Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this Report. All monetary figures are presented in U.S. dollars, unless otherwise indicated.
Certain information contained in this MD&A includes “forward-looking statements.” Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition and results of operations, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our existing and proposed business, including many assumptions regarding future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should,” “expect,” “intend,” “plan,” anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or similar terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith, and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward- looking statements as a result of various risks, uncertainties and other factors
In light of these risks and uncertainties, and especially given the nature of our existing and proposed business, there can be no assurance that the forward-looking statements contained in this section and elsewhere in this Annual Report on Form 10-K will in fact occur. Potential investors should not place undue reliance on any forward- looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
Results of Operations for the Years Ended June 30, 2025 and 2024
Year Ended June 30,
Period Change
Increase (Decrease)
Amount
Amount
$ Amount
% Change
Revenues - net
Cost of sales
Impairment of goodwill
Depreciation and amortization
General and administrative expenses
Loss from operations
Other income (expense) - net
Loss from continuing operations
Loss from discontinued operations
Net Loss
A. Revenues - net
Revenues were $482,285 in fiscal 2025 compared to no revenues from continuing operations in fiscal 2024. The increase was attributable to (i) the launch of Foodservice Packaging Distribution following its acquisition on March 31, 2025, and (ii) the commencement of initial customer billings under the Robotics-as-a-Service (“RaaS”) segment. The absence of revenues in the prior year fully accounts for the year-over-year increase.
B. Cost of Sales
Cost of sales was $412,503 in fiscal 2025, reflecting direct product sourcing, distribution, and equipment deployment costs associated with the packaging and RaaS businesses. As both segments only commenced near the end of fiscal 2025, no comparable costs were recorded in fiscal 2024.
C. Impairment of Goodwill
In fiscal 2025, the Company recognized a full impairment charge of $897,542 related to goodwill previously assigned to the RaaS (Robotics-as-a-Service) reporting unit. The impairment was triggered by continued operating losses, minimal revenues, and the inability to achieve the planned commercialization milestones for the legacy RaaS platform.
Subsequent to the impairment, the Company initiated a strategic realignment of its robotics technology initiatives under Skytech , a newly acquired subsidiary focused on integrating advanced automation and sensor systems into its future product roadmap. The goodwill impairment relates solely to historical RaaS operations and does not affect the carrying value of assets or goodwill attributable to Skytech.
No goodwill impairment was recorded in fiscal 2024.
D. Depreciation and Amortization
Depreciation and amortization totaled $45,552 in fiscal 2025 compared to none in the prior year. The increase reflects the capitalization of property, equipment, and intangible assets acquired as part of the SWC acquisition, which support both the packaging and RaaS operations.
E. General and Administrative Expenses
General and administrative expenses were $3,673,760 in fiscal 2025, compared to $712,052 in fiscal 2024. The $2,961,708 increase reflects the build-out of corporate infrastructure to support public company compliance and governance, expansion of finance, legal, and IT functions, and personnel costs associated with scaling the RaaS business. The increase also includes nonrecurring start-up costs incurred to establish the foodservice packaging distribution business following its acquisition.
F. Loss from operations
Loss from operations was $4,547,072 in fiscal 2025, compared to $712,052 in fiscal 2024. The increase of $3,789,468 was primarily due to higher general and administrative expenses, recognition of the goodwill impairment charge, and the addition of cost of sales and depreciation related to the newly launched packaging and RaaS operations.
G. Other income (expense) – net
Other expense, net, was $3,389,112 in fiscal 2025 compared to $2,241,410 in fiscal 2024, an unfavorable change of $1,147,702. The increase in expense was driven by higher interest costs associated with financing activities, amortization of debt issuance costs, and fair value losses on financing instruments and derivatives.
H. Loss from Continuing Operations
Loss from continuing operations totaled $7,936,184 in fiscal 2025, compared to $2,953,462 in fiscal 2024. The increase of $4,982,722 reflects the combined impact of the goodwill impairment, increased general and administrative costs, and higher financing and non-operating expenses.
I. Loss from Discontinued Operations
Loss from discontinued operations, which relates to the legacy Snacks and Beverages segment, was $179,694 in fiscal 2025 compared to $282,044 in fiscal 2024. The $102,350 reduction in loss reflects lower exit-related costs as the segment continued to wind down.
J. Net Loss
Net loss was $8,115,878 in fiscal 2025 compared to $3,235,506 in fiscal 2024, an unfavorable change of $4,880,372. The larger net loss primarily reflects the launch of packaging and RaaS operations (including associated start-up losses), the recognition of the goodwill impairment, increased corporate overhead, and higher non-operating expenses. See discussion of all items above.
Other Income (Expense)
Year Ended June 30,
Period Change
Increase (Decrease)
Other income (expense) - net
Amount
Amount
$ Amount
% Change
Interest income
Other income
Loss on debt extinguishment
Derivative expense
Interest expense (including amortization of debt discount)
Change in fair value of derivative liabilities
Loss on settlement of pre-existing assets
Gain on debt extinguishment - derivative liabilities
Total other income (expense) - net
Other Income (Expense) – Net
Other expense, net, was $(3,389,112) in fiscal 2025 compared to $(2,241,410) in fiscal 2024, an unfavorable change of $1,147,702 (51%). The increase in expense was primarily attributable to new acquisition-related derivative items (D and F – SWC notes acquired) and the loss on settlement of pre-existing assets (prior to acquisition of SWC) (G), partially offset by lower interest expense (E) and a gain on debt extinguishment – derivative liabilities (H).
A — Interest income. Increased $57,520, or 327%, to $75,119 in fiscal 2025 compared to $17,599 in fiscal 2024. The increase reflects accrued interest income on a higher loan balance during 2025.
B — Other income. Increased $9,810 in fiscal 2025 due to miscellaneous, non-recurring receipts; there was no comparable item in 2024.
C — Loss on debt extinguishment. Increased slightly by $2,225, to $(113,955) in fiscal 2025 from $(111,730) in fiscal 2024. In both years, this line item reflected one-time non-cash losses related to modifications and settlements of debt instruments.
D — Derivative expense. New non-cash charge of $(653,792) in fiscal 2025, compared to none in 2024. This arose from debt instruments acquired with SWC that became convertible upon closing on March 31, 2025, triggering recognition of an embedded derivative liability at fair value. The excess of the derivative’s initial fair value over proceeds was expensed immediately.
E — Interest expense (including amortization of debt discount). Decreased $621,212, or 29%, to $(1,526,067) in fiscal 2025 from $(2,147,279) in fiscal 2024. The decrease was primarily due to lower non-cash amortization of debt discounts ($332,021 in 2025 versus $638,194 in 2024) and the settlement of higher-cost debt.
F — Change in fair value of derivative liabilities. New non-cash loss of $(190,102) in fiscal 2025, arising from period-end remeasurement of embedded conversion features on SWC-related convertible notes. No comparable item existed in 2024.
G — Loss on settlement of pre-existing assets. New $(1,490,803) non-cash loss in fiscal 2025, recognized upon settlement of intercompany advances among SWC, FHVH, and NGTF, such pre-existing relationships are measured and recognized separately from the business combination.
H — Gain on debt extinguishment – derivative liabilities. New gain of $500,678 in fiscal 2025, resulting from the remeasurement of the derivative liability upon repayment and conversion of principal on a convertible note (Loan #17), consistent with ASC 470-50.
Net Loss
Year Ended June 30,
Period Change
Increase (Decrease)
Amount
Amount
$ Amount
% Change
Net loss for the year ended June 30, 2025, was $8,115,878, compared to a net loss of $3,235,506 for the year ended June 30, 2024. This represents an increase in net loss of $4,880,372, or 151%.
The increase in net loss was primarily the result of:
Higher general and administrative expenses – General and administrative expenses increased by $2,961,708, reflecting the expansion of corporate overhead to support public company compliance, additional headcount and infrastructure to scale the RaaS business, and start-up costs to establish the packaging business following its March 31, 2025 acquisition. These expenses were not present in the prior year and account for a significant portion of the increase in net loss.
Recognition of goodwill impairment – The Company recorded a $897,542 impairment charge in fiscal 2025, fully writing off goodwill associated with part of the RaaS reporting unit (FHVH). This non-cash charge did not occur in fiscal 2024.
Increased other expense – net – Other expense, net, rose by $1,147,702, largely reflecting acquisition-related non-cash charges in fiscal 2025, including:
Derivative expense of $653,792,
Loss on settlement of pre-existing assets of $1,490,803, and
Change in fair value of derivative liabilities of $190,102.
These were partially offset by a $500,678 gain on debt extinguishment – derivative liabilities and a $621,212 reduction in interest expense from the settlement of higher-cost debt obligations.
New operating costs – Fiscal 2025 included $412,503 of cost of sales and $45,552 of depreciation and amortization attributable to the acquired packaging and robotics operations. These expenses did not exist in the prior year.
Partially offsetting factors – The overall increase in net loss was mitigated by the Company’s first year of continuing operations revenues ($482,285 in fiscal 2025), which partially offset the additional costs and charges recognized during the year.
The majority of the year-over-year increase in net loss reflects the Company’s strategic acquisitions of SWC and Foodservice Packaging and the integration of those businesses, coupled with acquisition-related financing structures. Many of these charges were non-cash and non-recurring in nature but were necessary to position the Company for future growth.
Liquidity and Capital Resources
Liquidity and Going Concern
As reflected in the accompanying consolidated financial statements, for the year ended June 30, 2025, the Company had:
Net loss available to common stockholders of $8,127,444; and
Net cash used in operations was $1,634,483
Additionally, at June 30, 2025, the Company had:
Accumulated deficit of $46,753,844
Stockholders’ deficit of $(17,332,174)
Working capital deficit of $10,688,767; and
Cash on hand of $350,231
Following its recent acquisitions of SWC and Skytech, the Company has initiated early customer deployments under its Robotics-as-a-Service (“RaaS”) model and commenced revenue-generating activities. While these deployments represent an important step toward building recurring revenue, revenues to date are not sufficient to fund ongoing operations. Based on current operating levels and cash usage forecasts, existing cash resources are not sufficient to fund operations for the twelve months following the issuance of these financial statements without additional financing.
Historically, the Company has relied on third-party and related-party debt financing. There is no assurance that additional financing will be available on commercially acceptable terms, or at all. Furthermore, there is no assurance that any funds raised will be sufficient to enable the Company to complete its initiatives or achieve profitable operations.
The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the ability to successfully scale both its Foodservice Packaging and RaaS businesses, expand into new markets, respond to competitive pressures, and pursue strategic opportunities. Current capital needs reflect investments in:
Our capital needs reflect investments in:
Scaling RaaS deployments to new customers and markets;
Maintaining and upgrading robotic systems in the field; and
Supporting working capital and day-to-day operations
While the Company sees significant opportunity to grow recurring revenue through RaaS, its ability to execute on this opportunity depends on securing additional financing. If sufficient capital is not raised, the Company may be required to slow expansion plans, reduce operating activities, or adjust its overall strategy.
These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might result if the Company is unable to continue as a going concern and have been prepared on a basis that assumes the Company will continue as a going concern and realize assets and satisfy liabilities in the ordinary course of business.
Management’s strategic plans to address these matters include the following:
Expand into new and existing markets, with a focus on Robotics as a Service;
Obtain additional debt and/or equity financing to support working capital and growth;
Pursuing collaborations with other operating businesses for strategic opportunities; and
Selectively evaluating acquisitions to enhance or complement the current business model.
Cash
Period Change
Increase (Decrease)
June 30, 2025
June 30, 2024
$ Amount
% Change
Cash
Cash increased by $212,571, or 154%, to $350,231 at June 30, 2025, from $137,660 at June 30, 2024. The increase was primarily attributable to net proceeds from financing activities, including borrowings under new debt arrangements entered into to fund operations and acquisition-related integration costs. These inflows were partially offset by cash used in operating activities to support expanded infrastructure, integration of the Foodservice Packaging and RaaS businesses, and servicing of debt obligations.
While operating losses expanded during fiscal 2025 due to acquisition-related expenditures and higher ongoing corporate costs, management believes that the successful execution of the acquisitions, combined with prudent liquidity management, positions the Company to leverage these transactions for future revenue growth and improved cash flows.
The Company does not have any cash equivalents.
Other Matters:
Cash Needs and Runway
Based on our current operating plan, we estimate that our existing cash resources are sufficient to fund operations for approximately 3 months from the balance sheet date of June 30, 2025. We expect to require additional financing immediately to support our working capital requirements and planned growth initiatives.
Dilution Considerations
On March 25, 2025, we issued Series C Convertible Preferred Stock with a conversion feature into 565.5 million shares of common stock. The conversion of these instruments, together with other convertible securities, will significantly dilute our existing stockholders and may adversely affect the market price of our common stock.
Acquisition Financing
We have executed non-binding letters of intent to acquire hotel properties. These transactions are subject to financing and other contingencies, and there is no assurance they will close. Any financing secured for acquisitions may include additional equity issuances or debt arrangements, which could increase our leverage and/or dilute our stockholders.
Summary of Cash Flow Activities
Year Ended June 30,
Period Change
Increase (Decrease)
Net Cash Provided by (Used in)
Amount
Amount
$ Amount
% Change
Operating activities
Investing activities
Financing activities
Net change in cash
Cash Flow from Operating Activities
Year Ended June 30,
Operating activities
Net loss
Less: net loss - discontinued operations
Net loss - continuing operations
Adjustments to reconcile net loss to net cash used in operating activities
Non-cash financing cost under contingent liability
Interest income under acquisition note
Warrants issued for services
Warrants issued for financing cost
Depreciation and amortization
Impairment of inventory
Loss on debt extinguishment
Loss on settlement of pre-existing assets
Derivative expense
Change in fair value of derivative liabilities
Gain on debt extinguishment - derivative liabilities
Amortization of debt discount
Bad debt expense
Stock issued for services
Stock issued for financing costs
Vesting of Series C - preferred stock - issued as compensation
Interest expense incurred in connection with increase in debt principal
Impairment of goodwill
Changes in operating assets and liabilities
(Increase) decrease in
Accounts receivable
Inventory
Prepaids and other
Increase (decrease) in
Accounts payable and accrued expenses
Accounts payable and accrued expenses - related party
Deferred revenues
Net cash used in operating activities - continuing operations
Net cash used in operating activities - discontinued operations
Net cash used in operating activities
Operating Activities
Net cash used in operating activities was $(1,634,483) in fiscal 2025, compared to $(709,990) in fiscal 2024, an increase in cash outflows of $924,493. The increase primarily reflects the higher net loss from continuing operations, partially offset by non-cash adjustments and changes in working capital accounts. Key year-over-year variances are discussed below.
Adjustments to Reconcile Net Loss to Net Cash Used in Operations
A – Non-cash financing cost under contingent liability decreased $278,200, as no contingent liability financing costs were recorded in fiscal 2025 compared to the prior year.
B – Interest income under acquisition note increased $17,599, reflecting accrued interest income earned on a note receivable post-acquisition.
C & D – Warrants issued for services and financing costs decreased by a combined $805,700, as no warrants were issued in fiscal 2025 compared to the prior year.
E – Depreciation and amortization increased $45,552 due to the addition of tangible and intangible assets acquired in the SWC transaction.
F – Impairment of inventory decreased $4,803, reflecting the absence of write-downs in fiscal 2025.
G – Loss on debt extinguishment was relatively flat year-over-year, with a $2,225 increase.
H – Loss on settlement of pre-existing assets of $1,490,803 was recognized in fiscal 2025, arising from settlement of intercompany balances under ASC 805 prior to the acquisition of SWC; no comparable item existed in fiscal 2024.
I – Derivative expense increased $653,792 due to the recognition of embedded conversion features on SWC-related notes payable which, when acquired became convertible.
J – Change in fair value of derivative liabilities of $190,102 was recognized in 2025 from period-end remeasurement of derivative liabilities.
K – Gain on debt extinguishment – derivative liabilities of $(500,678) reflects a one-time gain in 2025 related to the remeasurement of derivative liabilities and upon partial repayment and conversion debt.
L – Amortization of debt discount decreased $306,173, primarily because prior-period discounts reached full amortization and fewer new debt instruments required discount amortization in 2025.
M – Bad debt expense increased $199,805, reflecting higher doubtful accounts associated with receivables from acquired operations.
N – Stock issued for services increased $90,395, representing higher share-based compensation for consultants.
O – Stock issued for financing costs decreased $50,000, as no such issuances occurred in 2025.
P – Vesting of Series C preferred stock contributed a significant non-cash charge of $1,521,840 in 2025, related to the vesting of previously granted preferred shares issued as compensation.
Q – Interest expense incurred in connection with debt principal was $73,750 in 2025, representing a new charge tied to a third-party lending arrangement.
R – Impairment of goodwill of $897,542 was recorded in fiscal 2025, reducing goodwill associated with the RaaS reporting unit (FHVH).
Changes in Operating Assets and Liabilities
S – Accounts receivable increased $66,141, reflecting higher outstanding receivables generated by new operations.
T – Inventory increased $67,288, due to items acquired and used post-acquisition of SWC to support packaging distribution sales.
U – Prepaids and other increased $123,983, reflecting higher deposits and advance payments for operating needs post-acquisition.
V – Accounts payable and accrued expenses increased $1,495,231, primarily from timing of payments and obligations related to integration of acquired businesses.
W – Accounts payable and accrued expenses – related party decreased $282,910, reflecting reductions in related-party balances settled during the year.
X - Net cash used in operating activities from discontinued operations was $(64,936) for the year ended June 30, 2025, compared to $(142,966) for the year ended June 30, 2024. The $78,030 improvement primarily reflects the wind-down of the legacy Snacks and Beverages business, which required fewer operating expenditures in 2025 as compared to the prior year.
Z - Deferred revenue changes are generally based on timing of payments as compared to when services are provided.
The overall increase in net cash used in operating activities reflects higher operating losses from newly acquired and expanded operations, non-cash charges related to acquisitions and financing structures, and integration-related expenditures. These were partially offset by favorable changes in accounts payable and the reduction in cash usage from discontinued operations as the legacy business was wound down.
Cash Flow from Investing Activities
Year Ended June 30,
Investing activities
Cash and debt acquired in acquisitions
Acquisition of property and equipment
Advances to future targets - including interest receivable
Acquisition costs secured by debt
Net cash used in investing activities
Net cash used in investing activities was $(602,118) for the year ended June 30, 2025, compared to $(447,870) in the prior year, an increase in cash outflows of $154,248. The change primarily reflects higher property and equipment purchases and increased advances to potential acquisition targets, partially offset by the absence of debt-financed acquisition costs in 2025.
A – Cash and debt acquired in acquisitions.
The Company recorded a net inflow of $28,340 in fiscal 2025, reflecting cash balances acquired (net of assumed debt) in connection with the Foodservice Packaging acquisition. No comparable inflows occurred in fiscal 2024.
B – Acquisition of property and equipment.
The Company invested $(200,851) in fiscal 2025 in property and equipment to support the launch and scaling of its packaging and RaaS businesses. No comparable purchases were made in fiscal 2024.
C – Advances to future targets – including interest receivable.
Cash outflows for advances to potential acquisition targets increased to $(429,607) in fiscal 2025, compared to $(149,990) in fiscal 2024. The increase reflects additional promissory note advances, including balances that accrue interest, made as part of the Company’s M&A strategy.
D – Acquisition costs secured by debt.
In fiscal 2024, the Company recorded $(297,880) of acquisition-related costs that were financed directly with debt. No such debt-financed acquisition costs were recorded in fiscal 2025, as all acquisition expenditures were funded through cash and equity consideration.
Cash Flow from Financing Activities
Year Ended June 30,
Financing activities
Proceeds from notes payable
Repayments on notes payable
Proceeds from convertible notes payable
Repayments on convertible notes payable
Net cash provided by financing activities
Net cash provided by financing activities was $2,449,172 in fiscal 2025 compared to $1,252,805 in fiscal 2024, an increase of $1,196,367. The increase reflects higher borrowings under both notes payable and convertible notes payable, partially offset by repayments during the current year.
A – Proceeds from notes payable.
The Company received $1,547,000 in proceeds from notes payable during fiscal 2025, compared to $1,252,805 in fiscal 2024. The increase reflects additional debt financing arrangements entered into during 2025 to fund operating losses, acquisition-related integration costs, and working capital needs.
B – Repayments on notes payable.
Cash outflows of $(23,988) were made in fiscal 2025 for scheduled repayments of notes payable. No comparable repayments occurred in fiscal 2024.
C – Proceeds from convertible notes payable.
In fiscal 2025, the Company raised $959,650 in cash proceeds from the issuance of convertible notes. No comparable proceeds were recognized in fiscal 2024.
D – Repayments on convertible notes payable.
Repayments of $(33,490) were made in fiscal 2025 on convertible note obligations. No comparable repayments occurred in fiscal 2024.
CRITICAL ACCOUNTING POLICIES
The preparation of our consolidated 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 Consolidated Financial Statements.
Principles of Consolidation
The consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. The Company consolidates entities where it has a controlling financial interest, as defined by ASC 810, “Consolidation”.
In accordance with ASC 810-10, consolidation applies to:
Entities with more than 50% voting interest, unless control is not with the Company; and
Variable Interest Entities (VIEs), where the Company is the primary beneficiary, possessing both (i) power over significant activities and (ii) the obligation to absorb losses or receive benefits.
All intercompany transactions and balances are eliminated in consolidation. The Company continuously evaluates its investments and relationships to assess consolidation requirements.
Business Combinations and Asset Acquisitions
The Company accounts for acquisitions in accordance with ASC 805, “Business Combinations,” and applicable SEC reporting requirements under Regulation S-X, Rule 3-05 and Regulation S-K, Items 101 and 303. Transactions qualifying as business combinations are accounted for under the acquisition method, while those classified as asset acquisitions follow the guidance in ASC 805-50. Additionally, the Company evaluates whether a transaction qualifies as a reverse acquisition under ASC 805-40 and applies the appropriate accounting and disclosure requirements.
Business Combinations
For transactions classified as business combinations, the Company:
Recognizes and measures identifiable assets acquired, liabilities assumed, and noncontrolling interests at their fair values at the acquisition.
Records goodwill as the excess of the fair value of consideration transferred over the fair value of net assets acquired, including any previously held equity interests.
Expenses acquisition-related costs as incurred.
Uses preliminary purchase price allocations, with adjustments permitted within the measurement period (not exceeding one year). Adjustments beyond the measurement period are recorded in earnings.
Significant judgments in fair value determinations include:
Intangible asset valuations, based on estimates of future cash flows and discount rates.
Useful life assessments, impacting amortization and financial results.
Contingent consideration, which is remeasured at fair value through earnings.
For SEC registrants, Regulation S-X, Rule 3-05 may require audited financial statements of the acquired business if the acquisition is significant. The determination of significance follows Rule 1-02(w) of Regulation S-X, which considers investment, asset, and income tests.
Asset Acquisitions
For transactions classified as asset acquisitions under ASC 805-50, the Company:
Applies the “screen test” to determine whether substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or group of similar assets.
Allocates the purchase price using a cost accumulation model, assigning costs to acquired assets based on their relative fair values.
Capitalizes direct acquisition costs as part of the asset’s cost, unlike business combinations where such costs are expensed.
The classification between business combinations and asset acquisitions requires significant judgment, particularly when applying the screen test. Incorrect classification can materially impact:
The recognition of goodwill (only in business combinations).
The measurement and presentation of acquired assets and assumed liabilities.
The Company’s financial position and results of operations.
Regulatory and Financial Reporting Considerations
For SEC registrants, acquisitions may trigger additional disclosure and reporting requirements:
Regulation S-X, Rule 3-05: Requires separate financial statements of the acquired business if it meets significance thresholds under Rule 1-02(w).
Regulation S-K, Item 101: Requires disclosure of the impact of material acquisitions on the Company’s business operations.
Regulation S-K, Item 303: Mandates discussion of the impact of acquisitions on the Company’s financial condition and results of operations in Management’s Discussion and Analysis (MD&A).
Regulation S-X, Article 11: Requires pro forma financial statements if the acquisition is significant.
Form 8-K, Item 2.01: Immediate reporting requirements for material acquisitions, including reverse mergers.
The Company continuously evaluates acquisitions, to ensure proper classification and compliance with ASC 805, SEC reporting requirements, and regulatory guidance.
Goodwill and Impairment
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment at least annually (in the fourth quarter) or more frequently if events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.
For impairment testing purposes, goodwill is assigned to the reporting unit(s) expected to benefit from the synergies of the acquisition. The Company performs either a qualitative assessment (“Step 0”) to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, or a quantitative assessment when required.
If the qualitative assessment indicates potential impairment, the Company estimates the fair value of the reporting unit and compares it with its carrying amount, including goodwill.
If the carrying amount exceeds fair value, an impairment charge is recognized for the difference, not to exceed the carrying value of goodwill.
Significant judgments in goodwill impairment testing include:
Determining the appropriate reporting units.
Forecasting future cash flows.
Selecting appropriate discount rates and market multiples.
Assessing macroeconomic factors, industry trends, and Company-specific performance.
Business Segments and Expense Disclosure
The Company follows ASC 280, Segment Reporting, which requires public entities to report financial and descriptive information about their reportable operating segments.
An operating segment is a component of a public entity that:
Engages in business activities from which it may earn revenues and incur expenses;
Has operating results that are regularly reviewed by the Chief Operating Decision Maker (“CODM,” which is our Chief Executive Officer) to make decisions about resource allocation and performance assessment; and
Has discrete financial information available.
Reportable Segments
Beginning in fiscal year 2025, following the acquisition of SWC Group, Inc. (d/b/a CarryOutSupplies.com) and the commencement of commercial activities under the Robotics-as-a-Service (RaaS) model, management determined that the Company operates in two reportable segments:
Foodservice Packaging Distribution
Conducted through SWC Group, Inc.
Provides wholesale distribution of disposable foodservice packaging products, including printed paper cups, plastic cups, food containers, bags, and related consumables.
Robotics-as-a-Service (RaaS)
Conducted through Skytech Automated Solutions, Inc. and Future Hospitality Venture Holdings, Inc.
Provides automation solutions to foodservice and hospitality environments through non-cancellable lease and service arrangements.
The CODM evaluates operating performance and allocates resources at the segment level.
Accordingly, the Company has concluded that Foodservice Packaging Distribution and RaaS represent separate reportable segments.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the recognition of revenues and expenses during the reporting period. Actual results may differ from these estimates, and such differences could be material.
Changes in estimates are recorded in the period in which they become known and are accounted for prospectively.
The Company bases its estimates on historical experience, industry trends, and other relevant factors, incorporating both quantitative and qualitative assessments that it believes are reasonable under the circumstances.
Significant estimates for the years ended June 30, 2025 and 2024, respectively, include:
Allowance for doubtful accounts and other receivables
Inventory reserves and classifications
Valuation of goodwill and intangible assets (acquired in an acquisition)
Impairment losses related to goodwill and intangible assets
Valuation of loss contingencies
Valuation of stock-based compensation
Estimated useful lives of property and equipment
Uncertain tax positions
Valuation allowance on deferred tax assets
Inventory
The Company accounts for inventory in accordance with ASC 330, Inventory. Inventory consists solely of snacks and related ingredients and packaging, and is stated at the lower of cost or net realizable value (“LCNRV”) using the first-in, first-out (FIFO) method.
Continuing Operations
As of June 30, 2025, inventory consisted primarily of:
Foodservice Packaging Distribution: Finished goods including paper cups, plastic cups, food containers, bags, and related consumables.
Robotics-as-a-Service (RaaS): None.
Management evaluates inventories each reporting period to assess whether reserves are necessary for slow-moving, obsolete, or impaired items. In performing this assessment, management considers market conditions, expected demand, aging trends, turnover rates, and estimated net realizable value.
Discontinued Operations
Inventories related to the Company’s legacy Snacks and Beverages business are classified within assets of discontinued operations in the consolidated balance sheets.
For the years ended June 30, 2025 and 2024, respectively, the Company did not record any provisions for inventory obsolescence or impairment.
At June 30, 2025 and 2024, the Company had inventory of $319,491 and $0, respectively.
Derivative Liabilities
The Company evaluates financial instruments containing characteristics of both liabilities and equity in accordance with FASB ASC 480, Distinguishing Liabilities from Equity, and FASB ASC 815, Derivatives and Hedging.
Accounting for Derivative Liabilities
Derivative liabilities are revalued at fair value at each reporting period, with changes in fair value recognized in the results of operations as a gain or loss on derivative remeasurement. The Company uses a Black-Scholes option pricing model to determine the fair value of these instruments.
Conversion and Extinguishment of Derivative Liabilities
When a debt instrument with an embedded conversion option (e.g., convertible debt or warrants) is converted into shares of common stock or repaid, the Company:
Records the newly issued shares at fair value;
Derecognizes all related debt, derivative liabilities, and unamortized debt discounts; and
Recognizes a gain or loss on debt extinguishment, if applicable.
For equity-based derivative liabilities (e.g., warrants) that are extinguished, any remaining liability balance is reclassified to additional paid-in capital.
Reclassification of Equity Instruments to Liabilities
Equity instruments initially classified as equity may be reclassified as liabilities if they no longer meet equity classification criteria. In such cases, they are remeasured at fair value on the date of reclassification, with changes recognized in earnings.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, as amended. Revenue is recognized when control of promised goods or services transfers to customers, in an amount that reflects the consideration expected to be received.
Revenue Streams
The Company currently generates revenue primarily from the following two (2) sources:
Foodservice Packaging – The wholesale distribution of disposable foodservice packaging products, including custom-printed and stock paper cups, plastic cups, food containers, bags, and related consumables, primarily through the Company’s e-commerce platform.
Robotics-as-a-Service (RaaS) – Multi-year service arrangements for automation solutions in the foodservice and hospitality industries. These generate recurring monthly service revenues, supplemented by implementation and integration services, ongoing maintenance, and technical support.
The Company previously generated revenues from the sale of packaged snack and beverage products. This activity has been discontinued and is presented separately as discontinued operations (see Note 14 – Discontinued Operations).
To provide further clarity on the nature, timing, and recognition of revenue, the Company’s revenue streams are discussed below:
A. Foodservice Packaging Distribution
Revenue from the distribution of disposable foodservice packaging products is derived exclusively from business customers on a wholesale basis through the Company’s e-commerce platform and direct sales channels. Customer contracts typically contain a single performance obligation: delivery of the ordered products. Shipping and handling activities that occur after the customer obtains control are accounted for as fulfillment costs and not as separate performance obligations. Because sales are exclusively to registered businesses, the Company collects and remits sales taxes where required; sales to businesses are exempt only when valid resale/exemption certificates are obtained.
B. Robotics as a Service
Revenue from Robotics-as-a-Service (“RaaS”) arrangements is recognized over time as services are provided under multi-year customer service agreements, which typically follow an initial pilot and site preparation period. Contracts generally include a recurring monthly service fee covering access to robotic equipment, automation software, monitoring, and support services. Although agreements are typically multi-year in duration, the related performance obligation is the continuous provision of RaaS services, and revenue is recognized ratably each month as services are delivered.
The Company owns and deploys all robotic equipment, including hardware, software, and related components, which remain the property of the Company. Customers do not obtain control over the units; instead, the Company retains responsibility for operation, servicing, refurbishment, and replacement as necessary. Management evaluated these arrangements under ASC 842 Leases and concluded they do not contain a lease because customers do not control the use of the robotic units. Accordingly, revenue is recognized under ASC 606 Revenue from Contracts with Customers .
Certain arrangements may include one-time activities such as installation, integration, or training. These activities are not distinct performance obligations and are accounted for as part of the overall service contract, with related fees recognized over the contract term. Ongoing support includes remote technical assistance, software updates, and maintenance, all of which are included in the recurring service fee.
The Company generally invoices customers monthly, with payments due monthly. As a result, contract assets and contract liabilities (deferred revenue) are not significant.
C. Snacks and Beverages (Discontinued Operations)
The Company previously generated revenue from the sale of snack and beverage products. This activity has been discontinued and is presented as discontinued operations in the accompanying consolidated financial statements.
For periods prior to discontinuation, revenue was recognized net of slotting fees, trade promotions, discounts, and other sales incentives, which were classified as variable consideration. Variable consideration was estimated based on historical experience, contractual terms, and current promotional strategies. Estimates were reviewed and updated each reporting period, and revenue was recognized only to the extent it was probable that a significant reversal would not occur.
No revenues or expenses from this activity are expected to contribute to the Company’s future results.
The Company follows the five-step revenue recognition model:
1. Identify the Contract with a Customer
A contract exists when:
The agreement creates enforceable rights and obligations;
It has commercial substance;
Payment terms are defined and consideration is determinable;
Collection is probable
Customer credit risk is assessed at contract inception and updated periodically.
For Robotics-as-a-Service (“RaaS”) contracts, agreements are non-cancellable for an initial 36-month term (except for breach), and automatically renew for one-year periods unless terminated. Management accounts for renewals as new contracts.
2. Identify the Performance Obligations
Foodservice Packaging – Each order represents a single performance obligation: shipment or delivery of the ordered goods.
Robotics-as-a-Service (RaaS) – Robotics-as-a-Service (RaaS) – Each contract contains a single bundled performance obligation, representing the continuous provision of robotic equipment and related services, including installation, integration, training, maintenance, and technical support. Installation and training are not distinct, as customers cannot benefit from the robots without integration. One-time implementation activities, when billed, are included in the overall service obligation and recognized over the contract term.
Snacks and Beverages (Discontinued) – Historically, each sale represented a single performance obligation for delivery of products. These activities were discontinued as of June 30, 2025, and results are presented as discontinued operations.
3. Determine the Transaction Price
Foodservice Packaging – Transaction price consists primarily of fixed consideration based on contract or list pricing.
RaaS – Transaction price consists of fixed monthly service fees over the 36-month initial term. Invoices are issued monthly, and payments are generally due as services are provided.
Contracts do not include material variable consideration, and the Company historically has not collected consideration prior to performance. As a result, contract liabilities (deferred revenue) are not significant.
Snacks and Beverages (Discontinued) – Transaction price included fixed consideration plus variable consideration such as slotting fees, promotions, and rebates.
1. Allocate the Transaction Price
Contracts generally contain only a single performance obligation (product delivery for Packaging, or continuous service provision (monthly) for RaaS). Accordingly, the entire transaction price is allocated to that performance obligation.
5. Recognize Revenue When (or As) Performance Obligations Are Satisfied
Foodservice Packaging – Revenue is recognized at a point in time, when control of the goods transfers to the customer (generally upon shipment or delivery).
RaaS – Revenue is recognized over time, ratably each month, as customers simultaneously receive and consume the benefits of the continuous service.
Snacks and Beverages (Discontinued) – Revenue was historically recognized at a point in time upon shipment or delivery.
Principal vs. Agent Considerations
In accordance with ASC 606-10-55-36 through 55-40, the Company evaluated whether it acts as principal or agent in each of its revenue streams. The assessment considers whether the Company (i) obtains control of goods or services before transfer to the customer, (ii) has discretion in establishing pricing, (iii) is primarily responsible for fulfillment, and (iv) is exposed to inventory or service-level risks.
Based on this analysis, the Company reached the following conclusions:
1. Foodservice Packaging Distribution
The Company acts as a principal in foodservice packaging sales.
The Company designs, sources, and controls products prior to transfer.
The Company has discretion in pricing.
The Company is responsible for fulfillment, including warehousing and logistics.
The Company bears inventory risk prior to transfer.
Revenue is recognized on a gross basis for foodservice packaging sales.
2. Robotics-as-a-Service (RaaS)
The Company acts as a principal in RaaS arrangements.
The Company provides customers with continuous access to robotic equipment and related services.
The Company controls the equipment and services before and during the transfer period.
The Company has discretion over pricing and contract terms.
The Company is responsible for providing and maintaining the service throughout the contract term.
Revenue is recognized on a gross basis for RaaS service contracts.
3. Snacks and Beverages (Discontinued Operations)
Prior to discontinuation, the Company acted as a principal in snack and beverage sales.
The Company controlled inventory prior to transfer.
The Company set pricing at its discretion.
The Company was responsible for fulfillment of its performance obligations.
The Company bore inventory risk until sale.
Revenue was recognized on a gross basis for snack and beverage sales, prior to classification as discontinued operations.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation,” using the fair value-based method. Under this guidance, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the requisite service period, typically the vesting period.
ASC 718 establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. It also applies to transactions where an entity incurs liabilities based on the fair value of its equity instruments or liabilities that may be settled using equity instruments.
The Company applies the fair value method for equity instruments granted to both employees and non-employees, aligning non-employee share-based payment accounting with that of employees. The fair value of stock-based compensation is determined as of the grant date or the measurement date (i.e., when the performance obligation is completed) and is recognized over the vesting period.
The Company determines the fair value of stock options using the Black-Scholes option pricing model, considering the following key assumptions:
Exercise price – The agreed-upon price at which the option can be exercised.
Expected dividends – The anticipated dividend yield over the expected life of the option.
Expected volatility – Based on historical stock price fluctuations.
Risk-free interest rate – Derived from U.S. Treasury securities with similar maturities.
Expected life of the option – Estimated based on historical exercise patterns and contractual terms.
Additionally, the Company follows the guidance under ASU 2016-09, which introduced amendments to simplify certain accounting aspects of share-based compensation, including:
The treatment of tax benefits and tax deficiencies in income tax reporting.
The option to recognize forfeitures as they occur rather than estimating them upfront.
Cash flow classification for certain tax-related transactions.
The Company continues to evaluate and apply the latest Accounting Standards Updates (ASUs) and interpretive releases related to stock-based compensation to ensure compliance with evolving financial reporting requirements.
Related Parties
The Company defines related parties in accordance with ASC 850, “Related Party Disclosures,” and SEC Regulation S-X, Rule 4-08(k). Related parties include entities and individuals that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company.
Related parties include, but are not limited to:
Principal owners of the Company.
Members of management (including directors, executive officers, and key employees).
Immediate family members of principal owners and members of management.
Entities affiliated with principal owners or management through direct or indirect ownership.
Entities with which the Company has significant transactions, where one party has the ability to exercise control or significant influence over the management or operating policies of the other.
A party is considered related if it has the ability to control or significantly influence the management or operating policies of the Company in a manner that could prevent either party from fully pursuing its own separate economic interests.
The Company discloses all material related party transactions, including:
The nature of the relationship between the parties.
A description of the transaction(s), including terms and amounts involved.
Any amounts due to or from related parties as of the reporting date.
Any other elements necessary for a clear understanding of the transactions’ effects on the financial statements.
Disclosures are made in accordance with ASC 850-10-50-1 through 50-6 and SEC Regulation S-X, Rule 4-08(k), which requires registrants to disclose material related party transactions and their effects on the financial position and results of operations.
See Note 4 for accrued liabilities – related parties.
Recent Accounting Standards
Adopted Accounting Standards
ASU 2023-07 — Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07 to improve disclosures related to reportable segments. The standard requires:
Enhanced disclosure of significant segment expenses regularly reviewed by the Chief Operating Decision Maker (CODM), even if those expenses are not allocated in segment profit or loss.
More detailed descriptions of how segment profit or loss is measured, and how reported measures align with internal management reporting.
The Company adopted ASU 2023-07 on July 1, 2024. The adoption did not have a material impact on the Company’s consolidated financial statements.
ASU 2023-09 — Income Taxes (Topic 740): Improvements to Income Tax Disclosures
Issued in December 2023, ASU 2023-09 enhances income tax disclosures by:
Requiring standardized disaggregation of the effective tax rate reconciliation into prescribed categories.
Mandating jurisdictional disclosure of income taxes paid, broken out by federal, state, and significant foreign jurisdictions.
Expanding narrative explanations for reconciling items and effective tax rate fluctuations.
The Company adopted ASU 2023-09 on July 1, 2024. The adoption did not have a material impact on the Company’s consolidated financial statements.
Adopted Accounting Standards (Not Yet Adopted)
ASU 2024-03 — Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, which requires greater disaggregation of certain income statement expense categories, including:
Inventory purchases
Employee compensation
Depreciation and amortization
Selling expenses, including a definition of what is included in that category
The standard is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted.
The Company is currently assessing the impact of ASU 2024-03 on its financial statement presentation and footnote disclosures. The standard is not expected to have a material effect on the Company’s financial condition, results of operations, or cash flows.
ASU 2025-05 — Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets
In July 2025, the FASB issued ASU 2025-05, which provides (1) all entities with a practical expedient and (2) entities other than public business entities with an accounting policy election when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers .
The practical expedient allows an entity to assume that, when estimating expected credit losses, current conditions as of the balance sheet date remain unchanged for the remaining life of the asset. The accounting policy election permits nonpublic entities that elect the practical expedient to also consider collection activity occurring after the balance sheet date when estimating expected credit losses.
The standard is effective for fiscal years beginning after December 15, 2025, and for interim periods within those annual reporting periods. Early adoption is permitted.
Accordingly, the Company will adopt ASU 2025-05 for its fiscal year beginning July 1, 2026.
The Company has evaluated ASU 2025-05 and does not expect the standard to have a material impact on its financial condition, results of operations, or cash flows.
Other Accounting Standards Updates
The FASB has issued other technical corrections and narrow-scope amendments across various accounting topics. These updates are not expected to have a material impact on the Company’s consolidated financial statements.
Reclassifications
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated results of operations, stockholders’ deficit, or cash flows.
As a result of the classification of the Company’s Snacks and Beverages segment as discontinued operations, prior-period amounts in the consolidated statements of operations and related disclosures have been reclassified to conform to the current-year presentation.
