Healthcare Integrated Technologies Inc. [HITC] Filings

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2024

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)

311 S. Weisgarber Road

Knoxville, TN 37919

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (865) 237-4448

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 ☒

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 ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically 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 ☒

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-Q or any amendment to this Form 10-Q. ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

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

As of June 20, 2024, there were 74,468,542 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, if applicable, our subsidiaries.

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 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 are also 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 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 Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this 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 Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether resulting from 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” included in our most recent Annual Report on Form 10-K for the year ended July 31, 2023 as filed with the United States Securities and Exchange Commission on November 13, 2023.

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS.

Index to Financial Statements

HEALTHCARE INTEGRATED TECHNOLOGIES, INC.

INTERIM CONSOLIDATED BALANCE SHEETS

See accompanying notes to the interim consolidated financial statements.

HEALTHCARE INTEGRATED TECHNOLOGIES, INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to the interim consolidated financial statements.

HEALTHCARE INTEGRATED TECHNOLOGIES, INC.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Unaudited)

See accompanying notes to the interim consolidated financial statements.

HEALTHCARE INTEGRATED TECHNOLOGIES, INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to the interim consolidated financial statements.

HEALTHCARE INTEGRATED TECHNOLOGIES, INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2024

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.

This following discussion summarizes the significant factors affecting the interim consolidated financial statements, financial condition, liquidity, and cash flows of Healthcare Integrated Technologies, Inc, for the nine months ended April 30, 2024 and 2023. The discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent Annual Report on Form 10-K for the year ended July 31, 2023 as filed with the SEC on November 13, 2023.

Executive Overview

Healthcare Integrated Technologies, Inc. and its subsidiaries is a healthcare technology company based in Knoxville, Tennessee. We are creating a diversified spectrum of healthcare technology solutions to integrate and automate the continuing care, home care and professional healthcare spaces.

Our initial product, SafeSpace™ with AI Vision™, is an ambient fall detection solution designed for continuing care communities and at home use. SafeSpace includes hardware devices utilizing RGB, radar and other sensor technology coupled with our internally developed software to effectively monitor a person remotely. In continuing care communities, SafeSpace detects resident falls and generates alerts to a centralized, intelligent dashboard without the use of wearable devices or any action by the resident. In the home, SafeSpace detects falls and sends alerts directly to designated individuals.

We recently introduced and are currently pilot testing two additional products - SafeFace™ and SafeGuard™. SafeFace provides fully automated and ambient time and attendance reporting for facility staff, and an integrated and automatic agency invoice reconciliation feature. SafeGuard is a novel fully ambient elopement detection and alerting system based on our facial recognition technology.

In addition to our current product offerings, we are developing a home concierge healthcare service application to provide a virtual assisted living experience for seniors, recently released postoperative patients, and others. The concierge application will enable the consumer to obtain home healthcare services and health and safety monitoring equipment to improve quality of life. We are also working to develop a fully integrated solution for the professional healthcare community that integrates electronic health records, remote patient monitoring, telehealth, and other items where integration is beneficial.

Strategy

Our mission is to grow a profitable healthcare technology company by focusing on our core product, continuing the development of our proprietary software, and developing new uses and product lines for our technology. Our management team is focused on maintaining financial flexibility and assembling the right complement of personnel and outside consultants required to successfully execute our mission.

Financial and Operating Results

We continue to utilize funds raised from the private sales of our common stock, issuance of debt, and short-term advances from related parties to provide cash for our operations, which has allowed us to continue refining our initial product and readying it for pilot testing, developing future product offerings and adding talented individuals to our management team and on a contract basis. Highlighted achievements for the nine months ended April 30, 2024 include:

Results of Operations

Three Months Ended April 30, 2024 Compared to the Three Months Ended April 30, 2023

Revenues

During the three months ended April 30, 2024, we recognized $60,283 in revenue from our service agreement that ended April 1, 2024. We have been unable to obtain extensions or additional agreements that would allow us to continue recognizing revenue in subsequent periods. We had no revenue during the three months ended April 30, 2023.

Operating Expenses

The table below presents a comparison of our operating expenses for the three months ended April 30, 2024 and 2023:

Officers’ Salaries - Officers’ salaries decreased $37,264, or 30%, over 2023. The decrease is a result of the Company’s officers accepting voluntary pay reductions to better reflect time commitments and reduce operating cost during the start-up phase.

Professional Fees - Professional fees decreased $14,223, or 48%, over the same period in the prior year. The decrease from 2023 primarily results from a $16,284 decrease in legal fees and a $5,000 decrease in the expense for outside consultants, which were partially offset by a $2,000 increase in accounting fees and a $4,081 increase in patent related costs. The remaining difference results from a small net increase in transfer agent and SEC filing costs.

Software Development - Software development expenses increased $7,006 over 2023. Prior to this period, our internally developed software had not been placed in service and software development cost were being capitalized.

Travel and Entertainment - Travel and entertainment expenses increased $13,243 over the same period in the prior year. The increase in travel and entertainment expenses is directly attributable to focused capital raising effort and actively evaluating acquisition opportunities during the period.

Advertising and Marketing - Advertising and marketing expenses increased $1,571 over 2023. The increase is primarily attributable to a $1,497 increase in expenses related to conferences and conventions during 2024.

Other - Other expenses decreased $3,412, or 62%, over the same period in the prior year. The decrease from 2023 primarily results from a $2,954 decrease in office expenses.

Stock-based Compensation - Stock-based compensation expense decreased $14,482, or 16%, from the same period in the prior year. The decrease results from a 2024 reduction in the amortization of the grant date fair value of employee stock options and restricted stock awards granted to our CEO, CFO, CTO and CMO. The decreases were partially offset by the additional expense related to the issuance of restricted stock awards and warrants to outside consultants.

Amortization - Amortization expense increased $54,087 over 2023. The increase in amortization expense primarily relates to the amortization of capitalized software development cost during the three months ended April 30, 2024 that had not yet been placed in service during the prior period.

Other Income (Expense)

The table below presents a comparison of our other income (expense) for the three months ended April 30, 2024 and 2023:

Interest Expense - Interest expense decreased $105,569, or 89%, over the same period in the prior year. Interest expense decreased due to a paydown and refinance of debt in June of 2023. The prior loan, which was in place during 2023, had a larger principal balance and associated fees that were initially recorded as debt discount and were being amortized as a component of interest expense.

Change in Fair Value of Derivative Liability – We had no derivative liability during the third quarter of fiscal 2024 and, accordingly, no change in the fair value of derivative liability. The change in the fair value of derivative liability in 2023 was associated with debt that was retired in June of 2023.

Nine Months Ended April 30, 2024 Compared to the Nine Months Ended April 30, 2023

Revenues

During the nine months ended April 30, 2024, we recognized $82,052 in revenue from our service agreement that ended April 1, 2024. We have been unable to obtain extensions or additional agreements that would allow us to continue recognizing revenue in subsequent periods. We had no revenue during the nine months ended April 30, 2023.

Operating Expenses

The table below presents a comparison of our operating expenses for the nine months ended April 30, 2024 and 2023:

Officers’ Salaries - Officers’ salaries decreased $111,836, or 30%, over 2023. The decrease is a result of the Company’s officers accepting voluntary pay reductions to better reflect time commitments and reduce operating cost during the start-up phase.

Professional Fees - Professional fees decreased $32,412, or 32%, over the same period in the prior year. The decrease from 2023 primarily results from a $18,750 decrease in the expense for outside consultants, $17,151 decrease in legal fees and a $3,016 decrease in accounting fees, which were partially offset by a $6,878 increase in patent related costs. The remaining difference results from a small net decrease in transfer agent and SEC filing costs.

Software Development - Software development expenses increased $15,287 over 2023. Prior to this period, our internally developed software had not been placed in service and software development cost were being capitalized.

Travel and Entertainment - Travel and entertainment expenses increased $13,759 over the same period in the prior year. The increase in travel and entertainment expenses is directly attributable to focused capital raising effort and actively evaluating acquisition opportunities during the period.

Other - Other expenses decreased $2,784, or 41%, over the same period in the prior year. The decrease from 2023 primarily results from a $2,443 decrease in office expenses.

Stock-based Compensation - Stock-based compensation expense decreased $138,809, or 57%, from the same period in the prior year. The decrease results from a 2024 reduction in the amortization of the grant date fair value of employee stock options and restricted stock awards granted to our CEO, CFO, CTO and CMO. The decreases were partially offset by the additional expense related to the issuance of restricted stock awards and warrants to outside consultants.

Amortization - Amortization expense increased $153,616 over 2023. The increase in amortization expense primarily relates to the amortization of capitalized software development cost during the nine months ended April 30, 2024 that had not yet been placed in service during the prior period.

Other Income (Expense)

The table below presents a comparison of our other income (expense) for the nine months ended April 30, 2024 and 2023:

Interest Expense - Interest expense decreased $312,238, or 89%, over the same period in the prior year. Interest expense decreased due to a paydown and refinance of debt in June of 2023. The prior loan, which was in place during 2023, had a larger principal balance and associated fees that were initially recorded as debt discount and were being amortized as a component of interest expense.

Change in Fair Value of Derivative Liability – We had no derivative liability during the first quarter of fiscal 2024 and, accordingly, no change in the fair value of derivative liability. The change in the fair value of the derivative liability in 2023 was associated with debt that was retired in June of 2023.

Liquidity and Capital Resources

Working Capital

The following table summarizes our working capital for the interim period ended April 30, 2024 and fiscal year ended July 31, 2023:

Current assets for the interim period ended April 30, 2024 increased $12,549 as compared to the fiscal year ended July 31, 2023. The increase is primarily due to an increase in accounts receivable related to the new Signature contract.

Current liabilities for the interim period ended April 30, 2024 increased $15,142 as compared to the fiscal year ended July 31, 2023. The increase is due to a $28,471 increase in accounts payable and accrued expenses, a $184,082 increase in payroll related liabilities as we continue to accrue officer compensation, and a $18,604 increase in notes payable to related parties, which were offset by a $216,015 reduction in short-term loans and accrued expenses owed to related parties.

Net Cash Used by Operating Activities

We currently do not have a recurring 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 amortization, stock-based compensation, and cash received from deferred revenue, which affect earnings but do not affect operating cash flow. Net cash used by operating activities was $198,352 and $77,565 for the nine months ended April 30, 2024 and 2023, respectively. as compared to net cash used by operating activities of $77,565 for the nine months ended April 30, 2023. The $120,787 increase in net cash used by operating activities during 2024 is attributable to a $202,436 decrease in the adjusted net loss from operations that is offset by a $323,223 decrease in changes in operating assets and liabilities from the 2023 amounts. The $202,436 decrease in the adjusted net loss from operations primarily results from a $82,052 increase in revenues and a $111,836 decrease in officer’s compensation. The $323,223 decrease in changes in operating assets and liabilities primarily results from $302,643 in payments to related parties that significantly reduced short-term related party loans and accrued expenses.

Net Cash Used by Investing Activities

Net cash used by investing activities was $-0- and $22,388 for the nine months ended April 30, 2024 and 2023, respectively. The amount is generally comprised of cash paid for the filing of patent applications and for the development of software for our internal use.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $197,971 for the nine months ended April 30, 2024, which represents a $16,731 increase over the same period of 2023. The 2024 increase primarily resulted from a $150,000 decrease in principal reduction payments on short term debt, that was partially offset by a $135,898 increase in payments to related parties for amounts owed for short-term loans and accrued expenses.

At this time, we cannot provide investors with any assurance that we will be able to obtain sufficient funding from debt financings 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 April 30, 2024.

Going Concern Qualification

We have a history of losses, an accumulated deficit, 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, 2023 and 2022. 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

Our interim consolidated financial statements and related public financial information are based on the application of U.S. GAAP. U.S. 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 U.S. 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, 2023 Annual Report.

We believe the following critical policies impact our more significant judgments and estimates used in preparation of our interim consolidated financial statements.

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.

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 fund our operations and fully develop our product(s); 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 U.S. 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.

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.

Intangible Assets

Intangible assets consist of patents, our website and the costs of software developed for internal use. Certain payroll and stock-based compensation costs incurred are allocated to the intangible assets. We determine the amount of costs to be capitalized based on the time spent by employees or outside contractors on the projects. Intangible assets are amortized over their expected useful life on a straight-line basis. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. If the estimate of an intangible asset’s remaining life is changed, the remaining carrying value of the intangible asset is amortized prospectively over the revised remaining useful life.

Impairment of Long-Lived Assets

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.

Derivative Liability

Options, warrants, convertible notes, or other contracts, if any, are evaluated to determine if those contracts, or embedded components of those contracts, qualify as derivatives to be separately accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging,” (paragraph 815-10-05-4 and Section 815-40-25). The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. The change in fair value is recorded in the consolidated statements of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise, or cancellation and then the related fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated, and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

The Company adopted Section 815-40-15 of the FASB ASC (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two- step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.

We utilize a binomial option pricing model to compute the fair value of the derivative liability and to mark to market the fair value of the derivative at each balance sheet date. We record the change in the fair value of the derivative as other income or expense in the consolidated statements of operations.

Revenue Recognition

Revenue is recognized under ASC 606, “Revenue from Contracts with Customers” 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.

Often contracts contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. Revenue is recognized net of any taxes collected and subsequently remitted to governmental authorities. If we determine that we have not satisfied a performance obligation, we defer recognition of the revenue until the performance obligation is satisfied. The agreements are generally non-cancellable or contain significant penalties for early cancellation, although customers typically have the right to terminate their contracts for cause if we fail to perform material obligations. However, if non-standard acceptance periods, non-standard performance criteria, or cancellation or right of refund terms are required, revenue is recognized upon the satisfaction of such criteria.

Contract Liabilities

The Company receives payments from customers based upon contractual billing schedules. Contract liabilities include payments received in advance of performance under the contract. Contract assets include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Our contract assets and liabilities are reported on an individual contract basis at the end of each reporting period. Contract liabilities are classified as current or noncurrent based on the timing of when we expect to recognize revenue. The Company expects to recognize all outstanding contract liabilities over the next 12 months.

Contract Combination

The Company may execute more than one contract or agreement with a single customer. The Company evaluates whether the agreements were negotiated as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements. The Company applied the revenue model to a portfolio of contracts with similar characteristics where we expected that the financial statements would not differ materially from applying it to the individual contracts within that portfolio.

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.

Stock-based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of stock-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the stock-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 consolidated statements of operations. Stock-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 stock-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.

Capital Resources

We had no material commitments for capital expenditures as of April 30, 2024.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements as of April 30, 2024.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We do not hold any market risk sensitive instruments. We consider our interest rate risk exposure to be minimal as a result of fixing interest rates on 100% of our debt. At April 30, 2024, there was no floating rate debt that would expose us to market fluctuations in interest rates.

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.

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.

On September 18, 2023, Apex Funding Source, LLC (the “Lender”) filed a lawsuit in the Supreme Court of the State of New York, County of New York, naming Grasshopper Staffing, Inc. and Indeliving Holdings, Inc., both of which are wholly owned subsidiaries of the Company, as defendants in the suit. The action against our wholly owned subsidiaries is due to an alleged guarantee of a loan the Lender made to Blue Earth Resources, Inc. (“BERI”), an entity related to the Company through common management control. The lawsuit is an action for BERI’s breach of a loan agreement and failure to pay $4,705,900 in principal and interest to the Lender when due. The lawsuit also named Scott M. Boruff, the CEO and Chairman of the Company’s Board of Directors, and Platinum Equity Advisors, LLC, the Company’s largest principal shareholder that is controlled by Julie Boruff, spouse of Scott M. Boruff, as defendants for their alleged guaranty of the BERI loan. On April 18, 2024, the Lender filed a motion seeking partial summary judgment on its First Cause of Action against BERI and its Second Cause of Action against Scott M. Boruff in the amount of $4,705,900, plus their actual and reasonable attorneys’ fees. Neither the Company nor its subsidiaries were included in the motion seeking partial summary judgment. In the event the Lender attempts to enforce the alleged guarantees against our subsidiaries, we believe we have valid defenses against such an action. In addition, both subsidiaries previously discontinued their operations and currently have no assets. In the judgement of the Company’s management, if the pending actions were adversely determined they would not have a material adverse effect on the Company.

Item 1A. RISK FACTORS.

Not required for emerging growth companies.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 31, 2024, 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 net proceeds were used for working capital. 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 February 9, 2024, we issued 250,000 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 $25,000. We incurred no cost related to the private transaction. The net proceeds were used for working capital. 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 7, 2024, 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 net proceeds were used for working capital. 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 22, 2024, 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 net proceeds were used for working capital. 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.

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 initially matured one-year from the date of issuance. As of March 18, 2024, 5% Notes with face amounts totaling $575,000 have been converted into common stock of the Company. 5% Notes with face amounts totaling $175,000 have matured and are currently in default for non-payment of principal and related accrued interest of $62,611 as of the filing date of this interim report.

On August 11, 2020 we agreed to repurchase 1,000,000 shares of our common stock from Acorn Management Partners, LLC (“AMP”). As consideration for the share repurchase, we issued a $50,000 promissory note bearing interest a 6.0% per annum and due one-year from the date of issuance (the “AMP Note”). The AMP Note was subsequently amended to extend the maturity date to March 31, 2023. In the event of default, we are required to deliver 1,000,000 shares of our common stock back to AMP in full satisfaction of the obligation. The AMP Note is currently in default for non-payment of the principal amount of $50,000 and related accrued interest of $11,261 as of the filing date of this report.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS

* Filed Herewith

SIGNATURES

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