UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended April 30, 2020
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)
Nevada |
|
85-1173741 |
(State
or Other Jurisdiction of
Incorporation or Organization) |
|
(I.R.S.
Employer
Identification No.) |
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.
Large
accelerated filer |
[ ] |
Accelerated
filer |
[ ] |
Non-accelerated
filer |
[ ] |
Smaller
reporting company |
[X] |
(Do
not check if a smaller reporting company) |
Emerging
growth company |
[ ] |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 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]
As of
June 11, 2020, there were 33,937,500 shares of common stock of the
registrant outstanding.
Documents
Incorporated by Reference: None.
TABLE
OF CONTENTS
Unless
the context clearly indicates otherwise, when used in this 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”).
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Quarterly Report on Form 10-Q (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 Form 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 Quarterly 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 Quarterly Report. All subsequent written and oral
forward-looking statements concerning other matters addressed in
this Quarterly 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 Quarterly
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 - FINANCIAL
INFORMATION
Item 1. FINANCIAL
STATEMENTS.
Index
to Financial Statements
HEALTHCARE INTEGRATED TECHNOLOGIES,
INC.
INTERIM
CONSOLIDATED BALANCE SHEETS
|
|
April 30, 2020 |
|
|
July 31, 2019 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
41,873 |
|
|
$ |
725 |
|
Total current assets |
|
|
41,873 |
|
|
|
725 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
3,008 |
|
|
|
18,392 |
|
Total
assets |
|
$ |
44,881 |
|
|
$ |
19,117 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses |
|
$ |
246,121 |
|
|
$ |
220,328 |
|
Accounts payable
and accrued expenses, related party |
|
|
334,145 |
|
|
|
341,798 |
|
Payroll related
liabilities |
|
|
754,741 |
|
|
|
472,078 |
|
Convertible
notes |
|
|
750,000 |
|
|
|
750,000 |
|
Current portion of long-term debt |
|
|
- |
|
|
|
3,209 |
|
Total current
liabilities |
|
|
2,085,007 |
|
|
|
1,787,413 |
|
|
|
|
|
|
|
|
|
|
OTHER
LIABILITIES: |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
41,667 |
|
|
|
2,625 |
|
Total
liabilities |
|
|
2,126,674 |
|
|
|
1,790,038 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT: |
|
|
|
|
|
|
|
|
Common stock par value $0.001;
200,000,000 shares authorized; 33,937,500 and 32,487,500 shares
issued and outstanding as of April 30, 2020 and July 31, 2019,
respectively |
|
|
33,938 |
|
|
|
32,488 |
|
Additional paid-in
capital |
|
|
8,981,160 |
|
|
|
8,582,166 |
|
Accumulated deficit |
|
|
(11,096,891 |
) |
|
|
(10,385,575 |
) |
Total
stockholders’ deficit |
|
|
(2,081,793 |
) |
|
|
(1,770,921 |
) |
Total
liabilities and stockholders’ deficit |
|
$ |
44,881 |
|
|
$ |
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 Nine Months Ended |
|
|
|
April 30, |
|
|
April 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
$ |
283,365 |
|
|
$ |
166,272 |
|
|
$ |
679,454 |
|
|
$ |
623,944 |
|
Total operating
expense |
|
|
283,365 |
|
|
|
166,272 |
|
|
|
679,454 |
|
|
|
623,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS |
|
|
(283,365 |
) |
|
|
(166,272 |
) |
|
|
(679,454 |
) |
|
|
(623,944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(10,429 |
) |
|
|
(9,742 |
) |
|
|
(30,347 |
) |
|
|
(28,929 |
) |
Total other
expense |
|
|
(10,429 |
) |
|
|
(9,742 |
) |
|
|
(30,347 |
) |
|
|
(28,929 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM
CONTINUING OPERATIONS |
|
|
(293,794 |
) |
|
|
(176,014 |
) |
|
|
(709,801 |
) |
|
|
(652,873 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM DISCONTINUED OPERATIONS |
|
|
(17 |
) |
|
|
(3,911 |
) |
|
|
(1,515 |
) |
|
|
(15,813 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS |
|
$ |
(293,811 |
) |
|
$ |
(179,925 |
) |
|
$ |
(711,316 |
) |
|
$ |
(668,686 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
33,235,913 |
|
|
|
32,487,500 |
|
|
|
32,920,069 |
|
|
|
32,487,500 |
|
See
accompanying notes to the interim consolidated financial
statements.
HEALTHCARE
INTEGRATED TECHNOLIGIES, INC.
INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
|
|
Nine-Month Period Ended April 30, 2020 |
|
|
|
|
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at July 31, 2019 |
|
|
32,487,500 |
|
|
$ |
32,488 |
|
|
$ |
8,582,166 |
|
|
$ |
(10,385,575 |
) |
|
$ |
(1,770,921 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(417,505 |
) |
|
|
(417,505 |
) |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
154,828 |
|
|
|
|
|
|
|
154,828 |
|
Activity for the six months ended
January 31, 2020 |
|
|
- |
|
|
|
- |
|
|
|
154,828 |
|
|
|
(417,505 |
) |
|
|
(262,677 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(293,811 |
) |
|
|
(293,811 |
) |
Issuance of common
stock |
|
|
1,450,000 |
|
|
|
1,450 |
|
|
|
163,550 |
|
|
|
|
|
|
|
165,000 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
80,616 |
|
|
|
|
|
|
|
80,616 |
|
Activity for the three months
ended April 30, 2020 |
|
|
1,450,000 |
|
|
|
1,450 |
|
|
|
244,166 |
|
|
|
(293,811 |
) |
|
|
(48,194 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
April 30, 2020 |
|
|
33,937,500 |
|
|
$ |
33,938 |
|
|
$ |
8,981,160 |
|
|
$ |
(11,096,891 |
) |
|
$ |
(2,081,793 |
) |
|
|
Nine-Month Period Ended April 30, 2019 |
|
|
|
|
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at July 31, 2018 |
|
|
32,487,500 |
|
|
$ |
32,488 |
|
|
$ |
8,287,656 |
|
|
$ |
(9,547,057 |
) |
|
$ |
(1,226,913 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(488,761 |
) |
|
|
(488,761 |
) |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
147,255 |
|
|
|
|
|
|
|
147,255 |
|
Activity for the six months ended
January 31, 2019 |
|
|
- |
|
|
|
- |
|
|
|
147,255 |
|
|
|
(488,761 |
) |
|
|
(341,506 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(179,925 |
) |
|
|
(179,925 |
) |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
73,628 |
|
|
|
|
|
|
|
73,628 |
|
Activity for the three months
ended April 30, 2019 |
|
|
- |
|
|
|
- |
|
|
|
73,628 |
|
|
|
(179,925 |
) |
|
|
(106,297 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
April 30, 2019 |
|
|
32,487,500 |
|
|
$ |
32,488 |
|
|
$ |
8,508,539 |
|
|
$ |
(10,215,743 |
) |
|
$ |
(1,674,716 |
) |
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, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(711,316 |
) |
|
$ |
(668,686 |
) |
Adjustments to
reconcile loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
4,214 |
|
|
|
6,204 |
|
Stock-based
compensation |
|
|
220,882 |
|
|
|
220,882 |
|
Stock issued for
services |
|
|
45,000 |
|
|
|
- |
|
Changes in
operating assets and liabilities (excluding effects of
acquisitions): |
|
|
|
|
|
|
|
|
Accounts
receivable, net |
|
|
- |
|
|
|
14,157 |
|
Prepaid expenses
and other current assets |
|
|
- |
|
|
|
648 |
|
Accounts payable
and accrued expenses |
|
|
25,793 |
|
|
|
52,984 |
|
Payroll related liabilities |
|
|
282,663 |
|
|
|
242,464 |
|
NET CASH USED
BY OPERATING ACTIVITIES |
|
|
(112,180 |
) |
|
|
(131,347 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from
stock issuances |
|
|
120,000 |
|
|
|
- |
|
Principal payments
of long-term debt |
|
|
(1,514 |
) |
|
|
(1,514 |
) |
Proceeds from debt
issuance |
|
|
41,667 |
|
|
|
- |
|
Proceeds from
related party loans |
|
|
38,825 |
|
|
|
41,739 |
|
Payments of amounts owed to related parties |
|
|
(46,478 |
) |
|
|
(75,800 |
) |
NET CASH
PROVIDED (USED) BY FINANCING ACTIVITIES |
|
|
153,328 |
|
|
|
(35,575 |
) |
|
|
|
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
|
41,148 |
|
|
|
(166,922 |
) |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period |
|
|
725 |
|
|
|
166,922 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period |
|
$ |
41,873 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH
FLOW INFORMATION |
|
|
|
|
|
|
|
|
Cash
paid for interest |
|
$ |
1,371 |
|
|
$ |
7,527 |
|
See
accompanying notes to the interim consolidated financial
statements.
HEALTHCARE INTEGRATED TECHNOLOGIES,
INC.
NOTES
TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – NATURE OF OPERATIONS AND 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. (the “Company”), 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.
Basis of Presentation
The
accompanying interim consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial
statements and with the instructions to Form 10-Q and Article 8 of
Regulation S-X of the United States Securities and Exchange
Commission (“SEC”). Accordingly, they do not contain all
information and footnotes required by accounting principles
generally accepted in the United States of America for annual
financial statements. In the opinion of the Company’s management,
the accompanying unaudited interim consolidated financial
statements contain all of the adjustments necessary (consisting
only of normal recurring accruals) to present the financial
position of the Company as of April 30, 2020 and the results of
operations and cash flows for the periods presented. The results of
operations for the nine months ended April 30, 2020 are not
necessarily indicative of the operating results for the full fiscal
year or any future period. These unaudited interim consolidated
financial statements should be read in conjunction with the
financial statements and related notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended July 31,
2019 filed with the SEC on March 20, 2020.
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.
On January 30, 2020, the World Health Organization (“WHO”)
announced a global health emergency because of a new strain of
coronavirus originating in Wuhan, China (the “COVID-19 outbreak”)
and the risks to the international community as the virus spreads
globally beyond its point of origin. In March 2020, the WHO
classified the COVID-19 outbreak as a pandemic, based on the rapid
increase in exposure globally. The full impact of the COVID-19
outbreak continues to evolve as of the date of this report. As
such, it is uncertain as to the full magnitude that the pandemic
will have on the Company’s future financial condition, liquidity,
and results of operations. Management is actively monitoring the
impact of the global situation on its financial condition,
liquidity, operations, suppliers, industry, and workforce. Given
the daily evolution of the COVID-19 outbreak and the global
responses to curb its spread, the Company is not able to estimate
the effects of the COVID-19 outbreak on its results of operations,
financial condition, or liquidity1 for fiscal year 2020.
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. The Company minimizes its credit risk associated with
cash by periodically evaluating the credit quality of its primary
financial institution. The balance at times may exceed federally
insured limits. The Company held no cash equivalents at April 30,
2020 and July 31, 2019.
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 probable 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 April 30,
2020 and July 31, 2019, all accounts receivable were deemed
uncollectable and are fully reserved.
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
Revenue
is recognized under ASC 606 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
$50,300 and $8,746 for the nine months ended April 30, 2020 and
2019, respectively, which are included in selling, general and
administrative expenses on the interim 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 stock-based compensation in accordance with
ASC Topic 718, “Compensation – Stock Compensation” (“ASC
718”) which establishes financial accounting and reporting
standards for stock-based employee compensation. It defines a fair
value-based method of accounting for an employee stock option or
similar equity instrument. The Company accounts for compensation
cost for stock option plans, if any, in accordance with ASC
718.
Share-based
payments, excluding restricted stock, are valued using a
Black-Scholes option pricing model. Grants of share-based payment
awards issued to non-employees for services rendered have been
recorded at the fair value of the share-based payment, which is the
more readily determinable value. The grants are amortized on a
straight-line basis over the requisite service periods, which is
generally the vesting period. If an award is granted, but vesting
does not occur, any previously recognized compensation cost is
reversed in the period related to the termination of service.
Stock-based compensation expenses are included in cost of goods
sold or selling, general and administrative expenses, depending on
the nature of the services provided, in the interim consolidated
statement of operations. Share-based payments issued to placement
agents are classified as a direct cost of a stock offering and are
recorded as a reduction in additional paid in capital.
The
Company recognizes all forms of share-based payments, including
stock option grants, warrants and restricted stock grants, at their
fair value on the grant date, which are based on the estimated
number of awards that are ultimately expected to vest.
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 April 30, 2020 and July 31, 2019, there were no
deferred taxes due to the uncertainty of the realization of net
operating loss carry forwards prior to their expiration.
Recently Adopted Accounting
Pronouncements
In
June 2018, the FASB issued Accounting Standards Update (ASU) No.
2018-07, Compensation – Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting.
Under the new standard, companies will no longer be required to
value non-employee awards differently from employee awards.
Companies will value all equity classified awards at their
grant-date under ASC 718 and forgo revaluing the award after the
grant date. ASU 2018-07 is effective for annual reporting periods
beginning after December 15, 2018, including interim reporting
periods within that reporting period. Early adoption is permitted,
but no earlier than the Company’s adoption date of Topic 606,
Revenue from Contracts with Customers (as described above
under “Revenue Recognition”). The adoption of the new
standard did not have a significant impact on our consolidated
financial statements.
Recent Accounting Pronouncements
In
August 2018, the FASB issued ASU 2018-13, “Fair Value
Measurement (Topic 820): Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement”. This
update is to improve the effectiveness of disclosures in the notes
to the financial statements by facilitating clear communication of
the information required by U.S. GAAP that is most important to
users of each entity’s financial statements. The amendments in this
update apply to all entities that are required, under existing U.S.
GAAP, to make disclosures about recurring or nonrecurring fair
value measurements. The amendments in this update are effective for
all entities for fiscal years beginning after December 15, 2019,
and interim periods within those fiscal years. The Company is
currently evaluating this guidance and the impact of this update on
its consolidated financial statements.
In
December 2019, the FASB issued authoritative guidance intended to
simplify the accounting for income taxes (ASU 2019-12, “Income
Taxes (Topic 740): Simplifying the Accounting for Income
Taxes”). This guidance eliminates certain exceptions to the
general approach to the income tax accounting model and adds
new guidance to reduce the complexity in accounting for income
taxes. This guidance is effective for annual periods after December
15, 2020, including interim periods within those annual periods.
The Company is currently evaluating the potential impact of this
guidance on its consolidated financial statements.
Management
does not believe that any recently issued, but not yet effective
accounting pronouncements, when adopted, will have a material
effect on the accompanying consolidated financial
statements.
NOTE 2 - GOING CONCERN
The
accompanying interim 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
interim 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 - 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 interim consolidated income statement as
discontinued operations.
Discontinued
operations consisted of the following for the nine months ended
April 30, 2020 and 2019:
|
|
For the Nine Months Ended |
|
|
|
April 30, 2020 |
|
|
April 30, 2019 |
|
Net revenue |
|
$ |
- |
|
|
$ |
27,909 |
|
Operating expenses |
|
|
(713 |
) |
|
|
(36,764 |
) |
Interest
expense |
|
|
(802 |
) |
|
|
(6,958 |
) |
Loss from
discontinued operations |
|
$ |
(1,515 |
) |
|
$ |
(15,813 |
) |
NOTE 4 - ACCOUNTS RECEIVABLE
Accounts
receivable, net consisted of the following at April 30, 2020 and
July 31, 2019:
|
|
April 30, 2020 |
|
|
July 31, 2019 |
|
Accounts receivable |
|
$ |
20,270 |
|
|
$ |
20,270 |
|
Less: allowance
for uncollectible accounts |
|
|
(20,270 |
) |
|
|
(20,270 |
) |
Total accounts
receivable, net |
|
$ |
- |
|
|
$ |
- |
|
There
was no bad debt expense recorded for the nine months ended April
30, 2020 and 2019.
NOTE 5 - PROPERTY AND EQUIPMENT
Property
and equipment, net consisted of the following at April 30, 2020 and
July 31, 2019:
|
|
April 30, 2020 |
|
|
July 31, 2019 |
|
Equipment |
|
$ |
8,923 |
|
|
$ |
23,923 |
|
Vehicles |
|
|
- |
|
|
|
14,766 |
|
Subtotal |
|
|
8,923 |
|
|
|
38,689 |
|
Less:
accumulated depreciation |
|
|
(5,915 |
) |
|
|
(20,297 |
) |
Total property
and equipment, net |
|
$ |
3,008 |
|
|
$ |
18,392 |
|
Depreciation
expense for the nine months ended April 30, 2020 and 2019 was
$4,214 and $6,204, respectively.
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consisted of the following at April
30, 2020 and July 31, 2019:
|
|
April 30, 2020 |
|
|
July 31, 2019 |
|
Accounts payable |
|
$ |
164,078 |
|
|
$ |
168,062 |
|
Accounts payable, related party |
|
|
201,859 |
|
|
|
203,582 |
|
Accrued expenses, related party |
|
|
132,285 |
|
|
|
138,216 |
|
Accrued
interest expense |
|
|
82,044 |
|
|
|
52,266 |
|
Total accounts
payable and accrued expenses |
|
$ |
580,266 |
|
|
$ |
562,126 |
|
NOTE 7 - PAYROLL RELATED LIABILITIES
Payroll
related liabilities consisted of the following at April 30, 2020
and July 31, 2019:
|
|
April
30, 2020 |
|
|
July
31, 2019 |
|
Accrued
officer’s payroll |
|
$ |
754,741 |
|
|
$ |
471,214 |
|
Payroll
taxes payable |
|
|
- |
|
|
|
864 |
|
Total
payroll related liabilities |
|
$ |
754,741 |
|
|
$ |
472,078 |
|
NOTE 8 - DEBT
We
had the following debt obligations reflected at their respective
carrying values on our interim consolidated balance sheets as of
April 30, 2020 and July 31, 2019:
|
|
April 30, 2020 |
|
|
July 31, 2019 |
|
5% Convertible promissory
notes |
|
$ |
750,000 |
|
|
$ |
750,000 |
|
Paycheck Protection Program loan |
|
|
41,667 |
|
|
|
- |
|
Ford Credit
note |
|
|
- |
|
|
|
5,834 |
|
Total debt
obligations |
|
$ |
791,667 |
|
|
$ |
755,834 |
|
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 to the Company. 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 the notes matured one-year from the date of issuance.
At April 30, 2020 and July 31, 2019, accrued but unpaid interest on
the 5% Notes was $82,044 and $52,266, 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 with a face amount of $300,000 that matured on various
dates during March 2019 and are currently in default and are not
convertible under the conversion terms. The 5% Notes with face
amounts totaling $450,000 mature on March 31, 2021 and are
convertible under the conversion terms. Management continues to
negotiate amendments to the remaining notes in default to extend
the maturity dates of such notes.
Paycheck Protection Program Loan
On
March 27, 2020 the Coronavirus Aid, Relief, and Economic Security
Act (the “CARES Act”) was enacted and included a provision for the
Small Business Administration (“SBA”) to implement its Paycheck
Protection Program (“PPP”). The PPP provides small businesses with
funds to pay up to eight (8) weeks of payroll costs, including
benefits. Funds received under the PPP may also be used to pay
interest on mortgages, rent, and utilities. Subject to certain
criteria being met, all or a portion of the loan may be forgiven.
The loans bear interest at an annual rate of one percent (1%), are
due two (2) years from the date of issuance, and all payments are
deferred for the first six (6) months of the loan. Any unforgiven
balance of loan principal and accrued interest at the end of the
six (6) month loan deferral period is amortized in equal monthly
installments over the remaining 18-months of the loan term. On
April 30, 2020, we closed a $41,667 SBA guaranteed PPP loan with
Mountain Commerce Bank. We expect to use the loan proceeds as
permitted and apply for and receive forgiveness for the entire loan
amount.
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. Effective February 21, 2020, the Company
transferred the 2013 Ford pickup truck and other equipment in
exchange for the assumption of the Ford Credit note.
NOTE 9 - INCOME TAXES
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% as of April 30, 2020 and July 31, 2019 are as
follows:
|
|
April 30, 2020 |
|
|
July 31, 2019 |
|
Federal income tax benefit
computed at the statutory rate |
|
$ |
(149,376 |
) |
|
$ |
(176,089 |
) |
Increase (decrease) resulting
from: |
|
|
|
|
|
|
|
|
State income
taxes, net of federal benefit |
|
|
(1,088 |
) |
|
|
(6,459 |
) |
Equity based
compensation |
|
|
49,443 |
|
|
|
61,867 |
|
Valuation
allowance |
|
|
100,803 |
|
|
|
119,019 |
|
Other |
|
|
218 |
|
|
|
1,682 |
|
Income tax
benefit, as reported |
|
$ |
- |
|
|
$ |
- |
|
The
components of the net deferred tax asset as of April 30, 2020 and
July 31, 2019 are as follows:
|
|
April 30, 2020 |
|
|
July 31, 2019 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss
carryovers |
|
$ |
505,454 |
|
|
$ |
404,651 |
|
Valuation
allowance |
|
|
(505,454 |
) |
|
|
(404,651 |
) |
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 April 30, 2020 we
have approximately $2.3 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 10 - 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
April 30, 2020, and July 31, 2019, related parties have advanced
the Company $201,859 and $203,581, 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 April 30, 2020 and
July 31, 2019, the accrued amount owed under the Platinum Agreement
is $132,285 and $138,216, respectively.
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 11 - COMMON STOCK
At
April 30, 2020 and July 31, 2019, we had 33,937,500 and 32,487,500
shares of common stock outstanding, respectively. We issued
1,450,000 shares during the nine months ended April 30, 2020, of
which 1,200,000 shares were issued for cash and 250,000 shares were
issued for services. No shares were issued during the year ended
July 31, 2019.
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.
On
March 18, 2020, we completed a private placement of 200,000 shares
of our common stock at a price of $0.10 per share resulting in net
proceeds to the Company of $20,000. We incurred no cost related to
the private placement.
On
March 21, 2020, we executed an agreement with BrandMETTLE, LLC
(“BrandMETTLE”) to serve as our advertising agency for IndeLiving.
Pursuant to the terms of the agreement, we issued 250,000 shares of
our common stock to certain principals of BrandMETTLE at an
estimated value of $0.18 per share.
On
April 22, 2020, we executed an agreement with Jurgen Vollrath to
act as our outside counsel for Intellectual Property (“IP”).
Pursuant to the terms of the agreement, we issued 1,250,000
warrants to purchase the Company’s common stock at an exercise
price of $0.23 per share with 250,000 warrants 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.
NOTE 12 - STOCK-BASED COMPENSATION
During
the nine months ended April 30, 2020 and 2019, we recorded $235,444
and $220,882, respectively, of compensation expense related
to stock options and warrants. The grant date fair value of stock
options and warrants granted during the nine months ended April 30,
2020 was $307,965. No stock options or warrants were granted during
the nine months ended April 30, 2019. We estimated the grant date
fair value of stock options and warrants using the Black-Scholes
pricing model with the following weighted average range of
assumptions for the periods presented:
|
|
April 30, 2020 |
|
|
April 30, 2019 |
|
Expected volatility |
|
|
232.07 |
% |
|
|
- |
|
Expected term (in years) |
|
|
3.28 |
|
|
|
- |
|
Risk-free interest rate |
|
|
0.66 |
% |
|
|
- |
|
Dividend yield |
|
|
None |
|
|
|
- |
|
Expected Volatility
Due
to the fact we do not consider historical volatility as 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 nine months ended April 30, 2020 and fiscal year ended July
31, 2019:
|
|
April 30, 2020 |
|
|
July 31, 2019 |
|
|
|
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 |
|
|
|
2,500,000 |
|
|
$ |
3.00 |
|
Granted |
|
|
1,850,000 |
|
|
|
.20 |
|
|
|
- |
|
|
|
- |
|
Exercised |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance at end of period |
|
|
4,350,000 |
|
|
$ |
1.81 |
|
|
|
2,500,000 |
|
|
$ |
3.00 |
|
Options and
warrants exercisable |
|
|
1,650,000 |
|
|
$ |
2.32 |
|
|
|
625,000 |
|
|
$ |
3.00 |
|
Item 2. MANAGEMENTS 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.
The
following discussion and analysis should be read in conjunction
with the interim consolidated financial statements and accompanying
notes included herein and the consolidated financial statements and
accompanying notes included in our most recent Annual Report on
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, we revised our operational
focus and we changed our name to Healthcare Integrated
Technologies, Inc. to better reflect our core business
strategy.
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 the nine months ended April 30, 2020 include:
|
● |
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. |
|
|
|
|
● |
On
March 18, 2020, we completed a private placement of 200,000 shares
of our common stock at a price of $0.10 per share resulting in net
proceeds to the Company of $20,000. We incurred no cost related to
the private placement. |
|
● |
On
March 21, 2020, we executed an agreement with BrandMETTLE, LLC
(“BrandMETTLE”) to serve as our advertising agency for IndeLiving.
Pursuant to the terms of the agreement, we issued 250,000 shares of
our common stock to certain principals of BrandMETTLE at an
estimated value of $0.18 per share. BrandMETTLE focuses on
providing branding, advertising, marketing and strategy development
for senior targeted healthcare technology firms, senior living
communities, pharmaceutical concerns and lifestyle brands for the
age 55+ consumer. |
|
|
|
|
● |
On
April 22, 2020, we executed an agreement with Jurgen Vollrath to
act as our outside counsel for Intellectual Property (“IP”).
Pursuant to the terms of the agreement, we issued 1,250,000
warrants to purchase the Company’s common stock at an exercise
price of $0.23 per share with 250,000 warrants 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. Mr.
Vollrath, who has spent the last 30 years working with technology
firms ranging from startups to Fortune 100 companies, is recognized
as a leading IP strategist. |
|
|
|
|
● |
On
April 30, 2020, we closed an SBA guaranteed PPP loan with Mountain
Commerce Bank resulting in $41,667 in loan proceeds to the Company.
We expect to use the loan proceeds as permitted under the program
and apply for and receive forgiveness for the entire loan
amount. |
Results of Operations
Three Months Ended April 30, 2020 Compared To Three Months Ended
April 30, 2019
Selling, General and Administrative Expenses
|
|
For the Three Months Ended April 30, |
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|
$ Variance |
|
|
%Variance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer’s salaries |
|
$ |
102,457 |
|
|
$ |
87,035 |
|
|
$ |
15,422 |
|
|
|
18 |
% |
Stock-based compensation |
|
|
80,616 |
|
|
|
73,627 |
|
|
|
6,989 |
|
|
|
9 |
% |
Advertising and marketing |
|
|
61,020 |
|
|
|
602 |
|
|
|
60,418 |
|
|
|
10,036 |
% |
Professional fees |
|
|
37,062 |
|
|
|
2,653 |
|
|
|
34,409 |
|
|
|
1,297 |
% |
Other |
|
|
2,210 |
|
|
|
2,355 |
|
|
|
(145 |
) |
|
|
(6 |
)% |
Total |
|
$ |
283,365 |
|
|
$ |
166,272 |
|
|
$ |
117,093 |
|
|
|
70 |
% |
Officer’s
Salaries – Officer’s salaries increased $15,422 from fiscal
2019, or 18%, primarily due to the addition of our new Chief
Financial Officer hired in October 2019.
Stock-Based
Compensation – Stock-based compensation expense increased
$6,989, or 9%, over the same period in the prior year. The increase
results from amortization of the grant date fair value of employee
stock options granted to our new Chief Financial Officer hired in
October 2019.
Advertising
and Marketing – Advertising and marketing costs increased
$60,418 from 2019. During fiscal 2020 we engaged BrandMETTLE as our
advertising agency and incurred additional advertising expense for
issuance of common stock for services related to our agreement. We
had little activity during fiscal 2019.
Professional
Fees – Professional fees increased $34,409 from fiscal 2019.
The increase was primarily related to the increased accounting,
legal and filing fees associated with the filing of our
Comprehensive Form 10-K in March 2020.
Interest Expense
Interest
expense increased $687 over the same period in the prior year. The
increase is primarily due to the compounding effect of the accrued
interest expense on our outstanding 5% Convertible
Notes.
Loss from Discontinued Operations
During
the three-month periods ending April 30, 2020 and 2019, the
operations of our Grasshopper Colorado subsidiary were
discontinued. We earned no revenue from the discontinued operations
during these periods as we incurred minimal expenses.
Nine Months Ended April 30, 2020 Compared To Nine Months Ended
April 30, 2019
Selling, General and Administrative Expenses
|
|
For the Nine Months Ended April 30, |
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|
$ Variance |
|
|
%Variance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer’s salaries |
|
$ |
288,528 |
|
|
$ |
253,424 |
|
|
$ |
35,104 |
|
|
|
14 |
% |
Stock-based compensation |
|
|
235,444 |
|
|
|
220,882 |
|
|
|
14,562 |
|
|
|
7 |
% |
Advertising and marketing |
|
|
66,320 |
|
|
|
90,213 |
|
|
|
(23,893 |
) |
|
|
(26 |
)% |
Professional fees |
|
|
83,198 |
|
|
|
43,176 |
|
|
|
40,022 |
|
|
|
93 |
% |
Other |
|
|
5,964 |
|
|
|
16,249 |
|
|
|
(10,285 |
) |
|
|
(63 |
)% |
Total |
|
$ |
679,454 |
|
|
$ |
623,944 |
|
|
$ |
55,510 |
|
|
|
9 |
% |
Officer’s
Salaries – Officer’s salaries increased $35,104 from fiscal
2019, or 14%, primarily due to the addition of our new Chief
Financial Officer hired in October 2019.
Stock-Based
Compensation – Stock-based compensation expense increased
$14,562, or 7%, over the same period in the prior year. The
increase results from amortization of the grant date fair value of
employee stock options granted to our new Chief Financial Officer
hired in October 2019.
Advertising
and Marketing – Advertising and marketing costs decreased
$23,893 from fiscal 2019, or 26%. The total decrease resulted from
an approximately $65,000 decrease in our sales staff and product
demonstration costs that was offset by an approximately $41,000
increase in advertising expense. The increase in advertising
expense resulted from the issuance of common stock for services
related to our engagement of BrandMETTLE as our advertising
agency.
Professional
Fees – Professional fees increased $40,022 from fiscal 2019.
The increase was primarily related to the increased accounting,
legal and filing fees associated with the filing of our
Comprehensive Form 10-K in March 2020.
Interest Expense
Interest
expense increased $1,418 over the same period in the prior year.
The increase is primarily due to the compounding effect of the
accrued interest expense on our outstanding 5% Convertible
Notes.
Loss from Discontinued Operations
In
February 2019 we discontinued the operations of our Grasshopper
Colorado subsidiary. Loss from discontinued operations consisted of
the following at April 30, 2020 and 2019:
|
|
April 30, 2020 |
|
|
April 30, 2019 |
|
Net revenue |
|
$ |
- |
|
|
$ |
27,909 |
|
Operating expenses |
|
|
(713 |
) |
|
|
(36,764 |
) |
Interest
expense |
|
|
(802 |
) |
|
|
(6,958 |
) |
Loss from
discontinued operations |
|
$ |
(1,515 |
) |
|
$ |
(15,813 |
) |
Liquidity and Capital Resources
Working Capital
The
following table summarizes our working capital for the interim
period ended April 30, 2020 and fiscal year ended July 31,
2019:
|
|
April
30, 2020 |
|
|
July
31, 2019 |
|
Current
assets |
|
$ |
41,873 |
|
|
$ |
725 |
|
Current
liabilities |
|
|
(2,085,007 |
) |
|
|
(1,787,413 |
) |
Working
capital deficiency |
|
$ |
(2,043,134 |
) |
|
$ |
(1,786,688 |
) |
Current
assets for the period ended April 30, 2020 increased as compared to
the year ended July 31, 2019 due to the cash proceeds received from
the closing of our SBA PPP loan on April 30, 2020.
Current
liabilities for the period ended April 30, 2020 increased as
compared to the year ended July 31, 2018 primarily due to the
continued accrual of 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 decreased $19,167 for
the nine months ended April 30, 2020 compared to the nine months
ended April 30, 2019. The decrease in cash used during fiscal 2020
is attributable to less activity in the early months of 2020 as
compared to 2019.
Net Cash Provided (Used) by Financing Activities
Net
cash provided by financing activities increased $188,903 for
the nine months ended April 30, 2020 over the same period in fiscal
2019. During 2019, we raised cash exclusively from short-term loans
from management. During 2020, we raised $120,000 from the private
placements of our common stock and received $41,667 in proceeds
from the closing of our SBA PPP loan. The remaining increase
resulted from a lesser amount of net cash used to repay shareholder
advances in 2020 as compared to 2019.
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.
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 interim
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
Our
interim consolidated financial statements and related public
financial information are based on the application of accounting
principles generally accepted in the United States (“GAAP”). GAAP
requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an
impact on the assets, liabilities, revenues and expense amounts
reported. These estimates can also affect supplemental information
contained in our external disclosures including information
regarding contingencies, risk and financial condition. We believe
our use of estimates and underlying accounting assumptions adhere
to GAAP and are consistently and conservatively applied. We base
our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the
circumstances. Actual results may differ materially from these
estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our
financial statements.
Our
significant accounting policies are summarized in Note 1 of our
interim consolidated financial statements.
There
have been no material changes to our critical accounting policies
and estimates from the information provided in Item 7,
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” included in our July 31, 2019 Annual
Report.
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
Revenue is recognized under ASC 606 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 April
30, 2020. 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 April 30,
2020.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
We do
not hold any derivative instruments and do not engage in any
hedging activities.
ITEM 4. 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.
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, which is conditioned on our ability to raise
capital.
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.
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 quarter that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II - OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS.
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 1A. RISK FACTORS.
Not
required for smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
On
February 11, 2020, we issued 1,000,000 shares of our common stock
at a price of $0.10 per share to an accredited investor resulting
in net proceeds to the Company of $100,000. We incurred no cost
related to the private transaction. The issuance of the shares was
exempt from registration under the Securities Act of 1933 in
reliance on an exemption provided by Section 4(a)2 of that
act.
On
March 18, 2020, we issued 200,000 shares of our common stock at a
price of $0.10 per share to an accredited investor resulting in net
proceeds to the Company of $100,000. We incurred no cost related to
the private transaction. The issuance of the shares was exempt from
registration under the Securities Act of 1933 in reliance on an
exemption provided by Section 4(a)2 of that act.
On
March 21, 2020, we issued 250,000 shares of our common stock valued
at $45,000 to two (2) individuals as compensation for services
rendered. The issuance was exempt from registration under the
Securities Act of 1933 in reliance on an exemption provided by
Section 4(a)1 and Rule 144.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.
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 face amount. 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. 5% Notes with face
amounts totaling $450,000 have been previously amended to extend
their maturity date to March 31, 2021. 5% Notes with face amounts
totaling $300,000 matured on various dates during March 2019 and
are currently in default for non-payment of principal and interest.
As of June 11, 2020, Principal and accrued interest of
approximately $34,500 are due on the notes in default.
ITEM 4. MINE SAFETY
DISCLOSURES
Not
applicable.
ITEM 5. OTHER
INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit
No.
|
|
Description |
|
|
|
10.1 |
|
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) |
|
|
|
10.2** |
|
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 |
|
Certification
of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 302 of 2002* |
|
|
|
31.2 |
|
Certification
of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 302 of 2002* |
|
|
|
32.1 |
|
Certification
of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002* |
|
|
|
32.2 |
|
Certification
of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002* |
**
Executive Compensation Agreement
SIGNATURES
Pursuant
to the requirements of the Securities 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:
June 11, 2020 |
|
|
|
By: |
/s/
Scott M. Boruff |
|
|
Scott
M. Boruff
President,
Chief Executive Officer (Principal Executive Officer)
|
|
Healthcare
Integrated Technologies, Inc. |
|
|
|
Date:
June 11, 2020 |
|
|
|
By: |
/s/
Charles B. Lobetti, III |
|
|
Charles
B. Lobetti, III |
|
|
Chief
Financial Officer (Principal Financial Officer) |
Healthcare Integrated Te... (PK) (USOTC:HITC)
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