UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended July 31, 2019
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ________ to ________
Commission
file number: 001-36564
Healthcare
Integrated Technologies, Inc.
(Exact
Name of Registrant as Specified in its Charter)
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Nevada
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46-3052781
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(State
or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S.
Employer
Identification No.)
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1462
Rudder Lane
Knoxville,
TN 37919
(Address
of Principal Executive Offices)
Registrant’s
telephone number, including area code: (865) 719-8160
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to section 12(g) of the Act:
Common
Stock, $0.001 par value
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes [ ]
No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ]
No [X]
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 [X]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ]
No [X]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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.
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Large
accelerated filer
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[ ]
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Accelerated
filer
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[ ]
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Non-accelerated
filer
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[ ]
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Smaller
reporting company
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[X]
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(Do
not check if a smaller reporting company)
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Emerging
growth company
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[ ]
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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 [X]
The
aggregate market value of the outstanding common stock, other than shares held by persons who may be deemed affiliates of the
registrant, computed by reference to the closing sales price for the registrant’s common stock on January 31, 2019 (the
last business day of the registrant’s most recently completed second quarter), as reported on the OTC Pink market, was approximately
$3,915,794. As of March 18, 2020, there were 33,487,500 shares of common stock of the registrant outstanding.
Documents
Incorporated by Reference: None.
TABLE
OF CONTENTS
EXPLANATORY
NOTE
Healthcare
Integrated Technologies, Inc. (formerly known as Grasshopper Staffing, Inc.) is filing this comprehensive annual report on Form
10-K for the fiscal years ending July 31, 2019 and July 31, 2018, and the quarterly periods ended April 30, 2018,
October 31, 2018, January 31, 2019, April 30, 2019, October 31, 2019, and January 31, 2020 (the “Comprehensive Form
10-K”) as part of its effort to become current in its filing obligations under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). This Comprehensive Form 10-K is our first periodic filing with the Securities and Exchange Commission
(the “SEC”) since the filing of our quarterly report on Form 10-Q for the quarterly period ended January 31, 2018.
Included in this Comprehensive 10-K are our audited financial statements for the fiscal years ended July 31, 2019 and July
31, 2018, which have not been previously filed with the SEC. In addition, the Comprehensive 10-K also includes unaudited
quarterly financial statements for the quarterly periods ended April 30, 2018, October 31, 2018, January 31, 2019, April
30, 2019, October 31, 2019, and January 31, 2020.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of
the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical
facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,”
“believe,” “estimate,” “intend,” “could,” “should,” “would,”
“may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,”
“project,” “forecast,” “potential,” “continue”, negatives thereof or similar expressions.
These forward-looking statements are found at various places throughout this Annual Report and include information concerning:
possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives
of management; any other statements regarding future operations, future cash needs, business plans and future financial results;
and any other statements that are not historical facts.
From
time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases,
in our presentations, on our website and in other materials released to the public. Any or all the forward-looking statements
included in this Annual Report and in any other reports or public statements made by us are not guarantees of future performance
and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions
and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of
our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking
statements. Considering these risks, uncertainties and assumptions, the events described in the forward-looking statements
might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. All subsequent written
and oral forward-looking statements concerning other matters addressed in this Annual Report and attributable to us or any person
acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Annual
Report.
Except
to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or
otherwise.
For
discussion of factors that we believe could cause our actual results to differ materially from expected and historical results
see “Item 1A - Risk Factors” below.
PART
I
ITEM
1. BUSINESS.
Overview
As
used in this Annual Report, “we,” “us,” “our,” “Healthcare Integrated Technologies,”
“Company,” or “our Company” refers to Healthcare Integrated Technologies, Inc. and our subsidiary IndeLiving
Holdings, Inc. (“Inde” or “IndeLiving”).
Healthcare
Integrated Technologies, Inc. (the “Company”), is a healthcare technology company whose primary operations are through
our IndeLiving subsidiary, which we acquired in March 2018. With the acquisition of IndeLiving, our core focus changed, and our
operations through our Grasshopper Staffing, Inc. (“Grasshopper Colorado”) subsidiary ceased in February 2019.
We also changed our name to Healthcare Integrated Technologies, Inc., to better reflect our new operations. As a result, our operations,
management and board of directors, and our business in general have undergone a substantial change and the Company has experienced
a change in control since the closing of the IndeLiving acquisition.
Founded
in 2016 and based in Knoxville, Tennessee, IndeLiving has developed a health monitoring system for assisted living centers and
private homes. IndeLiving is a development stage company that uses proprietary technology to monitor seniors in real time by both
caregivers and family without the need for the senior to wear any type of monitoring device. The monitoring system is customized
to the needs of the individual senior and, if applicable, to assisted living facility requirements. It provides real-time information
to monitoring stations at the assisted living facilities. It also can be set up to provide real time information via text, voice,
email, and a mobile phone application to family members or other caregivers. The residential model called “Inde Companion”
is a monitoring concept with custom modifications that can be applied to individual seniors in a variety of applications including
seniors living independently in their own home, with family members, or in an assisted living or retirement community.
We
have secured a contract with a hardware supplier, Vayyar Imaging, Ltd., to produce the monitoring devices as of August 7, 2019,
which requires us to purchase $2,000,000 in product by July 31, 2020. We are currently further developing the related software
for both a mobile phone application and a desktop “dashboard” to be used by assisted living facilities. We are engaged
in marketing and sales of our product to assisted living facilities.
Our
History
The
Company has had three distinct phases and businesses. First, we were incorporated in the state of Nevada on June 25, 2013 as Tomichi
Creek Outfitters, aiming to provide professionally guided big game hunts in Sargents, Colorado which is approximately four hours
southwest from Denver. This area of the country is home to trophy size Elk and Mule Deer. Our secondary business included offering
guided scenic tours on the western slopes of the Rocky Mountains. Every season offers a diversified plethora of wildlife
and stunning scenic views. Our Chief Executive Officer (“CEO”) and sole director at that time was Jeremy Gindro.
Second,
on March 2, 2015, the Company entered into a Business Acquisition Agreement and share exchange under which we acquired the business
and assets of Grasshopper Colorado, formed in the state of Colorado on January 13, 2015. The exchange for $10,651 was represented
by 250,000 shares of the Company’s common stock in exchange for all the outstanding shares of Grasshopper Colorado.
The assets purchased include the trademark and website, office supplies and office furniture. On November 2, 2015 we filed a Certificate
of Amendment to our Articles of Incorporation changing the name of our Company from Tomichi Creek Outfitters to Grasshopper Staffing,
Inc. Grasshopper Colorado was operating as a wholly-owned subsidiary of the Company and was the primary operation of our business
until the acquisition of IndeLiving Holdings Inc., on March 13, 2018. Our management consisted of Melanie Osterman as CEO,
and Jeremy Gindro who was our sole director.
Third,
we acquired IndeLiving and changed our name to Healthcare Integrated Technologies, Inc. Our current operations are described above.
With the acquisition of IndeLiving, we had another change in management, and Scott M. Boruff became CEO and sole director of the
Company.
Employees
At
July 31, 2018, we had 24 employees.
At
July 31, 2019, we had 1 employee.
Available
Information
We
electronically file certain documents with the Securities and Exchange Commission (the SEC). We file annual reports on Form 10-K;
quarterly reports on Form 10-Q; and current reports on Form 8-K (as appropriate); along with any related amendments and supplements
thereto. From time-to-time, we may also file registration statements and related documents in connection with equity or debt offerings.
You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington,
DC 20549. You may obtain information regarding the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the
SEC maintains an internet website at www.sec.gov that contains reports and other information regarding registrants that
file electronically with the SEC.
ITEM
1A. RISK FACTORS.
Risks
Related to Economic and Market Conditions
General
Economic and Financial Conditions
The
success of any investment activity is influenced by general economic and financial conditions, all of which are beyond the control
of the Company. These conditions, such as the recent global economic crisis and significant downturns in the financial markets,
may materially adversely affect our operating results, financial condition and ability to implement our business strategy and/or
meet our return objectives.
The
recent global outbreak of COVID-19 (more commonly known as the Coronavirus) has disrupted economic markets and the prolonged economic
impact is uncertain. Some economists and major investment banks have expressed concern that the continued spread of the virus
globally could lead to a world-wide economic downturn. Many manufacturers of goods in China and other countries have seen a downturn
in production due to the suspension of business and temporary closure of factories in an attempt to curb the spread of the illness.
As the impact of the Coronavirus spreads to other parts of the world, similar impacts may occur with respect to affected countries.
Risks
Related to Our Business
The
Company’s industry is highly competitive and we have less capital and resources than many of our competitors which may give
them an advantage in developing and marketing products similar to ours or make our products obsolete.
We
are involved in a highly competitive industry where we may compete with numerous other companies who offer alternative methods
or approaches, who may have far greater resources, more experience, and personnel perhaps more qualified than we do. Such resources
may give our competitors an advantage in developing and marketing products similar to ours or products that make our products
obsolete. There can be no assurance that we will be able to successfully compete against these other entities.
The
Company may be unable to respond to the rapid technological change in its industry and such change may increase costs and competition
that may adversely affect its business
Rapidly
changing technologies, frequent new product and service introductions and evolving industry standards characterize the Company’s
market. The continued growth of the Internet and intense competition in the Company’s industry exacerbate these market characteristics.
The Company’s future success will depend on its ability to adapt to rapidly changing technologies by continually improving
the performance features and reliability of its products and services. The Company may experience difficulties that could delay
or prevent the successful development, introduction or marketing of its products and services. In addition, any new enhancements
must meet the requirements of its current and prospective users and must achieve significant market acceptance. The Company could
also incur substantial costs if it needs to modify its products and services or infrastructures to adapt to these changes.
The
Company also expects that new competitors may introduce products, systems or services that are directly or indirectly competitive
with the Company. These competitors may succeed in developing, products, systems and services that have greater functionality
or are less costly than the Company’s products, systems and services, and may be more successful in marketing such products,
systems and services. Technological changes have lowered the cost of operating communications and computer systems and purchasing
software. These changes reduce the Company’s cost of providing services but also facilitate increased competition by reducing
competitors’ costs in providing similar services. This competition could increase price competition and reduce anticipated
profit margins.
The
Company’s services are new and its industry is evolving.
You
should consider the Company’s prospects considering the risks, uncertainties and difficulties frequently encountered
by companies in their early stage of development. To be successful in this industry, the Company must, among other things:
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develop
and introduce functional and attractive services;
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attract
and maintain a large base of customers;
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increase
awareness of the Company brand and develop consumer loyalty;
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respond
to competitive and technological developments;
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build
an operations structure to support the Company business; and
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attract,
retain and motivate qualified personnel.
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The
Company cannot guarantee that it will succeed in achieving these goals, and its failure to do so would have a material adverse
effect on its business, prospects, financial condition and operating results.
The
Company’s products and services are new and are in the early stages of development. The Company is not certain that
these products and services will function as anticipated or be desirable to its intended market. Also, some of the Company’s
products and services may have limited functionalities, which may limit their appeal to consumers and put the Company at a competitive
disadvantage. If the Company’s current or future products and services fail to function properly or if the Company does
not achieve or sustain market acceptance, it could lose customers or could be subject to claims which could have a material adverse
effect on the Company business, financial condition and operating results.
Risks
Related to Our Company
Uncertainty
of profitability
Our
business strategy may result in increased volatility of revenues and earnings. As we will only develop a limited number of products
and services at a time, our overall success will depend on a limited number of products and services, which may cause variability
and unsteady profits and losses depending on the products and services offered.
Our
revenues and our profitability may be adversely affected by economic conditions and changes in the market. Our business is also
subject to general economic risks that could adversely impact the results of operations and financial condition.
Because
of the anticipated nature of the products and services that we will attempt to develop, it is difficult to accurately forecast
revenues and operating results and these items could fluctuate in the future due to several factors. These factors may
include, among other things, the following:
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Our
ability to raise sufficient capital to take advantage of opportunities and generate sufficient revenues to cover expenses.
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Our
ability to source strong opportunities with sufficient risk adjusted returns.
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Our
ability to manage our capital and liquidity requirements based on changing market conditions generally.
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The
acceptance of the terms and conditions of our licenses and/or the acceptance of our royalties and fees.
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The
amount and timing of operating and other costs and expenses.
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The
nature and extent of competition from other companies that may reduce market share and create pressure on pricing and investment
return expectations.
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Adverse
changes in the national and regional economies in which we will participate, including, but not limited to, changes in our
performance, capital availability, and market demand.
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Adverse
changes in the projects in which we plan to invest which result from factors beyond our control, including, but not limited
to, a change in circumstances, capacity and economic impacts.
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Changes
in laws, regulations, accounting, taxation, and other requirements affecting our operations and business.
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Our
operating results may fluctuate from year to year due to the factors listed above and others not listed. At times, these fluctuations
may be significant.
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Our
independent auditors’ report for the fiscal years ended July 31, 2019 and 2018 have expressed doubts about our ability to
continue as a going concern
Due
to the uncertainty of our ability to meet our current operating and capital expenses, in our audited annual financial statements
as of and for the years ended July 31, 2019 and 2018 our independent auditors included a note to our financial statements regarding
concerns about our ability to continue as a going concern. We have incurred recurring losses and have generated limited revenue
since inception. These factors and our need for additional financing to effectively execute our business plan, raise substantial
doubt about our ability to continue as a going concern. The presence of the going concern note to our financial statements
may have an adverse impact on the relationships we are developing and plan to develop with third parties as we continue the commercialization
of our products and could make it challenging and difficult for us to raise additional financing, all of which could have a material
adverse impact on our business and prospects and result in a significant or complete loss of your investment.
COVID-19
could adversely impact our business
In December
2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread
to multiple countries, including the United States, and several European countries. If COVID-19 continues to spread in the
United States, we expect to experience disruptions that could adversely impact our business. The spread of COVID-19 has disrupted
the United States’ healthcare and healthcare regulatory systems which could divert healthcare resources away from our products.
It is unknown how long these disruptions could continue, were they to occur. Additionally, COVID-19’s spread, which
has had a broad global impact, including restrictions on travel and quarantine polices put into place by businesses and governments,
may materially affect us economically by causing disruptions in our supply chain or distribution channels. As the global outbreak
of COVID-19 continues to rapidly evolve, the extent to which COVID-19 may impact our business will depend on future
developments, which are highly uncertain and cannot be predicted.
Management
of growth will be necessary for us to be competitive
Successful
expansion of our business will depend on our ability to effectively attract and manage staff, strategic business relationships,
and shareholders. Specifically, we will need to hire skilled management and technical personnel as well as manage partnerships
to navigate shifts in the general economic environment. Expansion has the potential to place significant strains on financial,
management, and operational resources, yet failure to expand will inhibit our profitability goals.
We
are entering a potentially highly competitive market
The
markets for the healthcare and senior monitoring industries are competitive and evolving. We face strong competition from
larger companies that may be in the process of offering similar products and services to ours. Many of our current and potential
competitors have longer operating histories, significantly greater financial, marketing and other resources and larger client
bases than we have (or may be expected to have).
Given
the rapid changes affecting the global, national, and regional economies generally, and the healthcare industry specifically,
we may not be able to create and maintain a competitive advantage in the marketplace. Our success will depend on our ability
to keep pace with any market, legal and regulatory changes as well as competitive pressures. Any failure by us to
anticipate or respond adequately to such changes could have a material adverse effect on our financial condition, operating results,
liquidity and cash flow.
If
we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results
accurately or to prevent fraud. Any ability to report and file our financial results accurately and timely could harm our reputation
and adversely impact the future trading price of our common stock.
Effective
internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment
existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control
deficiencies may adversely affect our financial condition, results of operation and access to capital.
We
currently have insufficient written policies and procedures for accounting and financial reporting with respect to the requirements
and application of US GAAP and SEC disclosure requirements. Additionally, there is a lack of formal process and timeline for closing
the books and records at the end of each reporting period and such weaknesses restrict the Company’s ability to timely gather,
analyze and report information relative to the financial statements.
Because
of the Company’s limited resources, there are limited controls over information processing. There is inadequate segregation
of duties consistent with control objectives. Our Company’s management is composed of a small number of individuals resulting
in a situation where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional
staff.
The
Company’s failure to continue to attract, train, or retain highly qualified personnel could harm the company’s business.
The
Company’s success also depends on the Company’s ability to attract, train, and retain qualified personnel, specifically
those with management and product development skills. In particular, the Company must hire additional skilled personnel to further
the Company’s research and development efforts. Competition for such personnel is intense. If the Company fails in
attracting new personnel or retaining and motivating the Company’s current personnel, the Company’s business could
be harmed.
Risks
Related to Our Common Stock
Because
we will likely issue additional shares of our common stock, investment in our Company could be subject to substantial dilution.
Investors’
interests in our company will be diluted and investors may suffer dilution in their net book value per share when we issue additional
shares. We are authorized to issue 200,000,000 shares of common stock, $0.001 par value per share. As of March 18, 2020,
there were 33,487,500 shares of our common stock issued and outstanding. We anticipate that all or at least some of our
future funding, if any, will be in the form of equity financing from the sale of our common stock. If we do sell more common stock,
investors’ investment in our company will likely be diluted. Dilution is the difference between what you pay for your stock
and the net tangible book value per share immediately after the additional shares are sold by us. If dilution occurs, any investment
in our company’s common stock could seriously decline in value.
Trading
in our common stock on the OTC Pink has been subject to wide fluctuations.
Our
common stock is currently quoted for public trading on the OTC Pink. The trading price of our common stock has been subject to
wide fluctuations. Trading prices of our common stock may fluctuate in response to several factors, many of which will
be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that
trading prices and price earnings ratios previously experienced by our common stock will be matched or maintained. These broad
market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance.
In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation
has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management’s
attention and resources.
Our
Certificate of Incorporation and by-laws provides for indemnification of officers and directors at our expense and limit their
liability which may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be
expended for the benefit of officers and/or directors.
Our
Certificate of Incorporation and By-Laws include provisions that fully eliminate the personal liability of our directors for
monetary damages to the fullest extent possible under the laws of the State of Nevada or other applicable law. These
provisions eliminate the liability of our directors and our shareholders for monetary damages arising out of any violation of
a director of his fiduciary duty of due care. Under Nevada law, however, such provisions do not eliminate the personal
liability of a director for (i) breach of the director’s duty of loyalty, (ii) acts or omissions not in good faith or involving
intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases of stock other than from lawfully
available funds, or (iv) any transaction from which the director derived an improper benefit. These provisions do not affect a
director’s liabilities under the federal securities laws or the recovery of damages by third parties.
We
do not intend to pay dividends on any investment in the shares of stock of our Company and any gain on an investment in our Company
will need to come through an increase in our stock’s price, which may never happen.
We
have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent
that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment
of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through
an increase in the stock’s price. This may never occur and investors may lose all their investment in our
company.
Because
our securities are subject to penny stock rules, you may have difficulty reselling your shares.
Our
shares as penny stocks, are covered by Section 15(g) of the Securities Exchange Act of 1934 which imposes additional sales practice
requirements on broker/dealers who sell our company’s securities including the delivery of a standardized disclosure document;
disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and, furnishing monthly
account statements. These rules apply to companies whose shares are not traded on a national stock exchange, trade at less than
$5.00 per share, or who do not meet certain other financial requirements specified by the Securities and Exchange Commission.
These
rules require brokers who sell “penny stocks” to persons other than established customers and “accredited investors”
to complete certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning
the risks of trading in such penny stocks. These rules may discourage or restrict the ability of brokers to sell our shares of
common stock and may affect the secondary market for our shares of common stock. These rules could also hamper our ability to
raise funds in the primary market for our shares of common stock.
FINRA
sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In
addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”)
has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds
for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities
to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s
financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes
that there is a high probability that speculative low-priced securities will not be suitable for at least some customers.
FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may
limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
There
could be unidentified risks involved with an investment in our securities
The
foregoing risk factors are not a complete list or explanation of the risks involved with an investment in the securities. Additional
risks will likely be experienced that are not presently foreseen by the Company. Prospective investors must not construe this
information provided herein as constituting investment, legal, tax or other professional advice. Before making any decision to
invest in our securities, you should read this entire prospectus and consult with your own investment, legal, tax and other professional
advisors. An investment in our securities is suitable only for investors who can assume the financial risks of an investment in
the Company for an indefinite period and who can afford to lose their entire investment. The Company makes no representations
or warranties of any kind with respect to the likelihood of the success or the business of the Company, the value of our securities,
any financial returns that may be generated or any tax benefits or consequences that may result from an investment in the Company.
ITEM
1B. UNRESOLVED STAFF COMMENTS.
Not
applicable.
ITEM
2. PROPERTIES.
None.
ITEM
3. LEGAL PROCEEDINGS.
The
Company is currently not involved in any litigation that the Company believes could have a materially adverse effect on the Company’s
financial condition or results of operations. On January 2, 2020, a sworn account lawsuit was filed against our IndeLiving
Holdings, Inc. (“IndeLiving”) subsidiary and our CEO Scott M. Boruff by our previous Certified Public Accounting Firm,
RBSM LLP demanding payment of $28,007 for services rendered. We have filed our Answer and IndeLiving filed a breach of contract
Counterclaim on February 24, 2020 demanding repayment of a $7,500 retainer paid to RBSM LLP by IndeLiving for services that we
allege were not provided. Given the early state of the proceedings in this case, we currently cannot assess the probability of
losses, but we can reasonably estimate that the range of losses in this case will be immaterial since the full amount of the lawsuit
has previously been recorded in the consolidated financial statements.
ITEM
4. MINE SAFETY DISCLOSURES.
Not
applicable.
PART
II
ITEM
5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a)
Market Information
Our
common stock is quoted on the OTC Pink under the symbol “HITC”. The OTC Pink is a quotation service that displays
real-time quotes, last-sale prices, and volume information in over-the-counter equity securities.
The
following table shows, for the periods indicated, the high and low bid prices per share of the Company’s common Stock
as reported by the OTC Pink quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions, and may not necessarily represent actual transactions.
|
|
|
High
|
|
|
Low
|
|
|
Fiscal
Year 2018
|
|
|
|
|
|
|
|
|
|
First quarter
ended October 31, 2017
|
|
$
|
0.80
|
|
|
$
|
0.35
|
|
|
Second quarter
ended January 31, 2018
|
|
$
|
1.31
|
|
|
$
|
0.70
|
|
|
Third quarter
ended April 30, 2018
|
|
$
|
1.62
|
|
|
$
|
1.20
|
|
|
Fourth quarter
ended July 31, 2018
|
|
$
|
1.57
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year 2019
|
|
|
|
|
|
|
|
|
|
First quarter
ended October 31, 2018
|
|
$
|
0.65
|
|
|
$
|
0.30
|
|
|
Second quarter
ended January 31, 2019
|
|
$
|
0.45
|
|
|
$
|
0.30
|
|
|
Third quarter
ended April 30, 2019
|
|
$
|
0.47
|
|
|
$
|
0.12
|
|
|
Fourth quarter
ended July 31, 2019
|
|
$
|
0.20
|
|
|
$
|
0.12
|
|
(b)
Holders
As
of March 18, 2020, there were 48 stockholders of record. Because shares of the Company’s common stock
are held by depositaries, brokers and other nominees, the number of beneficial holders of the Company’s shares is larger
than the number of stockholders of record.
(c)
Dividends
We
have never declared or paid dividends on our common stock. We do not intend to declare dividends in the foreseeable future because
we anticipate that we will reinvest any future earnings into the development and growth of our business. Any decision as to the
future payment of dividends will depend on our results of operations and financial position and such other factors as our Board
of Directors in its discretion deems relevant.
(d)
Securities Authorized for Issuance under Equity Compensation Plan
The
Company does not have in effect any compensation plans under which the Company’s equity securities are authorized for issuance.
Transfer
Agent
Our
transfer agent is VStock, LLC located at 18 Lafayette Place, Woodmere, NY 11598.
Recent
Sales of Unregistered Securities
During
the years ended July 31, 2019 and 2018, we have not issued any securities which were not registered under the Securities
Act and not previously disclosed in the Company’s Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.
Rule
10B-18 Transactions
During
the years ended July 31, 2019 and 2018, there were no repurchases of the Company’s common stock by the Company.
ITEM
6. SELECTED FINANCIAL DATA.
Not
applicable
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
THE
FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS
AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS
THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT
FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS.
THESE RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND “RISK
FACTORS” AND THOSE INCLUDED ELSEWHERE IN THIS REPORT.
This
discussion summarizes the significant factors affecting the consolidated financial statements, financial condition, liquidity,
and cash flows of Healthcare Integrated Technologies, Inc, for the fiscal years ended July 31, 2019 and 2018 and the interim periods
included herein. The following discussion and analysis should be read in conjunction with the consolidated financial statements
and notes included elsewhere in this Form 10-K.
Executive
Overview
We
are healthcare technology company whose primary operations are through our IndeLiving subsidiary, which we acquired in March 2018.
With the acquisition of IndeLiving, our core focus changed, and we discontinued our operations of our Grasshopper Colorado subsidiary
in February 2019. We also changed our name to Healthcare Integrated Technologies, Inc., to better reflect our new operations.
As a result, our operations, management and board of directors, and our business in general have undergone a substantial change.
Strategy
Our
mission is to grow a profitable healthcare technology company through our IndeLiving subsidiary for the long-term benefit of our
shareholders by focusing on our relationship with our primary hardware supplier, further development of our proprietary software
and developing new uses and product lines for the technology. Our management team is focused on maintaining the financial flexibility
and assembling the right complement of personnel and outside consultants required to successfully execute our mission.
Financial
and Operating Results
Highlights
for fiscal years 2019 and 2018 and the interim periods included in this Form 10-K include:
|
|
●
|
In
February 2019, we discontinued our operations of our Grasshopper Colorado subsidiary, which was our only source of revenue.
|
|
|
|
|
|
|
●
|
On
February 21, 2018, we issued 1,000,000 shares of common stock to Acorn Management Partners, LLC (“Acorn”) in exchange
for Acorn forfeiting warrants to purchase 6,000,000 shares of our common stock. The warrants had an exercise price of $0.01
and expired ten years from the date of issuance. The transaction terms were negotiated in good faith with an unrelated third
party.
|
|
|
|
|
|
|
●
|
On
March 13, 2018 we entered into a Share Acquisition and Exchange Agreement with IndeLiving
Holdings, Inc., a Florida corporation (“IndeLiving”), and its shareholders,
under which we acquired 100% of the outstanding capital stock of IndeLiving in exchange
for 5,200,000 shares of our common stock. Estimated value of the shares issued was $22,751,
which equaled the estimated value of the net assets acquired.
|
|
|
|
|
|
|
●
|
On
March 13, 2018 (the “Termination Date”) we canceled the three-year consulting and advisory agreement with Platinum
Equity Advisors, LLC (the “Platinum Agreement”). Compensation consisted of a monthly retainer fee of $20,000.
In addition, for services rendered through January 15, 2016, we issued 8,000,000 shares of our common stock at a value of
$0.35 per share, or $2,788,000 (the “Stock Grant”). The value of the Stock Grant was being amortized over the
term of the agreement through the Termination Date. For the year ended July 31, 2018, we recorded consulting fees expense
of $147,742 for the monthly retainer fee and we recorded stock-based compensation expense of $1,355,278, which included the
full unamortized balance of the Stock Grant at the Termination Date. Services under the Platinum Agreement were being performed
by Scott M. Boruff, our current CEO.
|
|
|
|
|
|
|
●
|
On
March 13, 2018, Scott M. Boruff was appointed CEO and entered into a three-year employment agreement with the Company. The
employment agreement provides for a base salary of $300,000 per annum, a monthly automobile allowance of $1,950 and 2,500,000
options to purchase the Company’s common stock at an exercise price of $3.00 per share and become vested and exercisable
in equal annual installments over a period of four (4) years from the grant date. The value of the options on the grant date
was estimated using the Black-Scholes pricing model and is being recognized as an expense over the vesting term.
|
|
|
|
|
|
|
●
|
On
various dates during the month of March 2018 we issued a series of 5% Convertible Promissory Notes (collectively, the “5%
Notes”) totaling $750,000 in net proceeds. We incurred no costs related to the issuance of the 5% Notes. The 5% Notes
bear interest at the rate of five percent (5%) per annum, compounded annually and matured one-year from the date of issuance.
The 5% Notes are currently in default. Management is currently negotiating an amendment to the 5% Notes to extend the maturity
dates of the notes. See Note 9 – Debt to the consolidated financial statements for additional information.
|
|
|
|
|
|
|
●
|
On
August 7, 2019, we secured a contract with a hardware supplier, Vayyar Imaging, Ltd., to produce our monitoring devices. The
contract requires us to purchase $2,000,000 in product by July 31, 2020.
|
|
|
|
|
|
|
●
|
On
October 8, 2019, Charles B. Lobetti, III was appointed CFO and entered into a three-year employment agreement with the Company.
The employment agreement provides for a base salary of $52,000 per annum (on a part-time basis), a monthly automobile allowance
of $400 and 600,000 options to purchase the Company’s common stock at an exercise price of $0.15 per share with 25%
immediately vested and exercisable on the grant date and the remaining options vesting equally over a period of three (3)
years from the grant date. The value of the options on the grant date was estimated using the Black-Scholes pricing model
and is being recognized as an expense over the vesting term.
|
|
|
|
|
|
|
●
|
On
February 11, 2020, we completed a private placement of 1,000,000 shares of our common stock at a price of $0.10 per share
resulting in net proceeds to the Company of $100,000. We incurred no cost related to the private placement.
|
Results
of Operations
Revenues
Our
only source of revenue was derived from our Grasshopper Colorado subsidiary, the operations of which were discontinued in February
2019. For all consolidated statements of operations included in this Form 10-K after January 31, 2019, the net loss incurred by
Grasshopper Colorado is presented separately as discontinued operations.
Loss
from discontinued operations consisted of the following at July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Net
revenue
|
|
$
|
27,909
|
|
|
$
|
115,614
|
|
|
Operating
expenses
|
|
|
(35,969
|
)
|
|
|
(188,636
|
)
|
|
Interest
expense
|
|
|
(7,534
|
)
|
|
|
(12,368
|
)
|
|
Loss
from discontinued operations
|
|
$
|
(15,594
|
)
|
|
$
|
(85,390
|
)
|
An
analysis or discussion of our revenues does not provide any useful information since we discontinued the operations of our only
revenue source.
Selling,
General and Administrative Expenses
The
table below presents a comparison of our selling, general and administrative expenses for the years ended July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Officer’s
salaries
|
|
$
|
336,965
|
|
|
$
|
134,248
|
|
|
Stock-based
compensation
|
|
|
294,510
|
|
|
|
1,475,979
|
|
|
Advertising,
marketing and product demonstration expenses
|
|
|
90,212
|
|
|
|
56,143
|
|
|
Professional
fees
|
|
|
44,129
|
|
|
|
265,327
|
|
|
Other
|
|
|
18,177
|
|
|
|
19,960
|
|
|
Total
selling, general and administrative expenses
|
|
$
|
783,993
|
|
|
$
|
1,951,657
|
|
Officer’s
salaries were $336,965 in fiscal 2019, representing an increase of $212,717 over the fiscal 2018 amount. The increase is directly
related to the March 13, 2018 employment agreement with our CEO. Prior to the employment agreement, fees were being earned by
Platinum Equity Advisors, LLC, where our CEO served as Chief Manager, and were recorded as professional fees. The net increase
in Officer’s salaries is a result of the difference between our current and former CEO’s compensation. Officer’s
salaries for the interim periods ending October 31, 2019 and January 31, 2020 also include compensation expense from our CFO’s
employment agreement discussed above.
Stock-based
compensation decreased $1,181,469 from fiscal 2018. Fiscal 2019 stock-based compensation consisted entirely of the expense related
to the stock options granted to our CEO pursuant to the March 13, 2018 employment agreement discussed above. Fiscal 2018 stock-based
compensation included the expense related to the stock options granted to our CEO, as well as the normal periodic amortization
of the expense related to the 8,000,000 share grant related to the Platinum Agreement discussed above. In addition to the normal
periodic amortization, upon termination of the Platinum Agreement on March 13, 2018, we recognized share-based compensation expense
for the remaining $890,611 unamortized balance. Stock-based compensation for the interim periods ending October 31, 2019 and January
31, 2020 also include the expense from the granting of stock options under our CFO’s employment agreement discussed above.
Advertising,
marketing and product demonstration expenses increased $34,069 over the fiscal 2018 amount primarily due to the acquisition of
IndeLiving on March 13, 2018. IndeLiving has and, with adequate capital, will continue to incur substantially more advertising,
marketing and product demonstration costs than the Company has previously incurred.
Professional
fees decreased $221,198 in fiscal 2019 as compared to fiscal 2018. The decrease is primarily related to the cancellation of the
Platinum Agreement and additional legal and accounting fees in fiscal 2018 related to the IndeLiving acquisition (see above).
Interest
Expense
Interest
expense increased $24,564 for fiscal 2019 as compared to fiscal 2018. All our interest expense is related to the issuance of the
5% Convertible Promissory Notes in March 2018 (see above) and our assumption of a Ford Credit installment note in the IndeLiving
acquisition. Accordingly, fiscal 2018 includes approximately three and one-half months of interest on the notes while fiscal 2019
included a full year’s interest expense.
Liquidity
and Capital Resources
Working
Capital
The
following table summarizes our working capital for the fiscal years ending July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Current
assets
|
|
$
|
725
|
|
|
$
|
182,097
|
|
|
Current
liabilities
|
|
|
(1,806,413
|
)
|
|
|
(1,450,794
|
)
|
|
Working
capital deficiency
|
|
$
|
(1,805,688
|
)
|
|
$
|
(1,268,697
|
)
|
Current
assets for the year ended July 31, 2019 decreased compared to July 31, 2018, primarily due to a decrease
in cash and a decrease in accounts receivable upon the discontinuance of the Grasshopper Colorado operations.
Current
liabilities for the year ended July 31, 2019 increased compared to July 31, 2018 due to increases in short-term
loans from management and accrued but unpaid officer’s compensation.
Net
Cash Used by Operating Activities
Since
we discontinued the operations of our Grasshopper Colorado subsidiary in February 2019, we no longer have a revenue source and
will continue to have negative cash flow from operations for the near future. The factors in determining operating cash flows
are largely the same as those that affect net earnings, except for non-cash expenses such as depreciation and stock-based compensation,
which affect earnings but do not affect cash flow. Net cash used by operating activities
was $99,443 for the year ended July 31, 2019 compared to $319,235 for the year ended July 31, 2018. The
decrease in cash used during fiscal 2019 is attributable to management adhering to a strict cash expenditure budget until such
time as cash can be raised from outside sources.
Net
Cash Provided by Financing Activities
During
fiscal year 2019, we raised cash exclusively from short-term loans from management. During fiscal year 2018, we issued a series
of 5% Convertible Promissory Notes resulting in $750,000 in net proceeds to the Company in addition to short-term loans of $42,275
from related and third parties. The increases during fiscal 2019 and 2018 were offset by payments for amounts owed to related
parties of $75,800 and $310,650 respectively.
At
this time, we cannot provide investors with any assurance that we will be able to obtain sufficient funding from
debt financing and/or the sale of our equity securities to meet our obligations over the next twelve months.
We are likely to continue using short-term loans from management to meet our short-term funding needs. We
have no material commitments for capital expenditures as of July 31, 2019.
Going
Concern Qualification
We
have a history of losses, an accumulated deficit, a negative working capital and have not generated cash from operations to support
a meaningful and ongoing business plan. Our Independent Registered Public Accounting Firm has included a
“Going Concern Qualification” in their report for the years ended July 31, 2019, 2018, 2017 and 2016. The foregoing
raises substantial doubt about the Company’s ability to continue as a going concern. We intend on financing our future activities
and working capital needs largely from the sale of private and/or public equity securities with additional funding from
other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient
to fund working capital requirements. There is no guarantee that additional capital or debt financing will be available when and
to the extent required, or that if available, it will be on terms acceptable to us. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty. The “Going Concern Qualification”
might make it substantially more difficult to raise capital.
Critical
Accounting Policies and Estimates
We
believe the following critical policies impact our
more significant judgments and estimates used in preparation of our financial statements.
We
prepare our financial statements in conformity with United
States of America generally accepted accounting principles (“GAAP”). These principals require 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 amounts of revenues and expenses during the reporting
period. Management believes that these estimates are reasonable and have been discussed with the Board; however, actual results
could differ from those estimates.
We
issue options and warrants to consultants, directors, and
officers as compensation for services. These options and warrants are valued using the Black-Scholes model, which focuses on the
current stock price and the volatility of moves to predict the likelihood of future stock moves. This method of valuation is typically
used to estimate the value of stock options and warrants based on the price of the underlying stock.
Long-lived
assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate
that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based
on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar
assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable
from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value
of the asset. When fair values are not available, we estimate fair value using the expected future cash flows discounted
at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses
for any periods presented.
Fair
value estimates used in preparation of the financial statements are based upon certain market assumptions and pertinent information
available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair
values. These financial instruments include cash, accounts payable, note payable and due to related parties. Fair values were
assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying
amounts approximate fair values or they are receivable or payable on demand.
Business
Combinations
We
account for business combinations under the acquisition method of accounting. The acquisition method requires that the acquired
assets and liabilities, including contingencies, be recorded at fair value determined on the acquisition date and that changes
thereafter be reflected in income (loss). The estimation of fair values of the assets and liabilities assumed involves several
estimates and assumptions that could differ materially from the actual amounts recorded. The results of the acquired businesses
are included in our results from operations beginning from the day of acquisition.
Revenue
Recognition
We
adopted ASC 606 effective January 1, 2018 using the modified retrospective method. Under this method, the Company follows the
five-step model provided by ASC Topic 606 in order to recognize revenue in the following manner: 1) Identify the contract; 2)
Identify the performance obligations of the contract; 3) Determine the transaction price of the contract; 4) Allocate the transaction
price to the performance obligations; and 5) Recognize revenue. An entity recognizes revenue for the transfer of promised goods
or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange
for those goods or services. The Company’s revenue recognition policies remained substantially unchanged as a result of
the adoption of ASC 606, and there were no significant changes in business processes or systems.
Temporary
Staffing Revenue
Prior
to the discontinuance of its operations in February 2019, Grasshopper Colorado earned revenue by providing specialized temporary
staffing solutions to the cannabis industry. We provided temporary labor at an agreed upon rate per hour. Billings were invoiced
on a per-hour basis as the temporary staffing services were delivered to the customer. Revenue from the majority of our temporary
staffing services were recognized at a point in time. We applied the practical expedient to recognize revenue for these services
at various intervals based on the number of hours completed and agreed upon rate per hour at that time.
Capital
Resources
We
had no material commitments for capital expenditures as of July 31, 2019. Subsequent to July 31, 2019, on August 7, 2019, our
wholly owned subsidiary, IndeLiving Holdings, Inc., a Florida corporation (“Inde Living”), as buyer and licensee,
and Vayyar Imaging, Ltd. (“Vayyar”), as seller and licensor, entered into a Walabot Home Reseller Agreement, dated
as of July 31, 2019 (the “Agreement”). Under the terms of the Agreement, among other things, Inde Living has agreed
to purchase from Vayyar Walabot home hardware devices, used in the monitoring of residents and patients under care in assisted
living and similar facilities (the “Products”). The Company is required to order a minimum of $2,000,000 in
Products by July 31, 2020 (exclusive of shipping costs and taxes).
The
agreement also provides, among other terms, Inde Living with a non-exclusive, revocable license to sell the Products within the
United States during the term of the Agreement, which has an initial term extending until July 31, 2020 and which automatically
extends year-to-year afterwards unless either party elects to terminate the Agreement. The agreement provides a client
becomes exclusive when we sell 20 units or more to the client.
Although
the Agreement is dated as of July 31, 2019, signature pages were executed and delivered between both parties on August 7, 2019,
and so it became legally binding on the parties on that date.
Off-Balance
Sheet Arrangements
The
Company has no off-balance sheet arrangements as of July 31, 2019 or 2018.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We
do not hold any derivative instruments and do not engage in any hedging activities.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The
financial statements and supplementary financial information required to be filed under this Item 8 are presented in Part IV,
Item 15 of this Form 10-K and are incorporated herein by reference.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On
March 6, 2017, Stevenson & Company CPAs, LLP (“Stevenson”) informed the Company that Stevenson was resigning,
effective immediately, as the Company’s independent registered public accounting firm. Stevenson resigned because Stevenson
declined to stand for re-appointment.
During
the fiscal year ended July 31, 2016 and in the subsequent interim period through March 6, 2017, there were (i) no “disagreements”
(as that term is described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Stevenson
on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements,
if not resolved to the satisfaction of Stevenson, would have caused Stevenson to make reference to the subject matter
of such disagreements in its reports on the consolidated financial statements for such years, and (ii) no “reportable events”
(as that term is described in Item 304(a)(1)(v) of Regulation S-K).
Stevenson’s
reports on the consolidated financial statements of the Company for the fiscal years ended July 31, 2015 and 2014
did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope
or accounting principles.
On
March 7, 2017, the Board of Directors of the Company engaged RBSM, LLP (“RBSM”) as the Company’s new independent
registered public accounting firm.
During
the fiscal year ended July 31, 2016 and in the subsequent interim periods through March 7, 2017, neither the Company
nor anyone acting on its behalf consulted RBSM regarding either (i) the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be rendered with respect to the consolidated financial statements
of the Company, and neither a written report nor oral advice was provided to the Company by RBSM that RBSM concluded was an important
factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue or (ii) any
matter that was either the subject of a “disagreement” (as that term is used in Item 304(a)(1)(iv) of Regulation S-K
and the related instructions) or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation
S-K).
On
September 13, 2018, the Company dismissed RBSM LLP, effective September 12, 2018, as our independent registered public accounting
firm. RBSM LLP audited our financial statements for the fiscal years ended July 31, 2016 and 2017. The dismissal of RBSM LLP was
approved by our Board of Directors on September 12, 2018. RBSM LLP did not resign or decline to stand for re-election.
Neither
the report of RBSM LLP dated July 18, 2017 on our consolidated balance sheet at July 31, 2016, and the related consolidated statements
of operations, changes in stockholders’ deficit, and cash flows for the year ended July 31, 2016 nor the report of RBSM
LLP dated November 14, 2017 on our consolidated balance sheets at July 31, 2017 and 2016, and the related consolidated statements
of operations, changes in stockholders’ deficit, and cash flows for the years ended July 31, 2017 and 2016 contained an
adverse opinion or a disclaimer of opinion, nor was either such report qualified or modified as to uncertainty, audit scope, or
accounting principles, other than each such report was qualified as to our ability to continue as going concern.
During
the fiscal year ended July 31, 2017 and July 31, 2018 and in the subsequent interim period through September 13, 2018, there were
(i) no “disagreements” (as that term is described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions)
between the Company and RBSM on any matter of accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of RBSM, would have caused RBSM to make reference
to the subject matter of such disagreements in its reports on the consolidated financial statements for such years, and (ii) no
“reportable events” (as that term is described in Item 304(a)(1)(v) of Regulation S-K).
On
September 13, 2018, the Company engaged Marcum LLP as our independent registered public accounting firm.
During
our two most recent fiscal years and the subsequent interim period prior to retaining Marcum LLP (1) neither we nor anyone on
our behalf consulted Marcum LLP regarding (a) either the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on our financial statements or (b) any matter that
was the subject of a disagreement or a reportable event as set forth in Item 304(a)(1)(iv) and (v), respectively, of Regulation
S-K, and (2) Marcum LLP did not provide us with a written report or oral advice that they concluded was an important factor considered
by us in reaching a decision as to accounting, auditing or financial reporting issue.
On
January 7, 2020, the Company dismissed Marcum LLP as our independent registered public accounting firm. The dismissal of Marcum
LLP was approved by our Board of Directors. Marcum LLP did not resign or decline to stand for re-election.
During
the time that Marcum LLP served as our independent registered public accounting firm, we did not timely file financial statements
or provide information for Marcum LLP to be able to complete its audit of our financial statements dated July 31, 2018 or July
31, 2019 and the reviews of any interim financial statements for the quarterly periods of those fiscal years. As a result,
no report of Marcum LLP contained an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainly,
audit scope, or accounting principles, as no reports were filed.
During
our two most recent fiscal years and the subsequent interim period preceding our decision to dismiss Marcum LLP we had no
disagreements with the firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope
of procedure which disagreement if not resolved to the satisfaction of Marcum LLP would have caused it to make reference
to the subject matter of the disagreement in connection with its report.
On
January 7, 2020, the Company engaged Rodefer Moss & Co. PLLC as our independent registered public accounting firm.
During
our two most recent fiscal years and the subsequent interim period prior to retaining Rodefer Moss & Co. PLLC (1) neither
we nor anyone on our behalf consulted Rodefer Moss & Co. PLLC regarding (a) either the application of accounting principles
to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial
statements or (b) any matter that was the subject of a disagreement or a reportable event as set forth in Item 304(a)(1)(iv) and
(v), respectively, of Regulation S-K, and (2) Rodefer Moss & Co. PLLC did not provide us with a written report or oral advice
that they concluded was an important factor considered by us in reaching a decision as to accounting, auditing or financial reporting
issue.
ITEM
9A. CONTROLS AND PROCEDURES.
Disclosure
Controls and Procedures
Under
the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer,
we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined
in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended, at the end of the period covered by this report (the
“Evaluation Date”). In conducting its evaluation, management considered the material weaknesses described below in
Management’s Report on Internal Control over Financial Reporting.
Based
on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the Evaluation Date we did
not maintain disclosure controls and procedures that were effective in providing reasonable assurances that information required
to be disclosed in our reports filed under the Securities Exchange act of 1934 was recorded, processed, summarized and reported
within the time periods prescribed by SEC rules and regulations, and that such information was accumulated and communicated to
our management to allow timely decisions regarding required disclosure.
Our
management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and
procedures will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system
must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of
controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting
as of July 31, 2019. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of July
31, 2019 our internal controls over financial reporting were not effective.
In
making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework. Our management has concluded that, as of July 31, 2019, our internal control
over financial reporting is not effective based on these criteria. Material weaknesses noted by our management include:
|
|
●
|
Lack
of a functioning audit committee;
|
|
|
●
|
Lack
of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures;
|
|
|
●
|
Inadequate
segregation of duties consistent with control objectives and affecting the functions of authorization, recordkeeping, custody
of assets, and reconciliation;
|
|
|
●
|
Management
dominated by a single individual/small group without adequate compensating controls.
|
This
annual report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to temporary rules of the SEC that permit us to provide only management’s report in this annual report.”
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act, during our most recently completed fiscal year that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
ITEM
9B. OTHER INFORMATION
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The
following table sets forth information concerning our officers and directors as of the dates indicated. The directors of
the Company serve until their successors are elected and shall qualify. Executive officers are elected by the Board of Directors
and serve at the discretion of the directors.
Prior
to March 13, 2018
|
Name
|
|
Age
|
|
Title
|
|
Melanie
Osterman
|
|
64
|
|
President,
Chief Executive Officer and Chief Financial Officer
|
|
Jeremy
Gindro
|
|
27
|
|
Director
|
Set
forth below is a brief description of the background and business experience of each of the executive officers and directors
indicated above.
Melanie
Osterman, President, Chief Executive Officer and Chief Financial Officer, age 64
Ms.
Osterman has over 20 years of management experience in multiple fields of employment. From 2005 until her appointment as
President, Chief Executive Officer and Chief Financial Officer in May 2015, Ms. Osterman was business development director for
Security Title Insurance, where she was responsible for all aspects of customer relations and training employees on regulations
in the insurance industry. Prior to that position, she served as marketing and business development for Pueblo Bank
& Trust.
Jeremy
Gindro, Director, age 27
Mr.
Gindro was the sole Director of the Company. From September 1, 2005 through March 13, 2018, Mr. Gindro has been
a big game guide for individuals and groups of hunters. From May 2008 through present, Mr. Gindro is employed as a Supervisor
working for Jim Gindro Construction, Pueblo, Colorado. His responsibilities include operating heavy machinery including back hoes
and bobcats to dig foundations for new homes, septic tanks, and underground utilities lines and piping for new and existing homes.
Mr. Gindro was instrumental in procuring new business for the Company during his tenure and supervising all phases
of the rough build-out of single-family structures for his family business.
After
March 13, 2018
|
Name
|
|
Age
|
|
Title
|
|
Scott
M. Boruff
|
|
56
|
|
Chief Executive
Officer, Director
|
|
Charles
B. Lobetti, III
|
|
57
|
|
Chief
Financial Officer
|
Set
forth below is a brief description of the background and business experience of each of our current executive officers
and directors.
Scott
M. Boruff, Chief Executive Officer, Director, age 56
Mr.
Boruff has served as our Chief Executive Officer and Sole Director since March 13, 2018. He
has been the sole officer and director of IndeLiving Holdings, Inc. since the company’s formation in 2016. He has also served
as the Manager of Platinum Equity Advisors, LLC (“Platinum Equity”) since its formation in 2016. In addition to providing
consulting and advisory services, Platinum Equity has interests in a real estate brokerage firm and a luxury real estate auction
firm. Mr. Boruff is a proven executive with a diverse business background in investment banking and real estate development. He
currently serves as Manager of Own Shares, LLC, a privately held holding company with interests in various entertainment
ventures, and Managing Member of Stonewalk Companies, privately held real estate development company. As a professional in investment
banking, he specialized in consulting services and strategic planning with an emphasis on companies in the oil and gas field.
Mr. Boruff served as a member of the Board of Directors of Miller Energy Resources, Inc., a publicly traded company, from August
2008 until March 2016, serving as Executive Chairman of the Board of Directors from September 2014 until March 2016 and Chief
Executive Officer from August 2008 to September 2014. In October 2015, when it was being led by a successor management team, Miller
Energy Resources, Inc. filed a voluntary petition for reorganization under chapter 11 of title 11 of the U.S. Code in a pre-packaged
bankruptcy. It remained a debtor in possession and emerged from bankruptcy in March 2016. Mr. Boruff was a director and 49% owner
of Dimirak Securities Corporation, a broker-dealer and member of FINRA, from April 2009 until July 2012. In July 2012, Mr. Boruff
sold his interest in Dimirak. He has more than 30 years of experience in developing commercial real estate projects and from 2006
to 2007 Mr. Boruff successfully led transactions averaging $150 to $200 million in size while serving as a director of Cresta
Capital Strategies, LLC. Mr. Boruff received a Bachelor of Science degree in Business Administration from East Tennessee State
University.
Charles
B. Lobetti, III, Chief Financial Officer, Age 57
Mr.
Lobetti has served as our Chief Financial Officer since October 8, 2019. He holds both Bachelor of Science in Business
Administration (1985) and Master of Accountancy (1986) degrees from the University of Tennessee and is a licensed Certified Public
Accountant (Inactive) in the State of Tennessee. Upon graduation, Mr. Lobetti accepted a position in the tax department of the
Tampa, Florida office of Ernst & Young where he progressed to Senior Tax Consultant before he left the firm in 1989 to return
to his hometown of Knoxville, Tennessee as the Tax Manager with a progressive, local accounting firm. In 1990, Mr. Lobetti, along
with two co-workers, formed the accounting firm of Lobetti, Ideker & Reel (“LIR”) where he served as President
and Director of Tax Services. LIR was a member of the AICPA’s SEC Practice Section and served several SEC registrant clients.
In 1998, Mr. Lobetti left LIR to accept a position of Chief Financial Officer of United Petroleum Corporation (“UPET”),
a small cap, SEC registrant oil and natural gas development company and convenience store operator. Following his tenure at UPET,
Mr. Lobetti serviced as Chief Financial Officer for boutique investment banking/private equity firm specializing in the placement
and funding of Regulation D and Regulation S offerings. He spent the next 10-years working in various investment banking, commercial
mortgage banking and commercial banking functions before accepting the position of Controller – Alaska Operations with Miller
Energy Resources, Inc.(“Miller”), and SEC registrant oil and gas exploration and production company. Shortly after
accepting the position in 2011, Mr. Lobetti was promoted to Corporate Controller and thereafter appointed Treasurer in 2012. Since
leaving Miller in 2014, Mr. Lobetti enjoyed spending time with his family and working part-time in commercial mortgage banking
until recently accepting the position of Chief Financial Officer of Healthcare Integrated Resources, Inc.
Family
Relationships
There
are no family relationships among any of our directors or executive officers.
Involvement
in Certain Legal Proceedings
To
the best of the Company’s knowledge, none of the Company’s directors or executive officers has, during the past ten
years, except as set forth below:
|
|
●
|
been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
|
|
|
|
|
●
|
had
any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or
within two years prior to that time;
|
|
|
|
|
|
|
●
|
been
the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting,
his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance
activities, or to be associated with persons engaged in any such activity;
|
|
|
|
|
|
|
●
|
been
found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the judgment in such civil action has not been reversed,
suspended, or vacated;
|
|
|
|
|
|
|
●
|
been
the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to (i) an alleged violation of any federal or state securities or commodities law
or regulation, (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited
to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent
cease-and-desist order, or removal or prohibition order, or (iii) any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or
|
|
|
|
|
|
|
●
|
been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or persons associated with a member.
|
Mr.
Boruff served as a member of the Board of Directors, as Chief Executive Officer, and as Executive Chairman of Miller Energy Resources,
Inc. during the two years preceding Miller Energy Resources, Inc.’s filing of a bankruptcy petition in August 2015.
Mr.
Lobetti served as Treasurer of Miller Energy Resources, Inc. during the two-year period preceding Miller Energy Resources, Inc.’s
filing of a bankruptcy petition in August 2015.
Except
as set forth in the Company’s discussion below in “Certain Relationships and Related Transactions, and Director Independence”,
none of the Company’s directors or executive officers has been involved in any transactions with the Company or any of the
Company’s directors, executive officers, affiliates, or associates which are required to be disclosed pursuant to the rules
and regulations of the Commission.
Compliance
with Section 16(A) of the Exchange Act
Section
16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more
of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in
beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and
regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).
Based
solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the
fiscal year ended July 31, 2019 and 2018, were not timely.
Term
of Office
The
Company’s directors are elected by the Company’s stockholders for a one-year term until the next annual general meeting
of the Company’s stockholders, or until removed by the stockholders in accordance with the Company’s bylaws. The Company’s
officers are appointed by the Board and hold office until removed by the Board.
Code
of Ethics
The
Company does not currently have a code of ethics, and because the Company has only limited business operations and only two
officers and one director, the Company believes that a code of ethics would have limited utility. The Company intends to adopt
such a code of ethics as the Company’s business operations expand and the Company has more employees.
Board
Committees
As
we only have one board member and given our limited operations, we do not have separate or independent audit or compensation committees.
Our Board of Directors has determined that it does not have an “audit committee financial expert,” as that term is
defined in Item 407(d)(5) of Regulation S-K. In addition, we have not adopted any procedures by which our shareholders may recommend
nominees to our Board of Directors.
ITEM
11. EXECUTIVE COMPENSATION.
The
following table summarizes all compensation recorded by us in the past two years for:
|
|
●
|
our
principal executive officer or other individual serving in a similar capacity,
|
|
|
|
|
|
|
●
|
our
two most highly compensated executive officers other than our principal executive officer who were serving as executive officers
at July 31, 2019 and July 31, 2018 as that term is defined under Rule B-7 of the Securities Exchange Act of 1934, and
|
|
|
|
|
|
|
●
|
up
to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving
as an executive officer at July 31, 2019 and July 31, 2018.
|
Summary
Compensation Table (in dollars)
|
Name
and Principal
|
|
Fiscal
|
|
|
|
|
|
|
|
Stock
|
|
|
Non-Equity
Incentive Plan
|
|
|
Non-Qualified
Deferred
Compensation
|
|
|
All
Other
|
|
|
|
|
|
Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
B. Boruff
|
|
2019
|
|
|
300,000
|
|
|
|
-
|
|
|
|
294,510
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,400
|
|
|
|
617,910
|
|
|
Chief
Executive Officer
|
|
2018
|
|
|
115,323
|
|
|
|
-
|
|
|
|
120,701
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,995
|
|
|
|
245,019
|
|
|
Director
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
B. Lobetti, III
|
|
2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Chief
Financial Officer (2)
|
|
2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Melanie
Osterman
|
|
2019
|
|
|
38,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,900
|
|
|
Chief
Executive Officer
|
|
2018
|
|
|
16,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,500
|
|
|
Chief
Financial Officer (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeremy
Gindro
|
|
2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Director
(4)
|
|
2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1)
|
Mr.
Boruff has served as our Chief Executive Officer and our sole Director since March 13, 2018.
|
|
|
2)
|
Mr.
Lobetti has served as our Chief Financial Officer since October 8, 2019, which is after the end of our fiscal year July 31,
2019 but included in the interim periods October 31, 2019 and January 31, 2020.
|
|
|
3)
|
Ms.
Osterman served as our Chief Executive Officer and Chief Financial Officer from May 2015 to March 13, 2018.
|
|
|
4)
|
Mr.
Gindro served on our Board of Directors through March 13, 2018.
|
Director
Compensation
We
do not currently pay any cash fees to our directors, nor do we pay director’s expenses in attending board meetings.
Executive
Employment Agreements
Scott
M. Boruff and the Company entered into an Employment Agreement dated March 13, 2018, in which Mr. Boruff agreed to serve
as our Chief Executive Officer. As compensation, we agreed to pay him an annual salary of $300,000 and he is entitled
to discretionary bonuses as may be awarded from time to time by our Board of Directors. As additional compensation we granted
him an option to purchase 2,500,000 shares of the Company’s common stock at an exercise price of $3.00 per share, which
exceeded the fair market price of our common stock on the date of grant, vesting in four equal annual installments commencing
on the grant date. The vesting date of any unvested options accelerates in the event of a Change in Control (as defined
in the Employment Agreement). Mr. Boruff is also entitled to paid vacation and sick leave, an automobile allowance and participation
in any employee benefit plans or programs we may offer. The initial term of the Employment Agreement will automatically
renew for an additional one-year term unless either party provides notice of non-renewal.
The
Employment Agreement terminates upon the death or disability of Mr. Boruff, and may be terminated by us for cause, or by Mr. Boruff
without cause or for good reason. If the Employment Agreement is terminated for by us for cause, upon his death or disability,
at non-renewal or by Mr. Boruff without good cause, he is only entitled to receive compensation through the date of termination.
If the Employment Agreement is terminated by us without cause or by Mr. Boruff for good reason, we are obligated to pay
him severance equal to one year’s base salary and any unpaid incentive compensation. In addition, if at any time during
the term of the Employment Agreement Mr. Boruff’s employment is terminated by us without cause within two years after a
Change in Control of our company, or in the 90 days prior the Change in Control at the request of the acquiror, we are obligated
to pay him an amount equal to 2.99 times his annualized compensation. “Change in Control” is defined in the
Employment Agreement to mean the acquisition by any person of beneficial ownership of our securities representing greater than
50% of the combined voting power of our then outstanding voting securities.
The Employment Agreement contains customary invention assignment, non-compete and non-solicitation provisions.
Charles
B. Lobetti, III and the Company entered into a three-year Employment Agreement dated October 8, 2019, in which Mr. Lobetti agreed
to serve as our Chief Financial Officer. As compensation, we agreed to pay him an annual salary of $52,000 and he is entitled
to discretionary bonuses as may be awarded from time to time by our Board of Directors. As additional compensation we granted
him stock options to purchase 600,000 shares of our common stock at an exercise price of $0.15 per share, which was the closing
price of common stock as reported on the OTC Markets on the date immediately preceding the date of this Agreement. The options
vested 25% immediately upon exercise of the employment agreement with the remaining vesting equally in annual installments over
three (3) years. The vesting date of any unvested options accelerates in the event of a Change in Control (as defined in
the Employment Agreement). Mr. Lobetti is also entitled to paid vacation and sick leave, an automobile allowance and participation
in any employee benefit plans or programs we may offer. The initial term of the Employment Agreement will automatically
renew for an additional one-year term unless either party provides notice of non-renewal.
The
Employment Agreement terminates upon the death or disability of Mr. Lobetti, and may be terminated by us for cause, or by Mr.
Lobetti for any reason. If the Employment Agreement is terminated for by us for cause, upon his death or disability, at
non-renewal or by Mr. Lobetti, he is only entitled to receive base salary accrued but not paid through the date of termination,
and in the case of termination due to death or disability, a pro rata payment of the annual incentive earned for the year of termination.
If the Employment Agreement is terminated by us without cause or by Mr. Lobetti for good reason, we are obligated to pay
him severance equal to one year’s base salary and any unpaid incentive compensation. In addition, if at any time during
the term of the Employment Agreement Mr. Lobetti’s employment is terminated by us without cause within two years after a
Change in Control of our company, or in the 90 days prior the Change in Control at the request of the acquiror, we are obligated
to pay him an amount equal to 2.99 times his annualized compensation. “Change in Control” is defined in the
Employment Agreement to mean the acquisition by any person of beneficial ownership of our securities representing greater than
50% of the combined voting power of our then outstanding voting securities. The Employment Agreement contains customary invention
assignment, non-compete and non-solicitation provisions.
Melanie
Osterman and the Company entered into an Employment Agreement dated May 8, 2015, in which Ms. Osterman received 850,000 shares
of the Company’s common stock in return for the performance of duties as Chief Executive Officer and Chief Financial Officer.
Ms. Osterman resigned as our Chief Executive Officer on March 13, 2018.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The
following table sets forth certain information as of March 18, 2020 regarding the number and percentage of our Common Stock
(being our only voting securities) beneficially owned by each officer, director, each person (including any “group”
as that term is used in Section 13(d)(3) of the Exchange Act) known by us to own 5% or more of our Common Stock, and all officers
and directors as a group.
|
Title
of Class
|
|
Name,
Title and Address of
Beneficial
Owner of Shares
|
|
Amount
of
Beneficial
Ownership
(4)
|
|
|
Percent
of
Class
(5)
|
|
|
Common
|
|
Scott
M. Boruff, CEO, Director (1)
|
|
|
12,914,854
|
|
|
|
37.02
|
%
|
|
|
|
1462
Rudder Lane
|
|
|
|
|
|
|
|
|
|
|
|
Knoxville,
TN 37919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Charles
B. Lobetti, III, CFO (2)
|
|
|
150,000
|
|
|
|
<1
|
%
|
|
|
|
814
Evolve Way
|
|
|
|
|
|
|
|
|
|
|
|
Knoxville,
TN 37915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Officers and Directors as a Group
|
|
|
13,064,854
|
|
|
|
37.45
|
%
|
|
Principal
Shareholders:
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Acorn
Management Partners, LLC
4080 McGinnis Ferry Rd #101
Alpharetta, GA 30005
|
|
|
2,375,000
|
|
|
|
6.81
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeremy
Gindro (3)
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
310
Tanner Avenue
Florence, CO 81226
|
|
|
7,870,000
|
|
|
|
22.56
|
%
|
|
1)
|
The
shares owed by Mr. Boruff includes 11,664,854 shares owned by Platinum Equity Advisors, LLC, of which Mr. Boruff is the Chief
Manager. Pursuant to Mr. Boruff’s March 13, 2018 employment agreement as our Chief Executive Officer, the shares also
include options to purchase 1,250,000 shares of our common stock, which are vested and exercisable at $3.00 per share and
expire in 2023. The number of shares owned by Mr. Boruff excludes options to purchase 1,250,000 shares of our common stock
at $3.00 per share which have not yet vested and expire in 2023.
|
|
|
|
|
2)
|
Mr.
Lobetti owned no shares at July 31, 2019 and 2018. As of October 8, 2019, Mr. Lobetti’s employment agreement includes
an option to purchase 150,000 shares of our common stock which are vested and exercisable at $0.15 per share on such date
and expire in 2024. The remaining 450,000 options which will vest annually in equal amounts over a three-year period.
|
|
|
|
|
3)
|
The
total includes 100,000 shares owned by James Gindro, the father of Jeremy Gindro.
|
|
|
|
|
4)
|
As
used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of,
a security, or the sole or share investment power with respect to a security (i.e., the power to dispose of, or to direct
the disposition of a security). The inclusion of any shares as deemed beneficially owned does not constitute an admission
of beneficial ownership by the named stockholder.
|
|
|
|
|
5)
|
Unless
otherwise indicated, we have been advised that all individuals or entities listed have
the sole power to vote and dispose of the number of shares set forth opposite their names.
For purposes of computing the number and percentage of shares beneficially owned by a
security holder, any shares which such person has the right to acquire within 60 days
of March 18, 2020 are deemed to be outstanding, but those shares are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other security
holder. We currently do not maintain any equity compensation plans. As of March 18, 2020,
there were 34,887,500 shares beneficially owned.
|
Changes
in Control
We
are not aware of any arrangements that may result in “changes in control” as that term is defined by the provisions
of Item 403(c) of Regulation S-K.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Other
than compensation arrangements, the following is a description of transactions to which we were a participant or will be a participant
to, in which:
|
|
●
|
the
amounts involved exceeded or will exceed the lesser of 1% of our total assets or $120,000; and
|
|
|
|
|
|
|
●
|
any
of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family
of the foregoing persons, had or will have a direct or indirect material interest.
|
To
continue operations and meet operating cash requirements, we have periodically relied on advances from related parties, primarily
shareholders, until such time as our cash flow from operations meets our cash requirements or we are able to obtain adequate financing
through sales of our equity securities and/or traditional debt financing. There is no formal written commitment for continued
support by shareholders. Amounts advanced primarily relate to amounts paid to vendors. The advances are considered temporary in
nature and have not been formalized by any written agreement. As of July 31, 2019, and July 31, 2018, related parties have advanced
the Company $203,581 and $192,426, respectively. The advances are payable on demand and carry no interest.
In
addition, we have accrued expenses related to the January 15, 2016 consulting and advisory agreement with Platinum Equity Advisors,
LLC (the “Platinum Agreement”), a related party. The Platinum Agreement was terminated by on March 12, 2018 (the “Termination
Date”) when Scott M. Boruff, the Chief Manager of Platinum, was appointed Chief Executive Officer of the Company. As of
July 31, 2019 and 2018, the accrued amount owed under the Platinum Agreement is $138,216 and $181,833, respectively.
The
Platinum Agreement was a three-year consulting and advisory agreement. Compensation consisted of a monthly retainer fee of $20,000.
In addition, for services rendered through January 15, 2016, we issued 8,000,000 shares of our common stock at a value of $0.35
per share, or $2,788,000 (the “Stock Grant”). The value of the Stock Grant was being amortized over the term of the
agreement through the Termination Date. For the year ended July 31, 2018, we recorded consulting fees expense of $147,742 for
the monthly retainer fee and we recorded stock-based compensation expense of $1,355,278, which included the full unamortized balance
of the Stock Grant at the Termination Date.
The
amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred
had comparable transactions been entered into with independent third parties.
Director
Independence
We
currently have no independent directors. Because our common stock is not currently listed on a national securities exchange, we
have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule
5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or
any other individual having a relationship that, in the opinion of the company’s board of directors, would interfere with
the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that
a director cannot be considered independent if:
|
|
●
|
the
director is, or at any time during the past three years was, an employee of the Company;
|
|
|
|
|
|
|
●
|
the
director or a family member of the director accepted any compensation from the Company in excess of $120,000 during any period
of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including,
among other things, compensation for board or board committee service);
|
|
|
|
|
|
|
●
|
a
family member of the director is, or at any time during the past three years was, an executive officer of the Company;
|
|
|
|
|
|
|
●
|
the
director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity
to which the Company made, or from which the Company received, payments in the current or any of the past three fiscal years
that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject
to certain exclusions);
|
|
|
|
|
|
|
●
|
the
director or a family member of the director is employed as an executive officer of an entity where, at any time during the
past three years, any of the executive officers of the Company served on the compensation committee of such other entity;
or
|
|
|
|
|
|
|
●
|
The
director or a family member of the director is a current partner of the Company’s outside auditor, or at any time during
the past three years was a partner or employee of the Company’s outside auditor, and who worked on the Company’s
audit.
|
The
Company does not currently have a separately designated audit, nominating, or compensation committee.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The
following table sets forth the aggregate fees billed for each of the last two fiscal years for professional services rendered
by the principal accountant for the audit of the Company’s annual financial statements and review of financial statements
included in the Company’s quarterly reports or services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years.
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$
|
-
|
|
|
$
|
43,007
|
|
|
Audit-Related
Fees
|
|
|
22,950
|
|
|
|
-
|
|
|
Tax
Fees
|
|
|
-
|
|
|
|
-
|
|
|
All
Other Fees
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
22,950
|
|
|
$
|
43,007
|
|
Audit
Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Given
the small size of our Board as well as the limited activities of our Company, our Board of Directors acts as our Audit Committee.
Our Board pre-approves all audit and permissible non-audit services. These services may include audit services, audit-related
services, tax services, and other services. Our Board approves these services on a case-by-case basis.
PART
IV
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
2.1
|
|
Business
Acquisition Agreement between Tomichi Creek Outfitters and Grasshopper Staffing, Inc., dated March 2, 2015 (as filed by the
Company with the Securities and Exchange Commission on Form 8-K dated March 5, 2015 and incorporated herein by reference)
|
|
|
|
|
|
3.1
|
|
Articles
of Incorporation (as filed by the Company with the Securities and Exchange Commission of Form S-1 dated August 20, 2013, and
incorporated herein by reference)
|
|
|
|
|
|
3.2
|
|
Certificate
of Amendment to Articles of Incorporation, filed November 2, 2015 (as filed with the Securities and Exchange Commission on
Form 10-K dated November 23, 2016 and incorporated herein by reference)
|
|
|
|
|
|
3.3
|
|
Bylaws
(as filed by the Company with the Securities and Exchange Commission of Form S-1 dated August 20, 2013, and incorporated herein
by reference)
|
|
|
|
|
|
10.1
|
|
Advisory
Agreement dated January 15,2016 by and between Grasshopper Staffing, Inc. and Platinum Equity Advisors, LLC (as filed by the
Company with the Securities and Exchange Commission on Form 8-K dated January 22, 2016 and incorporated herein by reference)
|
|
|
|
|
|
10.2**
|
|
Employment
Agreement between the Company and Melanie Osterman, dated May 8, 2015 (as filed with the Securities and Exchange Commission
on Form 10-K dated November 23, 2016 and incorporated herein by reference)
|
|
|
|
|
|
10.3**
|
|
Employment
Agreement between the Company and Scott M. Boruff, dated March13, 2018 (as filed with
the Securities and Exchange Commission on Form 8-K dated March 15, 2018 and incorporated
herein by reference)
|
|
|
|
|
|
10.4
|
|
Walabot
Home Reseller Agreement, dated as of July 31, 2019 (as filed with the Securities and
Exchange Commission on Form 8-K dated August 12, 2019 and incorporated herein by reference)
|
|
|
|
|
|
10.5**
|
|
Employment
Agreement between the Company and Charles B. Lobetti, III, dated October 8, 2019 (as
filed with the Securities and Exchange Commission on Form 8-K dated January 14, 2020
and incorporated herein by reference)
|
|
|
|
|
|
31.1*
|
|
Chief
Executive Officer and Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
32.1*
|
|
Chief
Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
101.INS*
|
|
XBRL
Instance Document*
|
|
|
|
|
|
101.SCH*
|
|
XBRL
Taxonomy Extension Schema Document*
|
|
|
|
|
|
101.CAL*
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document*
|
|
|
|
|
|
101.DEF*
|
|
XBRL
Taxonomy Extension Definition Linkbase Document*
|
|
|
|
|
|
101.LAB*
|
|
XBRL
Taxonomy Extension Label Linkbase Document*
|
|
|
|
|
|
101.PRE*
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document*
|
*
Filed herewith
**
Executive Compensation Agreement
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
|
Healthcare
Integrated Technologies, Inc.
|
|
|
|
|
|
Date:
March 20, 2020
|
|
|
|
|
By:
|
/s/
Scott M. Boruff
|
|
|
|
Scott
M. Boruff
President,
Chief Executive Officer (Principal Executive Officer)
|
|
|
Healthcare
Integrated Technologies, Inc.
|
|
|
|
|
|
Date:
March 20, 2020
|
|
|
|
|
By:
|
/s/
Charles B. Lobetti, III
|
|
|
|
Charles
B. Lobetti, III
|
|
|
|
Chief
Financial Officer (Principal Financial Officer)
|
In
accordance with the Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
|
Date:
March 20, 2020
|
By:
|
/s/
Scott M. Boruff
|
|
|
|
Scott
M. Boruff
President,
Chief Executive Officer, Director (Principal Executive Officer)
|
|
Date:
March 20, 2020
|
By:
|
/s/
Charles B. Lobetti, III
|
|
|
|
Charles
B. Lobetti, III
|
|
|
|
Chief
Financial Officer (Principal Financial Officer)
|
INDEX
TO FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
To
the Board of Directors and Stockholders of
Healthcare
Integrated Technologies, Inc.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of Healthcare Integrated Technologies, Inc. (the “Company”)
as of July 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ deficit and cash flows
for each of the years in the two-year period ended July 31, 2019 and the related notes. In our opinion, the consolidated financial
statements present fairly, in all material respects, the consolidated financial position of the Company as of July 31, 2019 and
2018, and the results of its consolidated operations and its consolidated cash flows for each of the years in the two-year period
ended July 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Substantial
Doubt about the Company’s Ability to Continue as a Going Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the financial statements, the Company has a history of losses, an accumulated deficit, has negative
working capital and has not generated cash from operations to support a meaningful and ongoing business plan. Management’s
evaluation of the events and conditions and management’s plans regarding those matters also are described in Note 2. The
financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not
modified with respect to that matter.
/s/
Rodefer Moss & Co, PLLC
We
have served as the Company’s auditor since 2019
Nashville,
Tennessee
March
20, 2020
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
725
|
|
|
$
|
166,922
|
|
|
Accounts
receivable, net
|
|
|
-
|
|
|
|
14,527
|
|
|
Prepaid
expenses and other current assets
|
|
|
-
|
|
|
|
648
|
|
|
Total
current assets
|
|
|
725
|
|
|
|
182,097
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
18,392
|
|
|
|
28,009
|
|
|
Total
assets
|
|
$
|
19,117
|
|
|
$
|
210,106
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
220,328
|
|
|
$
|
158,402
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
341,798
|
|
|
|
374,260
|
|
|
Payroll
related liabilities
|
|
|
472,078
|
|
|
|
146,414
|
|
|
Convertible
notes
|
|
|
750,000
|
|
|
|
750,000
|
|
|
Current
portion of long-term debt
|
|
|
3,209
|
|
|
|
2,718
|
|
|
Total
current liabilities
|
|
|
1,787,413
|
|
|
|
1,431,794
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
2,625
|
|
|
|
5,225
|
|
|
Total
liabilities
|
|
|
1,790,038
|
|
|
|
1,437,019
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
|
|
|
|
|
|
Common
stock par value $0.001; 200,000,000 shares authorized; 32,487,500 and 32,487,500 shares issued and outstanding as of July
31, 2019 and July 31, 2018, respectively
|
|
|
32,488
|
|
|
|
32,488
|
|
|
Additional
paid-in capital
|
|
|
8,582,166
|
|
|
|
8,287,656
|
|
|
Accumulated
deficit
|
|
|
(10,385,575
|
)
|
|
|
(9,547,057
|
)
|
|
Total
stockholders’ deficit
|
|
|
(1,770,921
|
)
|
|
|
(1,226,913
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
19,117
|
|
|
$
|
210,106
|
|
See
accompanying notes to the consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
For
the Years Ended July 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES:
|
|
|
|
|
|
|
|
|
|
Contract
staffing services
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Direct
cost of services
|
|
|
-
|
|
|
|
-
|
|
|
Gross
margin
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
783,993
|
|
|
|
1,951,657
|
|
|
Total
operating expense
|
|
|
783,993
|
|
|
|
1,951,657
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(783,993
|
)
|
|
|
(1,951,657
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSE:
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(38,931
|
)
|
|
|
(14,366
|
)
|
|
Total
other expense
|
|
|
(38,931
|
)
|
|
|
(14,366
|
)
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS
|
|
|
(822,924
|
)
|
|
|
(1,966,023
|
)
|
|
|
|
|
|
|
|
|
-
|
|
|
LOSS
FROM DISCONTINUED OPERATIONS
|
|
|
(15,594
|
)
|
|
|
(85,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(838,518
|
)
|
|
$
|
(2,051,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
32,487,500
|
|
|
|
27,833,365
|
|
See
accompanying notes to the consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR
THE YEARS ENDED JULY 31, 2019 AND 2018
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
July 31, 2017
|
|
|
26,287,500
|
|
|
$
|
26,288
|
|
|
$
|
6,795,126
|
|
|
$
|
(7,495,644
|
)
|
|
$
|
(674,230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,051,413
|
)
|
|
|
(2,051,413
|
)
|
|
Exchange
of common stock for warrants
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
-
|
|
|
Acquisition
of subsidiary
|
|
|
5,200,000
|
|
|
|
5,200
|
|
|
|
17,551
|
|
|
|
|
|
|
|
22,751
|
|
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
1,475,979
|
|
|
|
|
|
|
|
1,475,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
July 31, 2018
|
|
|
32,487,500
|
|
|
|
32,488
|
|
|
|
8,287,656
|
|
|
|
(9,547,057
|
)
|
|
|
(1,226,913
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(838,518
|
)
|
|
|
(838,518
|
)
|
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
294,510
|
|
|
|
|
|
|
|
294,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
July 31, 2019
|
|
|
32,487,500
|
|
|
$
|
32,488
|
|
|
$
|
8,582,166
|
|
|
$
|
(10,385,575
|
)
|
|
$
|
(1,770,921
|
)
|
See
accompanying notes to the consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
For
the Years Ended July 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(838,518
|
)
|
|
$
|
(2,051,413
|
)
|
|
Adjustments
to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
9,617
|
|
|
|
3,965
|
|
|
Provision
for doubtful accounts
|
|
|
-
|
|
|
|
11,965
|
|
|
Stock-based
compensation
|
|
|
294,510
|
|
|
|
1,475,979
|
|
|
Changes
in operating assets and liabilities (excluding effects of acquisitions):
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
14,527
|
|
|
|
16,458
|
|
|
Prepaid
expenses and other current assets
|
|
|
648
|
|
|
|
152
|
|
|
Accounts
payable and accrued expenses
|
|
|
61,926
|
|
|
|
8,174
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
32,183
|
|
|
|
147,741
|
|
|
Payroll
related liabilities
|
|
|
325,664
|
|
|
|
67,744
|
|
|
NET
CASH USED BY OPERATING ACTIVITIES
|
|
|
(99,443
|
)
|
|
|
(319,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Cash
acquired from acquisition of subsidiary
|
|
|
-
|
|
|
|
3,960
|
|
|
Purchase
of property and equipment
|
|
|
-
|
|
|
|
(3,275
|
)
|
|
NET
CASH PROVIDED BY INVESTING ACTIVITIES
|
|
|
-
|
|
|
|
685
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible notes
|
|
|
-
|
|
|
|
750,000
|
|
|
Proceeds
from stock issuances
|
|
|
-
|
|
|
|
2,000
|
|
|
Principal
payments of long-term debt
|
|
|
(2,109
|
)
|
|
|
(718
|
)
|
|
Proceeds
from third party loans
|
|
|
-
|
|
|
|
32,925
|
|
|
Proceeds
from related party loans
|
|
|
11,155
|
|
|
|
9,350
|
|
|
Payments
of amounts owed to related parties
|
|
|
(75,800
|
)
|
|
|
(310,650
|
)
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
(66,754
|
)
|
|
|
482,907
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
(166,197
|
)
|
|
|
164,357
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
166,922
|
|
|
|
2,565
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
725
|
|
|
$
|
166,922
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
8,262
|
|
|
$
|
12,671
|
|
See
accompanying notes to the consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2019 and JULY 31, 2018
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
We
are a healthcare technology company whose primary operations are through our IndeLiving subsidiary, which we acquired in March
2018. With the acquisition of IndeLiving, our core focus changed, and our operations through our Grasshopper Colorado subsidiary
ceased in February 2019. We also changed our name to Healthcare Integrated Technologies, Inc., to better reflect our new operations.
As a result, our operations, management and board of directors, and our business in general have undergone a substantial change
and we have experienced a change in control since the closing of the IndeLiving acquisition.
Founded
in 2016 and based in Knoxville, Tennessee, IndeLiving has developed a health monitoring system for assisted living centers and
private homes. IndeLiving is a development stage company that uses proprietary technology to monitor seniors in real time by both
caregivers and family without the need for the senior to wear any type of monitoring device. The monitoring system is customized
to the needs of the individual senior and, if applicable, to assisted living facility requirements. It provides real-time information
to monitoring stations at the assisted living facilities. It also can be set up to provide real time information via text, voice,
email, and a mobile phone application to family members or other caregivers. The residential model called “Inde Companion”
is a monitoring concept with custom modifications that can be applied to individual seniors in a variety of applications including
seniors living independently in their own home, with family members, or in an assisted living or retirement community.
The
accounting policies used by us and our subsidiaries reflect industry practices and conform to U.S. generally accepted accounting
principles (“GAAP”). Significant policies are discussed below.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of Healthcare Integrated Technologies, Inc. and our subsidiaries
(collectively, the “Company”). All intercompany balances and transactions are eliminated in the consolidation.
Reclassifications
Certain
prior period amounts have been reclassified to conform to current period presentation.
Risk
and Uncertainties
Factors
that could affect our future operating results and cause actual results to vary materially from management’s expectation
include, but are not limited to: our ability to maintain and secure adequate capital to fully develop our product(s) and operations;
our ability to source strong opportunities with sufficient risk adjusted returns; acceptance of the terms and conditions of our
licenses and/or the acceptance of our royalties and fees; the nature and extent of competition from other companies that may reduce
market share and create pressure on pricing and investment return expectations; changes in the projects in which we plan to invest
which result from factors beyond our control, including, but not limited to, a change in circumstances, capacity and economic
impacts; changes in laws, regulations, accounting, taxation, and other requirements affecting our operations and business. Negative
developments in these or other risk factors could have a significant adverse effect on our financial position, results of operations
and cash flows.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. We base our estimates on experience and various other assumptions that are believed to be reasonable
under the circumstances. We evaluate our estimates and assumptions on a regular basis and actual results may differ from those
estimates.
Cash
and Cash Equivalents
We
consider all highly liquid short-term investments with a maturity of three months or less at the time of purchase to be cash equivalents.
Accounts
Receivable
Accounts
receivable are stated at their historical carrying amount net of write-offs and allowance for uncollectible accounts. We routinely
assess the recoverability of all customer and other receivables to determine their collectability and record a reserve when, based
on the judgement of management, it is probably that a receivable will not be collected and the amount of the reserve may be reasonably
estimated. When collection is no longer pursued, we charge uncollectable accounts receivable against the reserve. All our accounts
receivable relates to our Grasshopper Staffing, Inc. subsidiary which eased operations in February 2019. At July 31, 2019, all
accounts receivable were deemed uncollectable and the reserve for uncollectable accounts was increased accordingly.
Property
and Equipment
Property
and equipment are stated at cost, net of accumulated depreciation. Expenditures for major additions and improvements are capitalized
while minor replacements and maintenance and repairs, which do not improve or extend the life of such assets, are charged to operations
as incurred. Disposals are removed at cost less accumulated depreciation, and any resulting gain or loss is reflected in the statement
of operations. Depreciation is calculated using the straight-line method which depreciates the assets over the estimated useful
lives of the depreciable assets ranging from five to seven years.
Long-lived
assets such as property, equipment and identifiable intangibles are reviewed for impairment at least annually or whenever facts
and circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held
and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows,
market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived
asset is not recoverable, an impairment loss is recognized for the difference between the carrying amount and fair value of the
asset. The Company did not recognize any impairment losses for any periods presented.
Fair
Value of Financial Instruments
Fair
value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction
between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority
to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair
value hierarchy is as follows:
Level
1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access
at the measurement date.
Level
2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset
or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally
from or corroborated by market data by correlation or other means.
Level
3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions
about the assumptions that market participants would use in pricing the assets or liabilities.
Financial
instruments consist of cash and cash equivalents, accounts receivable, accounts payable and borrowings. The fair value of current
financial assets and current financial liabilities approximates their carrying value because of the short-term maturity of these
financial instruments.
Revenue
Recognition
We
adopted ASC 606 effective January 1, 2018 using the modified retrospective method. Under this method, the Company follows the
five-step model provided by ASC Topic 606 in order to recognize revenue in the following manner: 1) Identify the contract; 2)
Identify the performance obligations of the contract; 3) Determine the transaction price of the contract; 4) Allocate the transaction
price to the performance obligations; and 5) Recognize revenue. An entity recognizes revenue for the transfer of promised goods
or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange
for those goods or services. The Company’s revenue recognition policies remained substantially unchanged as a result of
the adoption of ASC 606, and there were no significant changes in business processes or systems.
Prior
to the discontinuance of its operations in February 2019, Grasshopper Colorado earned revenue by providing specialized temporary
staffing solutions to the cannabis industry. We provided temporary labor at an agreed upon rate per hour. Billings were invoiced
on a per-hour basis as the temporary staffing services were delivered to the customer. Revenue from most of our temporary staffing
services was recognized at a point in time. We applied the practical expedient to recognize revenue for these services at various
intervals based on the number of hours completed and the agreed upon rate per hour at that time.
Advertising
Advertising
costs are expensed as incurred in accordance with ASC 720-35, “Advertising Costs.” We incurred advertising costs of
$8,746 and $24,964 for the years ended July 31, 2019 and 2018, respectively, which are included in selling, general and administrative
expenses on the consolidated financial statements.
Net
Loss Per Common Share
We
determine basic income (loss) per share and diluted income (loss) per share in accordance with the provisions of ASC 260, “Earnings
Per Share.” Basic income (loss) per share excludes dilution and is computed by dividing earnings available to common stockholders
by the weighted-average number of common shares outstanding for the period. The calculation of diluted income (loss) per share
is similar to that of basic earnings per share, except the denominator is increased, if the earnings are positive, to include
the number of additional common shares that would have been outstanding if all potentially dilutive common shares had been exercised.
Stock
Based Compensation
The
Company accounts for the grant of restricted stock awards in accordance with ASC 718, “Compensation-Stock Compensation.”
ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of equity-based compensation.
The expense is recognized over the period during which the employee is required to provide service in exchange for the compensation.
Any remaining unrecognized balance will be recognized ratably over the life of the vesting period and is a reduction of stockholders’
equity.
The
Company accounts for non-employee share-based awards, if any, in accordance with the measurement and recognition criteria of ASC
505-50 “Equity-Based Payments to Non-Employees.”
Business
Combinations
We
account for business combinations under the acquisition method of accounting. The acquisition method requires that the acquired
assets and liabilities, including contingencies, be recorded at fair value determined on the acquisition date and that changes
thereafter be reflected in income (loss). The estimation of fair values of the assets and liabilities assumed involves several
estimates and assumptions that could differ materially from the actual amounts recorded. The results of the acquired businesses
are included in our results from operations beginning from the day of acquisition.
Income
Taxes
Under
ASC 740, “Income Taxes,” deferred tax assets and liabilities are recognized for the future tax consequences attributable
to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when
it is more likely than not that some or all the deferred tax assets will not be realized. As of July 31, 2019 and July 31, 2018,
there were no deferred taxes due to the uncertainty of the realization of net operating loss carry forwards prior to their expiration.
Statement
of Comprehensive Income
No
statement of comprehensive income is presented since net income (loss) and comprehensive income (loss) would be the same for all
periods reported.
Recent
Accounting Pronouncements
There
are no recently issued accounting pronouncements that are expected to have a material impact on our financial condition, results
of operations or cash flows.
NOTE
2 - GOING CONCERN
The
accompanying consolidated financial statements have been prepared in conformity with GAAP, which contemplates continuation of
the Company as a going concern. We have a history of losses, an accumulated deficit, have negative working capital
and have not generated cash from our operations to support a meaningful and ongoing business plan.
It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue
as a going concern.
In
view of these matters, our ability to continue as a going concern is dependent upon the development, marketing and sales of a
viable product to achieve a level of profitability. We intend on financing our future development activities and our working capital
needs largely from the sale of private and public equity securities with additional funding from other traditional financing sources,
including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The
consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern.
NOTE
3 - ACQUISITION
On
March 13, 2018 we entered into a Share Acquisition and Exchange Agreement with IndeLiving Holdings, Inc., a Florida corporation
(“IndeLiving”), and its shareholders under which we acquired 100% of the outstanding capital stock of IndeLiving
in exchange for 5,200,000 shares of our common stock.
As
a result of the significant financial interest of our Chief Executive Officer and former member of IndeLiving, for financial statement
reporting purposes, the merger between the Company and IndeLiving has been treated as a reverse acquisition with IndeLiving deemed
the accounting acquirer, and the Company deemed the accounting acquiree under the acquisition method of accounting in accordance
with section 805-10-55 of the FASB Accounting Standards Codification. The reverse acquisition is deemed a capital transaction
and the net assets of IndeLiving (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting
entity) at their carrying value before the acquisition. The acquisition process utilizes the capital structure of the Company
and the assets and liabilities of TW which are recorded at their historical cost. The equity of the Company is the historical
equity of IndeLiving retroactively restated to reflect the number of shares issued by the Company in the transaction.
|
Purchase Price:
|
|
|
|
|
5,200,000
shares of common stock
|
|
$
|
22,751
|
|
|
|
|
|
|
|
|
Allocation
of Assets Acquired and Liabilities Assumed:
|
|
|
|
|
|
Cash
|
|
$
|
3,961
|
|
|
Furniture,
fixtures and equipment
|
|
|
24,600
|
|
|
Stock
subscription receivable
|
|
|
21,000
|
|
|
Accounts
payable
|
|
|
(18,148
|
)
|
|
Notes
payable
|
|
|
(8,662
|
)
|
|
Estimated
value of assets acquired
and liabilities assumed
|
|
$
|
22,751
|
|
NOTE
4 - DISCONTINUED OPERATIONS
In
February 2019, due to continuing operating losses, negative cash flow, limited prospects for future growth and a desire to focus
on our healthcare technology products, management elected to discontinue the operations of its Grasshopper Colorado subsidiary.
The loss from the operations from the subsidiary is presented separately on the consolidated income statement as discontinued
operations.
Discontinued
operations consisted of the following at July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Net
revenue
|
|
$
|
27,909
|
|
|
$
|
115,614
|
|
|
Operating
expenses
|
|
|
(35,969
|
)
|
|
|
(188,636
|
)
|
|
Interest
expense
|
|
|
(7,534
|
)
|
|
|
(12,368
|
)
|
|
Loss
from discontinued operations
|
|
$
|
(15,594
|
)
|
|
$
|
(85,390
|
)
|
NOTE
5 - ACCOUNTS RECEIVABLE
Accounts
receivable, net consisted of the following at July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Accounts
receivable
|
|
$
|
20,270
|
|
|
$
|
34,427
|
|
|
Less:
allowance for uncollectible accounts
|
|
|
(20,270
|
)
|
|
|
(19,900
|
)
|
|
Total
accounts receivable, net
|
|
$
|
-
|
|
|
$
|
14,527
|
|
Bad
debt expense for the years ended July 31, 2019 and 2018 was $541 and $11,965 respectively.
NOTE
6 - PROPERTY AND EQUIPMENT
Property
and equipment, net consisted of the following at July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Equipment
|
|
$
|
23,923
|
|
|
$
|
26,567
|
|
|
Furniture
and fixtures
|
|
|
-
|
|
|
|
3,006
|
|
|
Vehicles
|
|
|
14,766
|
|
|
|
14,766
|
|
|
Subtotal
|
|
|
38,689
|
|
|
|
44,339
|
|
|
Less:
accumulated depreciation
|
|
|
(20,297
|
)
|
|
|
(16,330
|
)
|
|
Total
property and equipment, net
|
|
$
|
18,392
|
|
|
$
|
28,009
|
|
Depreciation
expense for the years ended July 31, 2019 and 2018 was $7,317 and $3,124 respectively.
NOTE
7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consisted of the following at July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Accounts
payable
|
|
$
|
168,062
|
|
|
$
|
144,339
|
|
|
Accounts
payable, related party
|
|
|
203,582
|
|
|
|
192,427
|
|
|
Accrued
expenses, related party
|
|
|
138,216
|
|
|
|
181,833
|
|
|
Accrued
interest expense
|
|
|
52,266
|
|
|
|
14,063
|
|
|
Total
accounts payable and accrued expenses
|
|
$
|
562,126
|
|
|
$
|
532,662
|
|
NOTE
8 - PAYROLL RELATED LIABILITIES
Payroll
related liabilities consisted of the following at July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Accrued
officer’s payroll
|
|
$
|
471,214
|
|
|
$
|
134,248
|
|
|
Accrued
payroll
|
|
|
-
|
|
|
|
10,556
|
|
|
Payroll
taxes payable
|
|
|
864
|
|
|
|
1,610
|
|
|
Total
payroll related liabilities
|
|
$
|
472,078
|
|
|
$
|
146,414
|
|
NOTE
9 - DEBT
We
had the following debt obligations reflected at their respective carrying values on our consolidated balance sheets as
of July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
5%
Convertible promissory notes
|
|
$
|
750,000
|
|
|
$
|
750,000
|
|
|
Ford
Credit note
|
|
|
5,834
|
|
|
|
7,943
|
|
|
Total
debt obligations
|
|
$
|
755,834
|
|
|
$
|
757,943
|
|
5%
Convertible Promissory Notes
On
various dates during the month of March 2018 we issued a series of 5% Convertible Promissory Notes (collectively, the “5%
Notes”) totaling $750,000 in net proceeds. We incurred no costs related to the issuance of the 5% Notes. The 5% Notes bear
interest at the rate of five percent (5%) per annum, compounded annually and matured one-year from the date of issuance. At July
31, 2019 and 2018, accrued but unpaid interest on the 5% Notes was $52,266 and $14,063 respectively.
The
5% Notes are convertible into common shares of the Company at a fixed ratio of two shares of common stock per dollar amount of
the face value of the note. The principal terms under which the 5% Notes may be converted into common stock of the Company are
as follows:
|
|
●
|
At
the option of the holder, the outstanding principal amount of the note, and any accrued but unpaid interest due, may be converted
into the Company’s common stock at any time prior to the maturity date of the note.
|
|
|
●
|
The
outstanding principal amount of the note, and any accrued but unpaid interest due, will automatically be converted into the
Company’s common stock if at any time prior to the maturity date of the note, the Company concludes a sale of equity
securities in a private offering resulting in gross proceeds to the Company of at least $1,000,000.
|
The
5% Notes matured on various dates during March 2019 and are currently in default and are not convertible under the conversion
terms. Management is currently negotiating an amendment to the 5% Notes to extend the maturity dates of the notes.
Ford
Credit Note
The
Ford Credit note was assumed in the IndeLiving acquisition on March 13, 2018. The original retail installment contract was entered
into on June 15, 2016 in the amount of $11,766. The note bears interest at 9.99% per annum and requires sixty (60) monthly installments
of $251 per month. The installment note is collateralized by a 2013 Ford pickup truck.
NOTE
10 - INCOME TAXES
On
December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law and permanently reduced the corporate
tax rate from 34% to 21% of taxable income. The Act was effective for tax years beginning on or after January 1, 2018. A reconciliation
of the provision for income taxes as reported, and the amount computed by multiplying net loss by the federal statutory rate of
21% in fiscal 2019 and 34% in fiscal 2018 are as follows:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Federal
income tax benefit computed at the statutory rate
|
|
$
|
(176,089
|
)
|
|
$
|
(697,480
|
)
|
|
Increase
(decrease) resulting from:
|
|
|
|
|
|
|
|
|
|
State
income taxes, net of federal benefit
|
|
|
(6,459
|
)
|
|
|
(4,419
|
)
|
|
Equity
based compensation
|
|
|
61,847
|
|
|
|
501,833
|
|
|
Revaluation
of deferred tax asset due to tax rate change
|
|
|
-
|
|
|
|
166,307
|
|
|
Valuation
allowance
|
|
|
119,019
|
|
|
|
10,832
|
|
|
Other
|
|
|
1,682
|
|
|
|
22,927
|
|
|
Income
tax benefit, as reported
|
|
$
|
-
|
|
|
$
|
-
|
|
Under
the guidance of ASC 740, “Income Taxes,” We revalued our deferred tax asset on the date of enactment of the Tax Cuts
and Jobs Act based on the reduction in the overall future tax benefit expected to be realized at the lower tax rate implemented
by the new legislation. The components of the net deferred tax asset as of July 31, 2019 and 2018 are as follows:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
|
Net
operating loss carryovers
|
|
$
|
404,651
|
|
|
$
|
451,939
|
|
|
Revaluation
of deferred tax asset due to tax rate change
|
|
|
-
|
|
|
|
(166,307
|
)
|
|
Valuation
allowance
|
|
|
(404,651
|
)
|
|
|
(285,632
|
)
|
|
Net
deferred tax asset, as reported
|
|
$
|
-
|
|
|
$
|
-
|
|
In
assessing the realizable value of deferred tax assets, management considers whether it is more likely than not that some portion
or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation
of future taxable income during the periods in which these temporary differences become tax deductible. Based on management’s
assessment of objective and subjective evidence, we have concluded at this time it is more likely than not that all of our deferred
tax asset will not be realized and we have provided a valuation allowance for the entire amount of the deferred tax asset. At
July 31, 2019 we have approximately $1.8 million in federal and state net operating loss carryovers that begin expiring in fiscal
2037.
We
conduct business solely in the United States and file income tax returns in the United States federal jurisdiction as well as
in the states of Tennessee and Colorado. The taxable years ended July 31, 2019, 2018 and 2017 remain open to examination by the
taxing jurisdictions to which we are subject.
NOTE
11 - RELATED PARTY TRANSACTIONS
To
continue operations and meet operating cash requirements, we have periodically relied on advances from related parties, primarily
shareholders, until such time as our cash flow from operations meets our cash requirements or we are able to obtain adequate financing
through sales of our equity securities and/or traditional debt financing. There is no formal written commitment for continued
support by shareholders. Amounts advanced primarily relate to amounts paid to vendors. The advances are considered temporary in
nature and have not been formalized by any written agreement. As of July 31, 2019, and July 31, 2018, related parties have advanced
the Company $203,581 and $192,426, respectively. The advances are payable on demand and carry no interest.
In
addition, we have accrued expenses related to the January 15, 2016 consulting and advisory agreement with Platinum Equity Advisors,
LLC (the “Platinum Agreement”), a related party. The Platinum Agreement was terminated on March 12, 2018 (the “Termination
Date”) when Scott M. Boruff, the Chief Manager of Platinum, was appointed Chief Executive Officer of the Company. As of
July 31, 2019 and 2018, the accrued amount owed under the Platinum Agreement is $138,216 and $181,833, respectively.
The
Platinum Agreement was a three-year consulting and advisory agreement. Compensation consisted of a monthly retainer fee of $20,000.
In addition, for services rendered through January 15, 2016, we issued 8,000,000 shares of our common stock at a value of $0.35
per share, or $2,788,000 (the “Stock Grant”). The value of the Stock Grant was being amortized over the term of the
agreement through the Termination Date. For the year ended July 31, 2018, we recorded consulting fees expense of $147,742 for
the monthly retainer fee and we recorded stock-based compensation expense of $1,355,278, which included the full unamortized
balance of the Stock Grant at the Termination Date.
The
amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred
had comparable transactions been entered into with independent third parties.
NOTE
12 - COMMON STOCK
At
both July 31, 2019 and 2018, we had 32,487,500 shares of common stock outstanding. No shares were issued during the year ended
July 31, 2019. We issued 6,200,000 shares during the year ended July 31, 2018, of which 1,000,000 were issued in exchange for
warrants and 5,200,000 shares were issued for the acquisition of IndeLiving.
On
February 21, 2018, we issued 1,000,000 shares of common stock to Acorn Management Partners, LLC (“Acorn”) in exchange
for Acorn forfeiting warrants to purchase 6,000,000 shares of our common stock. The warrants had an exercise price of $0.01 and
expired ten years from the date of issuance. The transaction terms were negotiated in good faith with an unrelated third party.
On
March 13, 2018, we entered into a Share Acquisition and Exchange Agreement with IndeLiving and its shareholders,
under which we acquired 100% of the outstanding capital stock of IndeLiving in exchange for 5,200,000 shares of our common stock.
The net estimated value of the shares issued was $22,751, which equaled the estimated value of the net assets acquired.
NOTE
13 - STOCK-BASED COMPENSATION
During
the years ended July 31, 2019 and 2018, we recorded $294,510 and $120,701, respectively, of employee compensation expense related
to stock options. No employee stock options were granted during the year ended July 31, 2019. The grant date fair value of employee
stock options granted during the year ended July 31, 2018 was $1,178,040. We estimated the grant date fair value of employee stock
options using the Black-Scholes pricing model with the following assumptions:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
Expected
volatility
|
|
|
—
|
|
|
|
142
|
%
|
|
Expected
term (in years)
|
|
|
—
|
|
|
|
3.75
|
|
|
Risk-free
interest rate
|
|
|
—
|
|
|
|
2.52
|
%
|
|
Dividend
yield
|
|
|
—
|
|
|
|
None
|
|
Expected
Volatility
Due
to the fact we do not consider historical volatility is the best indicator of future volatility, we use implied volatility of
our options to estimate future volatility.
Expected
Term
Where
possible, we use the simplified method to estimate the expected term of employee stock options. Where we are unable to use the
simplified method due to the terms of a stock option, we may use a modified simplified method to estimate the expected term. We
do not have adequate historical exercise data to provide a reasonable basis for estimating the expected term for the current share
options granted. The simplified method assumes that employees will exercise share options evenly between the period when the share
options are vested and ending on the date when the options would expire.
Risk-Free
Interest Rate
The
risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant.
Dividend
Yield
We
have not estimated any dividend yield as we currently do not pay a dividend and do not anticipate paying a dividend over the expected
term.
The
following table summarizes our stock-based compensation activities for the years ended July 31, 2019 and 2018:
|
|
|
July
31, 2019
|
|
|
July
31, 2018
|
|
|
|
|
Number
of
|
|
|
Weighted
|
|
|
Number
of
|
|
|
Weighted
|
|
|
|
|
Options
and
|
|
|
Average
|
|
|
Options
and
|
|
|
Average
|
|
|
|
|
Warrants
|
|
|
Exercise
Price
|
|
|
Warrants
|
|
|
Exercise
Price
|
|
|
Balance
at beginning of year
|
|
|
2,500,000
|
|
|
$
|
3.00
|
|
|
|
6,000,000
|
|
|
$
|
0.01
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
2,500,000
|
|
|
|
3.00
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,000,000
|
)
|
|
|
0.01
|
|
|
Balance
at end of year
|
|
|
2,500,000
|
|
|
|
3.00
|
|
|
|
2,500,000
|
|
|
|
3.00
|
|
|
Options
exercisable
|
|
|
625,000
|
|
|
$
|
3.00
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
(1)
|
On
February 21, 2018, we issued 1,000,000 shares of our common stock to Acorn Management Partners, LLC (“Acorn”)
in exchange for Acorn forfeiting warrants to purchase 6,000,000 shares of our common stock.
|
NOTE
14 - RECENT ACCOUNTING PRONOUNCEMENTS
On
January 1, 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,”
(“ASC Topic 606”) using the modified retrospective approach. Under this method, the Company follows the five-step
model provided by ASC Topic 606 in order to recognize revenue in the following manner: 1) Identify the contract; 2) Identify the
performance obligations of the contract; 3) Determine the transaction price of the contract; 4) Allocate the transaction price
to the performance obligations; and 5) Recognize revenue. Under this method, an entity recognizes revenue for the transfer or
promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled
in exchange for those goods or services. The Company’s revenue recognition policies remained substantially unchanged as
a result of the adoption of ASU No. 2014-09, and there were no significant changes in business processes or systems.
NOTE
15 - SUBSEQUENT EVENTS
On
January 2, 2020, a sworn account lawsuit was filed against IndeLiving and our CEO Scott Boruff by our previous Certified Public
Accounting Firm, RBSM LLP demanding payment of $28,007 for services rendered. We have filed our Answer and IndeLiving filed a
breach of contract Counterclaim on February 24, 2020 demanding repayment of a $7,500 retainer paid to RBSM LLP by IndeLiving for
services that we allege were not provided. Given the early state of the proceedings in this case, we currently cannot assess the
probability of losses, but we can reasonably estimate that the range of losses in this case will be immaterial since the full
amount of the lawsuit has previously been recorded in the consolidated financial statements.
On
February 11, 2020, we completed a private placement of 1,000,000 shares of our common stock at a price of $.10 per share resulting
in net proceeds to the Company of $100,000. We incurred no cost related to the private placement.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED BALANCE SHEETS
|
|
|
April
30, 2018
|
|
|
July
31, 2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
599,851
|
|
|
$
|
2,565
|
|
|
Accounts
receivable, net
|
|
|
19,980
|
|
|
|
42,950
|
|
|
Prepaid
expenses and other current assets
|
|
|
2,570
|
|
|
|
800
|
|
|
Total
current assets
|
|
|
622,401
|
|
|
|
46,315
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
26,624
|
|
|
|
3,259
|
|
|
Intangible
assets, net
|
|
|
-
|
|
|
|
840
|
|
|
Total
assets
|
|
$
|
649,025
|
|
|
$
|
50,414
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
178,205
|
|
|
$
|
99,155
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
647,960
|
|
|
|
546,819
|
|
|
Payroll
related liabilities
|
|
|
61,632
|
|
|
|
78,670
|
|
|
Convertible
notes
|
|
|
750,000
|
|
|
|
-
|
|
|
Current
portion of long-term debt
|
|
|
2,471
|
|
|
|
-
|
|
|
Total
current liabilities
|
|
|
1,640,268
|
|
|
|
724,644
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
5,834
|
|
|
|
-
|
|
|
Total
liabilities
|
|
|
1,646,102
|
|
|
|
724,644
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
|
|
|
|
|
|
Common
stock par value $0.001; 200,000,000 shares authorized; 32,487,500 and 26,287,500 shares issued and outstanding as of April
30, 2018 and July 31, 2017, respectively
|
|
|
32,488
|
|
|
|
26,288
|
|
|
Additional
paid-in capital
|
|
|
8,214,029
|
|
|
|
6,795,126
|
|
|
Accumulated
deficit
|
|
|
(9,243,594
|
)
|
|
|
(7,495,644
|
)
|
|
Total
stockholders’ deficit
|
|
|
(997,077
|
)
|
|
|
(674,230
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
649,025
|
|
|
$
|
50,414
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
For
the Three Months Ended
|
|
|
For
the Nine Months Ended
|
|
|
|
|
April
30,
|
|
|
April
30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
staffing services
|
|
$
|
90,622
|
|
|
$
|
72,859
|
|
|
$
|
376,367
|
|
|
$
|
249,342
|
|
|
Direct
cost of services
|
|
|
65,218
|
|
|
|
55,873
|
|
|
|
281,663
|
|
|
|
189,929
|
|
|
Gross
margin
|
|
|
25,404
|
|
|
|
16,986
|
|
|
|
94,704
|
|
|
|
59,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
1,107,194
|
|
|
|
341,494
|
|
|
|
1,825,566
|
|
|
|
1,080,538
|
|
|
Total
operating expense
|
|
|
1,107,194
|
|
|
|
341,494
|
|
|
|
1,825,566
|
|
|
|
1,080,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(1,081,790
|
)
|
|
|
(324,508
|
)
|
|
|
(1,730,862
|
)
|
|
|
(1,021,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(9,817
|
)
|
|
|
(3,135
|
)
|
|
|
(17,088
|
)
|
|
|
(10,206
|
)
|
|
Other
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,950
|
|
|
Total
other income (expense)
|
|
|
(9,817
|
)
|
|
|
(3,135
|
)
|
|
|
(17,088
|
)
|
|
|
(7,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(1,091,607
|
)
|
|
$
|
(327,643
|
)
|
|
$
|
(1,747,950
|
)
|
|
$
|
(1,028,381
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
28,070,915
|
|
|
|
26,287,500
|
|
|
|
27,227,346
|
|
|
|
26,287,500
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
For
the Nine Months Ended
|
|
|
|
|
April
30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,747,950
|
)
|
|
$
|
(1,028,381
|
)
|
|
Adjustments
to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,075
|
|
|
|
1,964
|
|
|
Provision
for doubtful accounts
|
|
|
11,965
|
|
|
|
-
|
|
|
Stock-based
compensation
|
|
|
1,402,351
|
|
|
|
697,000
|
|
|
Amortization
of deferred stock compensation, related parties
|
|
|
-
|
|
|
|
58,083
|
|
|
Revenue
factoring expense
|
|
|
-
|
|
|
|
8,744
|
|
|
Other
income
|
|
|
-
|
|
|
|
(2,950
|
)
|
|
Changes
in operating assets and liabilities (excluding effects of acquisitions):
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
11,005
|
|
|
|
11,199
|
|
|
Prepaid
expenses and other current assets
|
|
|
(1,770
|
)
|
|
|
5,474
|
|
|
Accounts
payable and accrued expenses
|
|
|
27,976
|
|
|
|
7,884
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
128,740
|
|
|
|
180,000
|
|
|
Payroll
related liabilities
|
|
|
(17,038
|
)
|
|
|
15,176
|
|
|
NET
CASH USED BY OPERATING ACTIVITIES
|
|
|
(163,645
|
)
|
|
|
(45,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Cash
acquired from acquisition of subsidiary
|
|
|
3,960
|
|
|
|
-
|
|
|
NET
CASH PROVIDED BY INVESTING ACTIVITIES
|
|
|
3,960
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible notes
|
|
|
750,000
|
|
|
|
-
|
|
|
Principal
payments of long-term debt
|
|
|
(356
|
)
|
|
|
-
|
|
|
Proceeds
from stock issuances
|
|
|
2,000
|
|
|
|
-
|
|
|
Proceeds
from third party loans
|
|
|
32,927
|
|
|
|
11,350
|
|
|
Proceeds
from related party loans
|
|
|
9,351
|
|
|
|
78,697
|
|
|
Payments
of amounts owed to related parties
|
|
|
(36,950
|
)
|
|
|
(11,705
|
)
|
|
Advances
under factoring arrangements
|
|
|
-
|
|
|
|
8,746
|
|
|
Repayments
under factoring arrangements
|
|
|
-
|
|
|
|
(41,281
|
)
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
756,972
|
|
|
|
45,807
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
597,286
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
2,565
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
599,851
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
12,401
|
|
|
$
|
-
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED BALANCE SHEETS
|
|
|
October
31, 2018
|
|
|
July
31, 2018
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,316
|
|
|
$
|
166,922
|
|
|
Accounts
receivable, net
|
|
|
20,540
|
|
|
|
14,527
|
|
|
Prepaid
expenses and other current assets
|
|
|
-
|
|
|
|
648
|
|
|
Total
current assets
|
|
|
22,856
|
|
|
|
182,097
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
25,938
|
|
|
|
28,009
|
|
|
Total
assets
|
|
$
|
48,794
|
|
|
$
|
210,106
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
189,242
|
|
|
$
|
158,402
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
321,724
|
|
|
|
374,260
|
|
|
Payroll
related liabilities
|
|
|
228,669
|
|
|
|
146,414
|
|
|
Convertible
notes
|
|
|
750,000
|
|
|
|
750,000
|
|
|
Current
portion of long-term debt
|
|
|
2,787
|
|
|
|
2,718
|
|
|
Total
current liabilities
|
|
|
1,492,422
|
|
|
|
1,431,794
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
4,599
|
|
|
|
5,225
|
|
|
Total
liabilities
|
|
|
1,497,021
|
|
|
|
1,437,019
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
|
|
|
|
|
|
Common
stock par value $0.001; 200,000,000 shares authorized; 32,487,500 and 32,487,500 shares issued and outstanding as of October
31, 2018 and July 31, 2018, respectively
|
|
|
32,488
|
|
|
|
32,488
|
|
|
Additional
paid-in capital
|
|
|
8,361,283
|
|
|
|
8,287,656
|
|
|
Accumulated
deficit
|
|
|
(9,841,998
|
)
|
|
|
(9,547,057
|
)
|
|
Total
stockholders’ deficit
|
|
|
(1,448,227
|
)
|
|
|
(1,226,913
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
48,794
|
|
|
$
|
210,106
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
For
the Three Months Ended
|
|
|
|
|
October
31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES:
|
|
|
|
|
|
|
|
|
|
Contract
staffing services
|
|
$
|
67,973
|
|
|
$
|
196,013
|
|
|
Direct
cost of services
|
|
|
50,209
|
|
|
|
148,537
|
|
|
Gross
margin
|
|
|
17,764
|
|
|
|
47,476
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
298,820
|
|
|
|
360,497
|
|
|
Total
operating expense
|
|
|
298,820
|
|
|
|
360,497
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(281,056
|
)
|
|
|
(313,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSE:
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(13,885
|
)
|
|
|
(442
|
)
|
|
Total
other expense
|
|
|
(13,885
|
)
|
|
|
(442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(294,941
|
)
|
|
$
|
(313,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
32,487,500
|
|
|
|
26,287,500
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
For
the Three Months Ended
|
|
|
|
|
October
31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(294,941
|
)
|
|
$
|
(313,463
|
)
|
|
Adjustments
to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,071
|
|
|
|
662
|
|
|
Provision
for doubtful accounts
|
|
|
-
|
|
|
|
(9,115
|
)
|
|
Stock-based
compensation
|
|
|
73,627
|
|
|
|
232,334
|
|
|
Other
income
|
|
|
-
|
|
|
|
(1,600
|
)
|
|
Changes
in operating assets and liabilities (excluding effects of acquisitions):
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
(6,013
|
)
|
|
|
(10,451
|
)
|
|
Prepaid
expenses and other current assets
|
|
|
648
|
|
|
|
(5,552
|
)
|
|
Accounts
payable and accrued expenses
|
|
|
30,840
|
|
|
|
25,234
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
23,202
|
|
|
|
60,000
|
|
|
Payroll
related liabilities
|
|
|
82,255
|
|
|
|
16,668
|
|
|
NET
CASH USED BY OPERATING ACTIVITIES
|
|
|
(88,311
|
)
|
|
|
(5,283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Principal
payments of long-term debt
|
|
|
(557
|
)
|
|
|
-
|
|
|
Proceeds
from third party loans
|
|
|
-
|
|
|
|
12,500
|
|
|
Proceeds
from related party loans
|
|
|
62
|
|
|
|
850
|
|
|
Payments
of amounts owed to related parties
|
|
|
(75,800
|
)
|
|
|
-
|
|
|
NET
CASH (USED) PROVIDED BY FINANCING ACTIVITIES
|
|
|
(76,295
|
)
|
|
|
13,350
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
(164,606
|
)
|
|
|
8,067
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
166,922
|
|
|
|
2,565
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
2,316
|
|
|
$
|
10,632
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
4,510
|
|
|
$
|
-
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED BALANCE SHEETS
|
|
|
January
31, 2019
|
|
|
July
31, 2018
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
-
|
|
|
$
|
166,922
|
|
|
Accounts
receivable, net
|
|
|
8,284
|
|
|
|
14,527
|
|
|
Prepaid
expenses and other current assets
|
|
|
-
|
|
|
|
648
|
|
|
Total
current assets
|
|
|
8,284
|
|
|
|
182,097
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
23,868
|
|
|
|
28,009
|
|
|
Total
assets
|
|
$
|
32,152
|
|
|
$
|
210,106
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
200,138
|
|
|
$
|
158,402
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
338,047
|
|
|
|
374,260
|
|
|
Payroll
related liabilities
|
|
|
305,568
|
|
|
|
146,414
|
|
|
Convertible
notes
|
|
|
750,000
|
|
|
|
750,000
|
|
|
Current
portion of long-term debt
|
|
|
2,859
|
|
|
|
2,718
|
|
|
Total
current liabilities
|
|
|
1,596,612
|
|
|
|
1,431,794
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
3,958
|
|
|
|
5,225
|
|
|
Total
liabilities
|
|
|
1,600,570
|
|
|
|
1,437,019
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
|
|
|
|
|
|
Common
stock par value $0.001; 200,000,000 shares authorized; 32,487,500 and 32,487,500 shares issued and outstanding as of January
31, 2019 and July 31, 2018, respectively
|
|
|
32,488
|
|
|
|
32,488
|
|
|
Additional
paid-in capital
|
|
|
8,434,912
|
|
|
|
8,287,656
|
|
|
Accumulated
deficit
|
|
|
(10,035,818
|
)
|
|
|
(9,547,057
|
)
|
|
Total
stockholders’ deficit
|
|
|
(1,568,418
|
)
|
|
|
(1,226,913
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
32,152
|
|
|
$
|
210,106
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
For
the Three Months Ended
|
|
|
For
the Six Months Ended
|
|
|
|
|
January
31,
|
|
|
January
31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
staffing services
|
|
$
|
31,174
|
|
|
$
|
89,732
|
|
|
$
|
99,147
|
|
|
$
|
285,745
|
|
|
Direct
cost of services
|
|
|
20,967
|
|
|
|
67,908
|
|
|
|
71,176
|
|
|
|
216,445
|
|
|
Gross
margin
|
|
|
10,207
|
|
|
|
21,824
|
|
|
|
27,971
|
|
|
|
69,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
193,273
|
|
|
|
357,875
|
|
|
|
492,092
|
|
|
|
718,372
|
|
|
Total
operating expense
|
|
|
193,273
|
|
|
|
357,875
|
|
|
|
492,092
|
|
|
|
718,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(183,066
|
)
|
|
|
(336,051
|
)
|
|
|
(464,121
|
)
|
|
|
(649,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(10,754
|
)
|
|
|
(6,829
|
)
|
|
|
(24,639
|
)
|
|
|
(7,271
|
)
|
|
Total
other expense
|
|
|
(10,754
|
)
|
|
|
(6,829
|
)
|
|
|
(24,639
|
)
|
|
|
(7,271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(193,820
|
)
|
|
$
|
(342,880
|
)
|
|
$
|
(488,760
|
)
|
|
$
|
(656,343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
32,487,500
|
|
|
|
26,287,500
|
|
|
|
32,487,500
|
|
|
|
26,287,500
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
For
the Six Months Ended
|
|
|
|
|
January
31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(488,760
|
)
|
|
$
|
(656,343
|
)
|
|
Adjustments
to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
4,141
|
|
|
|
1,323
|
|
|
Provision
for doubtful accounts
|
|
|
-
|
|
|
|
(9,115
|
)
|
|
Stock-based
compensation
|
|
|
147,255
|
|
|
|
464,667
|
|
|
Other
income
|
|
|
-
|
|
|
|
(1,600
|
)
|
|
Changes
in operating assets and liabilities (excluding effects of acquisitions):
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
6,243
|
|
|
|
24,911
|
|
|
Prepaid
expenses and other current assets
|
|
|
648
|
|
|
|
(3,630
|
)
|
|
Accounts
payable and accrued expenses
|
|
|
41,736
|
|
|
|
35,852
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
32,183
|
|
|
|
120,000
|
|
|
Payroll
related liabilities
|
|
|
159,154
|
|
|
|
(9,162
|
)
|
|
NET
CASH USED BY OPERATING ACTIVITIES
|
|
|
(97,400
|
)
|
|
|
(33,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Principal
payments of long-term debt
|
|
|
(1,126
|
)
|
|
|
-
|
|
|
Proceeds
from third party loans
|
|
|
-
|
|
|
|
27,150
|
|
|
Proceeds
from related party loans
|
|
|
7,404
|
|
|
|
8,350
|
|
|
Payments
of amounts owed to related parties
|
|
|
(75,800
|
)
|
|
|
-
|
|
|
NET
CASH (USED) PROVIDED BY FINANCING ACTIVITIES
|
|
|
(69,522
|
)
|
|
|
35,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
(166,922
|
)
|
|
|
2,403
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
166,922
|
|
|
|
2,565
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
-
|
|
|
$
|
4,968
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
5,889
|
|
|
$
|
-
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED BALANCE SHEETS
|
|
|
April
30, 2019
|
|
|
July
31, 2018
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
-
|
|
|
$
|
166,922
|
|
|
Accounts
receivable, net
|
|
|
370
|
|
|
|
14,527
|
|
|
Prepaid
expenses and other current assets
|
|
|
-
|
|
|
|
648
|
|
|
Total
current assets
|
|
|
370
|
|
|
|
182,097
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
21,805
|
|
|
|
28,009
|
|
|
Total
assets
|
|
$
|
22,175
|
|
|
$
|
210,106
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
211,386
|
|
|
$
|
158,402
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
340,198
|
|
|
|
374,260
|
|
|
Payroll
related liabilities
|
|
|
388,878
|
|
|
|
146,414
|
|
|
Convertible
notes
|
|
|
750,000
|
|
|
|
750,000
|
|
|
Current
portion of long-term debt
|
|
|
3,129
|
|
|
|
2,718
|
|
|
Total
current liabilities
|
|
|
1,693,591
|
|
|
|
1,431,794
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
3,300
|
|
|
|
5,225
|
|
|
Total
liabilities
|
|
|
1,696,891
|
|
|
|
1,437,019
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
|
|
|
|
|
|
Common
stock par value $0.001; 200,000,000 shares authorized; 32,487,500 and 32,487,500 shares issued and outstanding as of April
30, 2019 and July 31, 2018, respectively
|
|
|
32,488
|
|
|
|
32,488
|
|
|
Additional
paid-in capital
|
|
|
8,508,538
|
|
|
|
8,287,656
|
|
|
Accumulated
deficit
|
|
|
(10,215,742
|
)
|
|
|
(9,547,057
|
)
|
|
Total
stockholders’ deficit
|
|
|
(1,674,716
|
)
|
|
|
(1,226,913
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
22,175
|
|
|
$
|
210,106
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
For
the Three Months Ended
|
|
|
For
the Nine Months Ended
|
|
|
|
|
April
30,
|
|
|
April
30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
staffing services
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Direct
cost of services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Gross
margin
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
166,272
|
|
|
|
963,168
|
|
|
|
623,944
|
|
|
|
1,654,868
|
|
|
Total
operating expense
|
|
|
166,272
|
|
|
|
963,168
|
|
|
|
623,944
|
|
|
|
1,654,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(166,272
|
)
|
|
|
(963,168
|
)
|
|
|
(623,944
|
)
|
|
|
(1,654,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(9,742
|
)
|
|
|
(3,957
|
)
|
|
|
(28,929
|
)
|
|
|
(4,832
|
)
|
|
Total
other expense
|
|
|
(9,742
|
)
|
|
|
(3,957
|
)
|
|
|
(28,929
|
)
|
|
|
(4,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS
|
|
|
(176,014
|
)
|
|
|
(967,125
|
)
|
|
|
(652,873
|
)
|
|
|
(1,659,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM DISCONTINUED OPERATIONS
|
|
|
(3,911
|
)
|
|
|
(124,482
|
)
|
|
|
(15,813
|
)
|
|
|
(88,250
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(179,925
|
)
|
|
$
|
(1,091,607
|
)
|
|
$
|
(668,686
|
)
|
|
$
|
(1,747,950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
32,487,500
|
|
|
|
28,070,915
|
|
|
|
32,487,500
|
|
|
|
27,227,346
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
For
the Nine Months Ended
|
|
|
|
|
April
30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(668,686
|
)
|
|
$
|
(1,747,950
|
)
|
|
Adjustments
to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
6,204
|
|
|
|
2,075
|
|
|
Provision
for doubtful accounts
|
|
|
-
|
|
|
|
11,965
|
|
|
Stock-based
compensation
|
|
|
220,882
|
|
|
|
1,402,351
|
|
|
Changes
in operating assets and liabilities (excluding effects of acquisitions):
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
14,157
|
|
|
|
11,005
|
|
|
Prepaid
expenses and other current assets
|
|
|
648
|
|
|
|
(1,770
|
)
|
|
Accounts
payable and accrued expenses
|
|
|
52,984
|
|
|
|
27,977
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
32,184
|
|
|
|
147,742
|
|
|
Payroll
related liabilities
|
|
|
242,464
|
|
|
|
(17,038
|
)
|
|
NET
CASH USED BY OPERATING ACTIVITIES
|
|
|
(99,163
|
)
|
|
|
(163,643
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Cash
acquired from acquisition of subsidiary
|
|
|
-
|
|
|
|
3,960
|
|
|
NET
CASH PROVIDED BY INVESTING ACTIVITIES
|
|
|
-
|
|
|
|
3,960
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible notes
|
|
|
-
|
|
|
|
750,000
|
|
|
Proceeds
from stock issuances
|
|
|
-
|
|
|
|
2,000
|
|
|
Principal
payments of long-term debt
|
|
|
(1,514
|
)
|
|
|
(356
|
)
|
|
Proceeds
from third party loans
|
|
|
-
|
|
|
|
32,925
|
|
|
Proceeds
from related party loans
|
|
|
9,555
|
|
|
|
9,350
|
|
|
Payments
of amounts owed to related parties
|
|
|
(75,800
|
)
|
|
|
(36,950
|
)
|
|
NET
CASH (USED) PROVIDED BY FINANCING ACTIVITIES
|
|
|
(67,759
|
)
|
|
|
756,969
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
(166,922
|
)
|
|
|
597,286
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
166,922
|
|
|
|
2,565
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
-
|
|
|
$
|
599,851
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
7,527
|
|
|
$
|
12,401
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED BALANCE SHEETS
|
|
|
October
31, 2019
|
|
|
July
31, 2019
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
386
|
|
|
$
|
725
|
|
|
Total
current assets
|
|
|
386
|
|
|
|
725
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
16,562
|
|
|
|
18,392
|
|
|
Total
assets
|
|
$
|
16,948
|
|
|
$
|
19,117
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
230,196
|
|
|
$
|
220,328
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
356,154
|
|
|
|
341,798
|
|
|
Payroll
related liabilities
|
|
|
557,400
|
|
|
|
472,078
|
|
|
Convertible
notes
|
|
|
750,000
|
|
|
|
750,000
|
|
|
Current
portion of long-term debt
|
|
|
3,901
|
|
|
|
3,209
|
|
|
Total
current liabilities
|
|
|
1,897,651
|
|
|
|
1,787,413
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
1,933
|
|
|
|
2,625
|
|
|
Total
liabilities
|
|
|
1,899,584
|
|
|
|
1,790,038
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
|
|
|
|
|
|
Common
stock par value $0.001; 200,000,000 shares authorized; 32,487,500 and 32,487,500 shares issued and outstanding as of October
31, 2019 and July 31, 2019, respectively
|
|
|
32,488
|
|
|
|
32,488
|
|
|
Additional
paid-in capital
|
|
|
8,657,360
|
|
|
|
8,582,166
|
|
|
Accumulated
deficit
|
|
|
(10,572,484
|
)
|
|
|
(10,385,575
|
)
|
|
Total
stockholders’ deficit
|
|
|
(1,882,636
|
)
|
|
|
(1,770,921
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
16,948
|
|
|
$
|
19,117
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
For
the Three Months Ended
|
|
|
|
|
October
31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES:
|
|
|
|
|
|
|
|
|
|
Contract
staffing services
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Direct
cost of services
|
|
|
-
|
|
|
|
-
|
|
|
Gross
margin
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
175,970
|
|
|
|
277,692
|
|
|
Total
operating expense
|
|
|
175,970
|
|
|
|
277,692
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(175,970
|
)
|
|
|
(277,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSE:
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(9,844
|
)
|
|
|
(13,885
|
)
|
|
Total
other expense
|
|
|
(9,844
|
)
|
|
|
(13,885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS
|
|
|
(185,814
|
)
|
|
|
(291,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM DISCONTINUED OPERATIONS
|
|
|
(1,095
|
)
|
|
|
(3,364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(186,909
|
)
|
|
$
|
(294,941
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
32,487,500
|
|
|
|
32,487,500
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
For
the Three Months Ended
|
|
|
|
|
October
31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(186,909
|
)
|
|
$
|
(294,941
|
)
|
|
Adjustments
to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,829
|
|
|
|
2,071
|
|
|
Stock-based
compensation
|
|
|
75,194
|
|
|
|
73,627
|
|
|
Changes
in operating assets and liabilities (excluding effects of acquisitions):
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
-
|
|
|
|
(6,013
|
)
|
|
Prepaid
expenses and other current assets
|
|
|
-
|
|
|
|
648
|
|
|
Accounts
payable and accrued expenses
|
|
|
9,867
|
|
|
|
30,839
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
5,050
|
|
|
|
23,202
|
|
|
Payroll
related liabilities
|
|
|
85,322
|
|
|
|
82,255
|
|
|
NET
CASH USED BY OPERATING ACTIVITIES
|
|
|
(9,646
|
)
|
|
|
(88,312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Principal
payments of long-term debt
|
|
|
-
|
|
|
|
(557
|
)
|
|
Proceeds
from related party loans
|
|
|
9,307
|
|
|
|
63
|
|
|
Payments
of amounts owed to related parties
|
|
|
-
|
|
|
|
(75,800
|
)
|
|
NET
CASH (USED) PROVIDED BY FINANCING ACTIVITIES
|
|
|
9,307
|
|
|
|
(76,294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
(339
|
)
|
|
|
(164,606
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
725
|
|
|
|
166,922
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
386
|
|
|
$
|
2,316
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
802
|
|
|
$
|
4,510
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED BALANCE SHEETS
|
|
|
January
31, 2020
|
|
|
July
31, 2019
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
108
|
|
|
$
|
725
|
|
|
Total
current assets
|
|
|
108
|
|
|
|
725
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
14,733
|
|
|
|
18,392
|
|
|
Total
assets
|
|
$
|
14,841
|
|
|
$
|
19,117
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
260,786
|
|
|
$
|
220,328
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
375,559
|
|
|
|
341,798
|
|
|
Payroll
related liabilities
|
|
|
657,284
|
|
|
|
472,078
|
|
|
Convertible
notes
|
|
|
750,000
|
|
|
|
750,000
|
|
|
Current
portion of long-term debt
|
|
|
3,586
|
|
|
|
3,209
|
|
|
Total
current liabilities
|
|
|
2,047,215
|
|
|
|
1,787,413
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
1,224
|
|
|
|
2,625
|
|
|
Total
liabilities
|
|
|
2,048,439
|
|
|
|
1,790,038
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
|
|
|
|
|
|
Common
stock par value $0.001; 200,000,000 shares authorized; 32,487,500 and 32,487,500 shares issued and outstanding as of January
31, 2020 and July 31, 2019, respectively
|
|
|
32,488
|
|
|
|
32,488
|
|
|
Additional
paid-in capital
|
|
|
8,736,994
|
|
|
|
8,582,166
|
|
|
Accumulated
deficit
|
|
|
(10,803,080
|
)
|
|
|
(10,385,575
|
)
|
|
Total
stockholders’ deficit
|
|
|
(2,033,598
|
)
|
|
|
(1,770,921
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
14,841
|
|
|
$
|
19,117
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
For
the Three Months Ended
|
|
|
For
the Six Months Ended
|
|
|
|
|
January
31,
|
|
|
January
31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
staffing services
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Direct
cost of services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Gross
margin
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
220,119
|
|
|
|
179,980
|
|
|
|
396,089
|
|
|
|
457,671
|
|
|
Total
operating expense
|
|
|
220,119
|
|
|
|
179,980
|
|
|
|
396,089
|
|
|
|
457,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(220,119
|
)
|
|
|
(179,980
|
)
|
|
|
(396,089
|
)
|
|
|
(457,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(10,074
|
)
|
|
|
(5,302
|
)
|
|
|
(19,918
|
)
|
|
|
(19,187
|
)
|
|
Total
other expense
|
|
|
(10,074
|
)
|
|
|
(5,302
|
)
|
|
|
(19,918
|
)
|
|
|
(19,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS
|
|
|
(230,193
|
)
|
|
|
(185,282
|
)
|
|
|
(416,007
|
)
|
|
|
(476,858
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM DISCONTINUED OPERATIONS
|
|
|
(403
|
)
|
|
|
(8,538
|
)
|
|
|
(1,498
|
)
|
|
|
(11,902
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(230,596
|
)
|
|
$
|
(193,820
|
)
|
|
$
|
(417.505
|
)
|
|
$
|
(488,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
32,487,500
|
|
|
|
32,487,500
|
|
|
|
32,487,500
|
|
|
|
32,487,500
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
For
the Six Months Ended
|
|
|
|
|
January
31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(417,505
|
)
|
|
$
|
(488,760
|
)
|
|
Adjustments
to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
3,659
|
|
|
|
4,141
|
|
|
Provision
for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
|
Stock-based
compensation
|
|
|
154,828
|
|
|
|
147,255
|
|
|
Changes
in operating assets and liabilities (excluding effects of acquisitions):
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
-
|
|
|
|
6,243
|
|
|
Prepaid
expenses and other current assets
|
|
|
-
|
|
|
|
648
|
|
|
Accounts
payable and accrued expenses
|
|
|
40,458
|
|
|
|
41,146
|
|
|
Accounts
payable and accrued expenses, related party
|
|
|
5,050
|
|
|
|
32,183
|
|
|
Payroll
related liabilities
|
|
|
185,206
|
|
|
|
159,154
|
|
|
NET
CASH USED BY OPERATING ACTIVITIES
|
|
|
(28,305
|
)
|
|
|
(97,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Principal
payments of long-term debt
|
|
|
(1,024
|
)
|
|
|
(1,126
|
)
|
|
Proceeds
from related party loans
|
|
|
28,712
|
|
|
|
7,405
|
|
|
Payments
of amounts owed to related parties
|
|
|
-
|
|
|
|
(75,800
|
)
|
|
NET
CASH (USED) PROVIDED BY FINANCING ACTIVITIES
|
|
|
27,688
|
|
|
|
(69,521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
(617
|
)
|
|
|
(167,511
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
725
|
|
|
|
166,922
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
108
|
|
|
$
|
(589
|
)
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
1,032
|
|
|
$
|
5,889
|
|
See
accompanying notes to the interim consolidated financial statements.
HEALTHCARE
INTEGRATED TECHNOLOGIES, INC.
NOTES
TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - BASIS OF PRESENTATION
The
interim financial statements presented herein have been prepared by Healthcare Integrated Technologies, Inc. (the “Company”)
without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Where
the interim financial statements include comparative balances from the periods ended July 31, 2019, 2018 and 2017, these balances
were derived from audited financial statements. Certain information and footnote disclosures normally included in financial statements
prepared in accordance with United States generally accepted accounting principles (“GAAP”) have been omitted pursuant
to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.
These
statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary
for fair presentation of the information contained therein. Interim results are not necessarily indicative of results for a full
year. We recommend that these interim financial statements be read in conjunction with the financial statements and accompanying
notes included in the Company’s annual report for the fiscal year ended July 31, 2019. We follow the same accounting policies
in preparation of interim reports as we do in our annual reports.
NOTE
2 - GOING CONCERN
We
have a history of losses, an accumulated deficit, have negative working capital and have not generated cash flow from our operations
to support a meaningful and ongoing business plan. It is management’s opinion that these conditions raise substantial doubt
about the Company’s ability to continue as a going concern.
In
view of these matters, our ability to continue as a going concern is dependent upon the development, marketing and sales of a
viable product to achieve a level of profitability. We intend on financing our future development activities and our working capital
needs largely from the sale of private and public equity securities with additional funding from other traditional financing sources,
including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The
unaudited, interim financial statements do not include any adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern.
NOTE
3 - CONTINGENCY
On
January 2, 2020, a sworn account lawsuit was filed against our IndeLiving Holdings, Inc. (“IndeLiving”) subsidiary
and our CEO Scott M. Boruff by our previous Certified Public Accounting Firm, RBSM LLP demanding payment of $28,007 for services
rendered. We have filed our Answer and IndeLiving filed a breach of contract Counterclaim on February 24, 2020 demanding repayment
of a $7,500 retainer paid to RBSM LLP by IndeLiving for services that we allege were not provided. Given the early state of the
proceedings in this case, we currently cannot assess the probability of losses, but we can reasonably estimate that the range
of losses in this case will be immaterial since the full amount of the lawsuit has previously been recorded in the consolidated
financial statements.
NOTE
4 - SUBSEQUENT EVENTS
On
February 11, 2020, we completed a private placement of 1,000,000 shares of our common stock at a price of $.10 per share resulting
in net proceeds to the Company of $100,000. We incurred no cost related to the private placement.
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