 30, 2023: 

 

 

 

September 30, 2023

 

 

June 30, 2023

 

Period-end Euro: US$ exchange rate

 

$1.0573

 

 

$1.0915

 

Period-average Euro: US$ exchange rate

 

$1.0880

 

 

$1.0459

 

 

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, at the rate on the date of the transaction and included in the results of operations as incurred.

 

ASC Topic 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are stated net of an allowance for doubtful accounts. When management becomes aware of circumstances that may decrease the likelihood of collection to a point where a receivable is no longer probable of being collected, it records an allowance against amounts due, which reduces the receivable to the amount that management reasonably believes will be collected. For all other customers, management determines the adequacy of the allowance based on historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts. The Company does not have any off-balance-sheet credit exposure related to its customers. As of September 30, 2023 and June 30, 2023, the allowance for doubtful accounts amounted to $104 and $110, respectively. 

 

Inventories

 

Inventories consist primarily of raw materials, work-in-process (blended superfood powder) and finished goods. Finished goods and work-in-process include direct materials, finished product kits, finished products, third-party blender and other overhead costs involved in manufacturing for e-commerce sales. The Company values inventory using the standard costing method whereunder product costs are allocated based on standard rates for materials, labor, and overhead. The Company analyses actual costs at regular intervals and accounts for any variance in costs of goods sold. Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in first-out method. Inventories have been reduced by an allowance for excess, obsolete and unsaleable inventories. The allowance is an estimate based on our management’s review of inventories on hand compared to estimated future usage and sales. The Company performs cycle counts of inventories at its warehouse and distribution center throughout the year. An allowance for inventory shrinkage is established for estimated inventory shrinkage since the last physical inventory date through the reporting date.

 

Property and Equipment

 

Property and equipment are stated at cost, net of accumulated depreciation and amortization, and depreciated over their estimated lives using the straight-line method. The useful lives of leasehold improvements are determined by the economic useful lives of the assets or the term of the leases, whichever is shorter.

 

 
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Depreciation and amortization is provided for by the straight-line method over the estimated useful lives as follows:

 

Property and Equipment

 

Estimated Useful Life

Computer and other equipment

 

 3-7 years

Office furniture and fixtures

 

5-7 years

Leasehold improvements

 

Shorter of lease or useful life

 

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

 

Goodwill

 

Goodwill represents the excess of the purchase price over the fair market value of the net assets acquired on October 13, 2022 and March 3, 2023, respectively. The Company has implemented the Business Combinations Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350, Intangibles Goodwill and Other. Goodwill is deemed to have an indefinite life, and is not amortized but is subject to, at a minimum, an annual impairment test.

 

The Company tests goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. For the fiscal year ended June 30, 2023, the Company recorded impairment of goodwill of $3,869.  There was no impairment during the three months ended September 30, 2023.

 

Business Combinations

 

The Company accounts for business combinations using the purchase method of accounting. The purchase method requires the Company to determine the fair value of all acquired assets, including identifiable intangible assets and all assumed liabilities. The total cost of acquisitions is allocated to the underlying identifiable net assets, based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and the utilization of independent valuation experts, and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates and asset lives, among other items.

 

Long-Lived Assets

 

The Company evaluates the recoverability of its long-lived assets for impairment, other than goodwill, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows. The Company had no long-lived asset impairments as of September 30, 2023 and June 30, 2023, respectively.

 

Contract Assets

 

In accordance with ASC 606-10-45-3, a contract asset is the Company’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. The Company will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment.

 

There were no contract assets at September 30, 2023 and June 30, 2023.

 

Contract Liabilities

 

Deferred revenue, a contract liability, primarily consists of arrangement consideration collected in advance of order fulfillment and unsatisfied obligations related to outstanding loyalty points. The Company expects that the majority of the revenue deferrals recorded at the balance sheet date will be recognized as revenue in the next 12 months as performance obligations are satisfied, in accordance with ASC 606, Revenue from Contracts with Customers. Sales taxes collected from customers and remitted to government authorities are excluded from revenue and deferred revenue. Ownership passes to customers upon shipment. Deferred revenue represents amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing of annual subscription agreements. Also included in contract liabilities is the value of loyalty points with respect to the Company’s loyalty program described below. The value of these contract liabilities will increase or decrease based on the timing of invoices and recognition of revenue as customers use their rewards points.

 

 
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The Company offers a loyalty program to its customers which incorporates a points system for activities on the Company’s website, such as reviews, referrals, and purchases. Customers accumulate points based on their level of spending and type of participation. The points can be redeemed for purchases of goods offered at the Company’s websites. The Company defers the stand-alone selling price of earned reward points, net of rewards not expected to be redeemed (known as “breakage”), as liability for outstanding loyalty points. To estimate the stand-alone selling price for the points, the Company considers the stated redemption value per point dictated by the terms of the loyalty programs and then estimates the future breakage of reward points based on historical member activity. Upon redemption of points by customer, the Company recognizes revenue and reduces corresponding deferred revenue. The Company records breakage revenue of unredeemed points based on expected customer redemptions.

 

The Company’s total contract liability balance was $2,088 at September 30, 2023, of which $318 relates to the liability for outstanding loyalty points for Your Super and $1,770 relates to customer subscription deposits with respect to membership fees from the Chopra Meditation & Wellbeing app (“Chopra App”) which are collected in advance and amortized over the one (1) year term of the membership, advances on retreat packages and prepaid licensing fees.

 

The Company’s total contract liability balance was $2,343 at June 30, 2023, of which $212 related to the liability for outstanding loyalty points for Your Super and $1,345 related to customer subscription deposits with respect to membership fees from the Chopra App.

 

Fair Value Measurements

 

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, contracts receivable, accounts payable and accrued liabilities, contracts receivable recourse, deferred revenue, debt and a capital lease obligation. The carrying value of the Company’s financial instruments approximate fair value.

 

FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:

 

Level 1 - Quoted market prices for identical assets or liabilities in active markets or observable inputs;

Level 2 - Significant other observable inputs that can be corroborated by observable market data; and

Level 3 - Significant unobservable inputs that cannot be corroborated by observable market data.

 

The Company believes that the carrying amounts of cash and cash equivalents, accounts payable, and short-term borrowings approximate fair value based on either their short-term nature or on terms currently available to the Company in financial markets.

 

Revenue Recognition

 

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Company accounts for revenue contracts with customers by applying the requirements of ASC 606, Revenue from Contracts with Customers, which includes the following five steps:

 

 

i.

Identification of the contract with a customer.

 

ii.

Identification of the performance obligations in the contract.

 

iii.

Determination of the transaction price.

 

iv.

Allocation of the transaction price to the performance obligations in the contract.

 

v.

Recognition of revenue as the entity satisfies a performance obligation.

 

When a customer purchases a product from the Company, ownership of the product transfers to them at the point of shipment and the Company has an enforceable right to payment for the product sold at that time. Accordingly, the customer has control of the product purchased from the Company starting at the point of shipment. The risk of loss or damage during shipment resides exclusively with the shipping carrier and the Company assumes no obligation for loss or damage of product while in transit to the customer. As a result of this change in terms of sale, the Company recognizes revenue, including shipping revenue, when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers, which is at the point of shipment.  Sales are recorded net of returns, discounts, and any taxes collected from customers and remitted to government authorities.

 

 
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The Company generates revenues from a diversified mix of e-commerce activities with the majority of revenue earned through e-commerce direct sales to consumer.  The Company’s e-commerce activities include the sale of organic nutritional superfood powder mixes online, through the Company’s website YourSuper.com, and sales of the Chopra wellbeing line available at Chopra.com. During the three months ended September 30, 2023, the Company’s direct to consumer sales of products accounted for 60% of total revenue. 

 

In addition, the Company records revenue from the sale of memberships to the Chopra App.  Revenues from the membership are collected in advance and recognized over the term of the membership.  Finally, the Company records net revenue in the form of commissions with respect to sales of attendance at its wellness retreats at various US based locations.  Revenue for wellness retreats is deferred upon purchase and recognized at the time of the event with the transfer of services to the customer. 

 

The Company records revenues from the sales on a “gross” basis pursuant to ASC 606-10 Revenue Recognition – Revenue from Contracts with Customers, when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC 606-10 are present in the arrangement, revenue is recognized net of related direct costs.

 

Cost of Revenue

 

Cost of revenue primarily consists of costs associated with the purchase of superfood products and materials and packaging for its Chopra wellness kits from third-party manufacturers. These costs include ingredients, packaging, third party manufacturing costs and freight-in shipping.

 

Product Warranties

 

The Company’s provision for estimated future warranty costs is based upon the historical relationship of warranty claims to sales. Based upon historical sales trends and warranties, it has been concluded that no warranty liability is required as of September 30, 2023 and June 30, 2023. To date, product allowance and returns have been minimal and, based on experience, the Company believes that product returns will continue to be minimal.

 

Shipping and Logistics Expenses

 

Shipping and logistics expenses consist primarily of costs incurred to ship products to the customer.  If shipping and handling activities are performed after the customer obtains control of the good, then an entity may elect to account for shipping and handling as fulfillment activities and not promised services that require further evaluation under ASC 606.  If the entity elects this accounting policy, the costs related to the shipping and handling activities should be accrued when the entity recognizes revenue for the related promised goods. In addition, if this accounting policy is elected, the entity must apply it consistently to similar transactions and provide the accounting policy disclosures required by ASC 235.

 

The Company has elected to record shipping and handling activities performed after the customer obtains control of the product as fulfillment costs.  These expenses are presented as operating expenses in the accompanying consolidated statements of operations and comprehensive loss. 

 

Business Segments

 

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has three operating segments: Ecommerce sales of wellness products, sales of memberships to the Chopra App and operation of its wellness focused retreats. 

 

Commitments and Contingencies

 

The Company accounts for contingencies in accordance with ASC 450-20, Contingencies.  Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

 
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If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3. ACQUISITIONS

 

Acquisition – Assets of Chopra Global, LLC

 

On March 3, 2023, the Company and Chopra HLCO LLC, entered into and consummated the Purchase Agreement with the Seller, and solely with respect to certain specified indemnification provisions of the Purchase Agreement, Deepak Chopra, to acquire the Purchased Assets and certain liabilities related to the Seller’s business activities involving the Chopra Business. Following the closing of the Acquisition, the Purchased Assets are held by, and the Chopra Business is operated through, Chopra HLCO. 

 

The aggregate consideration paid and payable by the Buyer for the Purchased Assets is the Purchase Price of up to $5,000 in cash plus newly issued shares of the Company’s Common Stock. In total, the initial cash purchase amount consists of $3,500 in cash, of which the Company has $2,500 as of March 31, 2023 and $1,000 in April 2023, and issued 1,400,000 shares of the Company’s unregistered, restricted common stock issued. Additionally, up to three earnout payments of $1,000 in value each (the “Earnout Payments”) may be paid to the Seller, subject to and payable in accordance with earnout thresholds specified in the Purchase Agreement. Each of these Earnout Payments will be comprised of fifty percent (50%) in cash and fifty percent (50%) in shares of the Common Stock (the “Earnout Shares”). The Earnout Payments will be earned (i) for the period starting March 1, 2023 and ending December 31, 2023 if net revenue of the Chopra Business (then operated by the Buyer) exceeds $5,900; (ii) for the calendar year ending December 31, 2024 if such net revenue exceeds $11,000; and (iii) for the calendar year ending December 31, 2025 if such net revenue exceeds $15,000. The Earnout Shares will be valued at the market price at the time of issuance based on the five-day volume weighted average price of the Common Stock prior to the last day of the applicable measurement year. If the Company is taken private or undergoes a Change of Control (as defined in the Purchase Agreement), any subsequent Earnout Payment will be paid 100% in cash. The Closing Shares are restricted securities and do not carry any registration rights that require the filing of any registration statement in connection with their issuance. In accordance with the terms of a lock up/leak out agreement between the Company and Chopra Global effective as of the closing of the Acquisition (the “Lock Up/Leak Out Agreement”), the Closing Shares are subject to a three-year lock-up (unless released earlier as described below) from the date of the closing (the “Lock Up”) and thereafter may be released in four equal quarterly installments beginning on the first day of the fiscal quarter beginning after the third anniversary of the Closing and on the first day of each of the next three fiscal quarters (the “Leak Out”) subject to a restricted volume of no more than three percent (3%) of the volume-weighted average trading of the Common Stock over the previous five trading days.  The Closing Shares will be released from the Lock Up, but not from the Leak Out, upon (a) the closing of an underwritten, firm commitment public offering of at least $30,000 of the Common Stock, (b) a Change of Control or (c) the Company’s termination of reporting under the Securities Exchange Act of 1934, as amended.

 

 
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The Company’s acquisition of the operating assets of the Chopra Business is being accounted for as a business combination.  To perform the purchase price allocation, the tangible and intangible assets were valued as of March 1, 2023. The following is a summary of the estimated fair values of acquisition costs at the date of March 1, 2023:

 

(Dollars in thousands)

 

Consideration Paid – Fair Value

 

 

 

 

 

 

Acquisition costs – Cash

 

 

 

 

$3,500

 

Stock issued:

 

 

 

 

 

 

 

Number of Shares issued:

 

 

1,400,000

 

 

 

 

 

Value per share

 

$0.15

 

 

 

 

 

Total stock fair value

 

 

 

 

 

 

210

 

Total consideration

 

 

 

 

 

$3,710

 

 

As of September 30, 2023, a total of $3,500 in cash consideration was paid.  The following is a summary of the estimated fair values of the assets acquired and liabilities assumed and additional information regarding the intangible assets acquired:

 

(Dollars in thousands)

 

Tangible assets acquired:

 

 

 

Cash

 

$289

 

Inventory

 

 

216

 

Prepaid expenses and other assets

 

 

345

 

Total assets acquired

 

 

850

 

 

 

 

 

 

Assumed liabilities

 

 

 

 

Contract liabilities

 

 

(2,195 )

Total liabilities assumed

 

 

(2,195 )

Net tangible assets/(liabilities)

 

 

(1,345 )

 

Total liabilities acquired

 

 

(1,345

)

Goodwill

 

 

5,055

 

 

 

 

 

 

Total Net asset acquired

 

$

3,710

 

 

As of September 30, 2023, no impairment of the Company’s goodwill was required. The purchase accounting for the acquisition remains incomplete as management continues to gather and evaluate information about circumstances that existed as of the acquisition date. Under the purchase method of accounting, the total estimated purchase price as shown in the table above is net tangible and intangible assets and liabilities based on their estimated fair values as of the date of the acquisition. The pro forma adjustments included herein have been derived from the preliminary allocation of the total estimated purchase price and may be revised as additional information becomes available and as additional analyses are performed. The final allocation of the purchase price will be determined after completion of a final analysis to determine the fair values of the tangible assets, identifiable intangible assets, and liabilities as of the acquisition. Accordingly, the final purchase accounting adjustments may be materially different from the pro forma adjustments presented in this document. Increases or decreases in the fair value of the net assets may change the amount of the purchase price allocated to goodwill and other assets and liabilities. Measurement period adjustments will be recognized prospectively. The measurement period is not to exceed 12 months from the respective dates of acquisition. 

 

Acquisition - Assets of Your Super, Inc.

 

On September 9, 2022, the Company acquired from CircleUp, for cash consideration of $2,000 and 1,500,000 common stock purchase warrants with an exercise price of $2.00 per share and a term of seven years, all of CircleUp’s rights and interests of all loans and loan accommodations made to Your Super Company.

 

On September 30, 2022, the Company entered into an asset purchase agreement (the “YS Asset Purchase Agreement”) with Your Super, Inc. (“YS”), to acquire all of the rights, title and interests in and to substantially all of the assets owned by YS used in connection with the business of YS. The Closing took place on October 13, 2022.

 

Consideration for the assets of YS was comprised of forgiveness of the Loan Obligation and $8,000 paid in 3,200,000 shares of Company Common Stock valued at $2.50 per share, subject to lockup provisions.

 

 
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The Company’s acquisition of the operating assets of YS is being accounted for as a business combination and the Company treated as one acquisition transaction.

 

To perform the purchase price allocation, the tangible and intangible assets were valued as of September 30, 2022.  The following is a summary of the estimated fair values of acquisition costs at the date of September 30, 2022:

 

(Dollars in thousands)

 

Consideration Paid – Fair Value

 

 

 

 

 

 

Debt acquisition costs – Cash

 

 

 

 

$2,000

 

Debt acquisition cost -1,500,000 common stock purchase warrants

 

 

 

 

 

34

 

Stock issued:

 

 

 

 

 

 

 

Number of Shares:

 

 

3,200,000

 

 

 

 

 

Value per share

 

$0.15

 

 

 

 

 

Total stock fair value

 

 

 

 

 

 

480

 

Total consideration

 

 

 

 

 

$2,514

 

 

The following is a summary of the estimated fair values of the assets acquired and liabilities assumed and additional information regarding the intangible assets acquired at the date of September 30, 2022:

 

(Dollars in thousands)

 

Tangible assets acquired:

 

 

 

Cash

 

$363

 

Inventory

 

 

4,953

 

Accounts receivable

 

 

422

 

Prepaid expenses and other assets

 

 

836

 

Property and equipment

 

 

78

 

Security deposits

 

 

63

 

Deferred income taxes

 

 

45

 

Total assets acquired

 

 

6,760

 

 

 

 

 

 

Assumed liabilities

 

 

 

 

Accounts payable and accrued liabilities

 

 

(7,814 )

Contract liabilities

 

 

(259 )

Income tax payable

 

 

(41 )

Total liabilities assumed

 

 

(8,114 )

Net tangible assets/liabilities

 

 

(1,354 )

Goodwill

 

3,868

 

 

 

 

 

 

Total Net asset acquired

 

$2,514

 

 

The purchase accounting for the acquisition of Your Super was concluded as of June 30, 2023.  As of June 30, 2023, the Company determined that goodwill was fully impaired and recorded impairment charges $3,868

 

Following are the supplemental consolidated financial results of the Company, Your Superfoods, Inc., Your Superfoods BV and Your Superfoods GmbH and the assets of Chopra Global on an unaudited pro forma basis, as if the acquisitions had been consummated as of the beginning of the fiscal year 2022 (i.e., July 1, 2021):

 

 

 

Three Months Ended September 30,

 

 

 

2023

 

 

2022

 

Revenue

 

$2,614

 

 

2,635

 

Net income (loss)

 

$(803 )

 

(467 )

 

 

 

 

 

 

 

 

 

Weighted average number of common shares used in per share calculations

 

 

57,387,420

 

 

 

44,125,572

 

Basic and Diluted Loss Per Common Share

 

$(0.01 )

 

(0.01 )

 

 
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NOTE 4. PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following:

 

(Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Computer equipment

 

$299

 

 

$232

 

Furniture and fixtures

 

 

25

 

 

 

25

 

 

 

 

324

 

 

 

257

 

Less: accumulated depreciation

 

 

(231 )

 

 

(220 )

Property and equipment, net

 

$93

 

 

$37

 

 

Depreciation expense for the three months ended September 30, 2023 and 2022 was $11 and $0, respectively, and is included within general and administrative expense on the consolidated statements of operations and comprehensive loss. There are no assets held under capital leases.

 

NOTE 5. REVENUE

 

Disaggregation of Revenue

 

The following table presents the Company’s revenue for the three months ended September 30, 2023 from contracts with customers, disaggregated by Company location and sales channel:

 

Revenue by Geographical location:

 

(Dollars in thousands)

 

September 30,

2023

 

 

 

 

 

US

 

$2,431

 

Europe

 

 

660

 

Total

 

$3,091

 

 

Revenue by product sales channel:

 

(Dollars in thousands)

 

September 30,

2023

 

Direct to Consumer

 

$1,841

 

Amazon

 

 

262

 

Wholesale

 

 

122

 

Retreat/licensing

 

 

152

 

Digital

 

 

714

 

Total

 

$3,091

 

 

For the three months ended September 30, 2023, the Company had no customers who accounted for greater than 10% of total revenue. The Company primarily views its disaggregated revenue on a geographic basis.  There was no revenue for the three months ended September 30, 2022.

 

 
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Contract Liabilities

 

The deferred revenue balances were as follows:

 

(Dollars in thousands)

 

 Three Months Ended

September 30,

2023

 

Deferred revenue, June 30, 2023 

 

$2,343

 

Decrease in reward liabilities over the period, net (a)

 

 

(12 )

Decrease in deferred revenue over the period, net (b)(c)

 

 

(242 )

Deferred revenue, September 30, 2023

 

$

2,088

 

 

 

(a)

The Company records a liability for outstanding loyalty points earned by customers. As of September 30, 2023 and June 30, 2023, the liability for outstanding loyalty was approximately $259 and $271, respectively, and is included in contract liabilities in the accompanying consolidated balance sheets.

 

 

 

 

(b)

The Company records a liability for fees collected from customers with respect to its subscription-based wellness app, retreat package sales and licensing fees which amounts are recognized when earned. As of September 30, 2023 and June 30, 2023, the liabilities for unearned revenue totaled $1,792 and $2,065, respectively, and is included in contract liabilities in the accompanying consolidated balance sheets.

 

 

 

 

(c)

As of September 30, 2023 and June 30, 2023, liabilities for unearned product sales totaled $37 and $7, respectively.

 

Sales Returns Reserve

 

The Company offers a 30-day satisfaction guarantee and sales return refunds to its customers on their first order or first subscription order. The Company records a liability for estimated sales return refunds, which is based on historical returns and is included within accrued expenses on the consolidated balance sheet.

 

The reserve was approximately $14 and $28 as of September 30, 2023 and June 30, 2023, respectively, and is included in other current liabilities in the accompanying consolidated balance sheets.  The Company’s sales returns reserve was comprised of the following:

 

(Dollars in thousands)

 

Three Months Ended

September 30,

2023

 

Balance as of June 30, 2023

 

$28

 

Charges to Costs and Expenses

 

 

15

 

Deductions

 

 

(29 )

Balance as of September 30, 2023

 

14

 

 

NOTE 6. ACCOUNTS RECEIVABLE, NET

 

Account receivable consisted of the following:

 

Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Accounts receivable

 

$326

 

 

$270

 

Less: allowance for doubtful accounts

 

 

(104 )

 

 

(109 )

Total

 

$222

 

 

$161

 

 

 
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Allowance for Doubtful Accounts

 

The Company’s allowance for doubtful accounts, based on historical bad debts, was approximately $104 and $110 as of September 30, 2023 and June 30, 2023, respectively.

 

The Company’s allowance for doubtful accounts was comprised of the following:

 

(Dollars in thousands)

 

 Three Months Ended

September 30,

2023

 

Balance, June 30, 2023

 

$109

 

Charges to Costs and Expenses

 

 

 -

 

Deductions

 

 

(5 )

Balance as of September 30, 2023

 

$104

 

 

NOTE 7. INVENTORY

 

The following table presents the detail of inventory:

 

(Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Raw material

 

$2,535

 

 

$3,043

 

Work-in-process

 

 

208

 

 

 

201

 

Finished goods

 

 

694

 

 

 

745

 

Inventory reserve

 

 

(1,428 )

 

 

(1,308 )

Total

 

$2,009

 

 

$2,681

 

 

NOTE 8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accounts payable and accrued liabilities consist of the following:

 

(Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Accounts payable

 

$4,052

 

 

$4,387

 

Accrued payroll and related liabilities

 

 

9

 

 

 

97

 

Accrual of estimated tax related expense

 

 

-

 

 

 

437

 

Accrued expenses including accruals for professional fees, marketing costs, advertising, shipping and logistics

 

 

1,225

 

 

 

814

 

Accrued interest expenses

 

 

90

 

 

 

100

 

Other accrued liabilities including sales tax and returns

 

 

41

 

 

 

10

 

Total accounts payable and accrued liabilities

 

$5,417

 

 

$5,845

 

 

NOTE 9. LOAN PAYABLE

 

On August 4, 2022, the Company and its controlled subsidiary HLCO Borrower LLC entered into a credit facility agreement (the “Credit Agreement”) with the Lenders who agreed to extend a credit facility to the Company consisting of up to $150,000 in accordance with the terms of the Credit Agreement in aggregate principal amount of Term Loans, the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria established by an administrative agent (the “Administrative Agent”) under the Credit Agreement.

 

Term Loans anticipated to be funded under the Credit Agreement will be in a minimum principal amount of at least $400, bear an annual interest rate of 12% and will mature the earlier of 12 months following the final draw down under a Term Loan and a date on which an event of default, as defined in the Credit Agreement, occurs. Term Loans will be repayable in full on their maturity dates and may be voluntarily prepaid in full (but not in part) at the option of the Company and prepaid on a mandatory basis on the sale of the assets underlying a particular Term Loan. Interest on any outstanding Term Loans will be paid monthly. The Company paid an upfront fee of $563 recorded as finance costs to the Administrative Agent for the benefit of the Lenders and will pay the Administrative Agent, for its own account, a quarterly fee of $13. Further, the Company is paying a daily rate to the Lenders in respect of undrawn funds to meet a minimum funding threshold until such time as funds drawn total $50,000.

 

 
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The Company and each of the subsidiaries of HLCO Borrower LLC have agreed to secure all of their future anticipated obligations under the Credit Agreement by granting the Lenders a first priority lien on substantially all of their assets and the Company has agreed to secure all future obligations to be incurred under the Credit Agreement by granting to a collateral agent, for the benefit of the lenders, a first priority lien on all of the capital stock of the subsidiaries held by the Company.

 

In connection with the transactions contemplated by the Credit Agreement, the Company issued to the Administrative Agent a seven-year warrant to purchase, for its own account, up to 1,560,148 shares of the Company’s Seed Preferred Stock at an exercise price of $2.00 per share. The warrant was fully vested on issue date and was immediately expensed as financing costs (See Note 13 - Warrants).

 

On October 27, 2022, the Company was funded $3,000 under the Term Loan. As of September 30, 2023, the Company drew down an additional $1,873 under the Term Loan facility. During the three months ended September 30, 2023, the Company paid $12,500 in administrative fees and $260 as interest in respect to the outstanding loan balance and daily interest on undrawn funds.

 

As of September 20, 2023, we were out of compliance for the month ended August 31, 2023 with a financial covenant in our credit agreement requiring us to maintain at least $2,000 in unrestricted and unencumbered cash.  Additionally, as of September 30, 2023, our monthly EBITDA for Your Super was less than $75 which, under our credit agreement, resulted in a borrowing base deficiency with respect to the Your Super acquisition.  These two defaults entitled our lenders, upon notice to us, to take action to enforce their rights against us including, but not limited to, demanding immediate payment of their outstanding loans to us in the principal amount of $4,873, as of September 30, 2023, and enforcing their liens on our Your Super and Chopra operating assets. 

 

On October 12, 2023, we entered into a limited waiver to the credit agreement with our lenders, waiving  the two breaches referenced above provided that (i) we regain compliance with our cash covenant referenced above no later than, and remain compliant after, November 30, 2023, and (ii) we deposit $150 into a special reserve collection account on behalf of the secured lenders prior to the earlier to occur of (x) November 30, 2023 and (y) the closing of a sale of our equity in an amount of not less than $2,000. Our failure to comply with either of these two new covenants will constitute an event of default under the credit agreement entitling our secured lenders to pursue all rights and remedies against us under the credit agreement, including acceleration of our loans, foreclosure and collection actions.  

 

NOTE 10. RELATED PARTY TRANSACTIONS

 

WAOW Group of Companies

 

In November 2021, as amended May 22, 2022 WAOW Entrepreneurship GmbH (“WAOW”) entered into a subscription agreement with the Company whereunder they agreed to purchase 2,140,000 unregistered shares of Seed Preferred stock at $2.00 per share for total proceeds of $4,280. During the year ended June 30, 2022 and through June 30, 2023, the Company received cumulative cash proceeds of $3,950 in respect to the aforementioned subscription and issued 1,975,000 shares of seed preferred stock. A total of $330 remains receivable with respect to the remaining 165,000 shares subscribed as of September 30, 2023.

 

On March 10, 2022, the Company acquired NOEO (See Note 3). At the date of the acquisition, WAOW had outstanding loans with NOEO with a remaining principal balance of EUR140. During the year ended June 30, 2022, WAOW advanced an additional EUR18,000 to NOEO. At September 30, 2023, the loan had a balance outstanding of $167 (EUR158) which is unsecured and accrues interest at 5% per annum, and matured on December 31, 2022. As of September 30, 2023, the loan remained in default and the Company and WAOW are currently negotiating terms of settlement.

 

Accrued and unpaid interest at September 30, 2023 totaled $16 (EUR15), which is reflected in accounts payable – related party on the balance sheet.

 

Steven Bartlett, Former Director (Flight Story Limited)

 

On January 10, 2022, as amended September 1, 2022, the Company entered into a services agreement with Flight Story Limited (“FSL”), a company controlled by Mr. Bartlett, a former Director of the Company, whereby FSL is providing various services to the Company.  Under the terms of the agreement, as amended, FSL is paid $30 per month. Further, FSL has been granted non-statutory stock options to purchase a total of 1,000,000 shares of the Company’s Common Stock of which options to purchase 300,000 shares vested on January 10, 2023, and options to purchase an additional 700,000 shares vest in accordance with certain performance-based terms.  During the year ended June 30, 2023, FSL exercised fully vested stock options for the acquisition of a total of 300,000 shares of the Company’s Common Stock for cash consideration of $3, or $0.001 per share. 

 

 
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During the three months ended September 30, 2023, under the terms of the amended contract, FSL was paid $57, with an additional $44 accrued and unpaid at September 30, 2023 for services rendered.  In addition, R Agency, a marketing company also controlled by Mr. Bartlett, was paid $15,750 during the three months ended September 30, 2023, with a total of $120 accrued and unpaid as of September 30, 2023 for services rendered.  Director fees of $9 due to Mr. Bartlett as of September 30, 2023 are included in accounts payable – related party on the balance sheet.  Mr. Barlett resigned from the Board effective October 2, 2023.

 

Anabel Oelmann, Director (Trinity Holdings GmbH)

 

On March 10, 2022, the Company entered into and closed a share purchase agreement with Anabel Oelmann pursuant to which the Company acquired 100% of the issued and outstanding capital stock of NOEO GmbH, a German company (“NOEO”), involved in direct-to-consumer brand focusing on adaptogenic herbs and currently focused on three key products which include joint, memory and digestive complexes derived from mushrooms, in exchange for cash consideration of EUR25 ($30). Ms. Oelmann is a director of the Company and was the sole shareholder of NOEO. See Note 4.

 

At September 30, 2023, Ms. Oelmann, through her controlled corporate entity, Trinity Holdings GmbH, was owed advances totaling $3 (EUR3) by the Company’s wholly owned subsidiary, NOEO. In addition, at September 30, 2023, a total of $1 (EUR980) is included in accounts payable - related party, in respect to expense reimbursements owing to Ms. Oelmann.

 

Ms. Oelmann’s spouse, Wanja Oberhof, is serving as the Company’s Interim Chief Executive Officer, and is a greater than 10% shareholder of the Company as the control person of Ingenious Investments AG and WAOW Entrepreneurship GmbH.  During the three months ended September 30, 2023, WAOW Entrepreneurship GmbH converted 1,975,000 Seed Preferred shares into 1,975,000 shares of Common Stock.  See Note 11.

  

Other amounts included in Accounts Payable – related party

 

In addition to the amounts disclosed above, director fees payable to Kay Koplovitz and Ameeth Sankaran of $13 and $9, respectively, and consulting fees of $25 due to Justin Figgins, CFO, are included in accounts payable – related party on the Condensed Consolidated Balance Sheet.

 

NOTE 11. STOCKHOLDERS’ DEFICIT

 

One April 29, 2021, the Company’s board of directors approved a forward stock split of authorized and issued and, outstanding shares of Common Stock on a four (4) new shares for one (1) share held basis. Upon effectiveness of the forward split, the authorized shares increased to 300,000,000 shares of Company Common Stock and the issued and outstanding shares of Common Stock increased to 44,000,000 shares of Common Stock, all with a par value of $0.001.

 

On October 7, 2021, the Company amended its authorized capital to 290,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, $0.001 par value per share, of which 5,000,000 are designated as Seed Preferred Shares, each with a par value of $0.001 per share. On July 8, 2022, the Company’s board of directors and shareholders holding a majority of the Company’s Common Stock approved an amendment to the Company’s Amended and Restated Articles of Incorporation to increase the Seed Preferred Shares from 5,000,000 authorized shares to 7,800,000 shares.

 

In case of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of Seed Preferred Shares then outstanding will be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment will be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to 1.5 times the Seed Preferred Shares original issue price, plus any dividends declared but unpaid thereon (collectively, the “Seed Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Company the assets of the Company available for distribution to its stockholders is insufficient to pay the holders of Seed Preferred Shares the full amount to which they shall are entitled, the holders of shares of Seed Preferred Shares will share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

 
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In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after the payment in full of all Seed Liquidation Amount required to be paid to the holders of Seed Preferred Shares, the remaining assets of the Company available for distribution to its stockholders will be distributed among the holders of Seed Preferred Shares and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to Common Stock pursuant to the terms of the Amended and Restated Articles of Incorporation immediately prior to such liquidation, dissolution or winding up of the Company.

 

At such date and time as is specified by our board of directors in connection with, but prior to, the closing of the sale of shares of our Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended,, and in connection with such offering the Common Stock is listed for trading on the Nasdaq Stock Market’s National Market, (i) all outstanding Seed Preferred Shares will automatically be converted into shares of Common Stock on a 1:1 (i.e., one share of Seed Preferred Shares for one share of common stock) basis, and (ii) such shares may not be reissued by the Company. The holders of the Seed Preferred Stock also have the right to convert shares of Seed Preferred Stock to Common Stock on a 1:1 basis at any time, upon written notice of conversion to the Company.

 

To the fullest extent permitted under the Nevada Revised Statutes and other applicable law, the holders of Seed Preferred Shares will not be entitled to vote on any matter submitted to the stockholders of the Company for a vote.

 

Any of the rights, powers, preferences and other terms of our Seed Preferred Shares may be waived on behalf of all holders of Seed Preferred Shares by the affirmative written consent or vote of the holders of at least 51% of the Seed Preferred Shares then outstanding.

 

Common Stock

 

During the three months ended September 30, 2023, the Company received $350 in cash proceeds from the purchase of 175,000 shares of Common Stock at $2.00 per share.

 

During the three months ended September 30, 2023, the Company issued 1,975,000 shares of Common Stock upon conversion of 1,975,000 shares of Seed Preferred Stock.

 

During the three months ended September 30, 2023, the Company issued 125,000 shares of stock awards to a newly appointed member of the Board of Directors.

 

As of September 30, 2023 and June 30, 2023 the Company had a total of 57,474,920 and 55,199,920 shares of Common Stock issued and outstanding, respectively.

 

Seed Preferred Stock

 

During the fiscal year ended June 30, 2022, the Company entered into definitive agreements with non-U.S. persons to issue a total of 5,000,000 shares of Seed Preferred stock in private transactions (the “Transactions”). Under the terms of the Transactions, the Company agreed to sell an aggregate of 5,000,000 Seed Preferred Shares at $2.00 per share for proceeds of $10,000. As of September 30, 2023, the Company had received total proceeds of $9,670 and is awaiting shortfall payments from one subscriber totaling $330

 

During the three months ended September 30, 2023, 1,975,000 shares of Seed Preferred Stock were converted into 1,975,000 Common Shares.

 

At September 30, 2023 and June 30, 2023, the Company had a total of 645,000 and 2,620,000 shares of Seed Preferred Stock issued and outstanding, respectively.

 

NOTE 12. STOCK BASED COMPENSATION

 

On June 10, 2022, the Company’s board of directors approved (i) The Healing Company Inc. 2022 Omnibus Equity Incentive Plan (the “2022 Plan”) and (ii) the granting, in general terms, of awards and options which were previously contractually agreed to be granted upon formal approval of the 2022 Plan (the “Awards”).

 

Stock Options and Stock Awards: 

During the three months ended September 30, 2023, the Company granted 125,000 shares of Restricted Stock Awards under its 2022 Plan. The Restricted Stock Awards shall vest over a two (2) year period following the Vesting Start Date of July 25, 2023 with 12.5% of the Restricted Stock vesting on each three (3) month anniversary of the Vesting Start Date.

 

 
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The following table summarizes the Company’s stock award activities:

 

 

 

Number of shares

 

 

Weighted Average

Grant Date Fair

Value Per Share

 

 

Weighted Average

Remaining

Recognition

Period (Years)

 

Nonvested at June 30, 2022

 

 

2,881,250

 

 

$3.75

 

 

 

1.66

 

Granted**

 

 

1,305,000

 

 

$3.75

 

 

 

4.00

 

Vested**

 

 

(373,542 )

 

$3.75

 

 

 

-

 

Forfeited

 

 

(1,745,000 )*

 

$3.75

 

 

 

-

 

Nonvested at June 30, 2023

 

 

2,367,708

 

 

$3.75

 

 

 

1.31

 

Granted

 

 

125,000

 

 

$3.75

 

 

 

2.00

 

Vested

 

 

(131,250 )

 

$3.75

 

 

 

-

 

Forfeited

 

 

-

 

 

$-

 

 

 

-

 

Nonvested at September 30, 2023

 

 

2,061,458

 

 

$3.75

 

 

 

1.11

 

 

(*) During the year ended June 30, 2023 certain employees entered into separation agreements with the Company whereunder concurrent with the effective date of the termination of their employment with the Company a cumulative 1,745,000 restricted Common Stock awards were forfeited, returned to the Company, and canceled. As a result of the forfeiture, the Company recorded $800 against previously expensed stock-based compensation in respect to earned and forfeit stock awards and eliminated $5,700 of previously deferred compensation expense.

 

(**) Adjusted for Amended and Restated Restricted Stock Award Agreement with our interim Chief Financial Officer dated November 1, 2023, resulting in a decrease of 600,000 stock awards granted and a decrease of 300,000 stock awards vested as of June 30, 2023.

 

The Company recorded $800 and $1,030 as stock-based compensation expense related to stock awards during the three months ended September 30, 2023 and 2022, respectively. Deferred compensation expense associated with unvested stock awards is $7,030 as of September 30, 2023. The weighted average period over which these costs are expected to be recognized is approximately 1.22 years.

 

The following table summarizes the Company’s stock option activities:

 

 

 

Number

of Shares

 

 

Weighted

Average

Exercise Price

 

 

Weighted

Average

Remaining

Term

in Years

 

 

Aggregate

Intrinsic

Value

 

Outstanding at June 30, 2022

 

 

3,166,250

 

 

$0.001

 

 

 

7.60

 

 

$-

 

Granted 

 

 

225,000

 

 

0.001

 

 

 

10.00

 

 

 

-

 

Exercised 

 

 

(300,000

 

 

-

 

 

 

-

 

 

 

-

 

Cancelled 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at June 30, 2023

 

 

3,091,250

 

 

$0.001

 

 

 

8.89

 

 

$-

 

Granted 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercised 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Cancelled 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at September 30, 2023

 

 

3,091,250

 

 

$0.001

 

 

 

7.48

 

 

$-

 

Options exercisable at September 30, 2023

 

 

1,510,000

 

 

$0.001

 

 

 

8.65

 

 

$-

 

 

The stock options were valued using Black-Scholes pricing model. The Black-Scholes pricing model applied the following assumptions: risk-free interest rate of 3.26%, expected term of 5 to 10 years, expected volatility of 62.49% and dividend yield of 0%.

 

 
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The Company recorded $310 and $800, respectively, as stock based compensation expense related to its stock options for the three months ended September 30, 2023 and 2022, respectively. Unamortized compensation expense associated with unvested stock options is $5,830 as of September 30, 2023. The weighted average period over which these costs are expected to be recognized is approximately 1.01 years.

 

NOTE 13. WARRANTS

 

Warrant to Purchase Seed Preferred Stock

 

On August 4, 2022, in accordance with a credit facility (See Note 9) the Company initially issued to the Administrative Agent a seven-year warrant to purchase up to 1,300,123 shares of the Company’s Seed Preferred Stock at an exercise price of $2.00 per share. As an inducement for the $3,000 loan and for a waiver of certain terms of the credit facility with respect to this loan, we issued to the Administrative Agent an amended and restated warrant increasing the number of warrant shares from 1,300,123 shares of our Seed Preferred Stock to 1,560,148 shares of this stock. The stock warrants vested immediately and were valued using the Black-Scholes pricing model. The Black-Scholes pricing model applied the following assumptions: risk-free interest rate of 2.73%, expected term of 7 years, expected volatility of 62.56% and dividend yield of 0%. The Company recorded $4,100 as financing costs, included in professional and consulting fees, during the year ended June 30, 2023. There were no financing costs for the three months ended September 30, 2023.

 

Warrants to purchase Seed Preferred Stock transactions are summarized as follows:

 

 

 

Number

of shares

 

 

Weighted Average

Exercise Price ($)

 

 

Weighted Average

Remaining

Recognition

Period (Years)

 

Balance, June 30, 2023

 

 

1,560,148

 

 

$2.00

 

 

 

6.10

 

Warrants issued

 

 

-

 

 

$-

 

 

 

-

 

Warrants expired

 

 

-

 

 

$-

 

 

 

-

 

Balance, September 30, 2023

 

 

1,560,148

 

 

$2.00

 

 

 

5.60

 

 

Number

of Warrants

 

 

Exercise

Price ($)

 

 

Expiry Date

 

 

1,560,148

 

 

 $

2.00

 

 

August 04, 2029

 

 

Warrant to Purchase Common Stock

 

On September 9, 2022, in conjunction with a Loan Purchase and Sale Agreement, (See Note 3) the Company issued CircleUp a warrant to purchase 1,500,000 restricted shares of the Company’s common stock at an exercise price of $2.00 per share. This Warrant will begin to vest on the one-year anniversary of the closing of the purchase of the Loan with 12.5% of the Warrant amount (187,500 shares) vesting on that date and the remaining portion of the Warrant vesting in seven quarterly installments of 187,500 shares each over the next seven quarters.  Vesting of the Warrant will be accelerated upon the occurrence of a sale or merger of the Company. The Warrant will terminate on the seventh anniversary of the closing date and will be subject to customary adjustments of the warrant price and number of shares for splits, stock dividends, recapitalizations and the like. The stock warrants were valued using Black-Scholes pricing model. The Black-Scholes pricing model applied the following assumptions: risk-free interest rate of 4.25%, expected term of 3 years, expected volatility of 60% and dividend yield of 0%. The Company has valued the warrants as of the transaction date with a total value of $34 as part of purchase consideration. The first tranche of warrants vested as of September 9, 2023.

 

On November 10, 2022, the Company issued one vendor a warrant to purchase 150,000 restricted shares of the Company’s common stock at an exercise price of $2.00 per share under certain Tri-Party Assignment and Settlement Agreement where under the outstanding balance payable of $1,078 was agreed to be settled by the issuance of common stock purchase warrants (the “Warrant”). This Warrant shall vest over a period of three years, pro rata on monthly basis, beginning on November 10, 2022. The Warrant will terminate on the seventh anniversary of the closing date and will be subject to customary adjustments of the warrant price and number of shares for splits, stock dividends, recapitalizations and the like. The stock warrants were valued using Black-Scholes pricing model. The Black-Scholes pricing model applied the following assumptions: risk-free interest rate of 3.89%, expected term of 7 years, expected volatility of 63.52% and dividend yield of 0%. The Company has valued the warrants as of the transaction date with a total value of $427 which amount was recorded as a noncash payment, and the gain on debt settlement of $650 recorded as other income. The Company recorded $36 against other current liabilities during the three months ended September 30, 2023 in respect to the amortization of the vesting period of the warrant. The unamortized amount associated with unvested warrants is $297 as of September 30, 2023. The weighted average period over which the outstanding balance is expected to be recognized is approximately 6.12 years.

 

 
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Transactions involving Warrants to purchase Common Stock are summarized as follows:

 

 

 

Number of shares

 

 

Weighted Average

Exercise Price ($)

 

 

Weighted Average

Remaining

Recognition

Period (Years)

 

Nonvested at June 30, 2023

 

 

1,616,666

 

 

$2.00

 

 

 

6.37

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

Vested

 

 

(220,834 )

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

 

 

-

 

Nonvested at September 30, 2023

 

 

1,395,832

 

 

$2.00

 

 

 

5.96

 

 

NOTE 14. COMMITMENTS AND CONTINGENCIES

 

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.

 

Commitments

 

The following is a summary of the Company’s significant commitments.

 

 

(a)

Effective December 28, 2021, the Company entered into a two-year Board Advisory Agreement with Deepak Chopra LLC for services as an advisory to the Company. As consideration, Deepak Chopra LLC will receive $13 for each fiscal quarter. Additionally, the Advisor has been granted 200,000 Non Statutory Stock options with a term of 10 years which vest as to 25% each 6 months over two years for exercise at $0.001 per share.  Further under the agreement, the Company is to make an annual donation to The Chopra Foundation for $50, with the first annual donation to be paid within thirty days of the date of execution of the agreement. The Company remitted the required donation in April 2022. During the three months ended September 30, 2023, the Company recorded $94 as stock-based compensation in respect to the granted options.

 

 

(b)

On January 1, 2022, the Company entered into an independent contractor agreement with KET Consulting LLC (“KET”) to provide various marketing services, brand and go-to-market strategy and other operational services at the direction of the Board and the CEO. The contract had an initial term of 18 months and was renewable by mutual consent for a further term until the contract was terminated on November 13, 2023. Compensation was $240 per annum commencing January 1, 2022, payable monthly in arrears. Additionally, the Advisor has been granted 1,000,000 Non-Statutory Stock options with a term of 10 years which vest as to 25% on the one-year anniversary of January 1, 2022 and 1/36 each month thereafter, at an exercise at $0.001 per share.

 

 

 

 

(c)

On August 1, 2022, the Company entered into a Consulting Agreement with RayRos Holdings LLC for an initial term of three months, which was automatically renewed through the termination date of November 13, 2023, at a rate of $5 per month for marketing strategy and assessment and partnership development services focused on the wellness and healing sector. In addition, the Company granted a non-statutory stock option to purchase 100,000 shares of common stock, exercisable at $0.001 per share to the founder, Mr. John Hoekman, which options vest quarterly as to 25% each quarter from grant date, August 1, 2022. For the three months ended September 30, 2023, the Company recorded stock-based compensation of $47.

 

 

(d)

On September 1, 2022, the Company entered into a consulting agreement with Lee Forster for an initial term of 24 months, with automatic successive renewals unless otherwise terminated 30 days prior to the end of the current term, whereunder Mr. Forster shall act as an advisor to the Company on financing and fundraising efforts, growth opportunities, endorsements and other corporate strategy at a rate of $3 per month. In addition, the Company granted a non-statutory stock option to purchase 125,000 shares of common stock, exercisable at $0.001 per share to Mr. Forster, which options vest over a two-year period following the Vesting Start Date with 12.5% of the Option Shares vesting on each three-month anniversary of the Vesting Start Date. For the three months ended September 30, 2023, the Company recorded $58 as stock based compensation in respect to the aforementioned agreement.

  

 
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(e)

On February 14, 2023, the Company entered into a services agreement with Peter Kash.  Under the terms of the agreement, Mr. Kash will be employed as an independent contractor in order identify growth opportunities, among other services.  The agreement has a term of two (2) years, unless earlier terminated, and provides for compensation in the form of stock options, which options shall be granted upon mutual agreement of the exercise price.  Under the terms of the option agreement Mr. Kash will be granted a total of 75,000 incentive stock options, vesting as to 1/8 each quarter from grant date. In addition, Mr. Kash shall be entitled to certain additional compensation up to an additional 225,000 stock options for each qualifying entity acquired by the Company.  At September 30, 2023, the Company and Mr. Kash have not yet determined an agreeable exercise price for the aforementioned options.

 

 

(f)

On February 14, 2023, the Company entered into a services agreement with Dr. Linda Friedland.  Under the terms of the agreement, Dr. Friedland will be employed as an independent contractor in order identify growth opportunities, among other services.  The agreement has a term of two (2) years, unless earlier terminated, and provides for compensation in the form of stock options, which options shall be granted upon mutual agreement of the exercise price.  Under the terms of the option agreement Dr. Friedland will be granted a total of 75,000 incentive stock options, vesting as to 1/8 each quarter from grant date. In addition, Dr. Friedland shall be entitled to certain additional compensation up to an additional 225,000 stock options for each qualifying entity acquired by the Company.  At September 30, 2023, the Company and Dr. Friedland have not yet determined an agreeable exercise price for the aforementioned options.

 

 

(g)

On March 31, 2023, the Company entered into a consulting services agreement with Scarlett Leung.  Under the terms of the agreement, Ms. Leung will be employed as an independent contractor to support the management team with operational leadership and strategy in connection with the integration of the Chopra assets and growth of the business.  The agreement has an initial term of one month and automatically renews each month until terminated by either party in accordance with the agreement.  Ms. Leung will receive a monthly consulting fee of $10 and will be granted a restricted stock award of 120,000 shares of common stock, vesting as to 1/12 on each of the first twelve 30-day anniversaries of the grant date.

 

 

(h)

On June 1, 2023, Your Super HLCO LLC entered into a likeness rights agreement with Michael Kuech and Kristel de Groot, pursuant to which Mr. Kuech and Ms. De Groot granted the Company the non-exclusive right to utilize their likeness to advertise, market and promote the Company’s products.  Under this agreement, Mr. Kuech and Ms. De Groot will be paid a monthly consulting fee of $20,000 and 1% of the Company’s monthly net revenue for a term of six months.  The agreement may be terminated prior to the expiration date by either party with or without cause by delivering 30 days’ advance written notice. 

 

 

(i)

Effective July 10, 2023, the Company entered into a consulting services agreement with Jacalyn Y. Lee.  Under the terms of the agreement, Ms. Lee will be employed as an independent contractor to define and execute a communications strategy including strategy development and media relations.  The agreement has an initial term through October 31, 2023 and may be extended on a month-to-month basis upon written mutual consent of both parties.  Ms. Yee will receive a monthly retainer fee of $12.

 

 

(j)

Effective September 25, 2023, the Company entered into a consulting agreement with Charlotte Edelman.  Under the terms of the agreement, Ms. Edelman will provide legal advisory and related services.  The agreement may be terminated upon 30 calendar days’ written notice. Ms. Edelman will receive a monthly consulting fee of $15 and will be granted a restricted stock award of 1,000,000 shares of common stock, vesting 25% on September 25, 2024 with the balance vesting in equal monthly installments thereafter. 

  

NOTE 15. SUBSEQUENT EVENTS 

 

On October 2, 2023, Steven Bartlett resigned from the Company’s Board of Directors, effective as of the date of resignation.

 

On October 25, 2023, the Company issued 125,000 unregistered, restricted shares of Common Stock to an individual subscriber under the terms of a private placement at $2.00 per share for total proceeds of $250.

 

On November 1, 2023, the Company amended and restated the Restricted Stock Award Agreement with Justin Figgins and issued a restricted stock grant of 600,000 shares. 

 

On November 1, 2023, the Company amended and restated the Restricted Stock Award Agreement with Scarlett Leung and issued a restricted stock grant of 120,000 shares. 

 

On November 13, 2023, the employment of Simon Belsham, the Company’s Chief Executive Officer was terminated. Effective November 13, 2023, Mr. Wanja S. Oberhof, was appointed by the Company’s Board of Directors as the Company’s Interim Chief Executive Officer.

 

On November 14, 2023, Ameeth Sankaran notified the Company of his decision to resign from the Company’s Board effective immediately. Mr. Sankaran’s resignation did not result from any disagreement with the Company on any matter related to the Company’s operations, policies or practices.

 

Litigation

 

On or about April 12, 2023, the Company received a letter from litigation counsel to Google LLC (“Google”) that alleged that the Company’s indirectly wholly-owned subsidiary, Your Super, Inc. (“Your Super”), owed $236, plus continuing interest and fees, for advertising services rendered by Google to Your Super. After investigating Google’s allegations, Your Super negotiated and entered into a settlement agreement with Google dated July 25, 2023. Pursuant to that settlement agreement, Your Super agreed to pay Google an aggregate of $203 in monthly installments of $17 beginning July 31, 2023, and Your Super and Google mutually released claims against the other.

 

In 2019, Your Super entered into an agreement with WGST, Inc., which produces “Food Quest” with Mario and Courtney Lopez, and WGST Productions, Inc.  In or around the end of July 2023, after the original agreement had terminated, representatives of Mario Lopez contacted Your Super and alleged that Your Super was displaying the content produced for it by WGST in violation of the rights granted to Your Super under the agreement. The representatives of Mr. Lopez threatened to bring legal action against Your Super unless it made additional payment or agreed to buy new footage. A new production agreement was entered into on October 12, 2023, between the Company and WGST Productions, Inc., the successor to WGST, Inc., providing, among other things, for a full release of claims by WGST Productions, Inc., WGST, Inc., Mario and Courtney Lopez arising under the original agreement or for use of the content created under the original agreement.

 

The Company’s management has reviewed all material subsequent events through the date these financial statements were issued in accordance with ASC 855-10. 

 

 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Quarterly Report on Form I0-Q contains predictions, estimates and other forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “intends,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on October 23, 2023, that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

 

Forward-looking statements represent our management’s belief; and assumptions only as of the date of this Report. You should read this Report with the understanding that our actual future results may be materially different from what we expect.

 

All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.  All dollar values are expressed in thousands, unless otherwise noted.

 

The management’s discussion and analysis of our financial condition and results of operations are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements for the three months ended September 30, 2023 and the notes thereto appearing elsewhere in this Report and the Company’s audited financial statements for the fiscal year ended June 30, 2023, as filed with the SEC on Form 10-K on October 23, 2023.

 

General Overview

 

We are an emerging health and wellness company that has identified the need for a change to healthcare, where conventional medicine and alternative healing can both be drawn on to provide a world of integrated healing encompassing conventional medicine and alternative medicine. 

 

Our intent is to build a community of integrated healing brands by identifying and acquiring early stage, high potential brands within selected health and wellness categories.  Our plan is to build individual market impact through enhanced branding, a credible narrative, social conversation and improved accessibility by positioning all portfolio brands with a larger “healing community” of brands thus building exponential market impact.

 

On October 13, 2022, we concluded the acquisition of the assets and business of Los Angeles based Your Super, Inc. (“Your Super”) in order to capitalize on two high-growth wellness sectors: superfoods and plant-based nutrition. In connection with our acquisition of the assets of Your Super, we borrowed $3,000 loan under a credit facility that we established with certain lenders in August 2022. 

 

On March 3, 2023, we concluded the acquisition of certain assets of Chopra Global, LLC, a Delaware limited liability company including the Chopra App - a wellness and meditation app, certain products and services including guided meditation packages and detox kits and operation of select Chopra branded health and wellness retreats.  In connection with this acquisition, we borrowed an additional $1,873 from our credit facility.  

 

Recent Events

 

On September 7, 2023, we appointed biotech entrepreneurs and investors, Dr. Linda Friedland and Dr. Peter Kash, as advisors to the Company.

 

On October 2, 2023, Steven Bartlett resigned from our board of directors, effective as of that date.

 

On October 25, 2023, we issued 125,000 unregistered, restricted shares of our common stock to an individual subscriber under the terms of a private placement at $2.00 per share for total proceeds to us of $250.

 

 
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Table of Contents

 

Results of Operations

 

The Company acquired Your Super and Chopra wellness assets in October 2022 and March 2023, respectively and as a result, comparisons of the current period results of operations to prior period results may not be relevant.

 

Three Months Ended September 30, 2023 and September 30, 2022

 

The following table summarizes key items of comparison and their related changes for the three months ended September 30, 2023, and September 30, 2022.

 

 

 

Three Months Ended

 

 

 

 

 

 

 

September 30,

 

 

September 30,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

Revenue

 

$3,091

 

 

$-

 

 

$3,091

 

 

 

100%

Cost of revenue

 

 

1,470

 

 

 

-

 

 

 

1,470

 

 

 

100%

Gross profit

 

 

1,621

 

 

 

-

 

 

 

1,621

 

 

 

100%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising and marketing

 

 

909

 

 

 

-

 

 

 

909

 

 

 

100%

General and administrative

 

 

2,656

 

 

 

2,249

 

 

 

407

 

 

 

15%

Professional and consulting fees

 

 

1,309

 

 

 

4,057

 

 

 

(2,748 )

 

 

(210 )%

Management fees

 

 

332

 

 

 

370

 

 

 

(38 )

 

 

(11 )%

Total operating expenses

 

 

5,206

 

 

 

6,676

 

 

 

(1,470 )

 

 

(28 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations before taxes

 

(3,585 )

 

(6,676 )

 

 

3,091

 

 

 

(86 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense

 

 

(654 )

 

 

-

 

 

 

(654 )

 

 

100%

Interest expense

 

 

(220 )

 

 

(604 )

 

 

384

 

 

 

(174 )%

Foreign currency gain (loss)

 

 

(22 )

 

 

-

 

 

 

(22 )

 

 

100%

Total Other expense

 

 

(896 )

 

 

(604 )

 

 

(292 )

 

 

33%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(4,481 )

 

$(7,280 )

 

$

2,799

 

 

 

(62 )%

  

Revenue

 

During the three months ended September 30, 2023, we generated revenues of $3,091 as compared to $0 during the three months ended September 30, 2022. Cost of revenue during the three months ended September 30, 2023 was $1,470 as compared to $0 in the prior comparative period. We reported gross profit of $1,621 at September 30, 2023 compared to $0 during the three months ended September 30, 2022. The increase in revenues period over period is related to our acquisition of the Your Super and Chopra wellness assets in October 2022 and March 2023.

 

Operating Loss

 

We reported operating expenses of $5,206 resulting in a loss from operations of $3,585 for the three months ended September 30, 2023, as compared to operating expenses of $6,676 resulting in a loss from operations of $6,676 for the three months ended September 30, 2022. The decrease to our current period loss is a result of revenue during the current period and a decrease in operational expenses of $1,470, primarily related to the decrease to professional and consulting fees of $2,748 related to the transaction in the prior year whereby we acquired operating assets in the wellness sector, including financing fees and associated costs, offset by an increase of $407 in general and administrative fees due to the increase to our workforce as a result of the acquisition of new operations. In addition, during the three months ended September 30, 2023 we incurred advertising and marketing expenses of $909, with no comparative expenses in the fiscal year ended September 30, 2022. These increased costs were a result of our expansion into the health and wellness sector.

 

 
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Other Income / Expenses

 

For the three months ended September 30, 2023, we recorded interest expenses of $220 compared to $604 for the three months ended September 30, 2022, as well as a loss on foreign currency of $22 and other expense of $654, with no comparative loss or expense during the three months ended September 30, 2022. Interest incurred relates predominantly to a credit facility we obtained in August 2022.

 

Net Loss

 

We recorded a net loss of $4,481 for the three months ended September 30, 2023 as compared to a net loss of $7,280 for the three months ended September 30, 2022.

 

Statements of Cash Flows

 

The following table summarizes our cash flows for the three months ended September 30, 2023 and 2022:

 

 

 

September 30,

2023

 

 

September 30,

2022

 

Net cash used in operating activities

 

$(2,756 )

 

$(1,788 )

Net cash used in investing activities

 

 

(65 )

 

 

(1,998 )

Net cash provided by financing activities

 

 

2,796

 

 

 

-

 

Foreign exchange rate effect on cash

 

 

(58 )

 

 

-

 

Decrease in cash

 

 

(83 )

 

 

(3,786 )

Cash beginning of period

 

 

1,503

 

 

 

6,492

 

Cash end of period

 

$1,420

 

 

$2,706

 

 

Cash Used in Operating Activities

 

Reported in Thousands

 

Net Cash used in operating activities for the three months ended September 30, 2023 was $2,756 as compared to $1,788 of cash used by operating activities during the three months ended September 30, 2022.

 

Changes in operating activities during the three months ended September 30, 2023 include various adjustments to reconcile the net loss to net cash used in the current fiscal year including $10 in depreciation and amortization, $1,114 as stock based compensation, $563 of vesting warrants under debt settlements, a gain from foreign currency translation of $111 and a change in deferred income taxes of $1.  Cash used in operating activities of $1,788 during three months ended September 30, 2022 include various adjustments to reconcile the net loss to net cash used in the current fiscal year including stock based compensation of $1,828 and warrants issued for financing costs of $3,628 offset by our net loss of $7,280. 

 

Changes in operating assets and liabilities during the three months ended September 30, 2023 include a decrease in advances to vendors of $3, an increase to accounts receivable of $61, a decrease to inventories of $672, and a decrease to contract liabilities of $274.  Accounts payable decreased by $464 in the current year period as compared to an increase of $108 in the prior comparative year, prepaid expenses decreased by $17 in the current year as compared to an increase of $101 in the prior comparative year, and sales tax payable decreased by $17 compared to zero during the three months ended September 30, 2022.  During the three months ended September 30, 2023, we recorded a decrease to accounts payable, related party of $6, compared to an increase of $29 in the three months ended September 30, 2022.

 

Cash Provided by Investing Activities

 

During the three months ended September 30, 2023, investing activities were primarily comprised of purchases of property and equipment of $66, offset by an increase in cash from security deposits of $1. 

 

During the three months ended September 30, 2022, investing activities provided net cash of $1,998, which was comprised of other assets in the amount of $2,000 offset by a decrease in intangible assets of $2. 

 

Cash Provided by Financing Activities

 

During the three months ended September 30, 2023, financing activities provided net cash of $2,796, which was comprised of proceeds from the sale of common stock of $2,850, loan payments of $49, and related party loan payments of $5.  

 

There was no comparable activity during the three months ended September 30, 2022.

 

 
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Liquidity and Capital Resources

 

Reported in Thousands

 

The Company’s balance sheet as of September 30, 2023, reflects current assets of $6,846 consisting of $1,420 cash on hand, accounts receivable, net of $222, prepaid expenses of $1,292, inventory, net of $2,009, advances to vendors and other current assets of cumulative $1,903. We had a working capital deficit of $7,091 as of September 30, 2023 compared to $7,116 as of June 30, 2023, and have reported accumulated losses to date of $34,382. We have commenced revenue generating operations in the wellness sector; however, revenues are not yet sufficient to meet ongoing operational expenditures. During the fiscal year ended June 30, 2023, we entered into a credit agreement with certain lenders who agreed to extend us a credit facility of up to $75,000 (which amount may be increased up to $150,000 in accordance with the terms of the agreement) in aggregate principal amount of term loan commitments, the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria.  As of September 30, 2023, we borrowed $4,873 under the credit facility to assist in financing the acquisition of additional operating assets. 

 

Going Concern

 

We had a working capital deficit of $7,100 as of September 30, 2023. During the year ended June 30, 2022, we entered into private placement subscription agreements to raise a total of $10,000 by the sale of seed preferred stock at $2 per share, of which we have collected $9,660. During the three months ended September 30, 2023, the Company issued additional shares of common stock at $2.00 per share for total proceeds of $2,850, all of which has been collected to date.

 

We have commenced operations in the wellness sector initially through the acquisition of NOEO and more recently with the acquisitions of the Your Super and Chopra Business assets. During the fiscal year ended June 30, 2023, we entered into a credit agreement with certain lenders who agreed to extend a credit facility to us consisting of up to $75,000 (which amount may be increased up to $150,000 in accordance with the terms of the agreement) in aggregate principal amount of term loan commitments), the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria. As of September 30, 2023, we have been funded $4,870 under the terms of this agreement in order to facilitate the purchase of operating assets.  Our continuation as a going concern is dependent upon the ability to attain profitable operations from our future planned business operations and sufficient financing to carry out those plans. If we are unable to obtain adequate capital as needed, or conduct revenue generating operations, we may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern.

 

Credit Facility

 

As of September 30, 2023, we were out of compliance for the month ended August 31, 2023 with a financial covenant in our credit agreement requiring us to maintain at least $2,000 in unrestricted and unencumbered cash.  Additionally, as of September 30, 2023, our monthly EBITDA for Your Super was less than $75,000 which, under our credit agreement, resulted in a borrowing base deficiency with respect to the Your Super acquisition.  These two defaults entitled our lenders, upon notice to us, to take action to enforce their rights against us including, but not limited to, demanding immediate payment of their outstanding loans to us in the principal amount of $4,873, as of September 30, 2023, and enforcing their liens on our Your Super and Chopra operating assets. 

 

On October 12, 2023, we entered into a limited waiver to the credit agreement with our lenders, waiving  the two breaches referenced above provided that (i) we regain compliance with our cash covenant referenced above no later than, and remain compliant after, November 30, 2023, and (ii) we deposit $150 into a special reserve collection account on behalf of the secured lenders prior to the earlier to occur of (x) November 30, 2023 and (y) the closing of a sale of our equity in an amount of not less than $2,000. Our failure to comply with either of these two new covenants will constitute an event of default under the credit agreement entitling our secured lenders to pursue all rights and remedies against us under the credit agreement, including acceleration of our loans, foreclosure and collection actions.  

 

Tax Lien

 

On August 30, 2023, the Washington State Department of Revenue issued a tax warrant to our indirectly owned subsidiary, Your Superfoods, Inc., for the collection of unpaid sales taxes in the amount of $7. The Company has engaged a sales tax expert to file all tax returns and rectify this issue. As of the date of filing of this quarterly report, the sales taxes due have not yet been paid and a letter to the Company stating that the lien has been lifted has not yet been issued.

 

 
31

Table of Contents

 

Off-Balance Sheet Arrangements

 

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Inflation

 

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor the price change and continually maintain effective cost control in operations.

 

Seasonality

 

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introduction.

 

Critical Accounting Policies 

 

There have been no changes to our critical accounting policies during the three months ended September 30, 2023.

  

 
32

Table of Contents

  

 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company and are not required to provide this information.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, under supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e). Based upon this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of September 30, 2023, because of the material weakness in our internal control over financial reporting (“ICFR”) described below, our disclosure controls and procedures were not effective.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that required information to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that required information to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules 13a-15(f) and 14d-14(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial reporting reliability and financial statement preparation and presentation. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.

 

 
33

Table of Contents

 

Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2023. In making the assessment, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework 2013. Based on its assessment, management concluded that, as of September 30, 2023, our internal control over financial reporting was not effective and that material weaknesses in ICFR existed as more fully described below.

 

As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements” established by the Public Company Accounting Oversight Board (“PCAOB”), a material weakness is a deficiency or combination of deficiencies that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of September 30, 2023:

 

Our internal controls and procedures are not effective for the following reasons:

 

 

(i)

there has been an inadequate segregation of duties consistent with control objectives,

 

(ii)

the Company currently has no formal audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process,

 

(iii)

insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and

 

(iv)

the Company currently does not have an inventory tracking and valuation system in place.

 

Management’s Remediation Initiatives

 

As of September 30, 2023, management assessed the effectiveness of our internal control over financial reporting. Based on that evaluation, it was concluded that during the period covered by this report, the internal controls and procedures were not effective due to deficiencies that existed in the design or operation of our internal controls over financial reporting. However, management believes these weaknesses did not have a material impact on our financial results. During the course of our evaluation, we did not discover any fraud involving management or any other personnel who play a significant role in our disclosure controls and procedures or internal controls over financial reporting.

 

In order to mitigate the foregoing material weakness, The Company plans to establish an Audit Committee to provide oversight of remediation efforts. Management intends to take steps to develop and enhance its internal controls over financial reporting in 2023, including:

 

 

·

Management has improved segregation of duties by engaging an advisory firm to provide additional accounting and financial reporting support, and will continue to strengthen segregation of duties;

 

·

Engaging an advisory firm to lead the remediation and assessment of internal controls;

 

·

Developing formal policies and procedures over accounting and reporting; and

 

·

Identifying additional information technology to improve financial reporting.

 

Our management plans to establish procedures to monitor and evaluate the effectiveness of our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing necessary enhancements or improvement as cash flow and working capital permits. Management expects to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting during the fiscal year ended June 30, 2024. 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.

 

Changes in Internal Control over Financial Reporting

 

During the period covered by this report, there were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
34

Table of Contents

 

 

PART II - OTHER INFORMATION

 

ITEM l. LEGAL PROCEEDINGS

 

The Company knows of no material, existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which its directors, officers or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to its interest.

 

ITEM IA. RISK FACTORS

 

Please refer to the disclosure contained in “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC on October 23, 2023.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

There were no sales of equity securities during the period covered by this Report that were not registered under the Securities Act and/or were not previously reported in a Current Report on Form 8-K filed by the Company.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable

 

ITEM 5. OTHER INFORMATION

 

None

 

 
35

Table of Contents

 

ITEM 6. EXHIBITS

 

Exhibit Number

 

Exhibit

(3)

 

Articles of Incorporation and Bylaws

3.1

 

Certificate of Amendment filed with the Nevada Secretary of State on October 7, 2021, including Amended and Restated Articles of Incorporation. (incorporated by reference to our Annual Report on Form 10-K filed on October 12, 2022)

3.2

 

Amended and Restated Bylaws adopted October 7, 2021 (incorporated by reference to our Annual Report on Form 10-K filed on October 12, 2022)

3.3

 

Certificate of Amendment filed with the Nevada Secretary of State on July 19, 2022 (incorporated by reference to our Current Report on Form 8-K filed on July 25, 2022)

3.4

 

Certificate of Amendment filed with the Nevada Secretary of State on April 26, 2023 (incorporated by reference to our Current Report on Form 8-K filed on April 25, 2023)

(4)

 

Instruments defining the rights of securities holders

4.1

 

2022 Omnibus Incentive Plan (incorporated by reference to our Current Report on Form 8-K filed on July 12, 2022)

(10)

 

Material Contracts

(31)

 

Rule 13a-14(a)/15d-14(a) Certifications

31.1*

 

Certification of our Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2*

 

Certification of our Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

(32)

 

Section 1350 Certifications 

32.1#*

 

Certification of our Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

32.2#*

  

Certification of our Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

(101)

 

Interactive Data Files

101.INS*

 

XBRL Instance Document

101.SCH*

 

XBRL Taxonomy Extension Schema Document

101.CAL*

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

 

XBRL Taxonomy Extension Presentation Linkbase Document

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*Filed herewith

 

 
36

Table of Contents

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

The Healing Company Inc.

 

 

 

 

 

Dated: November 20, 2023

 

/s/ Wanja Oberhof

 

 

 

Wanja Oberhof

 

 

 

Interim Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

Dated: November 20, 2023

 

/s/ Justin Figgins

 

 

 

Justin Figgins

 

 

 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

 
37

 

nullnullnullnullv3.23.3
Cover - shares
3 Months Ended
Sep. 30, 2023
Nov. 17, 2023
Cover [Abstract]    
Entity Registrant Name THE HEALING COMPANY INC.  
Entity Central Index Key 0001441082  
Document Type 10-Q  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Entity Small Business true  
Entity Shell Company false  
Entity Emerging Growth Company false  
Entity Current Reporting Status Yes  
Document Period End Date Sep. 30, 2023  
Entity Filer Category Non-accelerated Filer  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2024  
Entity Common Stock Shares Outstanding   58,194,920
Entity File Number 000-56551  
Entity Incorporation State Country Code NV  
Entity Tax Identification Number 26-2862618  
Entity Address Address Line 1 135 W 50th Street  
Entity Address Address Line 2 2nd Floor  
Entity Address City Or Town New York  
Entity Address State Or Province NY  
Entity Address Postal Zip Code 10020  
City Area Code 866  
Local Phone Number 241-0670  
Document Quarterly Report true  
Document Transition Report false  
Entity Interactive Data Current Yes  
v3.23.3
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
Current Assets    
Cash and cash equivalents $ 1,420 $ 1,503
Accounts receivable, net 222 161
Prepaid expenses 1,292 1,309
Inventory, net 2,009 2,681
Advances to vendors 9 12
Other current assets 1,894 1,951
Total Current Assets 6,846 7,617
Property and equipment 93 37
Goodwill 5,055 5,036
Security deposits 1 2
Deferred income tax 78 79
Total Assets 12,073 12,771
Current Liabilities    
Accounts payable and accrued expenses 5,417 5,845
Accounts payable - related party 237 243
Contract liabilities 2,088 2,343
Loan 4,965 5,014
Loan payable - related party 167 172
Advances payable - related party 3 3
Other current liability 857 893
Sales tax payable 161 178
Income tax payable 41 42
Total Current Liabilities 13,936 14,733
Total Liabilities 13,936 14,733
Seed Preferred Shares - 10,000,000 authorized, $0.001 par value of which 645,000 and 2,620,000 are issued and outstanding as of September 30, 2023 and June 30, 2023, respectively 1 3
Common Shares - 290,000,000 authorized, $0.001 par value, 57,474,920 and 55,199,920 shares issued and outstanding as of September 30, 2023 and June 30, 2023, respectively 57 55
Additional Paid-in Capital 32,350 27,823
Accumulated Deficit (34,381) (29,900)
Other Comprehensive Income 110 57
Total Stockholders' Deficit (1,863) (1,962)
Total Liabilities and Stockholders' Deficit $ 12,073 $ 12,771
v3.23.3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2023
Jun. 30, 2023
Condensed Consolidated Balance Sheets    
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares issued 645,000 2,620,000
Preferred stock, shares outstanding 645,000 2,620,000
Common stock, shares authorized 290,000,000 290,000,000
Common stock, par value $ 0.001 $ 0.001
Common stock, shares issued 57,474,920 55,199,920
Common stock, shares outstanding 57,474,920 55,199,920
v3.23.3
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)    
Revenue $ 3,091 $ 0
Cost of revenue 1,470 0
Gross profit 1,621 0
Operating expenses    
Advertising and marketing 909 0
General and administrative 2,656 2,249
Professional and consulting fees 1,309 4,057
Management fees 332 370
Total operating expenses 5,206 6,676
Loss from operations (3,585) (6,676)
Other expense (654) 0
Interest expense (220) (604)
Foreign currency loss (22) 0
Total Other expense (896) (604)
Provisions for income taxes 0 0
Net loss (4,481) (7,280)
Other comprehensive income 111 12
Foreign currency translation adjustment (1) 0
Comprehensive loss $ (4,371) $ (7,268)
Basic and Diluted Loss per Common Share $ (0.08) $ (0.16)
Weighted average number of common shares used in Basic and Diluted per share calculations 57,387,420 44,125,572
v3.23.3
Condensed Consolidated Statements of Changes in Stockholders Equity (Deficit) (Unaudited) - USD ($)
$ in Thousands
Total
Seed Preferred Stock [Member]
Common Stock [Member]
Additional Paid-In Capital [Member]
Other Comprehensive Income [Member]
Retained Earnings (Accumulated Deficit)
Balance, shares at Jun. 30, 2022   4,660,000 44,004,920      
Balance, amount at Jun. 30, 2022 $ 6,118 $ 5 $ 44 $ 14,653 $ 7 $ (8,591)
Shares issued under stock awards, shares     3,700,000      
Shares issued under stock awards, amount 0   $ 4 (4) 0 0
Stock based compensation on stock awards 1,033     1,033 0 0
Stock based compensation on stock options 795     795 0 0
Warrants issued as financing cost 3,628     3,628 0 0
Loss for the periods (7,280)         (7,280)
Foreign currency translation 11       11  
Balance, shares at Sep. 30, 2022   4,660,000 47,704,920      
Balance, amount at Sep. 30, 2022 4,305 $ 5 $ 48 20,105 18 (15,871)
Balance, shares at Jun. 30, 2023   2,620,000 55,199,920      
Balance, amount at Jun. 30, 2023 (1,962) $ 3 $ 55 27,823 57 (29,900)
Shares issued under stock awards, shares     125,000      
Shares issued under stock awards, amount 0   $ 0 0 0 0
Loss for the periods (4,481)         (4,481)
Foreign currency translation 53 $ 0 $ 0 0 53 0
Investment at Chopra subsidiary 2,500     2,500    
Shares issued under private placement, shares     175,000      
Shares issued under private placement, amount 350   $ 0 350 0 0
Conversion of Seed Preferred to Common stock, shares   (1,975,000) 1,975,000      
Conversion of Seed Preferred to Common stock, amount 0 $ (2) $ 2 0 0 0
Vesting warrants under debt settlement 563     563 0 0
Stock based compensation - stock awards 800     800 0 0
Stock based compensation - stock options 314     314 0 0
Balance, shares at Sep. 30, 2023   645,000 57,474,920      
Balance, amount at Sep. 30, 2023 $ (1,863) $ 1 $ 57 $ 32,350 $ 110 $ (34,381)
v3.23.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (4,481) $ (7,280)
Depreciation and amortization 10 0
Stock based compensation 1,114 1,828
Vesting warrants under debt settlement 563 3,628
Foreign currency gain 111 0
Change in deferred income taxes 1 0
Changes in operating assets and liabilities:    
Vendor cash advances 3 0
Prepaid expenses 17 (101)
Accounts receivable (61) 0
Other current assets 57 0
Sales tax payable (17) 0
Inventories 672 0
Accounts payable and accrued expenses (465) 108
Accounts payable related party (6) 29
Contract liabilities (274) 0
Net Cash used in operating activities (2,756) (1,788)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Other assets - loan acquired as part of acquisition 0 (2,000)
Refund on trademark registration 0 2
Security deposits 1 0
Purchases of property and equipment (66) 0
Net Cash used in investing activities (65) (1,998)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from sale of Common stock 350 0
Proceeds from investment at Chopra subsidiary 2,500  
Payments of loan payable (49) 0
Payments of loan payable - related parties (5) 0
Net Cash provided by financing activities 2,796 0
Foreign Exchange Effect on Cash (58) 0
DECREASE IN CASH (83) (3,786)
CASH AT BEGINNING OF PERIOD 1,503 6,492
CASH AT END OF PERIOD 1,420 2,706
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION    
Interest Paid 220 0
Taxes Paid 0 0
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION    
Warrants issued as financing costs 0 3,628
Common stock awards issued as deferred compensation $ 469 $ 11,990
v3.23.3
DESCRIPTION OF BUSINESS, GOING CONCERN AND HISTORY
3 Months Ended
Sep. 30, 2023
DESCRIPTION OF BUSINESS, GOING CONCERN AND HISTORY  
DESCRIPTION OF BUSINESS, GOING CONCERN AND HISTORY

NOTE 1. DESCRIPTION OF BUSINESS, GOING CONCERN AND HISTORY  

 

DESCRIPTION OF BUSINESS AND HISTORY

 

Historical Information

 

The Healing Company Inc. (formerly “Lake Forest Minerals) a Nevada corporation, (the “Company”) was incorporated in the State of Nevada on June 23, 2008. The Company was originally formed to engage in the acquisition, exploration and development of natural resource properties of merit. 

 

Currently, the Company is an emerging health and wellness company that has identified the need for a change to healthcare, where conventional medicine and alternative healing can both be drawn on to provide a world of integrated healing encompassing conventional medicine and alternative medicine.

 

With the acquisition of NOEO GmbH (“NOEO”) on March 10, 2022, and the onboarding of a new management team, the Company commenced operations in the health and wellness sector.

 

On September 9, 2022, the Company entered into a loan purchase and sale agreement (the “Agreement”) with CircleUp Credit Advisors LLC (“Circle Up”) pursuant to which the Company agreed to purchase from CircleUp all loans and loan accommodations (the “Loan” and the obligations thereunder the “Loan Obligations”) made by the CircleUp to Your Superfoods, Inc. and Your Super, Inc. (together, “Your Super Company”). Pursuant to the terms of the Agreement, as consideration for purchase of the Loan, the Company made a cash payment of $2,000 to the CircleUp and issued to CircleUp a warrant to purchase 1,500,000 restricted shares of the Company’s common stock. This warrant began to vest on September 9, 2023 being the one-year anniversary of the closing of the purchase of the Loan with 12.5% of the Warrant amount (187,500 shares) vesting on that date and the remaining portion of the Warrant vesting in seven quarterly installments of 187,500 shares each over the next seven quarters. Vesting of the Warrant will be accelerated upon the occurrence of a sale or merger of the Company. The Warrant will terminate on September 9, 2029 being the seventh anniversary of the closing date and will be subject to customary adjustments of the warrant price and number of shares for splits, stock dividends, recapitalizations and the like.

 

On March 3, 2023, the Company and Chopra HLCO LLC, a Delaware limited liability company and indirect wholly owned subsidiary of the Company (“Chopra HLCO”) (collectively the “Buyer”) entered into and consummated an Asset Purchase Agreement (the “Purchase Agreement”) with Chopra Global, LLC, a Delaware limited liability company (the “Seller”), and solely with respect to certain specified indemnification provisions of the Purchase Agreement, Deepak Chopra, the majority member of the Seller, to acquire (the “Acquisition”) certain assets of the Seller (the “Purchased Assets”) and certain liabilities related to the Seller’s business activities involving Chopra Global Digital, Chopra Global Licensing and Chopra Global Products assets (these business activities are referred to herein as the “Chopra Business”). Following the closing of the acquisition, the Purchased Assets are held by, and the Chopra Business is operated through, Chopra HLCO. 

 

The aggregate consideration paid and payable by the Buyer for the Purchased Assets (the “Purchase Price”) consists of up to $5,000 in cash plus newly issued shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). $1,000 of the cash portion of the Purchase Price was paid to the Seller on March 3, 2023, along with the issuance to the Seller of One Million Four Hundred Thousand (1,400,000) shares of Common Stock (the “Closing Shares”). A deferred cash payment of $2,500 was paid to the Seller prior to March 31, 2023.  In addition, the Seller may receive certain Earnout payments of up to $3,000 by way of cash and shares upon certain terms and conditions.

Basis of Presentation

 

The (a) unaudited condensed consolidated balance sheets as of September 30, 2023, and as of June 30, 2023 , which has been derived from audited consolidated financial statements, and (b) the unaudited condensed consolidated statements of operations, stockholders’ deficit and cash flows of the Company, have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2023 are not necessarily indicative of results that may be expected for the year ending June 30, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended June 30, 2023, filed with the Securities and Exchange Commission (“SEC”) on October 23, 2023.

 

All amounts referred to in the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.

 

Going Concern

 

The Company had a working capital deficit of $7,090 on September 30, 2023. During the year ended June 30, 2022, the Company entered into private placement subscription agreements to raise a total of $10,000 by the sale of seed preferred stock at $2.00 per share, of which the Company has collected $9,660 with $340 remaining to be collected.  During the three months ended September 30, 2023, the Company issued additional shares of common stock at $2.00 per share for total proceeds of $2,850, all of which has been collected to date.

 

The Company commenced operations in the wellness sector initially through the acquisition of NOEO and more recently with the acquisition of the Your Super and Chopra Business assets. During the year ended June 30, 2023, the Company entered into a credit agreement with certain lenders (the “Lenders”) who agreed to extend a credit facility to the Company consisting of up to $150,000 in accordance with the terms of the agreement in aggregate principal amount of term loan commitments (the “Term Loans”)), the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria. To date, the Company has been funded $4,870 under the terms of this agreement to facilitate the purchase of operating assets.  The continuation of the Company as a going concern is dependent upon the ability to attain profitable operations from the Company’s existing and planned future business operations and sufficient financing to carry out those plans. If the Company is unable to obtain adequate capital as needed, or conduct revenue generating operations, the Company may be required to reduce the scope, delay, or eliminate some or all of its existing and planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. 

v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Sep. 30, 2023
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principals of Consolidation

 

The consolidated financial statements include the accounts of The Healing Company and its 100% controlled subsidiaries, NOEO GmbH, NOEO, Inc., HLCO Borrower LLC, Your Super HLCO, LLC, and Chopra HLCO LLC. All significant intercompany balances and transactions have been eliminated. “The Healing Company”, the “Company”, “we”, “our” or “us” is intended to mean The Healing Company, including the subsidiaries indicated above, unless otherwise indicated.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of its assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates, and the Company includes any revisions to its estimates in its results for the period in which the actual amounts become known. Significant estimates in the period include the preliminary purchase price allocation with respect to the acquisition of the assets and liabilities of the Chopra Business, the allowance for doubtful accounts on accounts and other receivables, inventory allowance and impairment, valuation and useful lives of fixed assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on due to related parties, and deferred tax valuation allowance.

 

Income and Other Taxes

 

Income taxes are accounted for using the asset and liability method in accordance with ASC 740, Income Taxes (“ASC 740”), and in accordance with taxation principles currently effective in the United States and Germany, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent they believe these assets will more-likely-than-not be realized.  In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.  In the event the Company was to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

 

Net Loss per Common Share

 

The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

The table below reflects the potentially dilutive securities at the end of each reporting period.

 

 

 

September 30,

2023

 

 

June 30,

2023

 

Seed Preferred stock (Convertible to Common stock 1:1)

 

 

645,000

 

 

 

2,620,000

 

Seed Preferred warrants (Convertible to Common stock 1:1)

 

 

1,560,148

 

 

 

1,560,148

 

Common stock warrants

 

 

1,650,000

 

 

 

1,650,000

 

Stock options

 

 

3,091,250

 

 

 

3,091,250

 

Total

 

 

6,946,398

 

 

 

8,921,398

 

 

Stock-based compensation

 

The Company accounts for stock option awards granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model. We recognize compensation expense for stock option awards over the requisite or implied service period of the grant. Compensation expense is recognized on a straight-line method over the requisite service period. Forfeitures are accounted for as they occur.

 

Cash and cash equivalents

 

The Company defines cash and cash equivalents as highly liquid investments with original maturities of 90 days or less at the time of purchase. The Company also considers amounts in transit from payment processors for customer credit card and debit card transactions to be cash and cash equivalents. At September 30, 2023 and June 30, 2023, the Company’s cash and cash equivalents consisted primarily of cash held in checking accounts, and payment in transit from payment processors for customer credit card and debit card transactions. As of September 30, 2023 and June 30, 2023, cash and cash equivalents was $1,420 and $1,503, respectively.

 

Concentration of Risk

 

Financial instruments that subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents.  The Company maintains substantially all of its cash and cash equivalents with three financial institutions, which, at times, may exceed federally insured limits. The Company has not incurred any losses associated with this concentration of deposits.

 

The Company currently has bank deposits with financial institutions in the U.S. which exceed FDIC insurance limits. FDIC insurance provides protection for bank deposits up to $250, so there were cumulative uninsured balances of $1,170 and $1,253 in the parent and its US based subsidiaries as of September 30, 2023 and June 30, 2023, respectively. There were no uninsured bank deposits with a financial institution outside the U.S. All uninsured bank deposits are held at high quality credit institutions.

Foreign currency translation and transactions

 

The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s Germany and Netherlands subsidiaries are the local currencies.  The assets and liabilities of the Company’s foreign subsidiaries are translated into US Dollars using exchange rates in effect at the consolidated balance sheet date. Revenues and expenses are translated using the average exchange rates prevailing during the period. Exchange-rate differences resulting from translation adjustments are accounted for as a component of accumulated other comprehensive loss. Borrowings in foreign currencies are recorded at the rate of exchange at the time of the transaction and are adjusted for any exchange rate gains or losses as of the balance sheet date.

 

Translation of amounts from Euro into US$ have been made at the following exchange rates for the periods ended September 30, 2023 and June 30, 2023: 

 

 

 

September 30, 2023

 

 

June 30, 2023

 

Period-end Euro: US$ exchange rate

 

$1.0573

 

 

$1.0915

 

Period-average Euro: US$ exchange rate

 

$1.0880

 

 

$1.0459

 

 

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, at the rate on the date of the transaction and included in the results of operations as incurred.

 

ASC Topic 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are stated net of an allowance for doubtful accounts. When management becomes aware of circumstances that may decrease the likelihood of collection to a point where a receivable is no longer probable of being collected, it records an allowance against amounts due, which reduces the receivable to the amount that management reasonably believes will be collected. For all other customers, management determines the adequacy of the allowance based on historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts. The Company does not have any off-balance-sheet credit exposure related to its customers. As of September 30, 2023 and June 30, 2023, the allowance for doubtful accounts amounted to $104 and $110, respectively. 

 

Inventories

 

Inventories consist primarily of raw materials, work-in-process (blended superfood powder) and finished goods. Finished goods and work-in-process include direct materials, finished product kits, finished products, third-party blender and other overhead costs involved in manufacturing for e-commerce sales. The Company values inventory using the standard costing method whereunder product costs are allocated based on standard rates for materials, labor, and overhead. The Company analyses actual costs at regular intervals and accounts for any variance in costs of goods sold. Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in first-out method. Inventories have been reduced by an allowance for excess, obsolete and unsaleable inventories. The allowance is an estimate based on our management’s review of inventories on hand compared to estimated future usage and sales. The Company performs cycle counts of inventories at its warehouse and distribution center throughout the year. An allowance for inventory shrinkage is established for estimated inventory shrinkage since the last physical inventory date through the reporting date.

 

Property and Equipment

 

Property and equipment are stated at cost, net of accumulated depreciation and amortization, and depreciated over their estimated lives using the straight-line method. The useful lives of leasehold improvements are determined by the economic useful lives of the assets or the term of the leases, whichever is shorter.

Depreciation and amortization is provided for by the straight-line method over the estimated useful lives as follows:

 

Property and Equipment

 

Estimated Useful Life

Computer and other equipment

 

 3-7 years

Office furniture and fixtures

 

5-7 years

Leasehold improvements

 

Shorter of lease or useful life

 

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

 

Goodwill

 

Goodwill represents the excess of the purchase price over the fair market value of the net assets acquired on October 13, 2022 and March 3, 2023, respectively. The Company has implemented the Business Combinations Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350, Intangibles Goodwill and Other. Goodwill is deemed to have an indefinite life, and is not amortized but is subject to, at a minimum, an annual impairment test.

 

The Company tests goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. For the fiscal year ended June 30, 2023, the Company recorded impairment of goodwill of $3,869.  There was no impairment during the three months ended September 30, 2023.

 

Business Combinations

 

The Company accounts for business combinations using the purchase method of accounting. The purchase method requires the Company to determine the fair value of all acquired assets, including identifiable intangible assets and all assumed liabilities. The total cost of acquisitions is allocated to the underlying identifiable net assets, based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and the utilization of independent valuation experts, and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates and asset lives, among other items.

 

Long-Lived Assets

 

The Company evaluates the recoverability of its long-lived assets for impairment, other than goodwill, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows. The Company had no long-lived asset impairments as of September 30, 2023 and June 30, 2023, respectively.

 

Contract Assets

 

In accordance with ASC 606-10-45-3, a contract asset is the Company’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. The Company will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment.

 

There were no contract assets at September 30, 2023 and June 30, 2023.

 

Contract Liabilities

 

Deferred revenue, a contract liability, primarily consists of arrangement consideration collected in advance of order fulfillment and unsatisfied obligations related to outstanding loyalty points. The Company expects that the majority of the revenue deferrals recorded at the balance sheet date will be recognized as revenue in the next 12 months as performance obligations are satisfied, in accordance with ASC 606, Revenue from Contracts with Customers. Sales taxes collected from customers and remitted to government authorities are excluded from revenue and deferred revenue. Ownership passes to customers upon shipment. Deferred revenue represents amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing of annual subscription agreements. Also included in contract liabilities is the value of loyalty points with respect to the Company’s loyalty program described below. The value of these contract liabilities will increase or decrease based on the timing of invoices and recognition of revenue as customers use their rewards points.

The Company offers a loyalty program to its customers which incorporates a points system for activities on the Company’s website, such as reviews, referrals, and purchases. Customers accumulate points based on their level of spending and type of participation. The points can be redeemed for purchases of goods offered at the Company’s websites. The Company defers the stand-alone selling price of earned reward points, net of rewards not expected to be redeemed (known as “breakage”), as liability for outstanding loyalty points. To estimate the stand-alone selling price for the points, the Company considers the stated redemption value per point dictated by the terms of the loyalty programs and then estimates the future breakage of reward points based on historical member activity. Upon redemption of points by customer, the Company recognizes revenue and reduces corresponding deferred revenue. The Company records breakage revenue of unredeemed points based on expected customer redemptions.

 

The Company’s total contract liability balance was $2,088 at September 30, 2023, of which $318 relates to the liability for outstanding loyalty points for Your Super and $1,770 relates to customer subscription deposits with respect to membership fees from the Chopra Meditation & Wellbeing app (“Chopra App”) which are collected in advance and amortized over the one (1) year term of the membership, advances on retreat packages and prepaid licensing fees.

 

The Company’s total contract liability balance was $2,343 at June 30, 2023, of which $212 related to the liability for outstanding loyalty points for Your Super and $1,345 related to customer subscription deposits with respect to membership fees from the Chopra App.

 

Fair Value Measurements

 

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, contracts receivable, accounts payable and accrued liabilities, contracts receivable recourse, deferred revenue, debt and a capital lease obligation. The carrying value of the Company’s financial instruments approximate fair value.

 

FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:

 

Level 1 - Quoted market prices for identical assets or liabilities in active markets or observable inputs;

Level 2 - Significant other observable inputs that can be corroborated by observable market data; and

Level 3 - Significant unobservable inputs that cannot be corroborated by observable market data.

 

The Company believes that the carrying amounts of cash and cash equivalents, accounts payable, and short-term borrowings approximate fair value based on either their short-term nature or on terms currently available to the Company in financial markets.

 

Revenue Recognition

 

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Company accounts for revenue contracts with customers by applying the requirements of ASC 606, Revenue from Contracts with Customers, which includes the following five steps:

 

 

i.

Identification of the contract with a customer.

 

ii.

Identification of the performance obligations in the contract.

 

iii.

Determination of the transaction price.

 

iv.

Allocation of the transaction price to the performance obligations in the contract.

 

v.

Recognition of revenue as the entity satisfies a performance obligation.

 

When a customer purchases a product from the Company, ownership of the product transfers to them at the point of shipment and the Company has an enforceable right to payment for the product sold at that time. Accordingly, the customer has control of the product purchased from the Company starting at the point of shipment. The risk of loss or damage during shipment resides exclusively with the shipping carrier and the Company assumes no obligation for loss or damage of product while in transit to the customer. As a result of this change in terms of sale, the Company recognizes revenue, including shipping revenue, when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers, which is at the point of shipment.  Sales are recorded net of returns, discounts, and any taxes collected from customers and remitted to government authorities.

The Company generates revenues from a diversified mix of e-commerce activities with the majority of revenue earned through e-commerce direct sales to consumer.  The Company’s e-commerce activities include the sale of organic nutritional superfood powder mixes online, through the Company’s website YourSuper.com, and sales of the Chopra wellbeing line available at Chopra.com. During the three months ended September 30, 2023, the Company’s direct to consumer sales of products accounted for 60% of total revenue. 

 

In addition, the Company records revenue from the sale of memberships to the Chopra App.  Revenues from the membership are collected in advance and recognized over the term of the membership.  Finally, the Company records net revenue in the form of commissions with respect to sales of attendance at its wellness retreats at various US based locations.  Revenue for wellness retreats is deferred upon purchase and recognized at the time of the event with the transfer of services to the customer. 

 

The Company records revenues from the sales on a “gross” basis pursuant to ASC 606-10 Revenue Recognition – Revenue from Contracts with Customers, when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC 606-10 are present in the arrangement, revenue is recognized net of related direct costs.

 

Cost of Revenue

 

Cost of revenue primarily consists of costs associated with the purchase of superfood products and materials and packaging for its Chopra wellness kits from third-party manufacturers. These costs include ingredients, packaging, third party manufacturing costs and freight-in shipping.

 

Product Warranties

 

The Company’s provision for estimated future warranty costs is based upon the historical relationship of warranty claims to sales. Based upon historical sales trends and warranties, it has been concluded that no warranty liability is required as of September 30, 2023 and June 30, 2023. To date, product allowance and returns have been minimal and, based on experience, the Company believes that product returns will continue to be minimal.

 

Shipping and Logistics Expenses

 

Shipping and logistics expenses consist primarily of costs incurred to ship products to the customer.  If shipping and handling activities are performed after the customer obtains control of the good, then an entity may elect to account for shipping and handling as fulfillment activities and not promised services that require further evaluation under ASC 606.  If the entity elects this accounting policy, the costs related to the shipping and handling activities should be accrued when the entity recognizes revenue for the related promised goods. In addition, if this accounting policy is elected, the entity must apply it consistently to similar transactions and provide the accounting policy disclosures required by ASC 235.

 

The Company has elected to record shipping and handling activities performed after the customer obtains control of the product as fulfillment costs.  These expenses are presented as operating expenses in the accompanying consolidated statements of operations and comprehensive loss. 

 

Business Segments

 

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has three operating segments: Ecommerce sales of wellness products, sales of memberships to the Chopra App and operation of its wellness focused retreats. 

 

Commitments and Contingencies

 

The Company accounts for contingencies in accordance with ASC 450-20, Contingencies.  Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

v3.23.3
ACQUISITIONS
3 Months Ended
Sep. 30, 2023
ACQUISITIONS  
ACQUISITIONS

NOTE 3. ACQUISITIONS

 

Acquisition – Assets of Chopra Global, LLC

 

On March 3, 2023, the Company and Chopra HLCO LLC, entered into and consummated the Purchase Agreement with the Seller, and solely with respect to certain specified indemnification provisions of the Purchase Agreement, Deepak Chopra, to acquire the Purchased Assets and certain liabilities related to the Seller’s business activities involving the Chopra Business. Following the closing of the Acquisition, the Purchased Assets are held by, and the Chopra Business is operated through, Chopra HLCO. 

 

The aggregate consideration paid and payable by the Buyer for the Purchased Assets is the Purchase Price of up to $5,000 in cash plus newly issued shares of the Company’s Common Stock. In total, the initial cash purchase amount consists of $3,500 in cash, of which the Company has $2,500 as of March 31, 2023 and $1,000 in April 2023, and issued 1,400,000 shares of the Company’s unregistered, restricted common stock issued. Additionally, up to three earnout payments of $1,000 in value each (the “Earnout Payments”) may be paid to the Seller, subject to and payable in accordance with earnout thresholds specified in the Purchase Agreement. Each of these Earnout Payments will be comprised of fifty percent (50%) in cash and fifty percent (50%) in shares of the Common Stock (the “Earnout Shares”). The Earnout Payments will be earned (i) for the period starting March 1, 2023 and ending December 31, 2023 if net revenue of the Chopra Business (then operated by the Buyer) exceeds $5,900; (ii) for the calendar year ending December 31, 2024 if such net revenue exceeds $11,000; and (iii) for the calendar year ending December 31, 2025 if such net revenue exceeds $15,000. The Earnout Shares will be valued at the market price at the time of issuance based on the five-day volume weighted average price of the Common Stock prior to the last day of the applicable measurement year. If the Company is taken private or undergoes a Change of Control (as defined in the Purchase Agreement), any subsequent Earnout Payment will be paid 100% in cash. The Closing Shares are restricted securities and do not carry any registration rights that require the filing of any registration statement in connection with their issuance. In accordance with the terms of a lock up/leak out agreement between the Company and Chopra Global effective as of the closing of the Acquisition (the “Lock Up/Leak Out Agreement”), the Closing Shares are subject to a three-year lock-up (unless released earlier as described below) from the date of the closing (the “Lock Up”) and thereafter may be released in four equal quarterly installments beginning on the first day of the fiscal quarter beginning after the third anniversary of the Closing and on the first day of each of the next three fiscal quarters (the “Leak Out”) subject to a restricted volume of no more than three percent (3%) of the volume-weighted average trading of the Common Stock over the previous five trading days.  The Closing Shares will be released from the Lock Up, but not from the Leak Out, upon (a) the closing of an underwritten, firm commitment public offering of at least $30,000 of the Common Stock, (b) a Change of Control or (c) the Company’s termination of reporting under the Securities Exchange Act of 1934, as amended.

The Company’s acquisition of the operating assets of the Chopra Business is being accounted for as a business combination.  To perform the purchase price allocation, the tangible and intangible assets were valued as of March 1, 2023. The following is a summary of the estimated fair values of acquisition costs at the date of March 1, 2023:

 

(Dollars in thousands)

 

Consideration Paid – Fair Value

 

 

 

 

 

 

Acquisition costs – Cash

 

 

 

 

$3,500

 

Stock issued:

 

 

 

 

 

 

 

Number of Shares issued:

 

 

1,400,000

 

 

 

 

 

Value per share

 

$0.15

 

 

 

 

 

Total stock fair value

 

 

 

 

 

 

210

 

Total consideration

 

 

 

 

 

$3,710

 

 

As of September 30, 2023, a total of $3,500 in cash consideration was paid.  The following is a summary of the estimated fair values of the assets acquired and liabilities assumed and additional information regarding the intangible assets acquired:

 

(Dollars in thousands)

 

Tangible assets acquired:

 

 

 

Cash

 

$289

 

Inventory

 

 

216

 

Prepaid expenses and other assets

 

 

345

 

Total assets acquired

 

 

850

 

 

 

 

 

 

Assumed liabilities

 

 

 

 

Contract liabilities

 

 

(2,195 )

Total liabilities assumed

 

 

(2,195 )

Net tangible assets/(liabilities)

 

 

(1,345 )

 

Total liabilities acquired

 

 

(1,345

)

Goodwill

 

 

5,055

 

 

 

 

 

 

Total Net asset acquired

 

$

3,710

 

 

As of September 30, 2023, no impairment of the Company’s goodwill was required. The purchase accounting for the acquisition remains incomplete as management continues to gather and evaluate information about circumstances that existed as of the acquisition date. Under the purchase method of accounting, the total estimated purchase price as shown in the table above is net tangible and intangible assets and liabilities based on their estimated fair values as of the date of the acquisition. The pro forma adjustments included herein have been derived from the preliminary allocation of the total estimated purchase price and may be revised as additional information becomes available and as additional analyses are performed. The final allocation of the purchase price will be determined after completion of a final analysis to determine the fair values of the tangible assets, identifiable intangible assets, and liabilities as of the acquisition. Accordingly, the final purchase accounting adjustments may be materially different from the pro forma adjustments presented in this document. Increases or decreases in the fair value of the net assets may change the amount of the purchase price allocated to goodwill and other assets and liabilities. Measurement period adjustments will be recognized prospectively. The measurement period is not to exceed 12 months from the respective dates of acquisition. 

 

Acquisition - Assets of Your Super, Inc.

 

On September 9, 2022, the Company acquired from CircleUp, for cash consideration of $2,000 and 1,500,000 common stock purchase warrants with an exercise price of $2.00 per share and a term of seven years, all of CircleUp’s rights and interests of all loans and loan accommodations made to Your Super Company.

 

On September 30, 2022, the Company entered into an asset purchase agreement (the “YS Asset Purchase Agreement”) with Your Super, Inc. (“YS”), to acquire all of the rights, title and interests in and to substantially all of the assets owned by YS used in connection with the business of YS. The Closing took place on October 13, 2022.

 

Consideration for the assets of YS was comprised of forgiveness of the Loan Obligation and $8,000 paid in 3,200,000 shares of Company Common Stock valued at $2.50 per share, subject to lockup provisions.

The Company’s acquisition of the operating assets of YS is being accounted for as a business combination and the Company treated as one acquisition transaction.

 

To perform the purchase price allocation, the tangible and intangible assets were valued as of September 30, 2022.  The following is a summary of the estimated fair values of acquisition costs at the date of September 30, 2022:

 

(Dollars in thousands)

 

Consideration Paid – Fair Value

 

 

 

 

 

 

Debt acquisition costs – Cash

 

 

 

 

$2,000

 

Debt acquisition cost -1,500,000 common stock purchase warrants

 

 

 

 

 

34

 

Stock issued:

 

 

 

 

 

 

 

Number of Shares:

 

 

3,200,000

 

 

 

 

 

Value per share

 

$0.15

 

 

 

 

 

Total stock fair value

 

 

 

 

 

 

480

 

Total consideration

 

 

 

 

 

$2,514

 

 

The following is a summary of the estimated fair values of the assets acquired and liabilities assumed and additional information regarding the intangible assets acquired at the date of September 30, 2022:

 

(Dollars in thousands)

 

Tangible assets acquired:

 

 

 

Cash

 

$363

 

Inventory

 

 

4,953

 

Accounts receivable

 

 

422

 

Prepaid expenses and other assets

 

 

836

 

Property and equipment

 

 

78

 

Security deposits

 

 

63

 

Deferred income taxes

 

 

45

 

Total assets acquired

 

 

6,760

 

 

 

 

 

 

Assumed liabilities

 

 

 

 

Accounts payable and accrued liabilities

 

 

(7,814 )

Contract liabilities

 

 

(259 )

Income tax payable

 

 

(41 )

Total liabilities assumed

 

 

(8,114 )

Net tangible assets/liabilities

 

 

(1,354 )

Goodwill

 

3,868

 

 

 

 

 

 

Total Net asset acquired

 

$2,514

 

 

The purchase accounting for the acquisition of Your Super was concluded as of June 30, 2023.  As of June 30, 2023, the Company determined that goodwill was fully impaired and recorded impairment charges $3,868. 

 

Following are the supplemental consolidated financial results of the Company, Your Superfoods, Inc., Your Superfoods BV and Your Superfoods GmbH and the assets of Chopra Global on an unaudited pro forma basis, as if the acquisitions had been consummated as of the beginning of the fiscal year 2022 (i.e., July 1, 2021):

 

 

 

Three Months Ended September 30,

 

 

 

2023

 

 

2022

 

Revenue

 

$2,614

 

 

2,635

 

Net income (loss)

 

$(803 )

 

(467 )

 

 

 

 

 

 

 

 

 

Weighted average number of common shares used in per share calculations

 

 

57,387,420

 

 

 

44,125,572

 

Basic and Diluted Loss Per Common Share

 

$(0.01 )

 

(0.01 )
v3.23.3
PROPERTY AND EQUIPMENT
3 Months Ended
Sep. 30, 2023
PROPERTY AND EQUIPMENT  
PROPERTY AND EQUIPMENT

NOTE 4. PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following:

 

(Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Computer equipment

 

$299

 

 

$232

 

Furniture and fixtures

 

 

25

 

 

 

25

 

 

 

 

324

 

 

 

257

 

Less: accumulated depreciation

 

 

(231 )

 

 

(220 )

Property and equipment, net

 

$93

 

 

$37

 

 

Depreciation expense for the three months ended September 30, 2023 and 2022 was $11 and $0, respectively, and is included within general and administrative expense on the consolidated statements of operations and comprehensive loss. There are no assets held under capital leases.

v3.23.3
REVENUE
3 Months Ended
Sep. 30, 2023
REVENUE  
REVENUE

NOTE 5. REVENUE

 

Disaggregation of Revenue

 

The following table presents the Company’s revenue for the three months ended September 30, 2023 from contracts with customers, disaggregated by Company location and sales channel:

 

Revenue by Geographical location:

 

(Dollars in thousands)

 

September 30,

2023

 

 

 

 

 

US

 

$2,431

 

Europe

 

 

660

 

Total

 

$3,091

 

 

Revenue by product sales channel:

 

(Dollars in thousands)

 

September 30,

2023

 

Direct to Consumer

 

$1,841

 

Amazon

 

 

262

 

Wholesale

 

 

122

 

Retreat/licensing

 

 

152

 

Digital

 

 

714

 

Total

 

$3,091

 

 

For the three months ended September 30, 2023, the Company had no customers who accounted for greater than 10% of total revenue. The Company primarily views its disaggregated revenue on a geographic basis.  There was no revenue for the three months ended September 30, 2022.

Contract Liabilities

 

The deferred revenue balances were as follows:

 

(Dollars in thousands)

 

 Three Months Ended

September 30,

2023

 

Deferred revenue, June 30, 2023 

 

$2,343

 

Decrease in reward liabilities over the period, net (a)

 

 

(12 )

Decrease in deferred revenue over the period, net (b)(c)

 

 

(242 )

Deferred revenue, September 30, 2023

 

$

2,088

 

 

 

(a)

The Company records a liability for outstanding loyalty points earned by customers. As of September 30, 2023 and June 30, 2023, the liability for outstanding loyalty was approximately $259 and $271, respectively, and is included in contract liabilities in the accompanying consolidated balance sheets.

 

 

 

 

(b)

The Company records a liability for fees collected from customers with respect to its subscription-based wellness app, retreat package sales and licensing fees which amounts are recognized when earned. As of September 30, 2023 and June 30, 2023, the liabilities for unearned revenue totaled $1,792 and $2,065, respectively, and is included in contract liabilities in the accompanying consolidated balance sheets.

 

 

 

 

(c)

As of September 30, 2023 and June 30, 2023, liabilities for unearned product sales totaled $37 and $7, respectively.

 

Sales Returns Reserve

 

The Company offers a 30-day satisfaction guarantee and sales return refunds to its customers on their first order or first subscription order. The Company records a liability for estimated sales return refunds, which is based on historical returns and is included within accrued expenses on the consolidated balance sheet.

 

The reserve was approximately $14 and $28 as of September 30, 2023 and June 30, 2023, respectively, and is included in other current liabilities in the accompanying consolidated balance sheets.  The Company’s sales returns reserve was comprised of the following:

 

(Dollars in thousands)

 

Three Months Ended

September 30,

2023

 

Balance as of June 30, 2023

 

$28

 

Charges to Costs and Expenses

 

 

15

 

Deductions

 

 

(29 )

Balance as of September 30, 2023

 

14

 

v3.23.3
ACCOUNTS RECEIVABLE NET
3 Months Ended
Sep. 30, 2023
ACCOUNTS RECEIVABLE NET  
ACCOUNTS RECEIVABLE, NET

NOTE 6. ACCOUNTS RECEIVABLE, NET

 

Account receivable consisted of the following:

 

Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Accounts receivable

 

$326

 

 

$270

 

Less: allowance for doubtful accounts

 

 

(104 )

 

 

(109 )

Total

 

$222

 

 

$161

 

Allowance for Doubtful Accounts

 

The Company’s allowance for doubtful accounts, based on historical bad debts, was approximately $104 and $110 as of September 30, 2023 and June 30, 2023, respectively.

 

The Company’s allowance for doubtful accounts was comprised of the following:

 

(Dollars in thousands)

 

 Three Months Ended

September 30,

2023

 

Balance, June 30, 2023

 

$109

 

Charges to Costs and Expenses

 

 

 -

 

Deductions

 

 

(5 )

Balance as of September 30, 2023

 

$104

 

v3.23.3
INVENTORY
3 Months Ended
Sep. 30, 2023
INVENTORY  
INVENTORY

NOTE 7. INVENTORY

 

The following table presents the detail of inventory:

 

(Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Raw material

 

$2,535

 

 

$3,043

 

Work-in-process

 

 

208

 

 

 

201

 

Finished goods

 

 

694

 

 

 

745

 

Inventory reserve

 

 

(1,428 )

 

 

(1,308 )

Total

 

$2,009

 

 

$2,681

 

v3.23.3
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
3 Months Ended
Sep. 30, 2023
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES  
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

NOTE 8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accounts payable and accrued liabilities consist of the following:

 

(Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Accounts payable

 

$4,052

 

 

$4,387

 

Accrued payroll and related liabilities

 

 

9

 

 

 

97

 

Accrual of estimated tax related expense

 

 

-

 

 

 

437

 

Accrued expenses including accruals for professional fees, marketing costs, advertising, shipping and logistics

 

 

1,225

 

 

 

814

 

Accrued interest expenses

 

 

90

 

 

 

100

 

Other accrued liabilities including sales tax and returns

 

 

41

 

 

 

10

 

Total accounts payable and accrued liabilities

 

$5,417

 

 

$5,845

 

v3.23.3
LOAN PAYABLE
3 Months Ended
Sep. 30, 2023
LOAN PAYABLE  
LOAN PAYABLE

NOTE 9. LOAN PAYABLE

 

On August 4, 2022, the Company and its controlled subsidiary HLCO Borrower LLC entered into a credit facility agreement (the “Credit Agreement”) with the Lenders who agreed to extend a credit facility to the Company consisting of up to $150,000 in accordance with the terms of the Credit Agreement in aggregate principal amount of Term Loans, the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria established by an administrative agent (the “Administrative Agent”) under the Credit Agreement.

 

Term Loans anticipated to be funded under the Credit Agreement will be in a minimum principal amount of at least $400, bear an annual interest rate of 12% and will mature the earlier of 12 months following the final draw down under a Term Loan and a date on which an event of default, as defined in the Credit Agreement, occurs. Term Loans will be repayable in full on their maturity dates and may be voluntarily prepaid in full (but not in part) at the option of the Company and prepaid on a mandatory basis on the sale of the assets underlying a particular Term Loan. Interest on any outstanding Term Loans will be paid monthly. The Company paid an upfront fee of $563 recorded as finance costs to the Administrative Agent for the benefit of the Lenders and will pay the Administrative Agent, for its own account, a quarterly fee of $13. Further, the Company is paying a daily rate to the Lenders in respect of undrawn funds to meet a minimum funding threshold until such time as funds drawn total $50,000.

The Company and each of the subsidiaries of HLCO Borrower LLC have agreed to secure all of their future anticipated obligations under the Credit Agreement by granting the Lenders a first priority lien on substantially all of their assets and the Company has agreed to secure all future obligations to be incurred under the Credit Agreement by granting to a collateral agent, for the benefit of the lenders, a first priority lien on all of the capital stock of the subsidiaries held by the Company.

 

In connection with the transactions contemplated by the Credit Agreement, the Company issued to the Administrative Agent a seven-year warrant to purchase, for its own account, up to 1,560,148 shares of the Company’s Seed Preferred Stock at an exercise price of $2.00 per share. The warrant was fully vested on issue date and was immediately expensed as financing costs (See Note 13 - Warrants).

 

On October 27, 2022, the Company was funded $3,000 under the Term Loan. As of September 30, 2023, the Company drew down an additional $1,873 under the Term Loan facility. During the three months ended September 30, 2023, the Company paid $12,500 in administrative fees and $260 as interest in respect to the outstanding loan balance and daily interest on undrawn funds.

 

As of September 20, 2023, we were out of compliance for the month ended August 31, 2023 with a financial covenant in our credit agreement requiring us to maintain at least $2,000 in unrestricted and unencumbered cash.  Additionally, as of September 30, 2023, our monthly EBITDA for Your Super was less than $75 which, under our credit agreement, resulted in a borrowing base deficiency with respect to the Your Super acquisition.  These two defaults entitled our lenders, upon notice to us, to take action to enforce their rights against us including, but not limited to, demanding immediate payment of their outstanding loans to us in the principal amount of $4,873, as of September 30, 2023, and enforcing their liens on our Your Super and Chopra operating assets. 

 

On October 12, 2023, we entered into a limited waiver to the credit agreement with our lenders, waiving  the two breaches referenced above provided that (i) we regain compliance with our cash covenant referenced above no later than, and remain compliant after, November 30, 2023, and (ii) we deposit $150 into a special reserve collection account on behalf of the secured lenders prior to the earlier to occur of (x) November 30, 2023 and (y) the closing of a sale of our equity in an amount of not less than $2,000. Our failure to comply with either of these two new covenants will constitute an event of default under the credit agreement entitling our secured lenders to pursue all rights and remedies against us under the credit agreement, including acceleration of our loans, foreclosure and collection actions.  

v3.23.3
RELATED PARTY TRANSACTIONS
3 Months Ended
Sep. 30, 2023
RELATED PARTY TRANSACTIONS  
RELATED PARTY TRANSACTIONS

NOTE 10. RELATED PARTY TRANSACTIONS

 

WAOW Group of Companies

 

In November 2021, as amended May 22, 2022 WAOW Entrepreneurship GmbH (“WAOW”) entered into a subscription agreement with the Company whereunder they agreed to purchase 2,140,000 unregistered shares of Seed Preferred stock at $2.00 per share for total proceeds of $4,280. During the year ended June 30, 2022 and through June 30, 2023, the Company received cumulative cash proceeds of $3,950 in respect to the aforementioned subscription and issued 1,975,000 shares of seed preferred stock. A total of $330 remains receivable with respect to the remaining 165,000 shares subscribed as of September 30, 2023.

 

On March 10, 2022, the Company acquired NOEO (See Note 3). At the date of the acquisition, WAOW had outstanding loans with NOEO with a remaining principal balance of EUR140. During the year ended June 30, 2022, WAOW advanced an additional EUR18,000 to NOEO. At September 30, 2023, the loan had a balance outstanding of $167 (EUR158) which is unsecured and accrues interest at 5% per annum, and matured on December 31, 2022. As of September 30, 2023, the loan remained in default and the Company and WAOW are currently negotiating terms of settlement.

 

Accrued and unpaid interest at September 30, 2023 totaled $16 (EUR15), which is reflected in accounts payable – related party on the balance sheet.

 

Steven Bartlett, Former Director (Flight Story Limited)

 

On January 10, 2022, as amended September 1, 2022, the Company entered into a services agreement with Flight Story Limited (“FSL”), a company controlled by Mr. Bartlett, a former Director of the Company, whereby FSL is providing various services to the Company.  Under the terms of the agreement, as amended, FSL is paid $30 per month. Further, FSL has been granted non-statutory stock options to purchase a total of 1,000,000 shares of the Company’s Common Stock of which options to purchase 300,000 shares vested on January 10, 2023, and options to purchase an additional 700,000 shares vest in accordance with certain performance-based terms.  During the year ended June 30, 2023, FSL exercised fully vested stock options for the acquisition of a total of 300,000 shares of the Company’s Common Stock for cash consideration of $3, or $0.001 per share. 

During the three months ended September 30, 2023, under the terms of the amended contract, FSL was paid $57, with an additional $44 accrued and unpaid at September 30, 2023 for services rendered.  In addition, R Agency, a marketing company also controlled by Mr. Bartlett, was paid $15,750 during the three months ended September 30, 2023, with a total of $120 accrued and unpaid as of September 30, 2023 for services rendered.  Director fees of $9 due to Mr. Bartlett as of September 30, 2023 are included in accounts payable – related party on the balance sheet.  Mr. Barlett resigned from the Board effective October 2, 2023.

 

Anabel Oelmann, Director (Trinity Holdings GmbH)

 

On March 10, 2022, the Company entered into and closed a share purchase agreement with Anabel Oelmann pursuant to which the Company acquired 100% of the issued and outstanding capital stock of NOEO GmbH, a German company (“NOEO”), involved in direct-to-consumer brand focusing on adaptogenic herbs and currently focused on three key products which include joint, memory and digestive complexes derived from mushrooms, in exchange for cash consideration of EUR25 ($30). Ms. Oelmann is a director of the Company and was the sole shareholder of NOEO. See Note 4.

 

At September 30, 2023, Ms. Oelmann, through her controlled corporate entity, Trinity Holdings GmbH, was owed advances totaling $3 (EUR3) by the Company’s wholly owned subsidiary, NOEO. In addition, at September 30, 2023, a total of $1 (EUR980) is included in accounts payable - related party, in respect to expense reimbursements owing to Ms. Oelmann.

 

Ms. Oelmann’s spouse, Wanja Oberhof, is serving as the Company’s Interim Chief Executive Officer, and is a greater than 10% shareholder of the Company as the control person of Ingenious Investments AG and WAOW Entrepreneurship GmbH.  During the three months ended September 30, 2023, WAOW Entrepreneurship GmbH converted 1,975,000 Seed Preferred shares into 1,975,000 shares of Common Stock.  See Note 11.

  

Other amounts included in Accounts Payable – related party

 

In addition to the amounts disclosed above, director fees payable to Kay Koplovitz and Ameeth Sankaran of $13 and $9, respectively, and consulting fees of $25 due to Justin Figgins, CFO, are included in accounts payable – related party on the Condensed Consolidated Balance Sheet.

v3.23.3
STOCKHOLDERS EQUITY (DEFICIT)
3 Months Ended
Sep. 30, 2023
STOCKHOLDERS EQUITY (DEFICIT)  
STOCKHOLDERS' EQUITY (DEFICIT)

NOTE 11. STOCKHOLDERS’ DEFICIT

 

One April 29, 2021, the Company’s board of directors approved a forward stock split of authorized and issued and, outstanding shares of Common Stock on a four (4) new shares for one (1) share held basis. Upon effectiveness of the forward split, the authorized shares increased to 300,000,000 shares of Company Common Stock and the issued and outstanding shares of Common Stock increased to 44,000,000 shares of Common Stock, all with a par value of $0.001.

 

On October 7, 2021, the Company amended its authorized capital to 290,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, $0.001 par value per share, of which 5,000,000 are designated as Seed Preferred Shares, each with a par value of $0.001 per share. On July 8, 2022, the Company’s board of directors and shareholders holding a majority of the Company’s Common Stock approved an amendment to the Company’s Amended and Restated Articles of Incorporation to increase the Seed Preferred Shares from 5,000,000 authorized shares to 7,800,000 shares.

 

In case of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of Seed Preferred Shares then outstanding will be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment will be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to 1.5 times the Seed Preferred Shares original issue price, plus any dividends declared but unpaid thereon (collectively, the “Seed Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Company the assets of the Company available for distribution to its stockholders is insufficient to pay the holders of Seed Preferred Shares the full amount to which they shall are entitled, the holders of shares of Seed Preferred Shares will share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after the payment in full of all Seed Liquidation Amount required to be paid to the holders of Seed Preferred Shares, the remaining assets of the Company available for distribution to its stockholders will be distributed among the holders of Seed Preferred Shares and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to Common Stock pursuant to the terms of the Amended and Restated Articles of Incorporation immediately prior to such liquidation, dissolution or winding up of the Company.

 

At such date and time as is specified by our board of directors in connection with, but prior to, the closing of the sale of shares of our Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended,, and in connection with such offering the Common Stock is listed for trading on the Nasdaq Stock Market’s National Market, (i) all outstanding Seed Preferred Shares will automatically be converted into shares of Common Stock on a 1:1 (i.e., one share of Seed Preferred Shares for one share of common stock) basis, and (ii) such shares may not be reissued by the Company. The holders of the Seed Preferred Stock also have the right to convert shares of Seed Preferred Stock to Common Stock on a 1:1 basis at any time, upon written notice of conversion to the Company.

 

To the fullest extent permitted under the Nevada Revised Statutes and other applicable law, the holders of Seed Preferred Shares will not be entitled to vote on any matter submitted to the stockholders of the Company for a vote.

 

Any of the rights, powers, preferences and other terms of our Seed Preferred Shares may be waived on behalf of all holders of Seed Preferred Shares by the affirmative written consent or vote of the holders of at least 51% of the Seed Preferred Shares then outstanding.

 

Common Stock

 

During the three months ended September 30, 2023, the Company received $350 in cash proceeds from the purchase of 175,000 shares of Common Stock at $2.00 per share.

 

During the three months ended September 30, 2023, the Company issued 1,975,000 shares of Common Stock upon conversion of 1,975,000 shares of Seed Preferred Stock.

 

During the three months ended September 30, 2023, the Company issued 125,000 shares of stock awards to a newly appointed member of the Board of Directors.

 

As of September 30, 2023 and June 30, 2023 the Company had a total of 57,474,920 and 55,199,920 shares of Common Stock issued and outstanding, respectively.

 

Seed Preferred Stock

 

During the fiscal year ended June 30, 2022, the Company entered into definitive agreements with non-U.S. persons to issue a total of 5,000,000 shares of Seed Preferred stock in private transactions (the “Transactions”). Under the terms of the Transactions, the Company agreed to sell an aggregate of 5,000,000 Seed Preferred Shares at $2.00 per share for proceeds of $10,000. As of September 30, 2023, the Company had received total proceeds of $9,670 and is awaiting shortfall payments from one subscriber totaling $330. 

 

During the three months ended September 30, 2023, 1,975,000 shares of Seed Preferred Stock were converted into 1,975,000 Common Shares.

 

At September 30, 2023 and June 30, 2023, the Company had a total of 645,000 and 2,620,000 shares of Seed Preferred Stock issued and outstanding, respectively.

v3.23.3
STOCK BASED COMPENSATION
3 Months Ended
Sep. 30, 2023
STOCK BASED COMPENSATION  
STOCK BASED COMPENSATION

NOTE 12. STOCK BASED COMPENSATION

 

On June 10, 2022, the Company’s board of directors approved (i) The Healing Company Inc. 2022 Omnibus Equity Incentive Plan (the “2022 Plan”) and (ii) the granting, in general terms, of awards and options which were previously contractually agreed to be granted upon formal approval of the 2022 Plan (the “Awards”).

 

Stock Options and Stock Awards: 

During the three months ended September 30, 2023, the Company granted 125,000 shares of Restricted Stock Awards under its 2022 Plan. The Restricted Stock Awards shall vest over a two (2) year period following the Vesting Start Date of July 25, 2023 with 12.5% of the Restricted Stock vesting on each three (3) month anniversary of the Vesting Start Date.

The following table summarizes the Company’s stock award activities:

 

 

 

Number of shares

 

 

Weighted Average

Grant Date Fair

Value Per Share

 

 

Weighted Average

Remaining

Recognition

Period (Years)

 

Nonvested at June 30, 2022

 

 

2,881,250

 

 

$3.75

 

 

 

1.66

 

Granted**

 

 

1,305,000

 

 

$3.75

 

 

 

4.00

 

Vested**

 

 

(373,542 )

 

$3.75

 

 

 

-

 

Forfeited

 

 

(1,745,000 )*

 

$3.75

 

 

 

-

 

Nonvested at June 30, 2023

 

 

2,367,708

 

 

$3.75

 

 

 

1.31

 

Granted

 

 

125,000

 

 

$3.75

 

 

 

2.00

 

Vested

 

 

(131,250 )

 

$3.75

 

 

 

-

 

Forfeited

 

 

-

 

 

$-

 

 

 

-

 

Nonvested at September 30, 2023

 

 

2,061,458

 

 

$3.75

 

 

 

1.11

 

 

(*) During the year ended June 30, 2023 certain employees entered into separation agreements with the Company whereunder concurrent with the effective date of the termination of their employment with the Company a cumulative 1,745,000 restricted Common Stock awards were forfeited, returned to the Company, and canceled. As a result of the forfeiture, the Company recorded $800 against previously expensed stock-based compensation in respect to earned and forfeit stock awards and eliminated $5,700 of previously deferred compensation expense.

 

(**) Adjusted for Amended and Restated Restricted Stock Award Agreement with our interim Chief Financial Officer dated November 1, 2023, resulting in a decrease of 600,000 stock awards granted and a decrease of 300,000 stock awards vested as of June 30, 2023.

 

The Company recorded $800 and $1,030 as stock-based compensation expense related to stock awards during the three months ended September 30, 2023 and 2022, respectively. Deferred compensation expense associated with unvested stock awards is $7,030 as of September 30, 2023. The weighted average period over which these costs are expected to be recognized is approximately 1.22 years.

 

The following table summarizes the Company’s stock option activities:

 

 

 

Number

of Shares

 

 

Weighted

Average

Exercise Price

 

 

Weighted

Average

Remaining

Term

in Years

 

 

Aggregate

Intrinsic

Value

 

Outstanding at June 30, 2022

 

 

3,166,250

 

 

$0.001

 

 

 

7.60

 

 

$-

 

Granted 

 

 

225,000

 

 

0.001

 

 

 

10.00

 

 

 

-

 

Exercised 

 

 

(300,000

 

 

-

 

 

 

-

 

 

 

-

 

Cancelled 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at June 30, 2023

 

 

3,091,250

 

 

$0.001

 

 

 

8.89

 

 

$-

 

Granted 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercised 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Cancelled 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at September 30, 2023

 

 

3,091,250

 

 

$0.001

 

 

 

7.48

 

 

$-

 

Options exercisable at September 30, 2023

 

 

1,510,000

 

 

$0.001

 

 

 

8.65

 

 

$-

 

 

The stock options were valued using Black-Scholes pricing model. The Black-Scholes pricing model applied the following assumptions: risk-free interest rate of 3.26%, expected term of 5 to 10 years, expected volatility of 62.49% and dividend yield of 0%.

The Company recorded $310 and $800, respectively, as stock based compensation expense related to its stock options for the three months ended September 30, 2023 and 2022, respectively. Unamortized compensation expense associated with unvested stock options is $5,830 as of September 30, 2023. The weighted average period over which these costs are expected to be recognized is approximately 1.01 years.

v3.23.3
WARRANTS
3 Months Ended
Sep. 30, 2023
WARRANTS  
WARRANTS

NOTE 13. WARRANTS

 

Warrant to Purchase Seed Preferred Stock

 

On August 4, 2022, in accordance with a credit facility (See Note 9) the Company initially issued to the Administrative Agent a seven-year warrant to purchase up to 1,300,123 shares of the Company’s Seed Preferred Stock at an exercise price of $2.00 per share. As an inducement for the $3,000 loan and for a waiver of certain terms of the credit facility with respect to this loan, we issued to the Administrative Agent an amended and restated warrant increasing the number of warrant shares from 1,300,123 shares of our Seed Preferred Stock to 1,560,148 shares of this stock. The stock warrants vested immediately and were valued using the Black-Scholes pricing model. The Black-Scholes pricing model applied the following assumptions: risk-free interest rate of 2.73%, expected term of 7 years, expected volatility of 62.56% and dividend yield of 0%. The Company recorded $4,100 as financing costs, included in professional and consulting fees, during the year ended June 30, 2023. There were no financing costs for the three months ended September 30, 2023.

 

Warrants to purchase Seed Preferred Stock transactions are summarized as follows:

 

 

 

Number

of shares

 

 

Weighted Average

Exercise Price ($)

 

 

Weighted Average

Remaining

Recognition

Period (Years)

 

Balance, June 30, 2023

 

 

1,560,148

 

 

$2.00

 

 

 

6.10

 

Warrants issued

 

 

-

 

 

$-

 

 

 

-

 

Warrants expired

 

 

-

 

 

$-

 

 

 

-

 

Balance, September 30, 2023

 

 

1,560,148

 

 

$2.00

 

 

 

5.60

 

 

Number

of Warrants

 

 

Exercise

Price ($)

 

 

Expiry Date

 

 

1,560,148

 

 

 $

2.00

 

 

August 04, 2029

 

 

Warrant to Purchase Common Stock

 

On September 9, 2022, in conjunction with a Loan Purchase and Sale Agreement, (See Note 3) the Company issued CircleUp a warrant to purchase 1,500,000 restricted shares of the Company’s common stock at an exercise price of $2.00 per share. This Warrant will begin to vest on the one-year anniversary of the closing of the purchase of the Loan with 12.5% of the Warrant amount (187,500 shares) vesting on that date and the remaining portion of the Warrant vesting in seven quarterly installments of 187,500 shares each over the next seven quarters.  Vesting of the Warrant will be accelerated upon the occurrence of a sale or merger of the Company. The Warrant will terminate on the seventh anniversary of the closing date and will be subject to customary adjustments of the warrant price and number of shares for splits, stock dividends, recapitalizations and the like. The stock warrants were valued using Black-Scholes pricing model. The Black-Scholes pricing model applied the following assumptions: risk-free interest rate of 4.25%, expected term of 3 years, expected volatility of 60% and dividend yield of 0%. The Company has valued the warrants as of the transaction date with a total value of $34 as part of purchase consideration. The first tranche of warrants vested as of September 9, 2023.

 

On November 10, 2022, the Company issued one vendor a warrant to purchase 150,000 restricted shares of the Company’s common stock at an exercise price of $2.00 per share under certain Tri-Party Assignment and Settlement Agreement where under the outstanding balance payable of $1,078 was agreed to be settled by the issuance of common stock purchase warrants (the “Warrant”). This Warrant shall vest over a period of three years, pro rata on monthly basis, beginning on November 10, 2022. The Warrant will terminate on the seventh anniversary of the closing date and will be subject to customary adjustments of the warrant price and number of shares for splits, stock dividends, recapitalizations and the like. The stock warrants were valued using Black-Scholes pricing model. The Black-Scholes pricing model applied the following assumptions: risk-free interest rate of 3.89%, expected term of 7 years, expected volatility of 63.52% and dividend yield of 0%. The Company has valued the warrants as of the transaction date with a total value of $427 which amount was recorded as a noncash payment, and the gain on debt settlement of $650 recorded as other income. The Company recorded $36 against other current liabilities during the three months ended September 30, 2023 in respect to the amortization of the vesting period of the warrant. The unamortized amount associated with unvested warrants is $297 as of September 30, 2023. The weighted average period over which the outstanding balance is expected to be recognized is approximately 6.12 years.

Transactions involving Warrants to purchase Common Stock are summarized as follows:

 

 

 

Number of shares

 

 

Weighted Average

Exercise Price ($)

 

 

Weighted Average

Remaining

Recognition

Period (Years)

 

Nonvested at June 30, 2023

 

 

1,616,666

 

 

$2.00

 

 

 

6.37

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

Vested

 

 

(220,834 )

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

 

 

-

 

Nonvested at September 30, 2023

 

 

1,395,832

 

 

$2.00

 

 

 

5.96

 

v3.23.3
COMMITMENTS AND CONTINGENCIES
3 Months Ended
Sep. 30, 2023
COMMITMENTS AND CONTINGENCIES  
COMMITMENTS AND CONTINGENCIES

NOTE 14. COMMITMENTS AND CONTINGENCIES

 

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.

 

Commitments

 

The following is a summary of the Company’s significant commitments.

 

 

(a)

Effective December 28, 2021, the Company entered into a two-year Board Advisory Agreement with Deepak Chopra LLC for services as an advisory to the Company. As consideration, Deepak Chopra LLC will receive $13 for each fiscal quarter. Additionally, the Advisor has been granted 200,000 Non Statutory Stock options with a term of 10 years which vest as to 25% each 6 months over two years for exercise at $0.001 per share.  Further under the agreement, the Company is to make an annual donation to The Chopra Foundation for $50, with the first annual donation to be paid within thirty days of the date of execution of the agreement. The Company remitted the required donation in April 2022. During the three months ended September 30, 2023, the Company recorded $94 as stock-based compensation in respect to the granted options.

 

 

(b)

On January 1, 2022, the Company entered into an independent contractor agreement with KET Consulting LLC (“KET”) to provide various marketing services, brand and go-to-market strategy and other operational services at the direction of the Board and the CEO. The contract had an initial term of 18 months and was renewable by mutual consent for a further term until the contract was terminated on November 13, 2023. Compensation was $240 per annum commencing January 1, 2022, payable monthly in arrears. Additionally, the Advisor has been granted 1,000,000 Non-Statutory Stock options with a term of 10 years which vest as to 25% on the one-year anniversary of January 1, 2022 and 1/36 each month thereafter, at an exercise at $0.001 per share.

 

 

 

 

(c)

On August 1, 2022, the Company entered into a Consulting Agreement with RayRos Holdings LLC for an initial term of three months, which was automatically renewed through the termination date of November 13, 2023, at a rate of $5 per month for marketing strategy and assessment and partnership development services focused on the wellness and healing sector. In addition, the Company granted a non-statutory stock option to purchase 100,000 shares of common stock, exercisable at $0.001 per share to the founder, Mr. John Hoekman, which options vest quarterly as to 25% each quarter from grant date, August 1, 2022. For the three months ended September 30, 2023, the Company recorded stock-based compensation of $47.

 

 

(d)

On September 1, 2022, the Company entered into a consulting agreement with Lee Forster for an initial term of 24 months, with automatic successive renewals unless otherwise terminated 30 days prior to the end of the current term, whereunder Mr. Forster shall act as an advisor to the Company on financing and fundraising efforts, growth opportunities, endorsements and other corporate strategy at a rate of $3 per month. In addition, the Company granted a non-statutory stock option to purchase 125,000 shares of common stock, exercisable at $0.001 per share to Mr. Forster, which options vest over a two-year period following the Vesting Start Date with 12.5% of the Option Shares vesting on each three-month anniversary of the Vesting Start Date. For the three months ended September 30, 2023, the Company recorded $58 as stock based compensation in respect to the aforementioned agreement.

 

(e)

On February 14, 2023, the Company entered into a services agreement with Peter Kash.  Under the terms of the agreement, Mr. Kash will be employed as an independent contractor in order identify growth opportunities, among other services.  The agreement has a term of two (2) years, unless earlier terminated, and provides for compensation in the form of stock options, which options shall be granted upon mutual agreement of the exercise price.  Under the terms of the option agreement Mr. Kash will be granted a total of 75,000 incentive stock options, vesting as to 1/8 each quarter from grant date. In addition, Mr. Kash shall be entitled to certain additional compensation up to an additional 225,000 stock options for each qualifying entity acquired by the Company.  At September 30, 2023, the Company and Mr. Kash have not yet determined an agreeable exercise price for the aforementioned options.

 

 

(f)

On February 14, 2023, the Company entered into a services agreement with Dr. Linda Friedland.  Under the terms of the agreement, Dr. Friedland will be employed as an independent contractor in order identify growth opportunities, among other services.  The agreement has a term of two (2) years, unless earlier terminated, and provides for compensation in the form of stock options, which options shall be granted upon mutual agreement of the exercise price.  Under the terms of the option agreement Dr. Friedland will be granted a total of 75,000 incentive stock options, vesting as to 1/8 each quarter from grant date. In addition, Dr. Friedland shall be entitled to certain additional compensation up to an additional 225,000 stock options for each qualifying entity acquired by the Company.  At September 30, 2023, the Company and Dr. Friedland have not yet determined an agreeable exercise price for the aforementioned options.

 

 

(g)

On March 31, 2023, the Company entered into a consulting services agreement with Scarlett Leung.  Under the terms of the agreement, Ms. Leung will be employed as an independent contractor to support the management team with operational leadership and strategy in connection with the integration of the Chopra assets and growth of the business.  The agreement has an initial term of one month and automatically renews each month until terminated by either party in accordance with the agreement.  Ms. Leung will receive a monthly consulting fee of $10 and will be granted a restricted stock award of 120,000 shares of common stock, vesting as to 1/12 on each of the first twelve 30-day anniversaries of the grant date.

 

 

(h)

On June 1, 2023, Your Super HLCO LLC entered into a likeness rights agreement with Michael Kuech and Kristel de Groot, pursuant to which Mr. Kuech and Ms. De Groot granted the Company the non-exclusive right to utilize their likeness to advertise, market and promote the Company’s products.  Under this agreement, Mr. Kuech and Ms. De Groot will be paid a monthly consulting fee of $20,000 and 1% of the Company’s monthly net revenue for a term of six months.  The agreement may be terminated prior to the expiration date by either party with or without cause by delivering 30 days’ advance written notice. 

 

 

(i)

Effective July 10, 2023, the Company entered into a consulting services agreement with Jacalyn Y. Lee.  Under the terms of the agreement, Ms. Lee will be employed as an independent contractor to define and execute a communications strategy including strategy development and media relations.  The agreement has an initial term through October 31, 2023 and may be extended on a month-to-month basis upon written mutual consent of both parties.  Ms. Yee will receive a monthly retainer fee of $12.

 

 

(j)

Effective September 25, 2023, the Company entered into a consulting agreement with Charlotte Edelman.  Under the terms of the agreement, Ms. Edelman will provide legal advisory and related services.  The agreement may be terminated upon 30 calendar days’ written notice. Ms. Edelman will receive a monthly consulting fee of $15 and will be granted a restricted stock award of 1,000,000 shares of common stock, vesting 25% on September 25, 2024 with the balance vesting in equal monthly installments thereafter. 

v3.23.3
SUBSEQUENT EVENTS
3 Months Ended
Sep. 30, 2023
SUBSEQUENT EVENTS  
SUBSEQUENT EVENTS

NOTE 15. SUBSEQUENT EVENTS 

 

On October 2, 2023, Steven Bartlett resigned from the Company’s Board of Directors, effective as of the date of resignation.

 

On October 25, 2023, the Company issued 125,000 unregistered, restricted shares of Common Stock to an individual subscriber under the terms of a private placement at $2.00 per share for total proceeds of $250.

 

On November 1, 2023, the Company amended and restated the Restricted Stock Award Agreement with Justin Figgins and issued a restricted stock grant of 600,000 shares. 

 

On November 1, 2023, the Company amended and restated the Restricted Stock Award Agreement with Scarlett Leung and issued a restricted stock grant of 120,000 shares. 

 

On November 13, 2023, the employment of Simon Belsham, the Company’s Chief Executive Officer was terminated. Effective November 13, 2023, Mr. Wanja S. Oberhof, was appointed by the Company’s Board of Directors as the Company’s Interim Chief Executive Officer.

 

On November 14, 2023, Ameeth Sankaran notified the Company of his decision to resign from the Company’s Board effective immediately. Mr. Sankaran’s resignation did not result from any disagreement with the Company on any matter related to the Company’s operations, policies or practices.

 

Litigation

 

On or about April 12, 2023, the Company received a letter from litigation counsel to Google LLC (“Google”) that alleged that the Company’s indirectly wholly-owned subsidiary, Your Super, Inc. (“Your Super”), owed $236, plus continuing interest and fees, for advertising services rendered by Google to Your Super. After investigating Google’s allegations, Your Super negotiated and entered into a settlement agreement with Google dated July 25, 2023. Pursuant to that settlement agreement, Your Super agreed to pay Google an aggregate of $203 in monthly installments of $17 beginning July 31, 2023, and Your Super and Google mutually released claims against the other.

 

In 2019, Your Super entered into an agreement with WGST, Inc., which produces “Food Quest” with Mario and Courtney Lopez, and WGST Productions, Inc.  In or around the end of July 2023, after the original agreement had terminated, representatives of Mario Lopez contacted Your Super and alleged that Your Super was displaying the content produced for it by WGST in violation of the rights granted to Your Super under the agreement. The representatives of Mr. Lopez threatened to bring legal action against Your Super unless it made additional payment or agreed to buy new footage. A new production agreement was entered into on October 12, 2023, between the Company and WGST Productions, Inc., the successor to WGST, Inc., providing, among other things, for a full release of claims by WGST Productions, Inc., WGST, Inc., Mario and Courtney Lopez arising under the original agreement or for use of the content created under the original agreement.

 

The Company’s management has reviewed all material subsequent events through the date these financial statements were issued in accordance with ASC 855-10. 

v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Sep. 30, 2023
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Principles of Consolidation

The consolidated financial statements include the accounts of The Healing Company and its 100% controlled subsidiaries, NOEO GmbH, NOEO, Inc., HLCO Borrower LLC, Your Super HLCO, LLC, and Chopra HLCO LLC. All significant intercompany balances and transactions have been eliminated. “The Healing Company”, the “Company”, “we”, “our” or “us” is intended to mean The Healing Company, including the subsidiaries indicated above, unless otherwise indicated.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of its assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates, and the Company includes any revisions to its estimates in its results for the period in which the actual amounts become known. Significant estimates in the period include the preliminary purchase price allocation with respect to the acquisition of the assets and liabilities of the Chopra Business, the allowance for doubtful accounts on accounts and other receivables, inventory allowance and impairment, valuation and useful lives of fixed assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on due to related parties, and deferred tax valuation allowance.

Income and Other Taxes

Income taxes are accounted for using the asset and liability method in accordance with ASC 740, Income Taxes (“ASC 740”), and in accordance with taxation principles currently effective in the United States and Germany, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent they believe these assets will more-likely-than-not be realized.  In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.  In the event the Company was to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

Net Loss per Common Share

The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

The table below reflects the potentially dilutive securities at the end of each reporting period.

 

 

 

September 30,

2023

 

 

June 30,

2023

 

Seed Preferred stock (Convertible to Common stock 1:1)

 

 

645,000

 

 

 

2,620,000

 

Seed Preferred warrants (Convertible to Common stock 1:1)

 

 

1,560,148

 

 

 

1,560,148

 

Common stock warrants

 

 

1,650,000

 

 

 

1,650,000

 

Stock options

 

 

3,091,250

 

 

 

3,091,250

 

Total

 

 

6,946,398

 

 

 

8,921,398

 

Stock-Based Compensation

The Company accounts for stock option awards granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model. We recognize compensation expense for stock option awards over the requisite or implied service period of the grant. Compensation expense is recognized on a straight-line method over the requisite service period. Forfeitures are accounted for as they occur.

Cash and Cash Equivalents

The Company defines cash and cash equivalents as highly liquid investments with original maturities of 90 days or less at the time of purchase. The Company also considers amounts in transit from payment processors for customer credit card and debit card transactions to be cash and cash equivalents. At September 30, 2023 and June 30, 2023, the Company’s cash and cash equivalents consisted primarily of cash held in checking accounts, and payment in transit from payment processors for customer credit card and debit card transactions. As of September 30, 2023 and June 30, 2023, cash and cash equivalents was $1,420 and $1,503, respectively.

Concentration of Risk

Financial instruments that subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents.  The Company maintains substantially all of its cash and cash equivalents with three financial institutions, which, at times, may exceed federally insured limits. The Company has not incurred any losses associated with this concentration of deposits.

 

The Company currently has bank deposits with financial institutions in the U.S. which exceed FDIC insurance limits. FDIC insurance provides protection for bank deposits up to $250, so there were cumulative uninsured balances of $1,170 and $1,253 in the parent and its US based subsidiaries as of September 30, 2023 and June 30, 2023, respectively. There were no uninsured bank deposits with a financial institution outside the U.S. All uninsured bank deposits are held at high quality credit institutions.

Foreign Currency Translation and Transactions

The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s Germany and Netherlands subsidiaries are the local currencies.  The assets and liabilities of the Company’s foreign subsidiaries are translated into US Dollars using exchange rates in effect at the consolidated balance sheet date. Revenues and expenses are translated using the average exchange rates prevailing during the period. Exchange-rate differences resulting from translation adjustments are accounted for as a component of accumulated other comprehensive loss. Borrowings in foreign currencies are recorded at the rate of exchange at the time of the transaction and are adjusted for any exchange rate gains or losses as of the balance sheet date.

 

Translation of amounts from Euro into US$ have been made at the following exchange rates for the periods ended September 30, 2023 and June 30, 2023: 

 

 

 

September 30, 2023

 

 

June 30, 2023

 

Period-end Euro: US$ exchange rate

 

$1.0573

 

 

$1.0915

 

Period-average Euro: US$ exchange rate

 

$1.0880

 

 

$1.0459

 

 

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, at the rate on the date of the transaction and included in the results of operations as incurred.

 

ASC Topic 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated net of an allowance for doubtful accounts. When management becomes aware of circumstances that may decrease the likelihood of collection to a point where a receivable is no longer probable of being collected, it records an allowance against amounts due, which reduces the receivable to the amount that management reasonably believes will be collected. For all other customers, management determines the adequacy of the allowance based on historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts. The Company does not have any off-balance-sheet credit exposure related to its customers. As of September 30, 2023 and June 30, 2023, the allowance for doubtful accounts amounted to $104 and $110, respectively. 

Inventories

Inventories consist primarily of raw materials, work-in-process (blended superfood powder) and finished goods. Finished goods and work-in-process include direct materials, finished product kits, finished products, third-party blender and other overhead costs involved in manufacturing for e-commerce sales. The Company values inventory using the standard costing method whereunder product costs are allocated based on standard rates for materials, labor, and overhead. The Company analyses actual costs at regular intervals and accounts for any variance in costs of goods sold. Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in first-out method. Inventories have been reduced by an allowance for excess, obsolete and unsaleable inventories. The allowance is an estimate based on our management’s review of inventories on hand compared to estimated future usage and sales. The Company performs cycle counts of inventories at its warehouse and distribution center throughout the year. An allowance for inventory shrinkage is established for estimated inventory shrinkage since the last physical inventory date through the reporting date.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization, and depreciated over their estimated lives using the straight-line method. The useful lives of leasehold improvements are determined by the economic useful lives of the assets or the term of the leases, whichever is shorter.

Depreciation and amortization is provided for by the straight-line method over the estimated useful lives as follows:

 

Property and Equipment

 

Estimated Useful Life

Computer and other equipment

 

 3-7 years

Office furniture and fixtures

 

5-7 years

Leasehold improvements

 

Shorter of lease or useful life

 

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

Goodwill

Goodwill represents the excess of the purchase price over the fair market value of the net assets acquired on October 13, 2022 and March 3, 2023, respectively. The Company has implemented the Business Combinations Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350, Intangibles Goodwill and Other. Goodwill is deemed to have an indefinite life, and is not amortized but is subject to, at a minimum, an annual impairment test.

 

The Company tests goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. For the fiscal year ended June 30, 2023, the Company recorded impairment of goodwill of $3,869.  There was no impairment during the three months ended September 30, 2023.

Business Combinations

The Company accounts for business combinations using the purchase method of accounting. The purchase method requires the Company to determine the fair value of all acquired assets, including identifiable intangible assets and all assumed liabilities. The total cost of acquisitions is allocated to the underlying identifiable net assets, based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and the utilization of independent valuation experts, and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates and asset lives, among other items.

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets for impairment, other than goodwill, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows. The Company had no long-lived asset impairments as of September 30, 2023 and June 30, 2023, respectively.

Contract assets

In accordance with ASC 606-10-45-3, a contract asset is the Company’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. The Company will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment.

 

There were no contract assets at September 30, 2023 and June 30, 2023.

Contract liabilities

Deferred revenue, a contract liability, primarily consists of arrangement consideration collected in advance of order fulfillment and unsatisfied obligations related to outstanding loyalty points. The Company expects that the majority of the revenue deferrals recorded at the balance sheet date will be recognized as revenue in the next 12 months as performance obligations are satisfied, in accordance with ASC 606, Revenue from Contracts with Customers. Sales taxes collected from customers and remitted to government authorities are excluded from revenue and deferred revenue. Ownership passes to customers upon shipment. Deferred revenue represents amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing of annual subscription agreements. Also included in contract liabilities is the value of loyalty points with respect to the Company’s loyalty program described below. The value of these contract liabilities will increase or decrease based on the timing of invoices and recognition of revenue as customers use their rewards points.

The Company offers a loyalty program to its customers which incorporates a points system for activities on the Company’s website, such as reviews, referrals, and purchases. Customers accumulate points based on their level of spending and type of participation. The points can be redeemed for purchases of goods offered at the Company’s websites. The Company defers the stand-alone selling price of earned reward points, net of rewards not expected to be redeemed (known as “breakage”), as liability for outstanding loyalty points. To estimate the stand-alone selling price for the points, the Company considers the stated redemption value per point dictated by the terms of the loyalty programs and then estimates the future breakage of reward points based on historical member activity. Upon redemption of points by customer, the Company recognizes revenue and reduces corresponding deferred revenue. The Company records breakage revenue of unredeemed points based on expected customer redemptions.

 

The Company’s total contract liability balance was $2,088 at September 30, 2023, of which $318 relates to the liability for outstanding loyalty points for Your Super and $1,770 relates to customer subscription deposits with respect to membership fees from the Chopra Meditation & Wellbeing app (“Chopra App”) which are collected in advance and amortized over the one (1) year term of the membership, advances on retreat packages and prepaid licensing fees.

 

The Company’s total contract liability balance was $2,343 at June 30, 2023, of which $212 related to the liability for outstanding loyalty points for Your Super and $1,345 related to customer subscription deposits with respect to membership fees from the Chopra App.

Fair Value Measurements

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, contracts receivable, accounts payable and accrued liabilities, contracts receivable recourse, deferred revenue, debt and a capital lease obligation. The carrying value of the Company’s financial instruments approximate fair value.

 

FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:

 

Level 1 - Quoted market prices for identical assets or liabilities in active markets or observable inputs;

Level 2 - Significant other observable inputs that can be corroborated by observable market data; and

Level 3 - Significant unobservable inputs that cannot be corroborated by observable market data.

 

The Company believes that the carrying amounts of cash and cash equivalents, accounts payable, and short-term borrowings approximate fair value based on either their short-term nature or on terms currently available to the Company in financial markets.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Company accounts for revenue contracts with customers by applying the requirements of ASC 606, Revenue from Contracts with Customers, which includes the following five steps:

 

 

i.

Identification of the contract with a customer.

 

ii.

Identification of the performance obligations in the contract.

 

iii.

Determination of the transaction price.

 

iv.

Allocation of the transaction price to the performance obligations in the contract.

 

v.

Recognition of revenue as the entity satisfies a performance obligation.

 

When a customer purchases a product from the Company, ownership of the product transfers to them at the point of shipment and the Company has an enforceable right to payment for the product sold at that time. Accordingly, the customer has control of the product purchased from the Company starting at the point of shipment. The risk of loss or damage during shipment resides exclusively with the shipping carrier and the Company assumes no obligation for loss or damage of product while in transit to the customer. As a result of this change in terms of sale, the Company recognizes revenue, including shipping revenue, when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers, which is at the point of shipment.  Sales are recorded net of returns, discounts, and any taxes collected from customers and remitted to government authorities.

The Company generates revenues from a diversified mix of e-commerce activities with the majority of revenue earned through e-commerce direct sales to consumer.  The Company’s e-commerce activities include the sale of organic nutritional superfood powder mixes online, through the Company’s website YourSuper.com, and sales of the Chopra wellbeing line available at Chopra.com. During the three months ended September 30, 2023, the Company’s direct to consumer sales of products accounted for 60% of total revenue. 

 

In addition, the Company records revenue from the sale of memberships to the Chopra App.  Revenues from the membership are collected in advance and recognized over the term of the membership.  Finally, the Company records net revenue in the form of commissions with respect to sales of attendance at its wellness retreats at various US based locations.  Revenue for wellness retreats is deferred upon purchase and recognized at the time of the event with the transfer of services to the customer. 

 

The Company records revenues from the sales on a “gross” basis pursuant to ASC 606-10 Revenue Recognition – Revenue from Contracts with Customers, when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC 606-10 are present in the arrangement, revenue is recognized net of related direct costs.

Cost of Revenue

Cost of revenue primarily consists of costs associated with the purchase of superfood products and materials and packaging for its Chopra wellness kits from third-party manufacturers. These costs include ingredients, packaging, third party manufacturing costs and freight-in shipping.

Product Warranties

The Company’s provision for estimated future warranty costs is based upon the historical relationship of warranty claims to sales. Based upon historical sales trends and warranties, it has been concluded that no warranty liability is required as of September 30, 2023 and June 30, 2023. To date, product allowance and returns have been minimal and, based on experience, the Company believes that product returns will continue to be minimal.

Shipping and Logistics Expenses

Shipping and logistics expenses consist primarily of costs incurred to ship products to the customer.  If shipping and handling activities are performed after the customer obtains control of the good, then an entity may elect to account for shipping and handling as fulfillment activities and not promised services that require further evaluation under ASC 606.  If the entity elects this accounting policy, the costs related to the shipping and handling activities should be accrued when the entity recognizes revenue for the related promised goods. In addition, if this accounting policy is elected, the entity must apply it consistently to similar transactions and provide the accounting policy disclosures required by ASC 235.

 

The Company has elected to record shipping and handling activities performed after the customer obtains control of the product as fulfillment costs.  These expenses are presented as operating expenses in the accompanying consolidated statements of operations and comprehensive loss. 

Business Segments

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has three operating segments: Ecommerce sales of wellness products, sales of memberships to the Chopra App and operation of its wellness focused retreats. 

Commitments and Contingencies

The Company accounts for contingencies in accordance with ASC 450-20, Contingencies.  Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
3 Months Ended
Sep. 30, 2023
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Schdule of potentially dilutive securities

 

 

September 30,

2023

 

 

June 30,

2023

 

Seed Preferred stock (Convertible to Common stock 1:1)

 

 

645,000

 

 

 

2,620,000

 

Seed Preferred warrants (Convertible to Common stock 1:1)

 

 

1,560,148

 

 

 

1,560,148

 

Common stock warrants

 

 

1,650,000

 

 

 

1,650,000

 

Stock options

 

 

3,091,250

 

 

 

3,091,250

 

Total

 

 

6,946,398

 

 

 

8,921,398

 

Schdule of Foreign Currency Translation and Transactions

 

 

September 30, 2023

 

 

June 30, 2023

 

Period-end Euro: US$ exchange rate

 

$1.0573

 

 

$1.0915

 

Period-average Euro: US$ exchange rate

 

$1.0880

 

 

$1.0459

 

Schdule of estimated useful lives

Property and Equipment

 

Estimated Useful Life

Computer and other equipment

 

 3-7 years

Office furniture and fixtures

 

5-7 years

Leasehold improvements

 

Shorter of lease or useful life

v3.23.3
ACQUISITIONS (Tables)
3 Months Ended
Sep. 30, 2023
ACQUISITIONS  
summary of the estimated fair values of acquisition costs

Consideration Paid – Fair Value

 

 

 

 

 

 

Acquisition costs – Cash

 

 

 

 

$3,500

 

Stock issued:

 

 

 

 

 

 

 

Number of Shares issued:

 

 

1,400,000

 

 

 

 

 

Value per share

 

$0.15

 

 

 

 

 

Total stock fair value

 

 

 

 

 

 

210

 

Total consideration

 

 

 

 

 

$3,710

 

Tangible assets acquired:

 

 

 

Cash

 

$289

 

Inventory

 

 

216

 

Prepaid expenses and other assets

 

 

345

 

Total assets acquired

 

 

850

 

 

 

 

 

 

Assumed liabilities

 

 

 

 

Contract liabilities

 

 

(2,195 )

Total liabilities assumed

 

 

(2,195 )

Net tangible assets/(liabilities)

 

 

(1,345 )

 

Total liabilities acquired

 

 

(1,345

)

Goodwill

 

 

5,055

 

 

 

 

 

 

Total Net asset acquired

 

$

3,710

 

summary of the estimated fair values of the assets acquired and liabilities

Consideration Paid – Fair Value

 

 

 

 

 

 

Debt acquisition costs – Cash

 

 

 

 

$2,000

 

Debt acquisition cost -1,500,000 common stock purchase warrants

 

 

 

 

 

34

 

Stock issued:

 

 

 

 

 

 

 

Number of Shares:

 

 

3,200,000

 

 

 

 

 

Value per share

 

$0.15

 

 

 

 

 

Total stock fair value

 

 

 

 

 

 

480

 

Total consideration

 

 

 

 

 

$2,514

 

Schedule Of supplemental consolidated financial results of the Company

Tangible assets acquired:

 

 

 

Cash

 

$363

 

Inventory

 

 

4,953

 

Accounts receivable

 

 

422

 

Prepaid expenses and other assets

 

 

836

 

Property and equipment

 

 

78

 

Security deposits

 

 

63

 

Deferred income taxes

 

 

45

 

Total assets acquired

 

 

6,760

 

 

 

 

 

 

Assumed liabilities

 

 

 

 

Accounts payable and accrued liabilities

 

 

(7,814 )

Contract liabilities

 

 

(259 )

Income tax payable

 

 

(41 )

Total liabilities assumed

 

 

(8,114 )

Net tangible assets/liabilities

 

 

(1,354 )

Goodwill

 

3,868

 

 

 

 

 

 

Total Net asset acquired

 

$2,514

 

Schedule Of net assets on acquisition

 

 

Three Months Ended September 30,

 

 

 

2023

 

 

2022

 

Revenue

 

$2,614

 

 

2,635

 

Net income (loss)

 

$(803 )

 

(467 )

 

 

 

 

 

 

 

 

 

Weighted average number of common shares used in per share calculations

 

 

57,387,420

 

 

 

44,125,572

 

Basic and Diluted Loss Per Common Share

 

$(0.01 )

 

(0.01 )
v3.23.3
PROPERTY AND EQUIPMENT (Tables)
3 Months Ended
Sep. 30, 2023
PROPERTY AND EQUIPMENT  
Schedule of property and equipment

(Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Computer equipment

 

$299

 

 

$232

 

Furniture and fixtures

 

 

25

 

 

 

25

 

 

 

 

324

 

 

 

257

 

Less: accumulated depreciation

 

 

(231 )

 

 

(220 )

Property and equipment, net

 

$93

 

 

$37

 

v3.23.3
REVENUE (Tables)
3 Months Ended
Sep. 30, 2023
REVENUE  
Schedule of Revenue by Geographical location

(Dollars in thousands)

 

September 30,

2023

 

 

 

 

 

US

 

$2,431

 

Europe

 

 

660

 

Total

 

$3,091

 

Schedule of Revenue by product sales channel

(Dollars in thousands)

 

September 30,

2023

 

Direct to Consumer

 

$1,841

 

Amazon

 

 

262

 

Wholesale

 

 

122

 

Retreat/licensing

 

 

152

 

Digital

 

 

714

 

Total

 

$3,091

 

Schedule of deferred revenue balances

(Dollars in thousands)

 

 Three Months Ended

September 30,

2023

 

Deferred revenue, June 30, 2023 

 

$2,343

 

Decrease in reward liabilities over the period, net (a)

 

 

(12 )

Decrease in deferred revenue over the period, net (b)(c)

 

 

(242 )

Deferred revenue, September 30, 2023

 

$

2,088

 

Schedule of Company's sales returns reserve

(Dollars in thousands)

 

Three Months Ended

September 30,

2023

 

Balance as of June 30, 2023

 

$28

 

Charges to Costs and Expenses

 

 

15

 

Deductions

 

 

(29 )

Balance as of September 30, 2023

 

14

 

v3.23.3
ACCOUNTS RECEIVABLE NET (Tables)
3 Months Ended
Sep. 30, 2023
ACCOUNTS RECEIVABLE NET  
Schedule of Account receivable

Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Accounts receivable

 

$326

 

 

$270

 

Less: allowance for doubtful accounts

 

 

(104 )

 

 

(109 )

Total

 

$222

 

 

$161

 

Schedule of Company's allowance for doubtful accounts

(Dollars in thousands)

 

 Three Months Ended

September 30,

2023

 

Balance, June 30, 2023

 

$109

 

Charges to Costs and Expenses

 

 

 -

 

Deductions

 

 

(5 )

Balance as of September 30, 2023

 

$104

 

v3.23.3
INVENTORY (Tables)
3 Months Ended
Sep. 30, 2023
INVENTORY  
Schedule of inventory

(Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Raw material

 

$2,535

 

 

$3,043

 

Work-in-process

 

 

208

 

 

 

201

 

Finished goods

 

 

694

 

 

 

745

 

Inventory reserve

 

 

(1,428 )

 

 

(1,308 )

Total

 

$2,009

 

 

$2,681

 

v3.23.3
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)
3 Months Ended
Sep. 30, 2023
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES  
Schedule of Accounts payable and accrued liabilities

(Dollars in thousands)

 

September 30,

2023

 

 

June 30,

2023

 

Accounts payable

 

$4,052

 

 

$4,387

 

Accrued payroll and related liabilities

 

 

9

 

 

 

97

 

Accrual of estimated tax related expense

 

 

-

 

 

 

437

 

Accrued expenses including accruals for professional fees, marketing costs, advertising, shipping and logistics

 

 

1,225

 

 

 

814

 

Accrued interest expenses

 

 

90

 

 

 

100

 

Other accrued liabilities including sales tax and returns

 

 

41

 

 

 

10

 

Total accounts payable and accrued liabilities

 

$5,417

 

 

$5,845

 

v3.23.3
STOCK BASED COMPENSATION (Tables)
3 Months Ended
Sep. 30, 2023
STOCK BASED COMPENSATION  
Schdule of granted Stock options and Stock awards

 

 

Number of shares

 

 

Weighted Average

Grant Date Fair

Value Per Share

 

 

Weighted Average

Remaining

Recognition

Period (Years)

 

Nonvested at June 30, 2022

 

 

2,881,250

 

 

$3.75

 

 

 

1.66

 

Granted**

 

 

1,305,000

 

 

$3.75

 

 

 

4.00

 

Vested**

 

 

(373,542 )

 

$3.75

 

 

 

-

 

Forfeited

 

 

(1,745,000 )*

 

$3.75

 

 

 

-

 

Nonvested at June 30, 2023

 

 

2,367,708

 

 

$3.75

 

 

 

1.31

 

Granted

 

 

125,000

 

 

$3.75

 

 

 

2.00

 

Vested

 

 

(131,250 )

 

$3.75

 

 

 

-

 

Forfeited

 

 

-

 

 

$-

 

 

 

-

 

Nonvested at September 30, 2023

 

 

2,061,458

 

 

$3.75

 

 

 

1.11

 

Schedule of stock award activites

 

 

Number

of Shares

 

 

Weighted

Average

Exercise Price

 

 

Weighted

Average

Remaining

Term

in Years

 

 

Aggregate

Intrinsic

Value

 

Outstanding at June 30, 2022

 

 

3,166,250

 

 

$0.001

 

 

 

7.60

 

 

$-

 

Granted 

 

 

225,000

 

 

0.001

 

 

 

10.00

 

 

 

-

 

Exercised 

 

 

(300,000

 

 

-

 

 

 

-

 

 

 

-

 

Cancelled 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at June 30, 2023

 

 

3,091,250

 

 

$0.001

 

 

 

8.89

 

 

$-

 

Granted 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercised 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Cancelled 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at September 30, 2023

 

 

3,091,250

 

 

$0.001

 

 

 

7.48

 

 

$-

 

Options exercisable at September 30, 2023

 

 

1,510,000

 

 

$0.001

 

 

 

8.65

 

 

$-

 

v3.23.3
WARRANTS (Tables)
3 Months Ended
Sep. 30, 2023
WARRANTS  
Schedule of Warrant to purchase Seed Preferred Stock transactions

 

 

Number

of shares

 

 

Weighted Average

Exercise Price ($)

 

 

Weighted Average

Remaining

Recognition

Period (Years)

 

Balance, June 30, 2023

 

 

1,560,148

 

 

$2.00

 

 

 

6.10

 

Warrants issued

 

 

-

 

 

$-

 

 

 

-

 

Warrants expired

 

 

-

 

 

$-

 

 

 

-

 

Balance, September 30, 2023

 

 

1,560,148

 

 

$2.00

 

 

 

5.60

 

Number

of Warrants

 

 

Exercise

Price ($)

 

 

Expiry Date

 

 

1,560,148

 

 

 $

2.00

 

 

August 04, 2029

 

Schdule of Warrants to purchase Common Stock

 

 

Number of shares

 

 

Weighted Average

Exercise Price ($)

 

 

Weighted Average

Remaining

Recognition

Period (Years)

 

Nonvested at June 30, 2023

 

 

1,616,666

 

 

$2.00

 

 

 

6.37

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

Vested

 

 

(220,834 )

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

 

 

-

 

Nonvested at September 30, 2023

 

 

1,395,832

 

 

$2.00

 

 

 

5.96

 

v3.23.3
DESCRIPTION OF BUSINESS, GOING CONCERN AND HISTORY (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Mar. 03, 2023
Sep. 09, 2022
Sep. 30, 2023
Jun. 30, 2023
Sale of seed preferred stocks per share     $ 2.00  
Working capital deficit     $ 7,090  
Subscription agreements amount     10,000  
Subscription agreement received     9,660  
Proceeds from common stock     2,850  
Subscription agreement remaining amount     $ 340  
Sale of seed preferred stock per share     $ 2.00  
Sale of seed common stock per share     $ 2  
Aggregate principal amount of term loan commitments     $ 150,000  
Company funded under term of agreement       $ 4,870
Common stock par value     $ 0.001 $ 0.001
Chopra HLCO [Member]        
Common stock par value $ 0.001      
Cash Consideration $ 5,000      
Cash paid $ 1,000      
Common stock, issued 1,400,000      
Deferred cash payment     $ 2,500  
Earnout payments received     $ 3,000  
CircleUp Credit Advisors LLC [Member] | Loan purchase and sale agreement [Member]        
Cash payment   $ 2,000    
Warrant to purchase restricted shares   1,500,000    
Warrant issued   187,500    
Warrant vesting quarterly installment   187,500    
Intrest rate     12.50%  
v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares
Sep. 30, 2023
Jun. 30, 2023
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    
Seed Preferred stock (Convertible to Common stock 1:1) 645,000 2,620,000
Seed Preferred warrants (Convertible to Common stock 1:1) 1,560,148 1,560,148
Common stock warrants 1,650,000 1,650,000
Stock options 3,091,250 3,091,250
Total 6,946,398 8,921,398
v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)
3 Months Ended 12 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Period-end Euro [Member]    
Translation of amounts from Euro into US 1.0573 1.0915
Period average Euro [Member]    
Translation of amounts from Euro into US 1.0880 1.0459
v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2)
3 Months Ended
Sep. 30, 2023
Leasehold Improvements [Member]  
Property and Equipment useful life Shorter of lease or useful life
Minimum [Member] | Computer and other equipment [Member]  
Property and Equipment useful lives 3 years
Minimum [Member] | Office furniture and fixtures [Member]  
Property and Equipment useful lives 5 years
Maximum [Member] | Computer and other equipment [Member]  
Property and Equipment useful lives 7 years
Maximum [Member] | Office furniture and fixtures [Member]  
Property and Equipment useful lives 7 years
v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Federal Deposit Insurance Corporation ("FDIC") $ 250  
Cash and cash equivalent 1,420 $ 1,503
Uninsured amount 1,170 1,253
Allowance for doubtful accounts 104 110
Impairment of intangible assets   3,869
Contract liability 2,088 2,343
Outstanding loyalty liability 318 212
Chopra Meditation & Wellbeing app [Member]    
Receive from member fee $ 1,770 $ 1,345
v3.23.3
ACQUISITION (Details) - Your Super, Inc. [Member] - USD ($)
$ / shares in Units, $ in Thousands
Mar. 01, 2023
Sep. 30, 2022
Acquisition costs - Cash $ 3,500 $ 2,000
Number of Shares issued 1,400,000 3,200,000
Stock issued value per share $ 0.15 $ 0.15
Total stock fair value $ 210 $ 480
Total consideration $ 3,710 $ 2,514
v3.23.3
ACQUISITION (Details 1) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
Sep. 30, 2022
Goodwill $ 5,055 $ 5,036  
Your Super, Inc. [Member]      
Cash 289   $ 363
Inventory 216   4,953
Prepaid expenses and other assets 345   836
Total assets acquired 850   6,760
Contract liabilities (2,195)   (259)
Total liabilities assumed (2,195)   (8,114)
Net tangible assets/liabilities (1,345)   (1,354)
Total liabilities acquired (1,345)    
Goodwill 5,055   3,868
Total Net asset acquired $ 3,710   $ 2,514
v3.23.3
ACQUISITION (Details 2) - Your Super, Inc. [Member] - USD ($)
$ / shares in Units, $ in Thousands
Mar. 01, 2023
Sep. 30, 2022
Debt acquisition costs - Cash $ 3,500 $ 2,000
Debt acquisition cost -1,500,000 common stock purchase warrants   $ 34
Number of Shares issued 1,400,000 3,200,000
Stock issued value per share $ 0.15 $ 0.15
Total stock fair value $ 210 $ 480
Total consideration $ 3,710 $ 2,514
v3.23.3
ACQUISITION (Details 3) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
Sep. 30, 2022
Accounts payable and accrued liabilities $ (5,417) $ (5,845)  
Goodwill 5,055 $ 5,036  
Your Super, Inc. [Member]      
Cash 289   $ 363
Inventory 216   4,953
Accounts receivable     422
Prepaid expenses and other assets 345   836
Property and equipment     78
Security deposits     63
Deferred income taxes     45
Total assets acquired 850   6,760
Accounts payable and accrued liabilities     (7,814)
Contract liabilities (2,195)   (259)
Income tax payable     (41)
Total liabilities assumed (2,195)   (8,114)
Net tangible assets/liabilities (1,345)   (1,354)
Goodwill 5,055   3,868
Total Net asset acquired $ 3,710   $ 2,514
v3.23.3
ACQUISITION (Details 4) - Your Super, Inc. [Member] - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Revenue $ 2,614 $ 2,635
Net loss from operations $ (803) $ (467)
Weighted average number of common shares used in per share calculations 57,387,420 44,125,572
Basic and Diluted Loss Per Common Share $ (0.01) $ (0.01)
v3.23.3
ACQUISITION (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 12 Months Ended
Sep. 09, 2022
Jun. 30, 2023
Jun. 30, 2023
Sep. 30, 2023
Common stock value per share       $ 2.50
Loan obligation       $ 8,000
Impairment of intangible assets     $ 3,869  
Chopra Global, LLC [Member]        
Description of purchase agreement   The aggregate consideration paid and payable by the Buyer for the Purchased Assets is the Purchase Price of up to $5,000 in cash plus newly issued shares of the Company’s Common Stock. In total, the initial cash purchase amount consists of $3,500 in cash, of which the Company has $2,500 as of March 31, 2023 and $1,000 in April 2023, and issued 1,400,000 shares of the Company’s unregistered, restricted common stock issued. Additionally, up to three earnout payments of $1,000 in value each (the “Earnout Payments”) may be paid to the Seller, subject to and payable in accordance with earnout thresholds specified in the Purchase Agreement. Each of these Earnout Payments will be comprised of fifty percent (50%) in cash and fifty percent (50%) in shares of the Common Stock (the “Earnout Shares”). The Earnout Payments will be earned (i) for the period starting March 1, 2023 and ending December 31, 2023 if net revenue of the Chopra Business (then operated by the Buyer) exceeds $5,900; (ii) for the calendar year ending December 31, 2024 if such net revenue exceeds $11,000; and (iii) for the calendar year ending December 31, 2025 if such net revenue exceeds $15,000. The Earnout Shares will be valued at the market price at the time of issuance based on the five-day volume weighted average price of the Common Stock prior to the last day of the applicable measurement year. If the Company is taken private or undergoes a Change of Control (as defined in the Purchase Agreement), any subsequent Earnout Payment will be paid 100% in cash.    
Public offering first commitment   $ 30,000    
Cash Consideration       $ 3,500
Measurement period   12 months    
Super, Inc. [Member]        
Cash Consideration $ 2,000      
Warrants exercise price $ 2.50      
Common stock purchase warrants 1,500,000      
Impairment of intangible assets   $ 3,868    
v3.23.3
PROPERTY AND EQUIPMENT (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
Property and equipment $ 324 $ 257
Less: accumulated depreciation (231) (220)
Property and equipment, net 93 37
Computer and other equipment [Member]    
Property and equipment 299 232
Office furniture and fixtures [Member]    
Property and equipment $ 25 $ 25
v3.23.3
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
PROPERTY AND EQUIPMENT    
Depreciation expenses $ 11 $ 0
v3.23.3
REVENUE (Details) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Revenue $ 3,091 $ 0
Revenue 3,091  
US    
Revenue 2,431  
Europe    
Revenue $ 660  
v3.23.3
REVENUE (Details 1) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Revenue $ 3,091  
Revenue 3,091 $ 0
Direct to Consumer    
Revenue 1,841  
Amazon    
Revenue 262  
Wholesale    
Revenue 122  
Retreat/licensing    
Revenue 152  
Digital    
Revenue $ 714  
v3.23.3
REVENUE (Details 2)
$ in Thousands
3 Months Ended
Sep. 30, 2023
USD ($)
REVENUE  
Deferred revenue, June 30, 2023 $ 2,343
Decrease in reward liabilities over the period, net (a) (12)
Decrease in deferred revenue over the period, net (b)(c) (242)
Deferred revenue, September 30, 2023 $ 2,088
v3.23.3
REVENUE (Details 3)
$ in Thousands
3 Months Ended
Sep. 30, 2023
USD ($)
REVENUE  
Balance, acquisition date $ 28
Charges to Costs and Expenses 15
Deductions (29)
Balance as of June 30, 2023 $ 14
v3.23.3
REVENUE (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2023
Jun. 30, 2023
REVENUE    
Rewards liabilities $ 259 $ 271
Unearned revenue 1,792 2,065
Liabilities for unearned product sales $ 37 7
Percentage of total revenue 10.00%  
Other current liabilities $ 14 $ 28
v3.23.3
ACCOUNTS RECEIVABLE NET (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
ACCOUNTS RECEIVABLE NET    
Accounts receivable $ 326 $ 270
Less: allowance for doubtful accounts (104) (109)
Total $ 222 $ 161
v3.23.3
ACCOUNTS RECEIVABLE NET (Details 1)
$ in Thousands
3 Months Ended
Sep. 30, 2023
USD ($)
ACCOUNTS RECEIVABLE NET  
Balance the acquisition date $ 109
Charges to Costs and Expenses 0
Deductions (5)
Balance as of September 30, 2023 $ 104
v3.23.3
ACCOUNTS RECEIVABLE NET (Details Narrative) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
Jun. 30, 2022
Allowance for Doubtful Accounts $ 104 $ 110  
Allowance for Doubtful Accounts      
Allowance for Doubtful Accounts $ 104   $ 110
v3.23.3
INVENTORY (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
INVENTORY    
Raw material $ 2,535 $ 3,043
Work-in-process 208 201
Finished goods 694 745
Inventory reserve (1,428) (1,308)
Total $ 2,009 $ 2,681
v3.23.3
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES    
Accounts payable $ 4,052 $ 4,387
Accrued payroll and related liabilities 9 97
Accrual of estimated tax related expense 0 437
Accrued expenses including accruals for professional fees, marketing costs, advertising, shipping and logistics 1,225 814
Accrued interest expenses 90 100
Other accrued liabilities including sales tax and returns 41 10
Total accounts payable and accrued liabilities $ 5,417 $ 5,845
v3.23.3
LOAN PAYABLE (Details narrative) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended
Aug. 04, 2022
Oct. 27, 2022
Sep. 30, 2023
Principal amount $ 400    
Interest rate 12.00%    
Maturity term 12 months    
Quarterly fee $ 13    
Total funds drawanable $ 50,000    
Warrants issued 1,560,148    
Exercise price $ 2.00    
Term loan fund   $ 3,000  
Additional term loan fund   $ 1,873  
Upfront fee     $ 563
Unrestricted and unencumbered cash     2,000
Monthly EBITDA     75
Outstanding payments of loan     $ 4,873
Credit agreement description     we regain compliance with our cash covenant referenced above no later than, and remain compliant after, November 30, 2023, and (ii) we deposit $150 into a special reserve collection account on behalf of the secured lenders prior to the earlier to occur of (x) November 30, 2023 and (y) the closing of a sale of our equity in an amount of not less than $2,000
Administrative fees     $ 12,500
Interest on outstanding loan     $ 260
Maximum [Member]      
Loan payable $ 150,000    
v3.23.3
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Mar. 10, 2022
Jan. 10, 2022
May 22, 2022
Sep. 30, 2023
Sep. 30, 2022
Jun. 30, 2023
Common stock       $ 57,000   $ 55,000
W A O W Advisory Group Gmbh [Member]            
Accrued and unpaid interest       $ 16,000    
Proceeds from subscription receivable     $ 4,280,000   $ 330,000  
Cash proceeds from aforementioned subscription         $ 3,950,000  
Shares issued of seed preferred stock         1,975,000  
Remaining subscribed seed preferred stock shares       165,000    
Purchase aggreement of unregistered shares of Seed Preferred stock     2,140,000      
Unregistered shares of Seed Preferred stock par value     $ 2.00      
Steven Bartlett, Director [Member]            
Additional unpaid amount       $ 44,000    
Accrued amount       120,000    
Vested stock options   30,000        
Non statutory stock options   1,000,000        
Common stock   $ 3,000        
Common stock par value   $ 0.001        
Further Vested stock options   700,000        
FSL paid for service rendered   $ 300,000   57,000    
Director fees       9,000    
Marketing service rendered       15,750,000    
Directors and executives [Member]            
Director fees       25,000    
Kay Koplovitz Chairpersonofthe Board [Member]            
Director fees       13,000 $ 9,000  
NOEO GmbH [Member] | Anabel Olemann, Director [Member]            
Ownership interest acquired 100.00%          
Cash consideration $ 30,000          
Advances       3,000    
Accounts payable - related party       $ 1,000    
Description of Converted shares       WAOW Entrepreneurship GmbH converted 1,975,000 Seed Preferred shares into 1,975,000 shares of Common Stock    
NOEO [Member] | Maturity One [Member]            
Balance outstanding       $ 167,000    
v3.23.3
STOCKHOLDERS EQUITY (DEFICIT) (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Sep. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jul. 08, 2022
Oct. 07, 2021
Apr. 29, 2021
Preferred stock, shares authorized 10,000,000   10,000,000      
Preferred stock, shares authorized increase       7,800,000    
Common stock, shares issued 57,474,920   55,199,920      
Preferred stock, par value $ 0.001   $ 0.001      
Preferred stock, shares issued 645,000   2,620,000      
Preferred stock, shares outstanding 645,000   2,620,000      
Common stock, par value $ 0.001   $ 0.001      
Common stock, shares authorized 290,000,000   290,000,000      
Cash proceeds from the issue of share $ 2,850          
Common stock share outstanding 57,474,920   55,199,920      
Financial Industry Regulatory Authority [Member]            
Preferred stock, shares authorized         10,000,000  
Common stock, shares issued           44,000,000
Preferred Stock designated Shares         5,000,000  
Preferred stock, par value         $ 0.001  
Common stock, par value           $ 0.001
Common stock, shares authorized         290,000,000 300,000,000
Seed Preferred Stock 1 [Member]            
Preferred Stock designated Shares   5,000,000        
Share issued of conversion 1,975,000          
Preferred stock, par value   $ 2.00        
Description of share holders rights and powers Any of the rights, powers, preferences and other terms of our Seed Preferred Shares may be waived on behalf of all holders of Seed Preferred Shares by the affirmative written consent or vote of the holders of at least 51% of the Seed Preferred Shares then outstanding          
Preferred stock, shares issued 645,000   2,620,000      
Preferred stock, shares outstanding 645,000   2,620,000      
Sale of stock 5,000,000 5,000,000        
Proceeds from sale of preferred stock   $ 10,000        
Preferred stock subscription received $ 9,670          
Seed preferred stock issued 330,000          
Board Of Director [Member]            
Issued shares of common Stock to upon conversion 125,000          
Common Stock And Share [Member]            
Common stock, shares issued 57,474,920   55,199,920      
Share issued of conversion 1,975,000          
Cash proceeds from the issue of share $ 350          
Common stock issue price $ 2.00          
Issued shares of common Stock to upon conversion 1,975,000          
Common stock share outstanding 57,474,920   55,199,920      
Issued shares of common Stock to acquisition of certain assets 175,000          
v3.23.3
STOCK BASED COMPENSATION (Details) - $ / shares
3 Months Ended 12 Months Ended
Sep. 30, 2023
Jun. 30, 2023
STOCK BASED COMPENSATION    
Nonvested, Beginning Balance 2,367,708 2,881,250
Nonvested, Granted 125,000 1,305,000
Nonvested, Vested (131,250) (373,542)
Nonvested, Forfeited 0 (1,745,000)
Nonvested, Ending Balance 2,061,458 2,367,708
Nonvested, Weighted Average Grant Date Fair Value Per Share, Beginning Balance $ 3.75 $ 3.75
Nonvested, Weighted Average Grant Date Fair Value Per Share, Granted 3.75 3.75
Nonvested, Weighted Average Grant Date Fair Value Per Share, Vested 3.75 3.75
Nonvested, Weighted Average Grant Date Fair Value Per Share, Forfeited 0 3.75
Nonvested, Weighted Average Grant Date Fair Value Per Share, Ending Balance $ 3.75 $ 3.75
Nonvested, Weighted Average Remaining Recgnition Period (Years), Start 1 year 3 months 21 days 1 year 7 months 28 days
Nonvested, Weighted Average Remaining Recgnition Period (Years). Granted 2 years 4 years
Nonvested, Weighted Average Remaining Recgnition Period (Years), Ending 1 year 1 month 9 days 1 year 3 months 22 days
v3.23.3
STOCK BASED COMPENSATION (Details 1) - USD ($)
3 Months Ended 12 Months Ended
Sep. 30, 2023
Jun. 30, 2023
STOCK BASED COMPENSATION    
Outstanding, Beginning Balance 3,091,250 3,166,250
Granted 0 225,000
Exercised 0 (300,000)
Cancelled 0 0
Outstanding, Ending Balance 3,091,250 3,091,250
Options exercisable 1,510,000  
Weighted Average Exercise Price, Beginning Balance $ 0.001 $ 0.001
Weighted Average Exercise Price, Granted 0 0.001
Weighted Average Exercise Price, Exercised 0 0
Weighted Average Exercise Price, Cancelled 0 0
Weighted Average Exercise Price, Ending Balance 0.001 $ 0.001
Weighted Average Exercise Price, Exercisable $ 0.001  
Weighted Average Remaining Term in Years. Granted   10 years
Weighted Average Remaining Term in Years. Outstanding Beginning 8 years 10 months 20 days 7 years 7 months 6 days
Weighted Average Remaining Term in Years. Outstanding Ending 7 years 5 months 23 days 8 years 10 months 21 days
Weighted Average Remaining Term in Years. Exercisable 8 years 7 months 24 days  
Aggregate Intrinsic Value, Outstanding $ 0 $ 0
Aggregate Intrinsic Value, Exercisable $ 0 $ 0
v3.23.3
STOCK BASED COMPENSATION (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Jun. 30, 2023
Restricted shares 125,000    
Stock-based compensation expenses $ 800 $ 1,030  
Deferred compensation expense $ 7,030    
Risk-free interest rate 3.26%    
Expected term Minimum 5 years    
Expected term Maximum 10 years    
Expected volatility 62.49%    
Weighted average period 1 year 2 months 19 days    
Decrease of stock awards granted 600,000    
Decrease of stock awards vested 300,000    
Dividend yield 0.00%    
Vested Award [Member]      
Stock-based compensation expenses $ 310 $ 800  
Weighted average period 1 year 3 days    
Unamortized compensation expenses $ 5,830    
Certaion Employees [Member]      
Stock-based compensation expenses     $ 800
Deferred compensation expense     $ 5,700
Decrease of stock awards granted     1,745,000
v3.23.3
WARRANTS (Details) - $ / shares
3 Months Ended 12 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Weighted Average Exercise Price, Beginning Balance $ 0.001 $ 0.001
Weighted Average Exercise Price, Ending Balance $ 0.001 $ 0.001
Weighted Average Remaining Term in Years. Outstanding 8 years 10 months 20 days 7 years 7 months 6 days
Warrants [Member]    
Number of shares beginning balance 1,560,148  
Number of shares ending balance 1,560,148 1,560,148
Weighted Average Exercise Price, Beginning Balance $ 2.00  
Weighted Average Exercise Price, Warrants issued 0  
Weighted Average Exercise Price, Warrants expired 0  
Weighted Average Exercise Price, Ending Balance $ 2.00 $ 2.00
Weighted Average Remaining Term in Years, Warrants issued 6 years 1 month 6 days  
Weighted Average Remaining Term in Years. Outstanding 5 years 7 months 6 days  
v3.23.3
WARRANTS (Details 1) - Warrants [Member]
3 Months Ended
Sep. 30, 2023
$ / shares
shares
Number | shares 1,560,148
Exercise price | $ / shares $ 2.00
Expiry Date August 04, 2029
v3.23.3
WARRANTS (Details 2) - $ / shares
3 Months Ended 12 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Number of shares nonvested beg balance 1,616,666  
Number of shares nonvested ending balance   1,616,666
Weighted Average Exercise Price, Beginning Balance $ 0.001 $ 0.001
Weighted Average Exercise Price, Granted 0 0.001
Weighted Average Exercise Price, Ending Balance $ 0.001 0.001
Warrants to purchase Common Stock    
Granted 0  
Vested (220,834)  
Number of shares nonvested ending balance 1,395,832  
Weighted Average Exercise Price, Beginning Balance $ 2.00  
Weighted Average Exercise Price, Forfeited 0  
Weighted Average Exercise Price, vested 0  
Weighted Average Exercise Price, Granted $ 0  
Weighted average remaining recognition period (year) 6 years 4 months 13 days  
Weighted average remaining recognition period (year) end of period 5 years 11 months 15 days  
Weighted Average Exercise Price, Ending Balance $ 2.00 $ 2.00
v3.23.3
WARRANTS (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Nov. 10, 2022
Sep. 09, 2022
Sep. 30, 2023
Jun. 30, 2023
Aug. 04, 2022
Other current liabilities     $ 857 $ 893  
Dividend yield     0.00%    
Warrants to purchase Common Stock          
Warrants description     Agent an amended and restated warrant increasing the number of warrant shares from 1,300,123 shares of our Seed Preferred Stock to 1,560,148 shares of this stock    
Expected term     7 months    
Other current liabilities     $ 36    
Volatility         62.56%
Warrants issued         1,300,123
Exercise price         $ 2.00
Risk-free interest rate         2.73%
Dividend yield         0.00%
Financing costs     4,100    
Inducement loan     $ 3,000    
Warrants to purchase Common Stock 1          
Total warrants value $ 427 $ 34      
Warrants description Tri-Party Assignment and Settlement Agreement where under the outstanding balance payable of $1,078 was agreed to be settled by the issuance of common stock purchase warrants (the “Warrant”)   This Warrant will begin to vest on the one-year anniversary of the closing of the purchase of the Loan with 12.5% of the Warrant amount (187,500 shares) vesting on that date and the remaining portion of the Warrant vesting in seven quarterly installments of 187,500 shares each over the next seven quarters    
Restricted shares 150,000 1,500,000      
Expected term 7 years 3 years      
Dividend yield 0.00% 0.00%      
Exercise price $ 2.00 $ 2.00      
Risk-free interest rate 3.89% 4.25%      
Volatility 63.52% 60.00%      
Gain on debt settlement $ 650        
Unamortized amount unvested warrants     $ 297    
Weighted average period     6 years 1 month 13 days    
v3.23.3
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended
Jul. 10, 2023
Jun. 01, 2023
Sep. 01, 2022
Aug. 03, 2022
Sep. 25, 2023
Mar. 31, 2023
Feb. 14, 2023
Dec. 28, 2021
Sep. 30, 2023
Aug. 01, 2022
Jan. 01, 2022
Granted restricted stock award of shares of common stock                 600,000    
Scarlett Leung [Member]                      
Consulting fee, monthly           $ 10          
Granted restricted stock award of shares of common stock           120,000          
Mr. Kuech and Ms. De Groot [Member]                      
Consulting fee, monthly   $ 20,000                  
Jacalyn Y. Lee [Member]                      
Retainer fee, monthly $ 12                    
Charlotte Edelman [Member]                      
Vesting percentage         25.00%            
Consulting fee, monthly         $ 15            
Granted restricted stock award of shares of common stock         1,000,000            
Ray Ros Holding LLC [Member]                      
Marketing strategy and assessment rate per month                   $ 5  
Common stock issue price                   $ 0.001  
Options vested quarter       25.00%              
Non statutory stock options issued       100,000              
Stock based compensation expense                 $ 47    
Lee Forester [Member]                      
Common stock issue price     $ 0.001                
Non statutory stock options issued     125,000                
Stock based compensation expense                 $ 58    
Advisory rate per month     $ 3                
KET Consulting LLC [Member]                      
Annual compensation                     $ 240
KET Consulting LLC [Member] | Equity Incentive Plan [Member]                      
Non statutory stock options issued                 1,000,000    
Exercisable price, per share                 $ 0.001    
Vesting term                 18 months    
Vesting percentage                 25.00%    
Deepak Chopra LLC [Member]                      
Stock based compensation expense                 $ 94    
Donation paid                 $ 50    
Stock options granted               200,000      
Cash Consideration               $ 13      
Options term, in years               10 years      
Options fully vested               25.00%      
Exercise price               $ 0.001      
Peter Kash                      
Incentive stock options             75,000        
additional stock options             225,000        
Dr. Linda Friedland                      
Incentive stock options             75,000        
additional stock options             225,000        
v3.23.3
SUBSEQUENT EVENTS (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended
Nov. 01, 2023
Apr. 12, 2023
Oct. 25, 2023
Litigation [Member]      
Monthly installments   $ 17  
Claiming amount after receiving letter from litigation counsel   236  
Settlement agreement payment   $ 203  
SubsequentEvent [Member] | Justin Figgins [Member]      
Issued a restricted stock grant 600,000    
SubsequentEvent [Member] | Scarlett Leung [Member]      
Issued a restricted stock grant 120,000    
Common Stocks [Member] | SubsequentEvent [Member]      
Common stock shares issued     125,000
Proceeds of shares     $ 250
Price per share     $ 2.00

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