U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-Q
☑ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20212022
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 0-51012
HEALTHTECH SOLUTIONS, INC./UT | |||
(Exact Name of Registrant in its Charter) | |||
Utah | 84-2528660 | ||
(State or Other Jurisdiction of incorporation or organization) | (I.R.S. Employer I.D. No.) | ||
181 Dante Avenue, Tuckahoe, NY10707 | |||
(Address of Principal Executive Offices)
| |||
Issuer’s Telephone Number: | |||
(Registrant's telephone number, including area code) | |||
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | None | Not Applicable |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes☑ No ☐
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. (Check One)
Large accelerated filer ☐ Accelerated filer ☐Non-accelerated filer ☐☑ 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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No☑No☑
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:
November 22, 2021August 19, 2022
Common Voting Stock: 62,965,933
HEALTHTECH SOLUTIONS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED SEPTEMBERJUNE 30, 20212022
TABLE OF CONTENTS
Part I. Financial Information | Page No. | |
Item 1. | Financial Statements (unaudited): | F-1 |
Consolidated Balance Sheets (Unaudited) – | F-1 | |
Consolidated Statements of Operations (Unaudited) - for the Three and | F-2 | |
Consolidated Statement of Changes in Stockholders' Equity (Deficit) (Unaudited) for the | F-3 | |
Statements of Cash Flows (Unaudited) – for the | F-4 | |
Notes to Consolidated Financial Statements (Unaudited) | F-5 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 1 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
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Item 4. | Controls and Procedures |
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Part II. Other Information | ||
Item 1. | Legal Proceedings |
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Item 1A. | Risk Factors |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3. | Defaults Upon Senior Securities |
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Item 4. | ||
Mine Safety Disclosures | 4 | |
Item 5. | Other Information | 4 |
Item 6. | Exhibits | 4 |
Signatures | 5 |
HEALTHTECH SOLUTIONS, INC. |
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CONSOLIDATED BALANCE SHEETS |
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(Unaudited) |
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| September 30, 2021 |
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| December 31, 2020 |
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Current Assets: |
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Cash |
| $ | 38,959 |
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| $ | 128,996 |
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Prepaid expenses |
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| 81,458 |
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| 10,000 |
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Total Current Assets |
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| 120,417 |
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| 138,996 |
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Intangible assets net of accumulated amortization |
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| 0 |
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| 25,926 |
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Goodwill |
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| 1,104,388 |
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| 0 |
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Total Assets |
| $ | 1,224,805 |
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| $ | 164,922 |
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Current Liabilities: |
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Accrued expenses |
| $ | 706,157 |
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| $ | 0 |
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Accrued interest |
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| 0 |
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| 3,792 |
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Accounts payable |
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| 174,205 |
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| 80,169 |
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Loan from related party |
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| 356,907 |
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| 0 |
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Total Current Liabilities |
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| 1,237,269 |
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| 83,961 |
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Long Term Liabilities: |
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Convertible debentures payable, net of discount |
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| 0 |
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| 305,684 |
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Derivative liabilities |
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| 0 |
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| 337,874 |
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Total Long Term Liabilities |
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| 0 |
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| 643,558 |
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Total Liabilities |
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| 1,237,269 |
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| 727,519 |
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Stockholders' Equity (Deficit): |
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Series A preferred stock, $0.001 par value, 2,000,000 authorized, 127,430 and 156,837 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively |
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| 127 |
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| 157 |
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Series C preferred stock, $0.001 par value, 30,000 and 0 authorized, 29,737.184 and 0 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively |
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| 30 |
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| 0 |
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Common stock, $0.001 par value, 200,000,000 shares authorized, 29,145,933 and 9,701,269 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively |
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| 29,146 |
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| 9,701 |
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Additional paid-in capital |
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| 7,661,385 |
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| 866,251 |
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Accumulated deficit |
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| (7,708,217 | ) |
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| (1,438,706 | ) |
Total Stockholders' Equity (Deficit) attributable to the company |
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| (17,529 | ) |
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| (562,597 | ) |
Non controlling Interest |
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| 5,065 |
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| 0 |
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Total Stockholders' Equity (Deficit) |
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| (12,464 | ) |
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| (562,597 | ) |
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Total Liabilities and Stockholders' Equity (Deficit) |
| $ | 1,224,805 |
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| $ | 164,922 |
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HEALTHTECH SOLUTIONS INC. |
CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
June 30, 2022 | December 31, 2021 | |||||||
Current Assets: | ||||||||
Cash | $ | 69,193 | $ | 7,105 | ||||
Prepaid expenses | 383,876 | 137,997 | ||||||
Other receivable | 9,778 | |||||||
Loan receivable | — | 168,000 | ||||||
Total Current Assets | 462,848 | 313,102 | ||||||
Long Term Assets: | ||||||||
Investment in and advance to non-consolidated affiliate | 110,000 | 110,000 | ||||||
Fixed Assets acquired net of accumulated depreciation | 103,333 | — | ||||||
Intangible assets net of accumulated amortization | 118,344 | — | ||||||
Total Long Term Assets | 331,678 | 110,000 | ||||||
Total Assets | $ | 794,525 | $ | 423,102 | ||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 1,320,949 | $ | 733,743 | ||||
Loans from non-affiliated parties | 791,000 | |||||||
Loans from shareholders | 1,111,283 | 336,921 | ||||||
Total Current Liabilities | 3,223,232 | 1,070,665 | ||||||
Total Liabilities | 3,223,232 | 1,070,665 | ||||||
Stockholders' Equity (Deficit): | ||||||||
Series A preferred stock, $ par value, authorized, and issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 110 | 110 | ||||||
Common stock, $ par value, shares authorized, and issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 66,966 | 66,966 | ||||||
Additional paid-in capital | 9,833,286 | 9,833,286 | ||||||
Accumulated deficit | (11,834,472 | ) | (10,547,924 | ) | ||||
Stockholders' Equity (Deficit) Attributable to the Company: | (1,934,111 | ) | (647,563 | ) | ||||
Non controlling Interest | (494,596 | ) | — | |||||
Total Stockholders' Equity (Deficit) | (2,428,707 | ) | (647,563 | ) | ||||
Total Liabilities and Stockholders' Equity (Deficit) | $ | 794,525 | $ | 423,102 |
The accompanying notes are an integral part of these consolidated financial statements
F-1 |
HEALTHTECH SOLUTIONS INC. | ||||||||
CONSOLIDATED | ||||||||
(Unaudited) |
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| Three Months Ended |
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| Nine Months Ended |
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| September 30, 2021 |
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| September 30, 2020 |
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| September 30, 2021 |
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| September 30, 2020 |
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Revenue |
| $ | 0 |
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| $ | 0 |
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| $ | 0 |
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| $ | 0 |
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Operating Expenses: |
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General and administrative |
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| 938,052 |
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| 7,126 |
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| 1,870,403 |
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| 39,426 |
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General and administrative-related party |
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| 92,500 |
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| 30,000 |
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| 426,049 |
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| 99,733 |
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Research and development |
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| 150,130 |
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| 96,603 |
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| 346,864 |
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| 122,336 |
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Research and development – related party |
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| 18,000 |
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| 12,000 |
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| 304,000 |
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| 49,500 |
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Amortization |
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| 6,482 |
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| 9,723 |
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| 25,926 |
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| 29,167 |
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Total Operating Expenses |
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| 1,205,164 |
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| 155,452 |
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| 2,973,242 |
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| 340,162 |
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Loss from Operations |
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| (1,205,164 | ) |
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| (155,452 | ) |
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| (2,973,242 | ) |
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| (340,162 | ) |
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Other Expenses (Income): |
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Interest expense |
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| 0 |
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| (3,112 | ) |
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| (367,144 | ) |
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| (3,112 | ) |
Change in fair value of derivative liabilities |
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| 0 |
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| 0 |
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| (2,933,735 | ) |
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| 0 |
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Total Other Expenses |
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| 0 |
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| (3,112 | ) |
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| (3,300,879 | ) |
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| (3,112 | ) |
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Loss before provision for income tax |
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| (1,205,164 | ) |
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| (158,564 | ) |
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| (6,274,121 | ) |
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| (343,274 | ) |
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Provision for income tax |
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| 0 |
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| 0 |
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| 0 |
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| 0 |
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Net Loss |
| $ | (1,205,164 | ) |
| $ | (158,564 | ) |
| $ | (6,274,121 | ) |
| $ | (343,274 | ) |
Net loss attributable to non-controlling interest |
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| (3,400 | ) |
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| 0 |
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| (4,610 | ) |
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| 0 |
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Net Loss attributable to Controlling Interest |
| $ | (1,201,764 | ) |
| $ | (158,564 | ) |
| $ | (6,269,511 | ) |
| $ | (343,274 | ) |
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Loss per common share |
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Basic and diluted |
| $ | (0.04 | ) |
| $ | 0 |
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| $ | (0.31 | ) |
| $ | 0 |
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Weighted average shares outstanding |
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Basic and diluted |
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| 29,145,933 |
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| - |
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| 19,932,187 |
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| - |
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
Revenue | $ | — | $ | — | $ | — | $ | — | ||||||||
Operating Expenses: | ||||||||||||||||
General and administrative | 302,113 | 857,195 | 640,741 | 932,351 | ||||||||||||
General and administrative-related party | 45,000 | 258,883 | 90,000 | 333,549 | ||||||||||||
Research and development | 593,234 | 111,786 | 978,649 | 196,734 | ||||||||||||
Research and development – related party | 18,000 | 268,000 | 36,000 | 286,000 | ||||||||||||
Depreciation & Amortization | 21,453 | 9,722 | 35,754 | 19,444 | ||||||||||||
Total Operating Expenses | 979,799 | 1,505,586 | 1,781,144 | 1,768,078 | ||||||||||||
Loss from Operations | (979,799 | ) | (1,505,586 | ) | (1,781,144 | ) | (1,768,078 | ) | ||||||||
Other Expenses (Income): | ||||||||||||||||
Interest expense | — | (328,544 | ) | — | (367,144 | ) | ||||||||||
Change in fair value of derivative liabilities | — | (2,940,950 | ) | — | (2,933,735 | ) | ||||||||||
Total Other Expenses | — | (3,269,494 | ) | — | (3,300,879 | ) | ||||||||||
Loss before provision for income tax | (979,799 | ) | (4,775,080 | ) | (1,781,144 | ) | (5,068,957 | ) | ||||||||
Provision for income tax | — | — | — | — | ||||||||||||
Net Loss | $ | (979,799 | ) | $ | (4,775,080 | ) | $ | (1,781,144 | ) | $ | (5,068,957 | ) | ||||
Net loss attributable to non-controlling interest | $ | (214,918 | ) | (1,210 | ) | $ | (362,696 | ) | (1,210 | ) | ||||||
Net Loss attributable to Controlling Interest | $ | (764,882 | ) | $ | (4,773,870 | ) | $ | (1,418,448 | ) | $ | (5,067,747 | ) | ||||
Loss per common share | ||||||||||||||||
Basic and diluted | $ | (0.01 | ) | $ | (0.23 | ) | $ | (0.03 | ) | $ | (0.33 | ) | ||||
Weighted average shares outstanding | ||||||||||||||||
Basic and diluted | 66,965,932 | 20,735,681 | 66,965,932 | 15,248,957 |
The accompanying notes are an integral part of these consolidated financial statements
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HEALTHTECH SOLUTIONS INC. | HEALTHTECH SOLUTIONS INC. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIENCY) EQUITY | CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIENCY) EQUITY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Preferred Stock |
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| Total |
| Common Stock | Series A Preferred Stock | Series C Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Common Stock |
| Series A Preferred |
| Series C Preferred |
| Additional |
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| Non- |
| Stockholders' |
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Equity (Deficit) | Non-Controlling Interest | Total Stockholders' Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Number of Shares |
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| Amount |
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| Number of Shares |
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| Amount |
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| Number of Shares |
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| Amount |
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| Paid-In Capital |
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| Accumulated Deficit |
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| Controlling Interest |
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| Equity (Deficit) |
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Balance at December 31, 2020 |
| 9,701,269 |
| $ | 9,701 |
| 156,837 |
| $ | 157 |
| - |
| $ | 0 |
| $ | 866,251 |
| $ | (1,438,706 | ) |
| $ | 0 |
| $ | (562,597 | ) | 9,701,269 | $ | 9,701 | 156,837 | $ | 157 | — | $ | — | $ | 866,251 | $ | (1,438,706 | ) | $ | — | $ | (562,597 | ) | ||||||||||||||||||||||||||||||||
Capital contributions |
| - |
| 0 |
| - |
| 0 |
| - |
| 0 |
| 4,558 |
| 0 |
| 0 |
| 4,558 |
| 4,558 | 4,558 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
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| - |
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| 0 |
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| - |
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| 0 |
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| - |
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| 0 |
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| 0 |
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| (293,877 | ) |
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| 0 |
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| (293,877 | ) | - | - | - | (293,877 | ) | - | (293,877 | ) | ||||||||||||||||||||||||||||||||
Balance at March 31, 2021 |
| 9,701,269 |
| 9,701 |
| 156,837 |
| 157 |
| - |
| 0 |
| 870,809 |
| (1,732,583 | ) |
| 0 |
| (851,916 | ) | 9,701,269 | 9,701 | 156,837 | 157 | — | — | 870,809 | (1,732,583 | ) | — | (851,915 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
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Issuance of common stock in Lieu of Cash |
| 975,000 |
| 975 |
| - |
| 0 |
| - |
| 0 |
| 1,028,053 |
| 0 |
| 0 |
| 1,029,028 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock |
| 8,962,500 |
| 8,963 |
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| 1,783,538 |
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| 1,792,500 |
| 9,937,500 | 9,938 | 2,811,590 | 2,821,528 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series C Preferred for acquisition of Varian |
| - |
| 0 |
| - |
| 0 |
| 29,737 |
| 30 |
| (9,704 | ) |
| 0 |
| 0 |
| (9,674 | ) | 29,737 | 30 | (9,704 | ) | (9,674 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Non controlling interest associated with acquisition of Varian |
| - |
| 0 |
| - |
| 0 |
| - |
| 0 |
| 0 |
| 0 |
| 9,675 |
| 9,675 |
| 9,675 | 9,675 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series A Preferred into common stock |
| 6,000,000 |
| 6,000 |
| (29,407 | ) |
| (30 | ) |
| - |
| 0 |
| (5,970 | ) |
| 0 |
| 0 |
| 0 |
| 6,000,000 | 6,000 | (29,407 | ) | (30 | ) | (5,970 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Debentures into common stock |
| 3,507,164 |
| 3,507 |
| - |
| 0 |
| - |
| 0 |
| 3,994,660 |
| 0 |
| 0 |
| 3,998,167 |
| 3,507,164 | 3,507 | 3,994,660 | 3,998,167 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (4,773,870 | ) |
|
| (1,210 | ) |
|
| (4,775,080 | ) | (4,773,870 | ) | $ | (1,210 | ) | (4,775,080 | ) | |||||||||||||||||||||||||||||||||
Balance at June 30, 2021 |
| 29,145,933 |
| 29,146 |
| 127,430 |
| 127 |
| 29,737 |
| 30 |
| 7,661,385 |
| (6,506,453 | ) |
| 8,465 |
| 1,192,700 |
| 29,145,933 | $ | 29,146 | 127,430 | $ | 127 | 29,737 | $ | 30 | $ | 7,661,385 | $ | (6,506,453 | ) | $ | 8,465 | $ | 1,192,700 | ||||||||||||||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | 66,965,933 | $ | 66,966 | 110,520 | $ | 110 | — | $ | — | $ | 9,833,286 | $ | (10,547,924 | ) | $ | — | $ | (647,563 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,201,764 | ) |
|
| (3,400 | ) |
|
| (1,205,164 | ) | - | - | - | - | (675,378 | ) | (125,967 | ) | (801,345 | ) | ||||||||||||||||||||||||||||||
Balance at September 30, 2021 |
|
| 29,145,933 |
|
| $ | 29,146 |
|
|
| 127,430 |
|
| $ | 127 |
|
|
| 29,737 |
|
| $ | 30 |
|
| $ | 7,661,385 |
|
| $ | (7,708,217 | ) |
| $ | 5,065 |
|
| $ | (12,464 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | 66,965,933 | 66,966 | 110,520 | 110 | — | — | 9,833,286 | (11,223,302 | ) | (125,967 | ) | (1,448,908 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 |
| - |
| $ | 0 |
| 156,837 |
| $ | 157 |
| - |
| $ | 0 |
| $ | 840,510 |
| $ | (706,498 | ) |
| $ | 0 |
| $ | 134,169 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Capital contributions |
| - |
| 0 |
| - |
| 0 |
| - |
| 0 |
| 28,500 |
| 0 |
| 0 |
| 28,500 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (75,557 | ) |
|
| 0 |
|
|
| (75,557 | ) | - | - | - | - | (611,170 | ) | (368,629 | ) | (979,799 | ) | ||||||||||||||||||||||||||||||
Balance at March 31, 2020 |
| - |
| 0 |
| 156,837 |
| 157 |
| - |
| 0 |
| 869,010 |
| (782,055 | ) |
| 0 |
| 87,112 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital contributions |
| - |
| 0 |
| - |
| 0 |
| - |
| 0 |
| 65,548 |
| 0 |
| 0 |
| 65,548 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (109,153 | ) |
|
| 0 |
|
|
| (109,153 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 |
| - |
| 0 |
| 156,837 |
| 157 |
| - |
| 0 |
| 934,558 |
| (891,208 | ) |
| 0 |
| 43,507 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital contributions |
| - |
| 0 |
| - |
| 0 |
| - |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (158,564 | ) |
|
| 0 |
|
|
| (158,564 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 |
|
| - |
|
| $ | 0 |
|
|
| 156,837 |
|
| $ | 157 |
|
|
| - |
|
| $ | 0 |
|
| $ | 934,558 |
|
| $ | (1,049,772 | ) |
| $ | 0 |
|
| $ | (115,057 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | 66,965,933 | 66,966 | 110,520 | 110 | — | $ | — | 9,833,286 | (11,834,472 | ) | (494,596 | ) | (2,428,707 | ) |
The accompanying notes are an integral part of these consolidated financial statements
HEALTHTECH SOLUTIONS INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
For the Six Months Ended | ||||||||
June 30, 2022 | June 30, 2021 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (1,781,144 | ) | $ | (5,068,957 | ) | ||
Adjustments to Reconcile Net Loss to Net Cash used in operating activities: | ||||||||
Amortization expense | 19,088 | 19,444 | ||||||
Depreciation expense | 16,667 | |||||||
Amortization of discount on convertible debenture | 351,212 | |||||||
Stock compensation expense | 1,029,028 | |||||||
Non-cash interest expense | 15,871 | |||||||
Change in fair value of derivative liabilities | 2,933,735 | |||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 47,275 | (147,582 | ) | |||||
Prepaid commissions | (382,586 | ) | ||||||
Other receivable | 9,778 | |||||||
Accounts payable and accrued expenses | 567,649 | 168,032 | ||||||
Net cash used in operating activities | (1,503,273 | ) | (699,217 | ) | ||||
Cash flows from investing activities: | ||||||||
Cash paid for purchase of Varian, net of cash acquired | (437,055 | ) | ||||||
Net cash used in investing activities | — | (437,055 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds of loans from shareholders | 774,362 | 118,084 | ||||||
Proceeds from convertible debenture | 50,000 | |||||||
Settlement of loan from shareholder | (50,542 | ) | ||||||
Loans from non-affiliated parties | 791,000 | |||||||
Capital contributions | 4,558 | |||||||
Issuance of common stock | 1,792,500 | |||||||
Paid In Capital | ||||||||
Net cash provided by financing activities | 1,565,362 | 1,914,600 | ||||||
Net increase (decrease) in cash | 62,089 | 778,328 | ||||||
Cash, beginning of period | 7,105 | 128,996 | ||||||
Cash, end of period | $ | 69,193 | $ | 907,324 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | $ | — | $ | 61 | ||||
Cash paid for taxes | $ | — | $ | — | ||||
Acquired noncontrolling interest in business acquisition | $ | — | $ | 523,267 |
HEALTHTECH SOLUTIONS, INC. |
| |||||||
CONSOLIDATED STATEMENT OF CASH FLOWS |
| |||||||
(Unaudited) |
| |||||||
|
|
|
|
|
|
| ||
|
| Nine Months Ended |
| |||||
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||
|
|
|
|
|
|
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net loss |
| $ | (6,274,121 | ) |
| $ | (343,274 | ) |
Adjustments to Reconcile Net Loss to Net Cash used in operating activities: |
|
|
|
|
|
|
|
|
Amortization expense |
|
| 25,926 |
|
|
| 19,444 |
|
Amortization of discount on convertible debentures |
|
| 351,212 |
|
|
| 0 |
|
Stock compensation expense |
|
| 1,029,028 |
|
|
| 0 |
|
Non-cash interest expense |
|
| 15,871 |
|
|
| 0 |
|
Change in fair value of derivative liabilities |
|
| 2,933,735 |
|
|
| 0 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
| (71,460 | ) |
|
| 0 |
|
Accrued expenses |
|
| 335,563 |
|
|
| (34,345 | ) |
Accounts payable |
|
| 83,664 |
|
|
| 0 |
|
Net cash used in operating activities |
|
| (1,570,582 | ) |
|
| (358,175 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Cash paid for purchase of Varian, net of cash acquired |
|
| (437,055 | ) |
|
| 0 |
|
Net cash used in investing activities |
|
| (437,055 | ) |
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from loan from related party |
|
| 121,084 |
|
|
| 0 |
|
Proceeds from convertible debenture |
|
| 50,000 |
|
|
| 0 |
|
Settlement of loan from related party |
|
| (50,542 | ) |
|
| 0 |
|
Capital contributions |
|
| 4,558 |
|
|
| 0 |
|
Issuance of common stock |
|
| 1,792,500 |
|
|
| 94,048 |
|
Net cash provided by financing activities |
|
| 1,917,600 |
|
|
| 94,048 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
| (90,037 | ) |
|
| (264,127 | ) |
Cash, beginning of period |
|
| 128,996 |
|
|
| 105,754 |
|
Cash, end of period |
| $ | 38,959 |
|
| $ | (158,373 | ) |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 61 |
|
| $ | 0 |
|
Cash paid for taxes |
| $ | 0 |
|
| $ | 0 |
|
Acquired noncontrolling interest in business acquisition |
| $ | 9,675 |
|
| $ | 0 |
|
Issuance of Series C preferred shares related to business acquisition |
| $ | 1,094,713 |
|
| $ | 0 |
|
The accompanying notes are an integral part of these consolidated financial statements
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Healthtech Solutions, Inc. (the(“Healthtech Solutions” or the “Company”) was incorporated in Utah on October 18, 1985. The Company had no business operations from April 25, 2015, when it spun off its only direct subsidiary, which at that time owned all of the assets through which the Company was carrying on operations, untilSince November 16, 2020, when the Company acquired all of the outstanding capital stock of Medi-Scan Inc.
Medi-Scan Inc. was organized as a limited liability company named "Medi-Scan LLC" formed in the State of Florida on September 25, 2018. On November 15, 2020, Medi-Scan LLC filed articles of conversion with the State of Florida that converted it from an LLC to a C corporation. In connection with the conversion In December 2018, Medi-Scan acquired a portfolio of intellectual property relating to medical imaging. Since December 2018, Medi-Scan, Healthtech Solutions has been engaged in developing practical applications for the medical imaging technology as well as related medical technology. Recently Medi-Scan applied for three patents based on the technology developed in the past two years.
The Company is pursuing a business plan in which the Company will acquire and/or invest in cutting edge healthcare technology in the medical device, biopharma and pharmaceutical fields. The goal will be to nurture these early stage ventures with financial support and administrative and technological assistance until their respective medical solutions are ready to enter the market. At the present time, the Company’s portfolio consists of three subsidiaries: 61.26% of Medi-Scan, Inc. and 100% of RevHeart, Inc. and 70% of Healthtech Wound Care, Inc.
Acquisition of Medi-Scan Inc.
Medi-Scan Inc. (“Medi-Scan”) was organized in the State of Florida on September 25, 2018. In December 2018, Medi-Scan acquired a portfolio of intellectual property relating to medical imaging. Since December 2018, Medi-Scan has been engaged in developing practical applications for the medical imaging technology as well as related medical technology. In 2020 Medi-Scan applied for two patents based on its technology.
On November 12, 2020, Healthtech Solutions Inc. entered into an exchange agreement with Medi-Scan Inc. ("Medi-Scan") and all of the shareholders of Medi-Scan, pursuant to which the shareholders of Medi-Scan agreed to transfer all of the issued and outstanding stock of Medi-Scan to Healthtech Solutions, Inc., and Healthtech Solutions Inc. agreed to issue to the shareholders of Medi-Scan, Inc. 156,837 shares of its Series A Preferred Stock, representingwhich at that time represented 97% of the equity in Healthtech Solutions. The exchange of equity (the "Share Exchange") was completed on November 16, 2020.
As a result of the Share Exchange, the Medi-Scan shareholders become the majority shareholders and havehad control of Healthtech Solutions. The acquisition of Medi-Scan was accounted for as a reverse merger effected by a Share Exchange. Healthtech Solutions is considered the legal acquirer and Medi-Scan is considered the accounting acquirer. Accordingly, the historical financial statements presented in this report for periods prior to November 16, 2020 are those of Medi-Scan.
On November 12, 2020, when the Share Exchange Agreement was executed, the three members of the Healthtech Solutions Board of Directors were also the three managing members of Medi-Scan, entities under their control owned a majority of the outstanding capital stock of Medi-Scan, and an entity under the control of one of them owned a majority of the outstanding capital stock of Healthtech Solutions. Therefore, the Share Exchange was accounted for as a business combination of entities under common control in accordance with ASC 805-50-30-5. Accordingly, the assets and liabilities of Medi-Scan are presented at their carrying values atas of the date of the Share Exchange,Exchange.
Organization of RevHeart, Inc.
Healthtech Solutions organized RevHeart, Inc. in March 2021. RevHeart is focused on novel approaches to correct cardiac rhythm abnormalities using electromagnetic waveforms in an innovative approach called entrainment. Entrainment, which is currently used in treating tachycardia (rapid heartbeat), works by linking the patient’s abnormal heart rhythm together with a normal heart rhythm, and gently encouraging the abnormal rhythm to revert to a more normal rhythm. As part of these efforts, RevHeart is developing software technology that compares a healthy heart rhythm electronic signal with a damaged heart’s signal, and subsequently derives an electronic signal representing the potentially curative waveform.
Acquisition of Wound Care Business
In January 2022 Healthtech Solutions organized Healthtech Wound Care, Inc. (“HWC”), which then acquired the business carried on by Predictive Biotech, Inc. (“PBI”) relating to of the development of novel wound care products for acute and chronic wounds. PBI transferred all of its assets related to that business to HWC in exchange for 30% of the equity in HWC, a commitment by HLTT to pay $517,432 to PBI and its parent as prepaid commissions, and the Company’s historical stockholders’ equity has been retroactively restatedconditional commitment by Healthtech Solutions to the first period presented.provide up to $3.5 million in funding for development of HWC’s business.
F-5 |
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS (Continued)
Acquisition of Varian Biopharmaceuticals, Inc.Wound Care Business (continued)
HWC’s plan is to use the business acquired from PBI as the foundation for HWC’s program of identifying and developing a pipeline of human cell and tissue product (HCT/Ps) candidates that we believe have novel mechanisms of action and immediate clinical potential in accordance with applicable federal regulations.
On May 7, 2021 HLTT Acquisition Corp., a special purpose vehicle wholly-owned by Healthtech Solutions, merged into Healthtech Oncology, Inc., a special purpose vehicle formed for the purpose of the merger, which on that same date acquired 99.83% of the outstanding capital stock of Varian Biopharmaceuticals, Inc. ("Varian") through a non-statutory share exchange. As a result, Healthtech Oncology became a wholly-owned subsidiary of Healthtech Solutions, and Varian became a 99.83%-owned subsidiary of Healthtech Solutions. In exchange for their ownership of Healthtech Oncology, the shareholders of Healthtech Oncology received an aggregate of 29,737.184 shares of Series C Preferred Stock issued by Healthtech Solutions.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying unaudited 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 (the “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 financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of SeptemberJune 30, 2021,2022, and the results of operations and cash flows for the periods presented. The results of operations for the ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Form 10-K for the year ended December 31, 2020,2021, filed with the SEC on March 2, 2021.April 15, 2022.
The accompanying consolidated financial statements reflect the accounts of Healthtech Solutions, Inc. and its wholly owned subsidiaries, Medi-Scan, RevHeart and Varian.Healthtech Wound Care, All significant inter-company accounts and transactions have been eliminated in consolidation.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 financial statements. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ from those estimates. One significant item subject to such estimates and assumptions is the valuation of the derivative liabilities. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable. Actual results could differ from these estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Software Development Costs
In accordance with ASC 985-20, the Company expenses software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products. Software development costs also include costs to develop software to be used solely to meet internal needs and cloud-based applications used to deliver our services. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended. Capitalization ends, and amortization begins when the product is available for general release to customers.
F-6 |
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development
Research and development costs are expensed when incurred. Research and development costs include costs of research, engineering, and technical activities to develop a new product or service or make significant improvement to an existing product or manufacturing process. Research and development costs also include pre-approval regulatory and clinical trial expenses.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill and Intangible Assets
Goodwill represents the cost of the acquired business in excess of the fair value of identifiable tangible and intangible net assets purchased.
The Company reviews goodwill and intangible assets with indefinite lives for impairment according to the provisions of ASC Topic 350: "Intangibles - Goodwill and Other" at least annually and when events or changes in circumstances indicate the carrying amount may not be recoverable. The Company measures recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value. Management has determined that no impairment exists as of SeptemberJune 30, 2021.2022.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of this note transaction and the effective conversion price embedded in this note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Share-Based Compensation
The Company follows the provisions of FASB ASC 718 requiring employee equity awards to be accounted for under the fair value method. Accordingly, share-based compensation is measured at grant date, based on the fair value of the award and recognized over its vesting period. No equity instruments were granted to employees during the ninesix months ending SeptemberJune 30, 20212022 and no compensation expense is required to be recognized under provisions of ASC 718 with respect to employees.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
The Company follows ASC 825-10-50-10 with respect to disclosures about fair value of its financial instruments and ASC 820-10-35-37 to measure the fair value of its financial instruments. ASC 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
· | Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
· | Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
· | Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
· Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
· Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
· Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.
Financial assets and liabilities of the Company primarily consist of cash, prepaid expenses, accounts payable and accrued liabilities, other payables and convertible debentures. As of SeptemberJune 30, 2021,2022, the carrying values of these financial instruments (other than convertible debentures) approximated their fair values due to the short-term nature of these instruments.
See: Note 9,10, "Derivative Financial Instruments", for fair value disclosures regarding the convertible debentures issued by the Company in November 2020 and exchanged for Common Stock on May 6, 2021. The derivative liability is classified as a Level 3 liability, and is the only financial liability measure at fair value on a recurring basis.
There were no transfers between level 1, level 2 or level 3 measurements during the ninesix months ending SeptemberJune 30, 2021.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)2022.
Earnings Per Share
The Company calculates earnings per share (“EPS”) as required by ASC 260, Earnings Per Share. Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For periods with a net loss, the dilutive common stock equivalents are excluded from the diluted EPS calculation. For purposes of this calculation, common stock subject to repurchase by the Company, options, and warrants are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.
F-8 |
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
(continued)
The Company follows ASC Topic 740, Income Taxes, which requires the recognition of deferred income taxes for the differences between the basis of assets and liabilities for financial statements and income tax purposes. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.
Deferred tax assets are also recognized for operating losses and for tax credit carryforwards. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740-10-30 requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Under ASC 740-10-30, tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Under ASC 740-10-40, previously recognized tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company had no0 material uncertain tax positions as of SeptemberJune 30, 20212022 or December 31, 2020.2021.
The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities or the deferred tax asset valuation allowance.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Adopted Accounting Standards
The Company has reviewed recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any recently issued pronouncements to have an impact on its results of operations or financial position.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any revenue since inception, and has an accumulated deficit of $7,708,217$11,834,472 as of SeptemberJune 30, 2021. The Company has had no revenues since inception.2022. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of these uncertainties.
In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to most other countries and infections have been reported globally. Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may have a material adverse impact on our business, financial condition and results of operations. Management expects that its business will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital or debt to fund operating expenses until its planned operations begingenerate sufficient revenue to generate revenue. The Company is not expecting to recognize revenue until 2022 atoffset the earliest.Company’s expenses. Management, therefore, is actively pursuing sources of investment capital, including both investment into Healthtech Solutions and investment into one or more of its subsidiaries. At present, the Company has received no firm commitment of investment capital. The Company is financing its current operations, therefore, by means of loans from its shareholders and a third party. None of these parties, however, has any contractual or other commitment to continue to lend money to the Company.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 4 – INTANGIBLE ASSETS
The Company’s intangible assets consistas of June 30, 2022 consisted of two patents pending that were acquired by Healthtech Wound Care, Inc. on January 31, 2022 and valued on that date at $137,432. The two patents pending are being amortized over a period of three years. Amortization expense relating to the patents pending totaled $11,453 for the quarter, and $19,088 for the six months ended June 30, 2022 and $0 in the quarter and six months ended June 30, 2021.
The Company’s intangible assets during the quarter and six months ended June 30, 2021 consisted of the intellectual property relating to medical imaging contributed to Medi-Scan in 2018 as a capital contribution. The intangible assets were amortized over three years. Amortization expense relating to the intangible assets totaled $6,482 and 25,926$0 in the threequarter and ninesix months ended SeptemberJune 30, 2021,2022, and $9,723 and $29,167$9,722 in the threequarter and nine$19,444 in the six months ended SeptemberJune 30, 2020.2021.
NOTE 5 - VARIAN ACQUISITION– INVESTMENT IN AND ADVANCE TO NON-CONSOLIDATED SUBSIDIARY
On May 7, 2021 the Company acquired ownership of Varian Biopharmaceuticals, Inc. (“Varian”) from its original shareholders (the “Varian Shareholders”) in exchange for 29,737.184 .184 shares of Series C Preferred Stock issued by Healthtech Solutions. The Company determined that the fair value of the Series C Preferred Stock was equal to the amount of cash acquired in the transaction plus the amount of debt in excess of that cash that was assumed, and on a preliminary basis allocated the fair value accordingly between the assets acquired and the liabilities assumed. The Company will continue to review the facts and circumstances that are relevant to a measurement of the fair value of Varian's assets, and may, during the applicable measurement period, retrospectively adjust the allocation of the purchase price to reflect any new information obtained.
The parties subsequently agreed that the relationship between Healthtech Solutions and Varian was not achieving its intended results. Therefore, on November 9, 2021, the Company entered into a Share Exchange Agreement (the "SEA") with the Varian Shareholders. in order to unwind its acquisition of Varian. Pursuant to the SEA, (a) the Varian Shareholders returned to Healthtech all of the outstanding shares of Healthtech Series C Preferred Stock and (b) Healthtech caused all of the outstanding shares of Varian common stock to be returned to the Varian Shareholders. Immediate subsequently, Varian issued to Healthtech Varian shares that represent 5.5% of the outstanding shares of Varian.
The Company has valued its 5.5% interest in Varian at $60,000, which represents 5.5% of the value of Varian on the Company’s books prior to the transfer pursuant to the SEA. That asset has been combined on the Company’s balance sheet with a $50,000 receivable from Varian provided for in the SEA, and the combination is classified as “investment in and advance to non-consolidated affiliate”
NOTE 6 -- ACQUISITION OF WOUND CARE BUSINESS
On January 31, 2022, pursuant to the Asset Purchase Agreement dated January 18, 2022 among the Company and its newly-organized subsidiary, Healthtech Wound Care, Inc. (“HWC”), Predictive Technology Group, Inc. (“PTG”) and its subsidiary, Predictive Biotech, Inc. (“Biotech”), HWC acquired the assets of Biotech that were related to Biotech’s wound care business and entered into an Operations Agreement with Biotech and PTG containing terms of their future relationship. The Company received from PTG three year options to purchase Biotech and/or Cellsure, LLC, another subsidiary of PTG, each for a purchase price of $10. During the three year term of the options, the Company will be entitled to exercise exclusive managerial control over the operations of Cellsure and over the operations of Biotech related to wound care.
In consideration of the transfer of its wound care business to HWC, HWC issued preferred shares to Biotech and the Company paid Biotech and PTG $517,432. Until HWC achieves positive cash flow or $3.5 million in capital has been contributed to HWC, the preferred shares held by Biotech will represent 30% of HWC’s equity and voting power. The Operations Agreement commits the Company to provide working capital to HWC and Biotech until HWC achieves positive cash flow or the Company contributes $3.5 million or the Company determines that market conditions make it unlikely that HWC will be financially successful.
F-10 |
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 6 -- ACQUISITION OF WOUND CARE BUSINESS (Continued)
The Company accounted for the acquisition as a business combination. The Company determined that the consideration for the business was the sum of $517,432 that the Company paid to PTG. No liabilities were assumed in connection with the acquisition. The assets acquired were recognized at their fair values as of the effective acquisition date, January 31, 2022, as determined by the Company’s management. The following table summarizes the provisional fair values ofassigned to the assets acquired and liabilities assumed on May 7, 2021.acquired.
Assets acquired: |
|
|
| |
Cash |
| $ | 1,658 |
|
Goodwill |
|
| 1,104,388 |
|
Total assets acquired |
|
| 1,106,046 |
|
|
|
|
|
|
Liabilities assumed: |
|
|
|
|
Accounts payable |
|
| 10,372 |
|
Accrued expenses |
|
| 370,594 |
|
Loans payable |
|
| 725,080 |
|
Total liabilities assumed |
|
| 1,106,046 |
|
Schedule of recognized identified assets acquired and liabilities assumed | ||||
Consideration | ||||
Cash paid | $ | 517,432 | ||
Assets Acquired | ||||
Equipment | $ | 120,000 | ||
Patents Pending | 137,432 | |||
Prepaid Commissions | 260,000 | |||
Net assets acquired | $ | 517,432 |
NOTE 67 – RELATED PARTIES
During the first five months of 2020, Medi-Scan paid $10,000 per month to a law firm owned by Denis Kleinfeld, whoDavid Rubin was a managing member of Medi-Scan at that timecommencing in May 2020 and became a member of the Board of Directorsserved as Chairman and CEO of Healthtech Solutions infrom September 2020. The payment included $1,447 as compensation for use of the law firm's offices as the executive offices of Medi-Scan, the remainder was compensation for the administrative and other services of employees of the law firm, and for legal services by Mr. Kleinfeld.
For legal services rendered as counsel to Healthtech Solutions during the period January 1, 2021 to September 30, 2021, Healthtech Solutions recorded $200,299 in fees and expenses payable to Robert Brantl. Mr. Brantl was the sole officer and director of Healthtech Solutions until September 4, 2020 and has served as Secretary of Healthtech Solutions since September 4, 2020.
through July 19, 2021. In May 2020 David Rubin, through his personal holding company, Storm Funding LLC, agreed to contribute $250,000$250,000 to Medi-Scan in exchange for a 25% equity interest in Medi-Scan. During the remainder of 2020,January 2021 Mr. Rubin satisfied $245,442completed that commitment with a final contribution of the obligation: he contributed $142,761 by paying obligations incurred by Medi-Scan in that amount, and$4,558. As of June 30, 2022, Mr. Rubin satisfied a totalloaned (net of $102,681 of the obligation by contributing to Medi-Scan the services of administrative personnel employed by eProdigy Financial LLC, a company owned by Mr. Rubin. During the period from January 1, 2021 to June 30, 2021 Mr Rubin satisfied the remainder of his contribution of $4,558. During that period, Mr Rubin also loaned $30,000payments) $543,131 to the Company and contributed services of eProdigy Financialemployees and expenses of Storm Funding LLC, a company owned by David Rubin, valued at $50,542.(net of payments) $33,153. In the first six months of 2022, Mr. Rubin was a managing memberand Storm Funding LLC loaned an additional $476,000 in cash and $11,362 in employee services to the Company. These loans of Medi-Scan commencingcash and services are included in May 2020 and became Chairman and CEO of Healthtech Solutions in September 2020. DuringLoans from Shareholders on the quarter ended June 30, 2021 Mr. Rubin resigned from his positions with Healthtech Solutions.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 6 – RELATED PARTIES (continued)
Company’s balance sheets.
On May 4, 2021 the Company entered into an Advisory Agreement with Kleinfeld Legal Services P.A., which is owned by Denis Kleinfeld. Mr. Kleinfeld was, until April 24, 2021, a member of the Company's Board of Directors. Pursuant to the Advisory Agreement, Kleinfeld Legal Services P.A. will provide legal and advisory services to Medi-Scan Inc. during the next two years.years ended May 4, 2023. In consideration of the services, the Company willagreed to pay Kleinfeld Legal Services a $100,000$100,000 signing fee plus a services fee of $150,000$150,000 per year. The Company also assigned to Kleinfeld Legal Services 19.9% of the capital stock of Medi-Scan, Inc. During the three months and nine monthsyear ended September 30,December 31, 2021, the companyCompany recorded expenses for advisory services from Kleinfeld Legal Services totaling $37,500 and $125,000.$200,000. During the first six months of 2022, the Company recorded expenses for advisory services from Kleinfeld Legal Services totaling $75,000.
AsDuring the first six months of September 30, 2021,2022, the Company's subsidiary, Varian, had loans payable to Keystone Capital Partners and Paul Mann in the aggregate amountCompany borrowed $774,362 from 3 of $353,907, which represented amounts loaned to Varian to pay its operating expenses.shareholders. The loans were made at various times from August 2020 through June 2021. The loans do notare unsecured, payable on demand and bear interest and each is repayable on the second anniversary of the specific loan. Keystone Capital Partners and Paul Mann were shareholders of Varian until May 7, 2021, and are now holders of Series C Preferred Stock issued by Healthtech Solutions.no interest.
NOTE 78 – SHAREHOLDERS EQUITY
Authorized Capital Stock
The following table sets forth information, as of SeptemberJune 30, 2021,2022, regarding the classes of capital stock that are authorized by the Articles of Incorporation of Healthtech Solutions, Inc.
Class |
| Shares Authorized |
|
| Shares Outstanding |
| ||
Common Stock, $.001 par value |
|
| 200,000,000 |
|
|
| 29,145,933 |
|
Series A Preferred Stock, $.001 par value |
|
| 156,937 |
|
|
| 110,520 |
|
Series B Preferred Stock, $.001 par value |
|
| 1,500,000 |
|
|
| 0 |
|
Series C Preferred Stock,$.001 par value |
|
| 30,000 |
|
|
| 29,737.184 |
|
Undesignated Preferred Stock, $.001 par value |
|
| 313,163 |
|
|
| 0 |
|
Summary of shareholders equity | ||||||||
Class | Shares Authorized | Shares Outstanding | ||||||
Common Stock, $.001 par value | 200,000,000 | 66,965,933 | ||||||
Series A Preferred Stock, $.001 par value | 156,937 | 110,520 | ||||||
Undesignated Preferred Stock, $.001 par value | 1,843,163 | 0 |
F-11 |
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 78 – SHAREHOLDERS EQUITY (Continued)
Series A Preferred Stock. The Series A Preferred Stock was authorized on November 16, 2020. When first authorized, each share of Series A Preferred Stock was convertible by the holder at any time into two thousand (2,000) shares of Common Stock and had voting rights equivalent to the voting rights of 2,000 shares of common stock. EachOn November 12, 2021, after a vote of the Board of Directors, the Company’s shareholders and the holders of the outstanding Series A Preferred Stock voting as a class, Articles of Amendment of the Company’s Articles of Incorporation were filed which modified the terms of the Series A Preferred Stock such that each share of Series A Preferred Stock is now convertible by the holder into two thousand (2,000)fifty (50) shares of Common Stock. Each share of Series A Preferred Stock at any time after May 31, 2024 and entitles a stockholder to voting rights equivalent to those of 2,00050 shares of Common Stock on all matters upon which stockholders are permitted to vote. In the event of our liquidation, dissolution or winding up, after payment of all creditors, holders of our Series A Preferred Stock are entitled to receive, ratably, a preferential payment of $.01 per share, then to share pro rate in the net assets available to stockholders on an as-converted basis.
Series C Preferred Stock. The Series C Preferred Stock will give to the its holders 4.9% of the voting power in Healthtech Solutions and a 4.9% liquidation preference. The Series C Shareholders will also be entitled to exchange their Series C Shares for common stock of the Company's subsidiary, Healthtech Oncology, Inc.. The percentage ownership of Healthtech Oncology that the Series C Shareholders will obtain if they exchange their Series C Shares will depend on the amount of cash loaned by Healthtech Solutions to Healthtech Oncology: ranging from 85% ownership, if Healthtech Solutions loans $10 million to Healthtech Oncology, to 100% if Healthtech Solutions makes no loans to Healthtech Oncology. The Series C Shareholders may exchange their shares after April 1, 2023 or earlier if Healthtech Solutions makes a distribution of Healthtech Oncology shares to the shareholders of Healthtech Solutions.
Undesignated Preferred Stock. The Board of Directors has authority, without shareholder approval and by resolution of the Board of Directors, to amend the Corporation's Articles of Incorporation to divide the class of undesignated Preferred Stock into series, to designate each such series by a distinguishing letter, number or title so as to distinguish the shares thereof from the shares of all other series and classes, and to fix and determine the following relative rights and preferences of the shares of each series so established.
Exchange of Series A Preferred Stock for Common Stock
On May 14, 2021 the Company entered into an Exchange Agreement with Richard Parker, who is Medi-Scan's Chief Research Officer. Pursuant to the Exchange Agreement, Mr. Parker's family trust surrendered 29,407 shares of the Company's Series A Preferred Stock, and the Company issued to Mr. Parker's family trust 6,000,000 shares of its common stock and assigned to it 18.75% of the outstanding shares of Medi-Scan, Inc. In addition, Mr. Parker assigned to the Company his intellectual property concerning electromagnetic waveform entrainment technology, and the Company issued to the Parker family trust an additional 250,000 shares of its common stock.
Issuance of Series C Preferred Stock for Settlement of Convertible Debentures
On May 6, 2021, the Company issued 3,507,164 shares of common shares in exchange for the settlement of the convertible debentures, see Note 8 and Note 9. These shares were valued at the previous market closing price of $1.14 per share.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
Capital Contributions
Medi-Scan's founders contributed $4,558to the Company $0 during the ninethree months and six months ended SeptemberJune 30, 2022, and $0 during the three months ended June 30, 2021 and $28,500$4,558 during the ninesix months ended SeptemberJune 30, 2020.2021.
On May 21, 2020, Medi-Scan entered into agreement with Storm Funding LLC, a company owned by David Rubin. Storm Funding LLC committed to invest $250,000 in exchange for a 25% membership interest in Medi-Scan. At the same time, David Rubin joined Medi-Scan as Executive Chairman. The financing commitment has been fully satisfied.
In April and May 2021, the Company issued 9,937,500 shares of common stock for aggregate proceeds of $2,821,528.
On October 5, 2021, the holders of 16,910 shares of the Company's Series A Preferred Stock converted those shares into 33,820,000 shares of the Company's common stock.
On NovemberNOTE 9 2021, the Company entered into a Share Exchange Agreement (the "SEA") with its subsidiaries: Healthtech Oncology, Inc. ("HoldCo") and Varian Biopharmaceuticals, Inc. ("Varian"), as well as with the holders of the outstanding shares of Healthtech Series C Preferred Stock (the "Shareholders"). Pursuant to the SEA, (a) the Shareholders delivered to Healthtech all of the outstanding shares of Healthtech Series C Preferred Stock and (b) Healthtech caused HoldCo to transfer to the Shareholders all of the outstanding shares of Varian common stock. At the same time, Varian issued to Healthtech Varian shares that represent 5.5% of the outstanding shares of Varian upon completion of the share exchange.
On November 9, 2021, the Company also entered into a Termination and Mutual Release Agreement with HoldCo and Varian (the "Termination Agreement"). The Termination Agreement terminated the Agreement and Plan of Merger and Reorganization among those same parties dated March 30, 2021. The Termination Agreement also included a provision in which Varian assumes responsibility for payment of certain obligations that Healthtech undertook for the benefit of Varian.
In accordance with ASC 855-10, the Company’s management has performed subsequent events procedures through the date these financial statements were issued, and determined that there are no reportable subsequent events other than as stated above.
NOTE 8 – EXCHANGEABLE NOTES AND CONVERTIBLE DEBENTURES
In August and September of 2020,Medi-Scan issued four 7% Exchangeable Promissory Notes in the aggregate principal amount of $375,000. Principal and interest were payable on the Notes on January 31, 2021. The Notes provided that, in the event that Medi-Scan was acquired by a corporation whose common stock was registered with the SEC, the Notes would be automatically exchanged for 7% convertible debentures issued by that acquirer.
In November of 2020, by reason of the Share Exchange, the four 7% Exchangeable Promissory Notes were automatically exchanged for 7% Convertible Debentures issued by Healthtech Solutions in a principal amount of $381,505, which was equal to the principal of and accrued interest on the Notes. Then, during December of 2020, Healthtech Solutions issued four additional 7% Convertible Debentures in the aggregate principal amount of $250,000 in exchange for payment of cash in that amount. On February 4, 2021 an additional debenture was issued in the amount $50,000.
The 7% Convertible Debentures were convertible into common stock, at the holders’ option, at a 30% discount to the market price of the Company’s common stock. The Company determined that the conversion feature represented a derivative financial instrument embedded in the Debentures. The accounting treatment of derivative financial instruments requires that the Company record the fair value of that derivative financial instrument as a discount to the value of the Debentures as of the inception date of each Debenture. Accordingly, the Company recorded an aggregate initial discount of $349,202$349,202 for the fair value of the derivative liability at inception of each convertible debenture. During the three and nine monthsyear ending September 30,December 31, 2021, the Company amortized $27,303$27,303 and $351,202$351,202 as interest expense. During the year ended December 31, 2020, the Company amortized $9,277 as interest expense. At December 31, 2020 the notes were presented on the balance sheet, net of unamortized discount, at $325,824expense.
On May 6, 2021, by agreement with the holders of the 7% Convertible Debentures, the Company issued 3,507,164 shares of common shares in exchange for conversionsurrender of the convertible debentures.
F-12 |
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 910 – DERIVATIVE FINANCIAL INSTRUMENTS
The Company determined that the conversion feature of the 7%7% Convertible Debentures represented an embedded derivative since the Debentures were convertible into a variable number of shares upon conversion. Accordingly, the Debentures are not considered to be conventional debt under ASC 815 and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability.
The fair value of the derivatives embedded in the 7%7% Convertible Debentures as of December 31, 2020 was determined using the Monte Carlo simulation method based on the following assumptions: (1) dividend yield of 0% %, (2) expected volatility of 167% %, (3) weighted average risk-free interest rate of 9.0% %, (4) expected life until January 31, 2024, and (5) the quoted market price of the Company’s common stock at each valuation date.
At March 31, 2021, the Company marked to market the fair value of the nine derivatives and determined a fair value of $359,608.$359,608. The Company recorded a gain resulting from change in fair value of debt derivatives of by $7,215 for the three months ending March 31, 2021.
At May 6, 2021, just prior to settlement, the Company marked-to-market the fair value of the nine derivatives and determined a fair value of $3,296,997.$3,296,997. The Company recorded a loss from change in fair value of debt derivatives of $2,940,950$2,940,950 for the three months ended June 30, 2021. Upon the issuance of 3,507,164 shares of common stock (see Note 7)9), the balance of the derivative liability of $3,296,997$3,296,997 and the principal totaling $681,581$681,581 were reduced to $0.
$0.
A summary of changes in derivative liabilitiesConvertible Debentures for the nine months ended Septemberperiod ending June 30, 2021 was as follows:
Summary of changes in convertible debentures | ||||||||
Balance at December 31, 2020 |
| $ | 337,874 |
| $ | 337,874 | ||
Issuance in February 2021 |
| $ | 25,388 |
| $ | 25,388 | ||
Change in fair value |
| 2,933,735 |
| (7,215 | ) | |||
Balance at March 31, 2021 | $ | 356,047 | ||||||
Change in fair value | 2,940,950 | |||||||
Settlement upon exchange for Common Stock |
|
| (3,296,997 | ) | (3,296,997 | ) | ||
Balance at September 30, 2021 |
|
| 0 |
| ||||
Balance at June 30, 2021 | 0 |
NOTE 1011 – INCOME TAX
As discussed in Note 1, in prior years and through November 15, 2020, including during the three months ended March 31, 2020, the Company was a limited liability company which was treated as a partnershipThe provision (benefit) for income tax purposes,taxes consisted of the following for the six month periods ended June 30, 2022 and the tax benefit of losses realized by the Company was passed on to its members.2021:
Schedule of provision for income taxes | ||||||||
June 30, 2022 | June 30, 2021 | |||||||
U.S. federal statutory rate | 21.0 | % | 21.0 | % | ||||
State tax, net of federal benefit | 5.0 | % | 5.0 | % | ||||
Change in valuation allowance | (26.0 | %) | (26.0 | %) | ||||
Net deferred tax assets | 0 | 0 |
F-13 |
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 1011 – INCOME TAX (Continued)(continued)
The following table reconciles the effective income tax rates with the statutory rates for the six month periods ended June 30, 2022 and 2021:
Schedule of effective income tax rate reconciliation |
| ||||
U.S. federal statutory rate | 21.0 | % | |||
State tax, net of federal benefit | 5.0 | % | |||
Change in valuation allowance |
| % | |||
|
| % | |||
Deferred tax assets are comprised of the following:
Schedule of deferred tax assets | ||||||||||||||||
|
| September 30, 2021 |
|
| December 31, 2020 |
| June 30, 2022 | December 31, 2021 | ||||||||
|
|
|
|
|
| |||||||||||
Net operating loss carryforwards |
| $ | 858,274 |
| $ | 111,265 |
| $ | 11,834,472 | $ | 10,547,924 | |||||
Valuation allowance |
|
| (858,274 | ) |
|
| (111,265 | ) | (11,834,472 | ) | (10,547,924 | ) | ||||
|
|
|
|
|
| |||||||||||
Net deferred tax assets |
| $ | 0 |
|
| $ | 0 |
| — | $ | — |
At SeptemberJune 30, 2021,2022, the Company had approximately $858,274$11,834,472 of federal net operating lossesthat may be available to offset future taxable income. Through 2036, the amount and utilization of any future net operating loss carry-forwards may be subject to limitations set forth by the Internal Revenue Code. Based upon an analysis of the Company’s stock ownership activity through SeptemberJune 30, 2021,2022, a change of ownership was deemed to have occurred in the 2020 fiscal year. This change of ownership created an annual limitation of substantially all of the Company’s net operating losses which are available through 2036.
The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established. Based upon the Company’s losses since inception, management believes that it is more likely than not that future benefit of the deferred tax asset will not be realized principally due to the continuing losses from operations and the change of ownership limitations and has therefore established a full valuation allowance.
The tax years ending December 31, 2020 and 2021 remain open to examination by the taxing authorities.
NOTE 1112 – SUBSEQUENT EVENTS
On October 5, 2021, the holders of 16,910 shares of the Company's Series A Preferred Stock converted those shares into 33,820,000 shares of the Company's common stock.
On November 9, 2021, the Company entered into a Share Exchange Agreement (the "SEA") with its subsidiaries: Healthtech Oncology, Inc. ("HoldCo") and Varian Biopharmaceuticals, Inc. ("Varian"), as well as with the holders of the outstanding shares of Healthtech Series C Preferred Stock (the "Shareholders"). Pursuant to the SEA, (a) the Shareholders delivered to Healthtech all of the outstanding shares of Healthtech Series C Preferred Stock and (b) Healthtech caused HoldCo to transfer to the Shareholders all of the outstanding shares of Varian common stock. At the same time, Varian issued to Healthtech Varian shares that represent 5.5% of the outstanding shares of Varian upon completion of the share exchange.
On November 9, 2021, the Company also entered into a Termination and Mutual Release Agreement with HoldCo and Varian (the "Termination Agreement"). The Termination Agreement terminated the Agreement and Plan of Merger and Reorganization among those same parties dated March 30, 2021. The Termination Agreement also included a provision in which Varian assumes responsibility for payment of certain obligations that Healthtech undertook for the benefit of Varian.
On November 12, 2021 the Company filed Articles of Amendment of its Articles of Incorporation. The Articles of Amendment modified the terms of the Series A Preferred Stock by (i) providing that the shares of Series A Preferred Stock are not convertible until May 31, 2024, and (ii) providing that each share of Series A Preferred Stock may be at that time converted into fifty shares of Healthtech Common Stock. The Articles of Amendment also eliminated the Series B Preferred Stock and the Series C Preferred Stock, none of which was outstanding, and reclassifying those shares to undesignated preferred stock.
In accordance with ASC 855-10, the Company’s management has performed subsequent events procedures through the date these financial statements were issued and determined that there are no reportable subsequent events other than as stated above.events.
F-14 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
On November 16, 2020 Healthtech SolutionsAt the end of January 2022 we acquired from Predictive Biotech, Inc. all of the capital stockassets related to its business of Medi-Scan,developing and producing wound care treatments, including AmnioBind, which is a placental membrane allograft designed to act as a covering or barrier for the protection of burns and non-healing wounds such as diabetic foot ulcers. Since acquiring those assets in our newly organized subsidiary, Healthtech Wound Care, Inc. in exchange(“HWC”), we have focused our immediate attention on achieving the regulatory approvals necessary for Series A Preferred Stock representing, at that time, 97%HWC to bring AmnioBind to market. $975,246 (i.e. 96%) of the equity in Healthtech Solutions. Because$1,014,649 that we devoted to research and development during the transaction is classified asfirst six months of 2022 was attributable to efforts of HWC to complete and test a reverse merger under GAAP, the financial results presented in this Report for the nine months ended September 30, 2020 are the financial resultsmarket-ready version of Medi-Scan for that period.AmnioBind.
On May 7, 2021 Healthtech Solutions acquired all of the capital stock of Healthtech Oncology, which owned 99% of the capital stock of Varian Biopharmaceuticals, Inc. In exchange for ownership of Varian, Healthtech Solutions issued Series C Preferred Stock representing a 4.9% equity position in Healthtech Solutions and a contingent right to exchange the Series C shares for control of Healthtech Oncology. Because the transaction is classified as an acquisition under GAAP, the financial results presented in this Report for the three and nine months ended September 30, 2021 include the results of Varian's operations for the period from May 7, 2021 through September 30, 2021.
The aforesaid two acquisitions, joined by a third, ground-up subsidiary named RevHeart, form the platform on which we intend to pursue an incubator model of operations, focused on medical technology, both therapeutic and device-oriented. Our business model begins with the identification of target subsidiary companies through our broad network of relationships in academia and industry. Upon bringing a company and/or its technology into a Healthtech subsidiary, we will provide funding and operational support to achieve value enhancing milestones and accelerate the organization’s mission. We will roll up our sleeves and provide operational and leadership supportother significant contributor to our portfolio companies, increasing their chances of success and decreasing their capital requirements. Upon achieving the targeted value inflection, we will work closely with our subsidiaries to prepare for their independent launch and spin-out. Through this approach, Healthtech shareholders may gain exposure to early-stage life science technologies that are approaching the steepest portion of their value creation curve through an investment structure that is devoid of the “carry” typically imposed by a traditional private equity/venture capital fund.
Our cash resources at this time are early stage, as we have relied to date on contributions by management and modest private offerings to their friends and family. The $6,269,511 net loss that we incurredfrom operations in the first ninehalf of 2022 was general and administrative expenses of $730,741 (including $90,000 payable to related parties). These expenses primarily involve insurance premiums, office expenses, legal and accounting expenses, compensation of consultants, and other expenses incurred in developing Healthtech Solutions into a viable incubator of development stage medical companies. In total, our operating expenses for the first six months of 2022 were $1,781,144, which amounted to our loss from operations as we had no revenue. By comparison, our loss from operations during the first six months of 2021 therefore, entailed a use for operating activities of only $1,570,582 in cash.
Since our only business activities duringwas $1,768,078, the nine months ended September 30, 2021 and 2020 were research and development activities, our expenses during those periods were primarily salaries and consulting and service fees, including fees relating to our development of potential acquisition targets and our efforts at securing the financial resources necessary to fund those acquisitions. During the three and nine months ended September 30, 2021, we incurred $1,205,164 and $2,973,242, respectively, in operating expenses, including, during the three month period, $523,870 in operating expenses of Varian for the period after its acquisition by Healthtech Solutions. The greater portion of our operating expenses werewhich was related to the market value of common stock that we granted to attract management, research and development expertise and other individuals qualified to aid our projects. Of the $2,973,242$1,768,078 in operating expenses incurred during the ninesix months ended SeptemberJune 30, 2021, stock compensation represented $1,029,028 of the expense.
During the three and nine months ended September 30, 2020,We expect that our operating expenses of $155,452 and $340,162, respectively, primarily reflected payments by Medi-Scan for management services along with payments for the research and development activities relatedexpenses will rise significantly if we obtain the capital resources necessary to Medi-Scan's scanning technology.fully implement our business plan. In particular, the effort to bring MediScan’s and RevHeart’s technology to market will require several million dollars of capital investment.
The cash portionIn the fall of our operating expenses during2020, prior to the three and nine months ended September 30, 2021 was primarily attributablereverse merger of Healthtech Solutions into MediScan, MediScan sold 7% Convertible Debentures to administrative costs: office expenses plus legal and accounting fees, and feesobtain capital. In connection with the reverse merger, the MediScan debentures were exchanged for public relations services. Legal fees, in particular, were high7% Convertible Debentures issued by Healthtech Solutions. Healthtech Solutions then sold additional Debentures, with the result that by during the first ninesix months of 2021 as we initiated negotiations of a number of prospective acquisitions, changed the corporate name, and entered into negotiations with a number of potential sources of finance. As we continue to implement our incubator model, the administrative costs of our operations should continue to grow; if we plot carefully, however, the ratio of cash used for administration to cash used in research and development activities will reduce.
As a result of the aforesaid expenses, in the three and nine month periods ended September 30, 2021 and 2020, we recorded losses from operations identical to our total operating expenses. During 2021, however, the greater portion of our net loss reflected "other expenses"“other expenses” related to the convertible debentures that we sold during 2020 and the first two months of 2021.debentures. During the three months ended September 30, 2021,June 30,2021, we did not incur any other expense items. During the nine months ended September 30, 2021, however, we recorded "other expenses" consistingincurred items of Other Expenses that added $3,269,494 to our net loss, specifically:
· | $328,544 in interest expense due to accretion of the debenture discount; and |
· | A loss of $2,940,950 due to an increase in the fair value of derivative liabilities, related to the 7% Convertible Debentures. |
● $367,144 in interest expense, which included $351,202 in interest expense due to accretion of the discount on the 7% Convertible Debentures; and.
● $2,933,735 attributable to the increase in the fair value of the derivative liabilities embedded in the 7% Convertible Debentures.
We accounted for our convertible debt in accordance with ASC 815, Derivatives and Hedging as the conversion feature embedded in the convertible debentures could have resulted in the debenture principal and related accrued interest being converted to a variable number of our common shares. The conversion feature on these debentures was variable and based on trailing market prices. It therefore containscontained an embedded derivative. The fair value of the conversion feature was calculated when the debentures were issued, and we recorded a debenture discount and derivative liability for the calculated value. We recognized interest expense for accretion of the debenture discount over the term of the note. The conversion liability was valued at the end of eachthe reporting period and would resultresulted in income for the reduction in fair value. Among the reasons why we negotiated a cancellation of the Debentures in exchange for common stock was that the volatile price of our stock meant that the gain or loss for the change in fair value. Duerealized due to the volatile nature of our stock, the change in the derivative liability and the resulting gain or lossDebentures could often be material to our results. This was among the reasons why, in May 2021, we negotiated a cancellation of the 7% Convertible Debentures in exchange for common stock.
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After taking these Other Expenses into account, our Other Expenses, ourHealthtech Solutions realized a net loss was $1,205,164of $979,799 ($0.01 per share) in the three months ended June 30, 2022 and $6,274,121a net loss of $4,775,080 ($.23 per share) during the three and nine months ended SeptemberJune 30, 2021. However, 30% of HWC and 38.74% of Medi-Scan are owned by minority investors. Therefore, $317,988 of the net loss contributed by HWC and $44,708 of the net loss contributed by Medi-Scan in the first six months of 2022 are attributable to those minority interests. These are recorded on our Statement of Operations as “net loss attributable to non-controlling interest.” The remainder, the “net loss attributable to controlling interest”, was $764,883 for the three months ended June 30, 2022 and $4,773,870 for the three months ended June 30, 2021. For the same reason, $362,696 of the net loss realized during the six months ended June 30, 2022 was attributed to the minority interests, leaving a net loss of $1,418,448 attributable to the controlling interest. For the six months ended June 30, 2021, respectively. During the three and nine months ended September 30, 2020, our net loss attributable to controlling interest was $158,564 and $343,274, respectively.
We will continue to incur losses for the immediate future. The process of making valuable acquisitions is expensive, and our acquisitions will generally not result in revenue until after a period of incubation, which may be lengthy. Success in implementing our business plan, therefore, will require infusions of capital. We are in ongoing discussions with investors, but have received no commitments at this time.$5,067,747.
Liquidity and Capital Resources
Our company is designed to function as an incubator for development stage medical technology enterprises. During 2021 and 2020 our statements of cash flows reflected that design: in each year we raised capital from the sale of securities and used approximately the amount of cash raised to fund medical research. Our administrative expenses, albeit representing a large portion of our loss in each year, were primarily paid for by issuance of common stock.
During the six months of 2022 we modified the funding process. For the funds needed to sustain our operations in the first six months of 2022, particularly the funds required by HWC to complete development of AmnioBind, we relied on loans from shareholders and from non-affiliated parties. During those six months, we borrowed $774,362 from shareholders and $791,000 from non-affiliated parties. From that sum, we advanced $349,432 to Predictive Biotech, Inc. and its parent as a prepayment of future commissions pursuant to the terms under which we purchased their wound care business. (We also reclassified to prepaid commissions a loan of $168,000 that we made to Predictive Biotech, Inc. in December 2021.) That left net loan proceeds of $1,047,930, from which we funded the remaining $1,120,687 in net cash that we used in our operating activities during the first six months of 2022.
In the first six months of 2021, our sources and uses of funds differed somewhat from the first six months of 2022. We entered 2021 with $128,996 in the bank (proceeds from the sale of convertible debentures). We added to that $1,792,500 proceeds from the sale of our common stock and $50,000 in debenture proceeds. That combination enabled us to fund the $699,217 that we used in operating activities and the $437,055 that we contributed to the operations of Varian while it was our subsidiary.
At December 31, 20202021 Healthtech Solutions had working capital totaling $55,035, primarily consisting of cash. At the end of September 2021, despite incurring a $6 million net loss in the intervening nine months, we had a working capital deficit of $1,116,852, as$757,563. During the first six months of 2022, we increased the working capital contributeddeficit by friends$2,002,861 to $2,760,384. The increase in the working capital deficit occurred primarily because we borrowed funds on a short-term basis and family offset muchused the funds to pay our present expenses and prepay future expenses.
We anticipate realizing revenue from the wound care business of our net loss. As noted above, however,HWC beginning in the second half of 2022, which will alleviate some of the cash requirementsflow burden of that business. That revenue, occurring shortly after our acquisition of the wound care business, will likely be the exception to the norm for our portfolio companies. Our business plan are intense. Tocontemplates that, to attract exciting additions to our portfolio, we must be able towill offer eachmost the several million dollars of financing that is necessary to bring a medical technology to a stage where its sponsor can function independently. Since our ambition is to sustain a portfolio of such enterprises, our near term capital requirements (near term being the two to three years before we can anticipate initial returns on most of our investments) will be tens of millions of dollars.
Note 3 to our consolidated financial statements discloses that the financial condition of Healthtech Solutions - i.e. our modest cash resources and the absence of revenue - raises substantial doubt as to the Company's ability to continue as a going concern. Management intends to pursue one or more offerings of securities in order to obtain the funds that will be necessary for successful implementation of our business plan. At present, however, no commitments for future funding have been received.
Application of Critical Accounting Policies
In preparing our financial statements we are required to formulate working policies regarding valuation of our assets and liabilities and to develop estimates of those values. In our preparation of the financial statements for the three and nine monthsmonth period ended SeptemberJune 30, 2021,2022, there was onewere two estimates made which was (a) subject to a high degree of uncertainty and (b) material to our results. This was: These were:
● Our determination of the fair value of the Class C Preferred Stock that we issued in order to acquire ownership of Varian. Based upon the speculative nature of the assets acquired, we determined that the fair value of the Series C Preferred Stock was equal to the amount of cash acquired in the transaction ($1,658) plus the amount of debt in excess of that cash that was assumed ($1,106,046).
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● | Our determination to record $60,000 as the fair value of the 5.5% interest in Varian Biopharmaceuticals, Inc. that we received in November 2021. This determination was based on the financial condition of Varian Biopharmaceuticals at that time and the absence of objective criteria for attributing fair value to its technology. The fair value of Varian Biopharmaceuticals is included in the item on our Balance Sheets titled “Investment in and advance to non-consolidated affiliate.” | |
● | Our determination to record an allowance of $257,432 and reduce to $260,000 the book value of the $517,432 prepaid commission that we advanced to Predictive Technology Group, Inc. (“PTG”) in connection with our purchase of the wound care business carried on by PTG’s subsidiary, Predictive Biotech, Inc. (See: Note 6 to the Consolidated Financial Statements.) Our determination was based on the fact that the prepaid commissions will be earned by PTG only as a result of sales to three specific customers and the fact that at the time of the acquisition Predictive Biotech, Inc. did not have a marketable product. |
Impact of Accounting Pronouncements
There were no recent accounting pronouncements that have or will have a material effect on the Corporation’s financial position or results of operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.
Impact of Accounting Pronouncements
There were no recent accounting pronouncements that have or will have a material effect on the Corporation’s financial position or results of operations.
ITEM 33. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 44. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. As of SeptemberJune 30, 2021,2022, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures have the following material weaknesses:
● Substantial portions of our accounting functions are outsourced, thus reducing the ability of senior management to supervise those functions.
● The relatively small number of our employees who are responsible for accounting functions prevents us from segregating duties within our internal control system.
● Our internal financial staff lack expertise in identifying and addressing complex accounting issues under U.S. Generally Accepted Accounting Principles.
● We have not developed sufficient documentation concerning our existing financial processes, risk assessment and internal controls.
Based on his evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s system of disclosure controls and procedures was not effective as of SeptemberJune 30, 20212022 for the purposes described in this paragraph.
Changes in Internal Controls. During the third fiscal quarter, thereControls. There was no change in internal control over financial reporting (as defined in Rule 13a‑15(f)13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in connection with the evaluation described above that occurred during Healthtech Solutions' thirdsecond fiscal quarter that has materially affected or is reasonably likely to materially affect Healthtech Solutions' internal control over financial reporting.
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PART II ‑- OTHER INFORMATION
Item 1. | Legal Proceedings |
None. | |
Item 1A | Risk Factors |
There has been no change from the risk factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, | |
Item 2 | Unregistered Sale of Securities and Use of Proceeds |
(a) Unregistered sales of equity securities | |
There were no unregistered sales of equity securities by the Company during the | |
(c) Purchases of equity securities | |
The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Exchange Act during the | |
Item 3. | Defaults Upon Senior Securities. |
None. | |
Item 4. | Mine Safety Disclosures. |
Not Applicable. | |
Item 5. | Other Information. |
None. | |
Item 6. | Exhibits | |
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Rule 13a-14(a) Certification of CEO and CFO | ||
Rule 13a-14(b) Certification of CEO and CFO | ||
101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | Inline XBRL Schema | |
101.CAL | Inline XBRL Calculation | |
101.DEF | Inline XBRL Definition | |
101.LAB | Inline XBRL Label | |
101.PRE | Inline XBRL Presentation | |
104 | Cover page formatted as Inline XBRL and contained in Exhibit 101 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
HEALTHTECH SOLUTIONS, INC. | |
Date: | By: /s/ Manuel Iglesias |