| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Healthcare
Integrated Technologies, Inc. and its subsidiaries (collectively the “Company,” “we,” “our” or “us”)
is a healthcare technology company based in Knoxville, Tennessee. We are creating a diversified spectrum of healthcare technology solutions
to integrate and automate the continuing care, home care and professional healthcare spaces. Our
initial product, SafeSpace™ with AI Vision™, is an ambient fall detection solution designed for continuing care communities
and at home use. SafeSpace includes hardware devices utilizing RGB, radar and other sensor technology coupled with our internally developed
software to effectively monitor a person remotely. In continuing care communities, SafeSpace detects resident falls and generates alerts
to a centralized, intelligent dashboard without the use of wearable devices or any action by the resident. In the home, SafeSpace detects
falls and sends alerts directly to designated individuals. In
addition to SafeSpace, we are creating a home concierge healthcare service application to provide a virtual assisted living experience
for seniors, recently released postoperative patients, and others. The concierge application will enable the consumer to obtain home
healthcare services and health and safety monitoring equipment to improve quality of life. We are also working to develop a fully integrated
solution for the professional healthcare community that integrates electronic health records, remote patient monitoring, telehealth,
and other items where integration is beneficial. Basis
of Presentation The
accompanying interim consolidated financial statements include those of Healthcare Integrated Technologies, Inc. and its subsidiaries,
after elimination of all intercompany accounts and transactions. We have prepared the accompanying interim consolidated financial statements
in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to
the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain
all information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of the Company’s management,
the accompanying interim consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring
accruals) to fairly present the financial position of the Company as of April 30, 2023 and the results of operations and cash flows for
the periods presented. The results of operations for the nine months ended April 30, 2023 are not necessarily indicative of the operating
results for the full fiscal year or any future period. These interim consolidated financial statements should be read in conjunction
with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended
July 31, 2022 filed with the SEC on September 23, 2022. Consolidation
Policy Our
consolidated financial statements are consolidated in accordance with U.S. GAAP and include our accounts and the accounts of our wholly
owned subsidiaries. We eliminate all intercompany transactions from our financial results. Business
Combinations We
account for business combinations under the acquisition method of accounting. The acquisition method requires that the acquired assets
and liabilities, including contingencies, be recorded at fair value determined on the acquisition date and that changes thereafter be
reflected in income (loss). The estimation of fair values of the assets and liabilities assumed involves several estimates and assumptions
that could differ materially from the actual amounts recorded. The results of the acquired businesses are included in our results from
operations beginning from the day of acquisition. Reclassifications Certain
prior period amounts may be reclassified to conform to current period presentation with no changes to previously reported net loss or
stockholders’ deficit. Risk
and Uncertainties Factors
that could affect our future operating results and cause actual results to vary materially from management’s expectation include,
but are not limited to: our ability to maintain and secure adequate capital to fund our operations and fully develop our product(s);
our ability to source strong opportunities with sufficient risk adjusted returns; acceptance of the terms and conditions of our licenses
and/or the acceptance of our royalties and fees; the nature and extent of competition from other companies that may reduce market share
and create pressure on pricing and investment return expectations; changes in the projects in which we plan to invest which result from
factors beyond our control, including, but not limited to, a change in circumstances, capacity and economic impacts; changes in laws,
regulations, accounting, taxation, and other requirements affecting our operations and business. Negative developments in these or other
risk factors could have a significant adverse effect on our financial position, results of operations and cash flows. Use
of Estimates The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those
estimates. We base our estimates on experience and various other assumptions that are believed to be reasonable under the circumstances.
We evaluate our estimates and assumptions on a regular basis and actual results may differ from those estimates. Cash
and Cash Equivalents We
consider all highly liquid short-term investments with a maturity of three months or less at the time of purchase to be cash equivalents.
The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution.
The balance at times may exceed federally insured limits. No loss has been experienced and management does not believe we are exposed
to any significant credit risk. Concentration
of Credit Risk Financial
instruments that potentially expose the Company to credit risk consist of demand deposits with a financial institution. The Company is
exposed to credit risk on its cash and cash equivalents in the event of default by the financial institution to the extent account balances
exceed the amount insured by the FDIC, which is $ 250,000 Accounts
Receivable Accounts
receivable are stated at their historical carrying amount net of write-offs and allowance for uncollectible accounts. We routinely assess
the recoverability of all customer and other receivables to determine their collectability and record a reserve when, based on the judgement
of management, it is probably that a receivable will not be collected and the amount of the reserve may be reasonably estimated. When
collection is no longer pursued, we charge uncollectable accounts receivable against the reserve. Property
and Equipment Property
and equipment are stated at cost, net of accumulated depreciation. Expenditures for major additions and improvements are capitalized
while minor replacements and maintenance and repairs, which do not improve or extend the life of such assets, are charged to operations
as incurred. Disposals are removed at cost less accumulated depreciation, and any resulting gain or loss is reflected in the interim
consolidated statements of operations. Depreciation is calculated using the straight-line method which depreciates the assets over the
estimated useful lives of the depreciable assets ranging from five to seven years. Intangible
Assets Intangible
assets consist of patents, our website and the costs of software developed for internal use. Certain payroll and stock-based compensation
costs incurred are allocated to the intangible assets. We determine the amount of costs to be capitalized based on the time spent by
employees or outside contractors on the projects. Intangible assets are amortized over their expected useful life on a straight-line
basis. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances
occur that could impact the recoverability of these assets. If the estimate of an intangible asset’s remaining life is changed,
the remaining carrying value of the intangible asset is amortized prospectively over the revised remaining useful life. We did not recognize
any impairment losses during any of the periods presented. Impairment
of Long-Lived Assets Long-lived
assets such as property, equipment and identifiable intangibles are reviewed for impairment at least annually, or whenever facts and
circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held and used
are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value
of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable,
an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. The Company did not recognize
any impairment losses for any periods presented. Related
Parties The
Company follows subtopic ASC 850-10 for the identification of related parties and disclosure of related party transactions. Pursuant
to Section 850-10-20, the related parties include: (a) affiliates of the Company (“Affiliate” means, with respect to any
specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is
under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities
for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value
Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit
of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners
of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from
fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies
of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other
to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. Derivative
Liability Options,
warrants, convertible notes, or other contracts, if any, are evaluated to determine if those contracts, or embedded components of those
contracts, qualify as derivatives to be separately accounted for in accordance with Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging,” Fair
Value of Financial Instruments Fair
value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between
market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices
in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as
follows: Level
1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access
at the measurement date. Level
2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
(such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated
by market data by correlation or other means. Level
3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions
about the assumptions that market participants would use in pricing the assets or liabilities. Financial
instruments consist of cash and cash equivalents, accounts receivable, accounts payable and borrowings. The fair value of current financial
assets and current financial liabilities approximates their carrying value because of the short-term maturity of these financial instruments. In
circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated, and there are also other
embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments
are accounted for as a single, compound derivative instrument. The
classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification
are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will
be classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument is expected
within 12 months of the balance sheet date. The
Company adopted Section 815-40-15 of the FASB ASC (“Section 815-40-15”) We
utilize a binomial option pricing model to compute the fair value of the derivative liability and to mark to market the fair value of
the derivative liability at each balance sheet date. We record the change in the fair value of the derivative liability as other income
or expense in the interim consolidated statements of operations. The
Company had derivative liabilities of $ 88,068 76,451 Revenue
Recognition The
Company’s revenue recognition policy is to recognize revenue in accordance with ASC 606, “ Revenue from Contracts with
Customers. Advertising
and Marketing Advertising
and marketing costs are expensed as incurred in accordance with ASC 720-35, “ Advertising Costs 5,418 24,380 Stock-Based
Compensation The
Company accounts for stock-based compensation in accordance with ASC Topic 718, “ Compensation – Stock Compensation”
Stock-based
payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of stock-based payment awards issued
to non-employees for services rendered have been recorded at the fair value of the stock-based payment, which is the more readily determinable
value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If
an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the
termination of service. Stock-based compensation expense is included in cost of goods sold or selling, general and administrative expenses,
depending on the nature of the services provided, in the interim consolidated statements of operations. Stock-based payments issued to
placement agents are classified as a direct cost of a stock offering and are recorded as a reduction in additional paid in capital. The
Company recognizes all forms of stock-based payments, including stock option grants, warrants and restricted stock grants, at their fair
value on the grant date, which are based on the estimated number of awards that are expected to vest. See Note 12 - Stock-Based Compensation Income
Taxes We
use the asset and liability method of accounting for income taxes in accordance with Topic 740, “Income Taxes”. ASC
Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting
periods presented. Net
Loss Per Common Share We
determine basic loss per share and diluted loss per share in accordance with the provisions of ASC 260, “ Earnings Per Share Recent
Accounting Pronouncements Management
has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”)
through the date these interim consolidated financial statements were available to be issued and found no recent accounting pronouncements
issued, but not yet effective, that when adopted, will have a material impact on the interim consolidated financial statements of the
Company. |
