NOTE 5. DISCONTINUED OPERATIONS

On June 28, 2025, the Company disposed of both of its wholly-owned subsidiaries Sarah Adult Day Services, Inc., and Sarah Day Care Centers, Inc. in exchange for $300,000 and forgiveness of $2,177,929 in liabilities. As of June 30, 2025, the $300,000 was not received and was recorded in other receivable on the balance sheet. As a result of the disposition, the Company recorded a gain on disposition of subsidiaries in the amount of $3,366,943. The gain was calculated as follows:

The Company categorized Sarah Adult Day Services, Inc., and Sarah Day Care Centers, Inc. as discontinued operations in our consolidated financial statements for year ended June 30, 2024.

The operating results for discontinued operations have been presented in the accompanying consolidated statement of operations for the year ended June 30, 2024 is summarized below:

The assets and liabilities of the discontinued operations at June 30, 2024 is summarized below:

(1) Property and equipment, net

Property and equipment, at cost, for the discontinued operations consisted of the following at June 30, 2024:

Depreciation expense for the discontinued operations for the year ended June 30, 2024 was $42,081.

(2) Leases

Operating leases

Stow Professional Lease

Sarah Adult Day Centers, Inc. has a facilities lease with 6,000 square feet at 4472 Darrow Road, Stow, Ohio 44224. The lease expired on March 31, 2025 and the lease payments are as follows:

________ 

*The Company has to repay the lessor monthly payments as a result of COVID relief.

S. Frank Professional Lease

Sarah Day Care Centers, Inc. on March 25, 2021, the Company acquired a facilities lease with 5,300 square feet in Jackson, Ohio. The monthly lease payments are $7,910, which includes monthly payments of $603 as repayments for COVID relief. The lease expires on July 1, 2026.

Higbee Lease

Sarah Adult Day Centers, Inc. has a facilities lease with 3,469 square feet at 4580 Stephen Circle NW. Canton, OH 44718. The monthly lease payments are $1,245 and the lease expires on as of  October 15, 2028. For the last 2 years of the lease the monthly lease payments are increased to $1,370.

Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is the incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of the Company’s leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in general and administrative expenses on the consolidated statements of operations.

Right-of-use asset is summarized below:

Operating lease liability is summarized below:

Commencing during the year ended June 30, 2025, the Company leases office equipment under two finance leases with combined monthly payments of $5,897. The leases mature on March 1, 2025 and December 1, 2026.

Finance right of use assets are summarized below:

Amortization expense was $4,590 and $12,622 for the years ended June 30, 2025 and 2024, respectively.

Finance lease liabilities are summarized below:

(3) Notes payable, related parties

As of June 30, 2024, the Company had $158,502 in outstanding notes payable, related parties. As of June 30, 2024, the Company had $51,633 in accrued interest related to these notes.

* As of June 30, 2025, this note is in default.

(4) Notes payable

As of June 30, 2024, the Company had $113,663 in outstanding notes payable, as following:

(5) SBA loan

On June 25, 2020 and January 6, 2022, Sarah Day Care Centers, Inc. received proceeds of $150,000 and $200,000, respectively, in the form of an SBA loan. Installment payments, including principal and interest of $1,746 are due monthly beginning on December 22, 2021. The balance of principal and interest is payable thirty years from the promissory note date. The interest accrues at a rate of 3.75% per annum. During the year ended June 30, 2024, the Company recorded $12,873 in interest expense related to the SBA loan.