Notes To Consolidated Financial Statements
(Unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Healthtech Solutions, Inc. (“Healthtech Solutions” or the “Company”)
was incorporated in Utah on October 18, 1985. Since November 16, 2020, when the Company acquired all of the outstanding capital stock
of Medi-Scan Inc., Healthtech Solutions has been 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: 81.25% of Medi-Scan, Inc., 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 entered into an exchange agreement
with 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, and Healthtech Solutions agreed to issue to the shareholders of Medi-Scan,
Inc. 156,837 shares of its Series A Preferred Stock, which 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 had control of Healthtech Solutions. 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 as of the date of the Share 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 conditional commitment by Healthtech Solutions to provide up to $3.5 million in funding for development of HWC’s business.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
Acquisition of 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.
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 September 30, 2022, and the results of operations and cash flows for the periods presented. The results of operations for the nine
months ended September 30, 2022 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, 2021, filed with the SEC on April 15, 2022.
The accompanying consolidated financial statements reflect the accounts
of Healthtech Solutions, Inc. and its subsidiaries, Medi-Scan, RevHeart and Healthtech Wound Care, All significant inter-company accounts
and transactions have been eliminated in consolidation.
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. 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 have not experienced any losses in our
accounts. We believe we are not exposed to any significant credit risk on cash.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventory
Inventory consists of direct labor, raw material, production equipment,
and overhead and are stated at the lower of cost or net realizable value, less an allowance for obsolete inventory of $22,178. Cost is
determined using an average costing methodology, which approximates cost under the first-in, first-out (“FIFO”) method. The
allowance for obsolete inventory was based on industry standards and will be adjusted to reflect the Company’s experience as it
develops. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based
primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost
basis of accounting for the related inventory.
Revenue Recognition
Under ASC 606, Revenue from Contracts with Customers, the Company recognizes
revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects
to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under Accounting Standards
Update (“ASU”) 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract;
(iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize
revenues when (or as) we satisfy the performance obligation.
The Company generally deems its performance
obligations under the terms of a contract to be satisfied when control of the product is transferred to the customer and treatment using
the product is commenced. The Company’s payment terms are typically 60 days from the date of treatment using the product sold. Provisions
for certain rebates, sales incentives, trade promotions, coupons, product returns, discounts to customers and governmental clawback provisions
are accounted for as variable consideration and recorded as a reduction in revenue.
Product discounts
granted are based on the terms of arrangements with direct, indirect and other market participants, as well as market conditions, including
consideration of competitor pricing. Rebates are estimated based on contractual terms, historical experience, patient outcomes, trend
analysis and projected market conditions in the markets served. A significant portion of the liability related to rebates is from the
sale of the Company's products within the U.S., primarily the
Managed Care, Medicare and Medicaid programs. The Company evaluates market conditions for products or groups of products primarily through
the analysis of wholesaler and other third-party sell-through and market research data, as well as internally generated information.
Promotional programs, such
as product listing allowances and cooperative advertising arrangements, are recorded in the same period as related sales. Continuing promotional
programs include coupons and volume-based sales incentive programs. Volume-based incentive programs are based on the estimated sales volumes
for the incentive period and are recorded as products are sold. These arrangements are evaluated to determine the appropriate amounts
to be deferred or recorded as a reduction of revenue.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at their
net realizable value. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which,
in management's judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts
receivable, the relationship of the allowance for doubtful accounts to accounts receivable, and current economic conditions. The determination
of the collectability of amounts due requires the Company to make judgments regarding future events and trends. Allowances for doubtful
accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process
consists of a review of historical collection experience, current aging status of the customer account, and the financial condition of
the Company’s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific customers
and the accounts receivable portfolio as a whole.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
Intangible Assets
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 September 30, 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 nine months
ending September 30, 2022 and no compensation expense is required to be recognized under provisions of ASC 718 with respect to employees.
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. |
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 June 30, 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 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 nine months ending September 30, 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.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
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 no material uncertain tax
positions as of September 30, 2022 or December 31, 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.
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 generated limited revenue since inception, and had an accumulated deficit of $12,662,603 as of September 30, 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.
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 generate sufficient
revenue to offset the 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 as of September 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 $26,667
for the three months and $30,540 for the nine months ended September 30, 2022.
The Company’s intangible assets during the three and nine months
ended September 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 $0
in the quarter and nine months ended September 30, 2022, and $6,482 in the three months and $25,926 in the nine months ended September
30, 2021.
NOTE 5 – 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 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 allocated
the fair value accordingly between the assets acquired and the liabilities assumed.
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 for their wound care
business 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.
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 fair values assigned to the assets
acquired.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 6 – ACQUISITION OF WOUND CARE BUSINESS (Continued)
| 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 7 – RELATED PARTIES
David Rubin was a managing member of Medi-Scan commencing in May
2020 and served as Chairman and CEO of Healthtech Solutions from September 2020 through July 19, 2021. In May 2020 David Rubin, through
his personal holding company, Storm Funding LLC, agreed to contribute $250,000 to Medi-Scan in exchange for a 25% equity interest in Medi-Scan.
During January 2021 Mr. Rubin completed that commitment with a final contribution of $4,558. As of September 30, 2022, Mr. Rubin loaned
(net of payments) $667,527 to the Company and contributed services of employees and expenses of Storm Funding LLC, a company owned by
David Rubin, valued at (net of payments) $34,999. In the first nine months of 2022, Mr. Rubin and Storm Funding LLC loaned an additional
$600,527 in cash and $13,078 in employee services to the Company. These loans of cash and services are included in Loans from Shareholders
on the 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. agreed to provide legal and advisory services to Medi-Scan
Inc. during the two years ended May 4, 2023. In consideration of the services, the Company agreed to pay Kleinfeld Legal Services a $100,000
signing fee plus a services fee of $150,000 per year. The Company also assigned to Kleinfeld Legal Services 19.9% of the capital stock
of Medi-Scan, Inc. During the year ended December 31, 2021, the Company recorded expenses for advisory services from Kleinfeld
Legal Services totaling $200,000. During the first nine months of 2022, the Company recorded expenses for advisory services from Kleinfeld
Legal Services totaling $75,000.
On September 13, 2022, HLTT and Medi-Scan Inc. entered into a Share
Exchange Agreement with Denis Kleinfeld, Kleinfeld Legal Services PA (“KLS”), and four entities that owned minority shares
in Medi-Scan, Inc.: DAK 2017 Trust Resolution, Jaclene Kleinfeld Trust, DYBIM, LLC and Doncaster Holdings, LLC (the “Medi-Scan Shareholders”).
Pursuant to the SEA, the Medi-Scan Shareholders transferred to HLTT their 19.99% interest in Medi-Scan and HLTT issued 2,000,000 common
shares to DYBIM and 500,000 common shares to Doncaster Holdings. HLTT agreed to pay $25,000 to KLS after HLTT raises an additional $1
million in capital. The Advisory Agreement between KLS and Medi-Scan was terminated. HLTT and Medi-Scan gave general releases to the other
six parties and the other six parties gave general releases to HLTT and Medi-Scan, which included releases of the accrued liability to
KLS under the Advisory Agreement.
During the nine months ending September 30, 2022, the Company borrowed
$1,024,631 from 3 of its shareholders. The loans are unsecured, payable on demand and bear no interest. The Board granted three year options
for 15 million common shares, exercisable at $.25 per share. The options were granted to the shareholders who have provided loans exceeding
$1.5 million to HLTT during the past 12 months in compensation for the loans.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 8 – SHAREHOLDERS EQUITY
Authorized Capital Stock
The following table sets forth information, as of September 30, 2022, regarding
the classes of capital stock that are authorized by the Articles of Incorporation of Healthtech Solutions, Inc.
| Summary of shareholders equity | |
| | | |
| | |
| Class | |
Shares Authorized | |
Shares Outstanding |
| Common Stock, $.001 par value | |
| 200,000,000 | | |
| 69,965,933 | |
| Series A Preferred Stock, $.001 par value | |
| 156,937 | | |
| 110,520 | |
| Undesignated Preferred Stock, $.001 par value | |
| 1,843,163 | | |
| 0 | |
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. On 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 fifty (50) shares of Common Stock at any time after May 31, 2024 and entitles a stockholder to voting rights equivalent
to those of 50 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.
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.
Issuance of Common Stock
On September 6, 2022, the Company issued
a total of 500,000 shares of common stock to three individuals as compensation for consulting services rendered. The shares were valued
at the previous market closing price of $.20 per share.
On September 13, 2022, the Company
issued 2,500,000 shares
of common stock to two entities. The shares were issued (a) in satisfaction of an account payable of $187,500
and (b) in exchange for shares in the Company’s subsidiary Medi-Scan, Inc., representing 19.99% of the capital stock of
Medi-Scan, Inc. The Company also agreed to pay $25,000 cash for the Medi-Scan shares at a future date. The Company shares issued in
the transaction were valued at the previous market closing price of $.248
per share for an
aggregate value of $620,000. On the Company’s financial statements, from the $645,000 purchase price, $187,00 was credited to the
satisfaction of the account payable and the remaining $457,500 was applied to purchase of the Medi-Scan shares and shown as a reduction
to non-controlling interest and additional equity of the Company.
Grant of Stock Options
On September 6, 2022, the Company granted three-year options for 15
million common shares, exercisable at $.25
per share, to the shareholders who provided loans to HLTT during the preceding 12 months. The options vested immediately. The grant
was made in compensation for the loans. The aggregate fair value of the options was determined to be $135,000
using the Black Scholes Model for option valuation.
Below are the assumptions applied in determining the fair value of the
options:
| Schedule of stock option assumptions used | |
| | |
| Stock option assumptions | |
| | |
| Risk-free interest rate | |
| 5.0% per annum | |
| Expected dividend yield | |
| — | |
| Expected volatility | |
| 11.0% per annum | |
| Expected life of options (in years) | |
| 3 years | |
Capital Contributions
Medi-Scan's founders contributed to the Company $0 during the three months
and nine months ended September 30, 2022, and $0 during the three months ended September 30, 2021 and $4,558 during the nine months ended
September 30, 2021.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 9 – 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 for the fair value
of the derivative liability at inception of each convertible debenture. During the year ending December 31, 2021, the Company amortized
$27,303 and $351,202 as interest expense.
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 surrender of the convertible debentures.
NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS
The Company determined that the conversion feature of the 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% 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. The Company recorded a gain resulting from change in fair
value of debt derivatives 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. The Company recorded a loss from change in
fair value of debt derivatives of $2,940,950 for the three months ended June 30, 2021. Upon the issuance of 3,507,164 shares
of common stock (see Note 9), the balance of the derivative liability of $3,296,997 and the principal totaling $681,581 were
reduced to $0.
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
A summary of changes in Convertible Debentures for the period
ending June 30, 2021 was as follows:
| Summary of changes in convertible debentures | |
| | |
| Balance at December 31, 2020 | |
$ | 337,874 | |
| Issuance in February 2021 | |
$ | 25,388 | |
| Change in fair value | |
| (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 | ) |
| Balance at June 30, 2021 | |
| — | |
NOTE 11 – INCOME TAX
The provision (benefit) for income taxes consisted of the following for
the nine month periods ended September 30, 2022 and 2021:
| Schedule of provision for income taxes | |
| |
|
| | |
September 30,
2022 | |
September 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 | |
| — | | |
| — | |
The following
table reconciles the effective income tax rates with the statutory rates for the nine month periods ended September 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 | |
| 26.0 | % |
| | |
| | |
| Effective income tax rate | |
| — | % |
Deferred tax assets are comprised of the following:
| Schedule of deferred tax assets |
|
|
|
|
| |
|
September 30,
2022 |
|
December 31,
2021 |
| |
|
|
|
|
| Net operating loss carryforwards |
|
$ |
3,167,125 |
|
|
$ |
2,742,460 |
|
| Valuation allowance |
|
|
(3,167,125 |
) |
|
|
(2,742,460 |
) |
| Net deferred tax assets |
|
|
— |
|
|
$ |
— |
|
HEALTHTECH SOLUTIONS, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 11 – INCOME TAX (Continued)
At September 30, 2022, the Company had approximately $12,662,603 of federal
net operating losses that 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 September 30, 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 12 – SUBSEQUENT EVENTS
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.
* * * *