Healing Co Inc. - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

Form 10-Q

For the quarterly period ended September 30, 2022

For the transition period from __________ to __________

(Commission File Number) 333-152805

(866) 241-0670

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

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 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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 7(a)(2)(B) of the Securities Act. ☐

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

As of November 11, 2022, there were 50,904,920 shares of the registrant’s common stock issued and outstanding.

The Healing Company Inc.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Index to Unaudited Condensed Consolidated Financial Statements

The Healing Company Inc.

Condensed Consolidated Balance Sheets

(Stated in U.S. Dollars)

(Unaudited)

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

The Healing Company Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Stated in U.S. Dollars)

(Unaudited)

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

The Healing Company Inc.

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

 (Stated in U.S. Dollars)

(Unaudited)

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

The Healing Company Inc.

Condensed Consolidated Statements of Cash Flows

 (Stated in U.S. Dollars)

(Unaudited)

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

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 1. DESCRIPTION OF BUSINESS AND HISTORY

Historical Information

The Healing Company Inc. (formerly “Lake Forest Minerals) a Nevada corporation, (hereinafter referred to as 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.

Commencing in February 22, 2010, our purpose has been to serve as a vehicle to acquire an operating business.

Current Information

During January 2021, our then sole officer and director, Mr. Jeffrey Taylor sold his 32,000,000 shares of common stock of the Company, representing 73% of the issued and outstanding shares, to certain third parties in a series of private transactions for cash consideration of $300,000. Concurrently Mr. Taylor resigned all positions and Mr. Larson Elmore was appointed to fill ensuing vacancies.

In cooperation with the new majority shareholders, the Company determined to redefine its acquisition objectives to establish a platform of companies that source, harvest and utilize the most natural compounds for holistic nutrition from around the world. In doing so, the Company intends to offer the best natural remedies to connect humans with nature, and prevent and heal lifestyle diseases on a broad scale.

On April 29, 2021, the sole director and our majority shareholder approved a name change of our Company from Lake Forest Minerals Inc. to The Healing Company Inc.

Concurrently the board and majority shareholder approved a resolution to effect a forward stock split of our authorized and issued and outstanding shares of common stock on a four (4) new shares for one (1) share held. Upon effectiveness of the forward split, our authorized capital became 300,000,000 shares of stock and our issued and outstanding shares of common stock increased from 11,000,000 to 44,000,000 shares of common stock, all with a par value of 0.001. The Certificate of Amendment to effect the forward split and the change of name was filed with the Nevada Secretary of State on April 29, 2021. The name change and forward stock split were subsequently reviewed and approved by the Financial Industry Regulatory Authority (FINRA) with an effective date of June 2, 2021. The impact of the forward split has been retroactively applied to all share and per share information contained herein.

On October 7, 2021, the sole director and majority shareholder approved the adoption of our Amended and Restated Articles of Incorporation, which replace our prior articles of incorporation in their entirety. Among other things, the Amended and Restated Articles of Incorporation authorized us to issue (a) 290,000,000 shares of common stock, $0.001 par value per share and (b) 10,000,000 shares of preferred stock, $0.001 par value per share, and establish 5,000,000 Seed Preferred Shares as a first series of such preferred stock.

A Certificate of Amendment was filed with the Nevada Secretary of State on October 7, 2021.

Effective January 10, 2022, Mr. Larson Elmore resigned as the President, Chief Executive Officer and director of the company. Mr. Elmore remained as the Company’s Chief Financial Officer, Treasurer and Secretary. Concurrently, Mr. Simon Belsham was appointed to fill the ensuing vacancies and each of Steven Bartlett, Poonacha Machaiah and Anabel Oelmann were appointed to the Company’s Board.

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 1. DESCRIPTION OF BUSINESS AND HISTORY (continued)

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 EUR25,000 (USD$29,800). Ms. Oelmann is a director of the Company and the sole shareholder of NOEO. On closing, NOEO became a wholly owned subsidiary of the Company, and the Company exited from shell status.

On March 23, 2022, the Board of Directors appointed Kay Koplovitz to the Board of Directors and as Chairman of the Board effective April 1, 2022.

On June 6, 2022, Mr. Elmore resigned his remaining officer positions and Mr. Amit Kapur was appointed CFO, Secretary and Treasurer. 

On July 8, 2022, our board of directors and shareholders holding a majority of our common stock approved an amendment to our Amended and Restated Articles of Incorporation, as amended and restated on October 7, 2021, to increase the Preferred Shares designated as Seed Preferred Stock from 5,000,000 authorized shares of Seed Preferred Stock to 7,800,000 shares of Seed Preferred Stock. The increase to the authorized shares has been retroactively impacted.

On July 27, 2022, the Company incorporated a Nevada Corporation, NOEO, Inc. and has commenced the process of transferring the assets of NOEO GMBH to the Nevada corporation where it will undertake the expansion of the business in North America. Currently the Company is in the process of rebranding the NOEO product line in accordance with North American labeling standards and best practices. As of September 30, 2022, the rebranding process and relocation to North American based operations has not yet concluded..

On August 4, 2022, The Healing Company Inc. (the “Company”) entered into a credit agreement (the “Agreement”) with certain lenders (the “Lenders”) who agreed to extend a credit facility to the Company consisting of up to $75,000,000 (which amount may be increased up to $150,000,000 in accordance with the terms of the Agreement) in aggregate principal amount of term loan commitments (“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”) party to the Agreement. Further in accordance with the terms of the Agreement the Company issued 1,300,123 fully vested warrants for exercise for period of seven (7) years at an exercise price of $2.00 per share to the Administrative Agent.

On September 9, 2022, The Healing Company Inc. (the “Company”) entered into a loan purchase and sale agreement (the “Agreement”) with CircleUp Credit Advisors LLC (the “Seller”) pursuant to which it agreed to purchase from the Seller all loans and loan accommodations (the “Loan”) made by the Seller 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 $2,000,000 to the Seller and issued the Seller a warrant to purchase 1,500,000 restricted shares of the Company’s common stock. 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 Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 1. DESCRIPTION OF BUSINESS AND HISTORY (continued)

On September 27, 2022, the Company issued 3,700,000 shares of unregistered, restricted common stock to various officers, directors and consultants in accordance with certain stock award agreements.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States (“US GAAP”). The Company’s fiscal year end is June 30. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The unaudited financial statements for the three months ended September 30, 2022, are not necessarily indicative of the results for the remainder of the fiscal year. As such, the information included in the condensed consolidated financial statements for the three months ended September 30, 2022, should be read in conjunction with the audited financial statements and accompanying notes included in the Company’s Form 10-K for the Company’s fiscal year ended June 30, 2022, as filed with the Securities and Exchange Commission (“SEC”).

USE OF ESTIMATES - The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America 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 financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates.

INCOME TAXES - The Company provides for income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of September 30, 2022 and June 30, 2022 the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidated statement of operations.

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 and Your Super 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.

NET LOSS PER COMMON SHARE - The Company computes net income (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 income (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 each reporting period:

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 - For purposes of Statements of Cash Flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of September 30, 2022 and June 30, 2022 the Company had $2,453,398 and $6,241,937 in excess of the FDIC insured limit, respectively.

FINANCIAL INSTRUMENTS - The Company’s financial instruments consist principally of other assets consisting of a loan receivable, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820 and 825, the fair value of our cash and cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations, all of which are short term.

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the company. Unobservable inputs are inputs that reflect the company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

REVENUE RECOGNITION - The Company follows ASC 606, Revenue from Contracts with Customers, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. The Company considers its performance obligations satisfied upon shipment and/or delivery of the purchased products to the customer. The Company evaluates returns from customers purchasing product using its eCommerce site on a case-by-case basis and generally will issue replacement product in the limited cases of product returns. The Company has no policy requiring cash refunds. The Company did not record any revenue during the three months ended September 30, 2022, or the fiscal year ended June 30, 2022.

FOREIGN CURRENCY TRANSLATION - 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 wholly owned subsidiary, NOEO, is the Euro.

 The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 FOREIGN CURRENCY TRANSLATION – (Cont’d)

Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s consolidated statements of cash flows. Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in “General and Administrative” expenses on the Company’s consolidated statements of operations.

INVENTORY - Inventory acquired with the purchase of NOEO consists of finished goods and is valued at the lower of cost or market value, with cost determined using First-In-First-Out Method. During the year ended June 30, 2022, the Company fully impaired inventory on hand in the amount of $7,938.

INTANGIBLE ASSETS - The Company generally recognizes assets for brand recognition, trade secret product formulations, and intellectual property such as finite-lived trade names. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets. Amortization for trade names is recognized in sales and marketing expenses. In the year ended June 30, 2022, the Company recorded assets acquired from the acquisition of NOEO of approximately $141,925 and expended a further $10,714 on trademark registration. Intangible assets acquired with NOEO included intellectual property and trademarks, an ecommerce website and branding recognition. The Company initially records acquired intangible assets at their estimated fair values and management reviews these assets periodically for impairment. During the year ended June 30, 2022, the Company recorded impairment of intangible assets of $138,366. As of September 30, 2022, intangible assets on the balance sheet totaled $8,318, net of the costs of a previous filed trademark application abandoned in the quarter in the amount of $2,396.

RECENT ACCOUNTING PRONOUNCEMENTS - The Company has implemented all new accounting pronouncements that are in effects and that may impact its 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- GOING CONCERN

The Company has working capital of $4,297,339 at September 30, 2022. During the year ended June 30, 2022, the Company entered into private placement subscription agreements to raise a total of $10 million by sale of seed preferred stock at $2 per share, of which the Company has collected $9,320,000, with the remaining $680,000 expected to be collected in the second quarter of fiscal 2023. The Company has commenced operations in the wellness sector. During the three months ended September 30, 2022, the Company has entered into a credit agreement with certain lenders who agreed to extend a credit facility to the Company consisting of up to $75,000,000 (which amount may be increased up to $150,000,000 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. Subsequent to September 30, 2022, the Company finalized an acquisition of target operations with substantive recurring revenue in the wellness sector, the results of which will be reflected in the quarter ended December 31, 2022. The Company also entered into subscription agreements for the sale of an additional 500,000 shares of seed preferred stock at $2 per share of which $100,000 has been collected to date. The continuation of the Company as a going concern is dependent upon the ability to attain profitable operations from the Company’s future planned 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 planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 3- GOING CONCERN (continued)

The financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

COVID-19 Pandemic

While it appears the COVID-19 pandemic has subsided, the impact of COVID-19 could continue to have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may severely impact the Company’s ability to raise additional capital and to pursue certain acquisitions. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is highly uncertain and subject to change. The Company is not able to estimate the potential effects of the COVID-19 outbreak on its operations or financial condition for the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise funds or conclude the acquisition of identified businesses.

NOTE 4 – ACQUISITION

On March 10, 2022, the Company closed a Share Purchase Agreement pursuant to which we acquired 100% of the issued and outstanding capital stock of NOEO GmBH, a German corporation, controlled by a member of our board of directors, for total consideration of $28,290 (EUR25,000), paid on closing. NOEO has established a series of wellness products, sold direct-to-consumer focusing on adaptogenic herbs and the marketing of three key products which include joint, memory and digestive complexes taken orally derived from functional mushrooms. The acquisition is in line with the Company’s current mandate of acquiring operating wellness-focused businesses. On closing, the shares of NOEO were transferred to the Company and NOEO became a wholly owned subsidiary of the Company.

The following table sets forth the net assets on acquisition date:

The purchase accounting for the acquisition of NOEO was concluded as of June 30, 2022. On June 30, 2022, the impairment tests carried out by management indicated that certain intangible assets including trademarks, trade names, brand recognition and ecommerce websites were impaired, and the Company recorded a loss on impairment of $138,366 (ref: Note 5).

 The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 5. INTANGIBLE ASSETS

During the year ended June 30, 2022, the Company incurred costs in respect to certain trademarks, and acquired certain intangible assets (re: Note 4) including trademarks, trade names, brand recognition and ecommerce websites.

During the three months ended September 30, 2022, the Company decreased intangible assets by $2,396 with respect to the termination of a previously filed trademark application.

The following table sets forth the details of intangible assets at September 30, 2022:

NOTE 6. RELATED PARTY TRANSACTIONS

Astutia Venture Capital AG (“AVCG”)

As of January 2021, the Company had received a total of $173,616 in advances from its previous CEO, Jeffrey Taylor. On January 25, 2021, all advances made by the previous CEO were assigned to AVCG for $10. as part of a transaction where under AVCG also acquired a portion of 32,000,000 shares sold in a series of private transactions by Mr. Taylor. Further, during the fiscal year ended June 30, 2021, the Company received a further $29,999 in unsecured advances from AVCG for operational expenses. At June 30, 2021 a total of $203,615 included in advances payable, related parties, was due to AVGG.

During the nine months ended March 31, 2022, a minority shareholder of the Company reimbursed AVCG for advances paid in the amount of $29,999, leaving $173,616 due and payable to AVCG at March 31, 2022, which amount was repaid in full prior to June 30, 2022. At September 30, 2022 and June 30, 2022 there were no further funds owing to AVCG.

WAOW Group of Companies

During the fiscal year ended June 30, 2021, WAOW Entrepreneurship Gmbh (“WAOWE”) acquired certain shares of the Company in a series of private transactions with AVCG and Mr. Jeffrey Taylor, our former officer and director. Subsequently, in November 2021, as amended May 22, 2022 WAOWE entered into a subscription agreement with the Company whereunder they agreed to purchase 2,140,000 unregistered shares of Seed Preferred stock at $2 per share for total proceeds of $4,280,000. During the year ended June 30, 2022, the Company received cash proceeds of $3.6M in respect to the aforementioned subscription and issued 1.8M shares of seed preferred stock. A total of $680,000 remains receivable with respect to the remaining 340,000 shares subscribed as at September 30, 2022.

During the year ended June 30, 2022, an affiliated company, WAOW Advisory Group Gmbh (“WAOW”) assumed amounts owing to AVCG in the amount of $29,999 and advanced a further $402,467 to the Company which amount was repaid in fully prior to June 30, 2022.

On March 10, 2022, the Company acquired NOEO (See Note 4). At the date of the acquisition, WAOW had outstanding loans with NOEO with a remaining principal balance of EUR139,793. During the period ended June 30, 2022, WAOW advanced an additional EUR18,000 to NOEO. At September 30, 2022 the loan had a balance outstanding of $154,401 (EUR157,793) which is unsecured and accrues interest at 5% per annum, maturing on December 31, 2022.

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

NOTE 6. RELATED PARTY TRANSACTIONS (continued)

WAOW Group of Companies (continued)

Accrued and unpaid interest at September 30, 2022 totaled $7,239, (June 30, 2022 - $5,771), which is reflected in accounts payable – related parties.

Lee Larson Elmore, Former Secretary

Effective January 31, 2021, Mr. Jeffrey Taylor resigned as the President, Chief Executive Officer, Chief Financial Officer, Treasurer and director of the Company and Mr. Lee Larson Elmore was appointed to fill all officer positions, and as sole director.

On May 1, 2021, Mr. Elmore entered into an agreement with the Company for a six-month term ending October 31, 2021, for a monthly fee of $1,000 plus stock compensation of 15,000 shares at $4.00 per share, or the equivalent cash consideration of $60,000, at Mr. Elmore’s election. As at June 30, 2021, Mr. Elmore had received $2,000 and had accrued expenses of $60,000.

On November 1, 2021, Mr. Elmore entered into a revised compensation agreement with the Company through his controlled company, Administrative Services LLC, whereby services of Mr. Elmore would be invoiced at a rate of $5,000 per month commencing November 1, 2021.

During the fiscal years ended June 30, 2022 and 2021, respectively, Mr. Elmore and his controlled company invoiced $40,720 and $62,000 for management services. Mr. Elmore resigned as CEO, Director and President effective January 10, 2022, and as Secretary, Treasurer and CFO on June 6, 2022. A total of $2,800 remained due and payable to Mr. Elmore at June 30, 2022.

During the three months ended September 30, 2022, Mr. Elmore received payments of $1,800, leaving $1,000 due and payable at September 30, 2022.

Simon Belsham, CEO, President and Director

On November 27, 2021, as amended, September 1, 2022, the Company entered into a two-year employment agreement with Simon Belsham whereby Mr. Belsham was engaged by the Company to provide certain management services and to accept the appointment of Chief Executive Officer, President and Director immediately upon the Board making such appointment. The agreement provides for annual compensation of $400,000 in years one and two and $500,000 per annum in year three, a $75,000 signing bonus (which amount was paid during the six months ended December 31, 2021) and for the first calendar year completed during Mr. Belsham’s employment an annual bonus, with a maximum pay-out opportunity of one hundred thousand dollars ($100,000). During the second calendar year completed the annual bonus has a maximum pay-out opportunity of two hundred thousand dollars ($200,000). Further, under the terms of the employment agreement, as amended, Mr. Belsham has been issued a total 1,000,000 shares of restricted common stock, subject to a restricted stock award agreement, whereby 25% of such award vests on the one-year anniversary of September 1, 2021, and 1/36^th each month thereafter, for which the Company has recorded stock-based compensation expense of $778,253 in the year ended June 30, 2022. During the three months ended September 30, 2022, the Company recorded an additional $236,301 as stock based compensation expenses. At September 30, 2022 $4,399 was payable to Mr. Belsham in respect to expense reimbursements.

On September 1, 2022, Mr. Belsham acquired 2.5 million shares of the Company’s common stock in a private secondary stock purchase transaction with Ingenious Investments AG, a corporation controlled by Wanja Oberhof and a greater than 10% shareholder, for consideration of $0.001 per share, or $2,500, as determined by a 409A valuation report.

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 6. RELATED PARTY TRANSACTIONS (continued)

Steven Bartlett, Director

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, whereby FSL will provide various services. Under the terms of the agreement, as amended FSL will be paid $30,000 per month. Further FSL has been granted a total of 1,000,000 non statutory stock options of which 300,000 vest on January 10, 2023, and a further 700,000 vest in accordance with certain performance based terms. During the year ended June 30, 2022, the Company recorded $530,137 as stock-based compensation in respect to the aforementioned option grant. During the year ended June 30, 2022, FSL was paid $109,178 for services rendered. In addition, R Agency, a marketing company also controlled by Mr. Bartlett was paid $88,459 in the year ended June 30, 2022, for services rendered. During the three months ended September 30, 2022, under the terms of the amended contract, FSL was paid $65,675 and the Company recorded an additional $283,562 as stock-based compensation.

On February 16, 2022, the Company entered into a Board of Directors Services Agreement with Steven Bartlett with a January 1, 2022 start date, whereunder Mr. Bartlett is to receive an annual fee of $37,500 paid in equal monthly installments over 12 months and was granted 125,000 non incentive stock options with an exercise price of $0.001 per share, vesting over a two (2) year period following the Vesting Start Date (January 1, 2022) with 12.5% of the Option Shares vesting on each three (3) month anniversary of the Vesting Start Date. During the year ended June 30, 2022, Mr. Bartlett was paid $18,750 under the terms of his contract and the Company recorded stock-based compensation expense of $115,312 in respect to 31,250 vested stock options. During the three months ended September 30, 2022, Mr. Bartlett was paid $9,375 under the terms of his contract, and the Company recorded stock-based compensation expense of $57,656 in respect to a further 15,625 options which vested during the quarter.

Poonacha Machaiah, Director

On July 16, 2021, the Company entered into an agreement with Poonacha Machaiah, in relation to his proposed appointment to the Board of Directors of the Company. Under the terms of the agreement, Mr. Machaiah is to receive an annual fee of $37,500 commencing January 1, 2022, paid in equal monthly installments over 12 months and was granted 125,000 non incentive stock options with an exercise price of $0.001 per share, vesting over a two (2) year period following the Vesting Start Date (December 28, 2021) with 12.5% of the Option Shares vesting on each three (3) month anniversary of the Vesting Start Date. During the year ended June 30, 2022, the company accrued $15,625 under the terms of his agreement, which amount is included in accounts payable, related parties, and the Company recorded stock-based compensation expense of $115,312 in respect to 31,250 vested stock options. During the three months ended September 30, 2022, the company accrued a further $9,375 under the terms of his agreement, which amount is included in accounts payable, related parties, and the Company recorded stock-based compensation expense of $57,656 in respect to 15,625 options which vested during the quarter.

Anabel Oelmann, Director

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 EUR25,000 (USD$29,800). Ms. Oelmann is a director of the Company and was the sole shareholder of NOEO. See Note 4.

At September 30, 2022 and June 30, 2022, Ms. Oelmann, through her controlled corporate entity, Trinity Holdings GmbH was owed advances totaling $2,935 (EUR3,000) by the Company’s wholly owned subsidiary, NOEO. In addition, at September 30, 2022 and June 30, 2022 a total of $959 (EUR980) is included in accounts payable, related parties, in respect to expense reimbursements owing to Ms. Oelmann.

 The Healing Company Inc.203615Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 6. RELATED PARTY TRANSACTIONS (continued)

Kay Koplovitz, Chairperson of the Board

On March 23, 2022, the Board of Directors approved a Board Service Agreement (the “Agreement”) and appointed Kay Koplovitz to the Board of Directors and as Chairman of the Board effective April 1, 2022. Under the agreement to commence April 1, 2022, Ms. Koplovitz will be paid an annual fee of $50,000 for Director’s services (the “Director’s Fee”), which shall be payable quarterly, in arrears, as long as Director continues to fulfill her duties and provide the services. A total of $12,500 was accrued during the year ended June 30, 2022, in respect to this Agreement and is included in accounts payable, related parties. As further payment for the Director’s provision of the services the Company issued two-hundred fifty thousand (250,000) shares of restricted common stock to Ms. Koplovitz, subject to a restricted stock award agreement whereby the 250,000 shares shall vest ratably over the two (2) year period commencing on the Effective Date of the Agreement (“Vesting Start Date”) as follows: 1/8th of the total shares shall vest each quarter, such that 100% of the Shares shall be vested as of the second anniversary of the Vesting Start Date, provided that Director is still a Director for the Company on each such vesting date. During the year ended June 30, 2022, the Company recorded a total of $117,187 as stock-based compensation in respect to 31,250 vested stock awards.

During the three months ended September 30, 2022, the Company accrued an additional $12,500 in respect to Director’s services and recorded a further $117,187 as stock-based compensation in respect to a further 31, 250 vested stock awards.

Amit Kapur, CFO

On June 2, 2022, Mr. Amit Kapur entered into an at-will offer of employment whereunder he was appointed Chief Financial Officer with an annual base salary of $300,000. Under the terms of the agreement Mr. Kapur is eligible for discretionary annual bonuses as determined by the Board payable 75 days following the end of each calendar year. Further Mr. Kapur has been issued a total of 1,250,000 shares of restricted common stock, subject to a restricted stock award agreement, whereby 25% of such award vests on the one-year anniversary of June 6, 2022, and 1/36^th each month thereafter, for which the Company has recorded stock-based compensation expense of $80,265 in the year ended June 30, 2022. During the three months ended September 30, 2022, the Company recorded stock based compensation expense of $295,376 in respect to stock awards vested during the quarter.

At September 30, 2022 $2,075 was payable to Mr. Kapur in respect to expense reimbursements.

NOTE 7. 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.

NOTE 8. STOCKHOLDERS’ EQUITY (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 four (4) new shares for one (1) share held. Upon effectiveness of the forward split, the authorized shares increased to 300,000,000 shares of 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.

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 8. STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

The forward stock split was approved by the Financial Industry Regulatory Authority (FINRA) with an effective date of June 2, 2021 as such all capital transaction have been retroactively restated to show the effect of the stock split.

On October 7, 2021, the Company amended its authorized capital to 290,000,000 common shares and 10,000,000 preferred shares 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, our board of directors and shareholders holding a majority of our common stock approved an amendment to our Amended and Restated Articles of Incorporation, as amended and restated on October 7, 2021, to increase the Preferred Shares designated as Seed Preferred Stock from 5,000,000 authorized shares of Seed Preferred Stock to 7,800,000 shares of Seed Preferred Stock. The increase to the authorized shares has been retroactively impacted.

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 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, 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.

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

On March 7, 2022, the Company issued 4,920 shares of our common stock subscribed for under definitive agreements with 41 non-U.S. persons in a private transaction (the “Transaction”). Under the terms of the Transaction, the Company sold 4,920 Common Shares at $2.00 per share for aggregate proceeds of $9,840.

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 8. STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

Common Stock (Cont’d)

During the three months ended September 30, 2022, the Company issued a total of 3,700,000 stock awards to various individuals.

As at September 30, 2022 and June 30, 2022, the Company has a total of 47,704,920 and 44,004,920 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 $10,000,000. As at September 30, 2022, the Company had received total proceeds of $9,320,000 and is awaiting shortfall payments from one subscriber totaling $680,000.

At September 30, 2022 and June 30, 2022, the Company had a total of 4,660,000 shares of Seed Preferred Stock issued and outstanding.

NOTE 9. 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 fiscal 2022 and the three months ended September 30, 2022, the Company granted the following Stock options and Stock awards under its 2022 Plan:

*Vesting Schedule:

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 9. STOCK BASED COMPENSATION (Continued)

Stock Options and Stock Awards: (continued)

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

The Company recorded $1,885,381 as stock-based compensation expenses during the fiscal year ended June 30, 2022 and a further $1,033,404 in the three months ended September 30, 2022. Deferred compensation expense associated with unvested stock awards is $10,956,215 as of September 30, 2022. The weighted average period over which these costs are expected to be recognized is approximately 2 years.

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 9. STOCK BASED COMPENSATION (Continued)

 Stock Options and Stock Awards: (continued)

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

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 $3,442,847 as stock-based compensation expenses during the fiscal year ended June 30, 2022 in respect to vested options and a further $795,020 during the three months ended September 30, 2022. Unamortized compensation expense associated with unvested stock options is $8,479,321 as of September 30, 2022. The weighted average period over which these costs are expected to be recognized is approximately 7.5 years.

NOTE 10. WARRANTS

Warrant to Purchase Seed Preferred Stock

On August 4, 2022, in accordance with a credit facility (ref: Note 11(h)) the Company 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. 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 $3,627,980 as financing costs, included in professional and consulting fees, during the three months ended September 30, 2022.

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

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 10. WARRANTS

Warrant to Purchase Seed Preferred Stock (Cont’d)

Warrant to Purchase Common Stock

On September 9, 2022, in conjunction with a Loan Purchase and Sale Agreement, (ref: Note 12 – Loan Purchase and Sale Agreement) the Company issued the Seller 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 3.44%, expected term of 7 years, expected volatility of between 67.44% to 69.38% and dividend yield of 0%. The Company has valued the warrants as of the transaction date with a total value of $3,910,320, all of which remains unamortized as of the date of this report. The first tranche of warrants do not initially vest until the one year anniversary of the agreement date, and therefore there is no financial impact as a result of the warrant during the current reporting period ended September 30, 2022.

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

NOTE 11. COMMITMENTS

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 11. COMMITMENTS (continued)

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 11. COMMITMENTS (continued)

NOTE 12 – LOAN PURCHASE AND SALE AGREEMENT

On September 9, 2022, the Company entered into a loan purchase and sale agreement (the “Agreement”) with CircleUp Credit Advisors LLC (the “Seller”) pursuant to which it agreed to purchase from the Seller all loans and loan accommodations (the “Loan”) made by the Seller 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 $2,000,000 to the Seller and issued the Seller a warrant to purchase 1,500,000 restricted shares of the Company’s common stock. 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. As of the date of the Agreement, the outstanding principal amount of the Loan along with accrued but unpaid interest was approximately $7.614 million. The Loan stopped accruing interest on July 22, 2022.

The Healing Company Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2022

NOTE 12 – LOAN PURCHASE AND SALE AGREEMENT (Cont’d)

The Company purchased the Loan to provide additional time for the negotiation of the Company’s acquisition of the assets of Your Super Company, which occurred subsequent to the quarter ended September 30, 2022 (ref: Note 13, Subsequent Events). The Loan acquired has been recorded on the balance sheets as “Other Assets” at its fair value of cash proceeds paid of $2,000,000. The Company has valued the warrants granted to CircleUp as of the transaction date, September 9, 2022, with a total value of $3,910,320 (ref: Note 10 - Warrants). The first tranche of warrants do not initially vest until the one year anniversary of the agreement date, or September 30, 2023. The value of the warrants will amortized ratably over the vesting period.

NOTE 13 - SUBSEQUENT EVENTS

On October 7, 2022, we entered into definitive agreements with one U.S. accredited investor and one non-U.S. person to issue a new tranche of our seed preferred stock, $0.001 par value per share (the “Seed Preferred Shares”), in a private placement (the “Offering”). Under the terms of the Offering, we agreed to sell an aggregate of 500,000 Seed Preferred Shares at $2.00 per share for aggregate proceeds of $1,000,000. The Seed Preferred Shares sold in the Offering are exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act as not involving a public offering, and Regulations D and S, thereunder. The Offering was made without any form of general solicitation to sophisticated investors and with full access to any information requested by the investors regarding us and the Seed Preferred Shares. To date, we have received $100,000 of the $1,000,000 subscribed for Seed Preferred Shares.

On October 13, 2022, The Healing Company, Inc., a Nevada corporation (“HLCO”) and HLCO Borrower, LLC, a Delaware limited liability company (either being referred to as the “Buyer”) entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Your Super, Inc., a Delaware corporation (the “Seller”), and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative of the stockholders (the “Stockholders”) of the Seller (in such capacity, the “Stockholders’ Representative”), pursuant to which the Buyer agreed to acquire (the “Acquisition”) substantially all of the Seller’s right, title and interest in and to all of the assets, properties, rights, interests, claims and goodwill of the Seller, tangible and intangible, of every kind and description, including all of the capital stock of the subsidiaries of the Seller. The Seller is engaged in the business of manufacturing and marketing non-GMO and certified organic superfoods (the “Business”). It is on a mission to improve people’s health with the power of super plants. Under the Purchase Agreement, the total consideration to be paid by the Buyer for the Business and acquired assets at the closing (the “Closing”) of the transactions contemplated by the Purchase Agreement will consist of (i) 3,200,000 shares of HLCO common stock (the “Buyer Shares”) valued at $2.50 per share for an aggregate value of $8 million and (ii) the forgiveness of $7,614,444.40 of outstanding debt of the Seller owed to HLCO (the “Loan Obligation”). The Loan Obligation was originally an obligation of the Seller to CircleUp Credit Advisors LLC. HLCO acquired the Loan Obligation from CircleUp Advisors LLC on September 9, 2022, for cash consideration of $2,000,000 and a seven-year warrant to purchase up to 1,500,000 shares of HLCO common stock at an exercise price of $2.00 per share. The Buyer Shares are restricted securities and will also be subject to a contractual lock-up pursuant to which the holder(s) of the Buyer Shares will agree not to transfer any of the Buyer Shares for a three-year period, and then the Buyer Shares will be released from the lock-up in four equal quarterly installments beginning on the first day of the fiscal quarter beginning after the third anniversary of the Closing date and on the first day of each of the next three fiscal quarters, in accordance with the lock up provisions set forth in the Purchase Agreement. Under the Purchase Agreement, the Seller may distribute the Buyer Shares to the Stockholders after one year from the Closing, subject to the recipient Stockholders being subject to the original lock-up terms. The Buyer Shares carry no registration rights that require or permit the filing of any registration statement in connection with their issuance.

In connection with our acquisition of the assets of Your Super, Inc., on October 27, 2022, we received a $3 million loan under the i80 credit facility referenced above. As an inducement for the loan and for a waiver of certain terms of the credit facility with respect to this loan, we issued to the administrative agent for the credit facility 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. In addition, Your Super HLCO LLC, our indirectly wholly owned subsidiary that we established to house the acquired assets of Your Super, Inc. and to run our new Your Super business, entered into a supplement to guarantee and collateral agreement with the administrative agent of the i80 credit facility pursuant to the terms of which, Your Super HLCO LLC pledged all of its assets to the administrative agent as collateral for the $3 million loan.

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

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

This Quarterly Report on Form 10-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 12, 2022, 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 beliefs 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.

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, 2022 and the notes thereto appearing elsewhere in this Report and the Company’s audited financial statements for the fiscal year ended June 30, 2022, as filed with the SEC on Form 10-K on October 12, 2022.

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 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.

Our first acquisition, NOEO, is a German based company involved in direct-to-consumer brand focusing on adaptogenic herbs. Our products can be found at http://www.noeo.co. We are currently in the process of relocating these operations to the United States along with a rebranding effort.

Recent Developments

On October 13, 2022, we concluded the acquisition of the assets and business of Los Angeles based Your Super, Inc. in order to capitalize on two high-growth wellness sectors: superfoods and plant-based nutrition. Your Super ranked #1 in the food and beverage category on Inc.’s 2021 5,000 fastest growing company list, placing 25th overall with a three-year revenue growth of 11,477 percent and $180 million in cumulative revenue. Your Super is a next-gen industry leader in plant-based living. Your Super’s plant-based superfood and protein mixes contain 5-6 naturally dried superfoods. Superfoods are nutrient-rich foods considered to be high in micronutrients like vitamins, minerals, antioxidants, phytonutrients and enzymes, beneficial for health and well-being. Every ingredient is grown, harvested, 3rd party tested, and packaged 100% sustainably. The ingredients are certified organic, non-GMO certified, glyphosate-free, plant-based and gluten-free. Your Super products do not contain any sweeteners, stevia, artificial flavors, fillers, preservatives or additives.

On August 4, 2022, we entered into a credit agreement with certain lenders who agreed to extend a credit facility to us consisting of up to $150,000,000 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 established by an administrative agent party to the credit agreement. 

In connection with our acquisition of the assets of Your Super, Inc., on October 27, 2022, we received a $3 million loan under the i80 credit facility referenced above. As an inducement for the loan and for a waiver of certain terms of the credit facility with respect to this loan, we issued to the administrative agent for the credit facility 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. In addition, Your Super HLCO LLC, our indirectly wholly owned subsidiary that we established to house the acquired assets of Your Super, Inc. and to run our new Your Super business, entered into a supplement to guarantee and collateral agreement with the administrative agent of the i80 credit facility pursuant to the terms of which, Your Super HLCO LLC pledged all of its assets to the administrative agent as collateral for the $3 million loan.

Results of Operations

Three months Ended September 30, 2022, compared to the three months ended September 30, 2021

Revenue

The Company did not record any revenue during the three months ended September 30, 2022, and 2021.

Operating Loss

The Company had an operating loss of $6,675,703 for the three-month period ended September 30, 2022, as compared to an operating loss for the three-month period ended September 30, 2021, of $595,775. The substantial increase to our current period loss is a direct result of an increase in operational expenses of $6,079,928, consisting of increases to general and administrative expenses of $2,242,519, predominantly related to certain stock based compensation of $1,828,424 in the current period, an increase to professional and consulting fees of $3,467,474 all of which relates to the issuance of certain share purchase warrants in respect to a financing line valued at $3,627,980, and an increase to management fees of $369,935. These increased costs were a result of the Company’s decision to change its business direction and move to retain additional management and operational staff as well as legal and accounting staff to support its planned growth in the health and wellness sector.

The following table summarizes key items of comparison and their related increase for the three-month periods ended September 30, 2022 and September 30, 2021.

Three Months ended September 30, 2022 and 2021

Other Expenses

For the three months ended September 30, 2022, the Company recorded interest expenses of $604,662, including financing costs of $562,500 with respect to a newly acquired credit facility, with no comparable expense for the three months ended September 30, 2021.

Net Loss

The Company recorded a net loss of $7,280,365 at September 30, 2022 as compared to a net loss of $595,775 at September 30, 2021.

Statements of Cash Flows

September 30, 2022 and 2021

The following table summarizes our cash flows for the periods presented:

Cash Used in Operating Activities

Net Cash used in operating activities for the three months ended September 30, 2022 was $1,787,632 as compared to $392,145 of cash used by operating activities in the three months ended September 30, 2021.

Changes in operating activities in the three months ended September 30, 2022, include an increase in accounts payable and accrued expenses of $108,145, an increase to related party payables of $29,255, a decrease to other current liabilities of $33, an increase to prepaid expenses of $101,038, and non-cash adjustments including stock based compensation of $1,828,424 and warrants issued for financing costs of $3,627,980 offset by our net loss of $7,280,365. Changes in operating activities in the three months ended September 30, 2021, included an increase in accounts payable and accrued expenses of $143,630 and an increase of $60,000 in accounts payable and accrued expenses – related party, combined with a net loss of $595,775 for total cash used in operating activities of $392,145.

Cash provided by Investing Activities

During the three months ended September 30, 2022, investing activities provided net cash of $1,997,604, which was comprised of other assets in the amount of $2,000,000 offset by a decrease in intangible assets of $2,396. During the three months ended September 30, 2021, there were no investing activities.

Cash Provided by Financing Activities

During the three months ended September 30, 2021 the Company received advances from related parties in the amount of $392,145 with no comparable activity during the three month period ended September 30, 2022.

Liquidity and Capital Resources

Our balance sheet as of September 30, 2022, reflects current assets of $4,893,017 consisting of $2,706,441 cash on hand and prepaid expenses of $186,576. We had working capital of $4,297,339 (June 30, 2022- $6,107,031) and have reported accumulated losses to date of $15,871,290. We have unfunded subscriptions totaling $1,580,000 at the date of this report with respect to an offering of Seed Preferred Shares and expect to receive those funds in the quarter ended December 31, 2022. The Company has commenced operations in the wellness sector. During the three months ended September 30, 2022, the Company has entered into a credit agreement with certain lenders who agreed to extend a credit facility to the Company consisting of up to $75,000,000 (which amount may be increased up to $150,000,000 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. Subsequent to September 30, 2022, the Company finalized an acquisition of target operations with substantive recurring revenue in the wellness sector, the results of which will be reflected in the quarter ended December 31, 2022. The Company believes that upon receipt of the subscription proceeds there will be sufficient working capital to enable the Company to carry out its stated plan of operation for the next twelve months.

Going Concern

The Company has working capital of $4,297,339 at September 30, 2022. During the year ended June 30, 2022, the Company entered into private placement subscription agreements to raise a total of $10 million by sale of seed preferred stock at $2 per share, of which the Company has collected $9,320,000, with the remaining $680,000 expected to be collected in the second quarter of fiscal 2023. The Company has commenced operations in the wellness sector. During the three months ended September 30, 2022, the Company has entered into a credit agreement with certain lenders who agreed to extend a credit facility to the Company consisting of up to $75,000,000 (which amount may be increased up to $150,000,000 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. Subsequent to September 30, 2022, the Company finalized an acquisition of target operations with substantive recurring revenue in the wellness sector, the results of which will be reflected in the quarter ended December 31, 2022. The Company also entered into subscription agreements for the sale of an additional 500,000 shares of seed preferred stock at $2 per share of which $100,000 has been collected to date. The continuation of the Company as a going concern is dependent upon the ability to attain profitable operations from the Company’s future planned 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 planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

COVID-19 Pandemic

While it appears the COVID-19 pandemic has subsided, the impact of COVID-19 could continue to have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may severely impact the Company’s ability to raise additional capital and to pursue certain acquisitions. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is highly uncertain and subject to change. The Company is not able to estimate the potential effects of the COVID-19 outbreak on its operations or financial condition for the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise funds or conclude the acquisition of identified businesses.

Off Balance Sheet Arrangements

The Company currently has no off-balance sheet arrangements.

Critical Accounting Policies

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in the Notes to our Financial Statements. 

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 - For purposes of Statements of Cash Flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of September 30, 2022 and June 30, 2022 the Company had $2,453,398 and $6,241,937 in excess of the FDIC insured limit, respectively.

INTANGIBLE ASSETS - The Company generally recognizes assets for brand recognition, trade secret product formulations, and intellectual property such as finite-lived trade names. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets. Amortization for trade names is recognized in sales and marketing expenses. In the year ended June 30, 2022, the Company recorded assets acquired from the acquisition of NOEO of approximately $141,925 and expended a further $10,714 on trademark registration. Intangible assets acquired with NOEO included intellectual property and trademarks, an ecommerce website and branding recognition. The Company initially records acquired intangible assets at their estimated fair values and management reviews these assets periodically for impairment. During the year ended June 30, 2022, the Company recorded impairment of intangible assets of $138,366. As of September 30, 2022, intangible assets on the balance sheet totaled $8,318, net of the costs of a previous filed trademark application abandoned in the quarter in the amount of $2,396.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06 to simplify the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The update also provides for expanded disclosure requirements to increase transparency. For SEC filers, excluding smaller reporting companies, this update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, this Update is effective for fiscal years beginning after December 15, 2023, including interim periods therein.

Subsequent Events

On October 7, 2022, we entered into definitive agreements with one U.S. accredited investor and one non-U.S. person to issue a new tranche of our seed preferred stock, $0.001 par value per share, in a private placement. Under the terms of this private placement, we agreed to sell an aggregate of 500,000 shares of our seed preferred stock at $2.00 per share for aggregate proceeds of $1,000,000. To date, we have received $100,000 of the $1,000,000 aggregate amount of the subscribed for shares.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is a smaller reporting company and are not required to provide this information.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of September 30, 2022, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer concluded that, based on the material weaknesses discussed below, our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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 as management was comprised of only one person, who is the Company’s principal executive officer and principal financial officer and, (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.

In order to mitigate the foregoing material weakness, we have engaged additional management and outside accounting consultants with significant experience in the preparation of financial statements in conformity with GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity with GAAP. Further, it is the intent of management to establish an audit committee compliant with the regulations to ensure adequate board oversight going forward. We will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.

We are currently hiring additional staff to provide greater segregation of duties. Management will continue to assess this matter to determine whether improvement in segregation of duty is adequately established. In addition, we have expanded our board to include independent members and may add additional independent directors, if and when deemed necessary.

Going forward, we intend to evaluate our processes and procedures and, where practicable and resources permit, implement changes in order to have more effective controls over financial reporting.

Changes in Internal Control over Financial Reporting

During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management of the Company knows of no material, existing or pending legal proceedings against the Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. 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 12, 2022.

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.

ITEM 6. EXHIBITS

*Filed herewith

SIGNATURES

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