Healthcare Integrated Technologies Inc. - Quarter Report: 2018 January (Form 10-Q)

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

1

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-1

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-2

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-3

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Grasshopper Staffing, Inc (the “Company”), formally Tomichi Creek Outfitters, was formed in the state of Nevada on June 25, 2013 and its year-end is July 31.

On March 2, 2015, the Company entered into a Business Acquisition Agreement and share exchange under which it acquired the business and assets of Grasshopper Staffing Inc (“Grasshopper Colorado”), formed in the state of Colorado on January 13, 2015. The exchange for $10,651 was represented by 250,000 shares of the Company’s common stock in exchange for all of the outstanding shares of Grasshopper Colorado. The assets purchased include the logo and website, office supplies and office furniture. Grasshopper Colorado is operating as a wholly-owned subsidiary of the Company and is now the primary operation of its business.

Grasshopper Colorado was founded as a solution to the staffing needs presented in the blossoming cannabis industry in Colorado.

NOTE 2 - SEASONAL NATURE OF OPERATIONS

The cannabis industry in general historically experiences seasonal fluctuations in revenue and net income.  The Company’s revenues reflect two cutting periods resulting in higher revenues in the months of May through July and October through December. Therefore, the results of operations presented for the six months ended January 31, 2018, are not necessarily representative of the results of operations for the full year.

NOTE 3 - GOING CONCERN

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplates continuation of the Company as a going concern.  The Company has a history of losses, an accumulated deficit, has minimal working capital and has not generated cash from its operations to support meaningful ongoing operations. In view of these matters, the Company’s ability to continue as a going concern is dependent upon advancement of operations and to achieve a level of profitability. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The interim unaudited condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for six months ended January 31, 2018 and 2017 and cash flows for the six months ended January 31, 2018 and 2017 and our financial position as of January 31, 2018 have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

F-4

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Certain information and disclosures normally included in the notes to the annual audited consolidated financial statements have been condensed or omitted from these interim unaudited consolidated financial statements.  Accordingly, these interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended July 31, 2017, which are included in the Company’s annual report on Form 10-K filed on November 14, 2017. The July 31, 2017 balance sheet is derived from those statements.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying consolidated financial statements include the estimates of useful lives for depreciation.

Accounts Receivable

Accounts receivable represent amounts due from customers in the ordinary course of business from sales activities The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. At January 31, 2018 and July 31, 2017, the Company reserved $17,050 and $7,935, respectively to the allowance.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for major additions and improvements are capitalized while minor replacements and maintenance and repairs, which do not improve or extend the life of such assets, are charged to operations as incurred. Disposals are removed at cost less accumulated depreciation, and any resulting gain or loss is reflected in the statement of operations.  Depreciation is calculated using the straight-line method which depreciates the assets over the estimated useful lives of the depreciable assets ranging from five to seven years.

Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment at least annually or whenever facts and circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset.  The Company did not recognize any impairment losses for any periods presented.

Intangible Assets

Intangible assets with definite useful lives are recorded on the basis of cost and are amortized on a straight-line basis over their estimated useful lives. The Company uses a useful life of 3 years for website development. The Company evaluates the remaining useful life of intangible assets annually to determine whether events and circumstances warrant a revision to the remaining amortization period. If the estimate of the intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life. At January 31, 2018, no revision to the remaining amortization period of the intangible assets was made.

F-5

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 has the ability to access at the measurement date.

Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and borrowings. The fair value of current financial assets and current financial liabilities approximates their carrying value because of the short-term maturity of these financial instruments.

Revenue Recognition

Revenue is derived from the placement of temporary workers. The Company recognizes revenue when it is realized or realizable and estimable in accordance with ASC 605, “Revenue Recognition”. The Company will recognize revenue only when all of the following criteria have been met:

·

Persuasive evidence for an agreement exists;

·

Service has been provided;

·

The fee is fixed or determinable; and,

·

Collection is reasonably assured.

Basic Net Loss Per Common Share

Basic net loss per common share is computed by dividing the loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.

Stock Based Compensation

The Company accounts for the grant of restricted stock awards in accordance with ASC 718, “Compensation-Stock Compensation.” ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of equity based compensation. The expense is recognized over the period during which the employee is required to provide service in exchange for the compensation. Any remaining unrecognized balance will be recognized ratably over the life of the vesting period and is a reduction of stockholders' equity.

The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 505-50 “Equity-Based Payments to Non-Employees.”

F-6

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

Under ASC 740, “Income Taxes,” deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of January 31, 2018 there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.

Recent Accounting Pronouncements

The Company has reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

Any new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at January 31, 2018 and July 31, 2017:

Depreciation expense for the six months ended January 31, 2018 and 2017 was $483 and $483 respectively.

NOTE 6 - INTANGIBLE ASSETS

Intangible assets consisted of the following at January 31, 2018 and July 31, 2017:

Amortization expense for the six months ended January 31, 2018 and 2017 was $840 and $840 respectively.

F-7

NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at January 31, 2018 and July 31, 2017:

NOTE 8 - PAYROLL LIABILITIES

The Company has past due payroll liabilities due to the Internal Revenue Service (“IRS”) for unpaid payroll taxes, penalties and interest for 2015 and 2016.

As of January 31, 2018, the past due balance due to the tax authorities, including penalties, interest, and fees, totaled $69,508. The original unpaid payroll taxes to the IRS for these periods totaled approximately $39,000 and the related accrued penalties and interest as of January 31, 2018 totaled approximately $23,000.  The remaining $7,000 relates to current payroll tax obligations.  On March 14, 2018 the Company paid $63,000 to the IRS in full satisfaction of the past due liabilities and the balance of the payment was applied to current liabilities.  (See Note 13).

NOTE 9 - CONCENTRATIONS

The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the six months ended January 31, 2018 and 2017. At January 31, 2018, three customers accounted for 43% of the Company’s total revenue.

NOTE 10 - RELATED PARTY TRANSACTIONS

In support of the Company’s efforts and cash requirements, it has relied on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note. As of January 31, 2018 and July 31, 2017, members of management have loaned the Company $191,427 and $183,077, respectively. The loans are payable on demand and carry no interest.

In addition, the Company has accrued expenses related to the January 15, 2016 consulting and advisory agreement (See Note 11).  As of January 31, 2018 and July 31, 2017, the Company has accrued $483,742 and $363,742, respectively in monthly retainer fees and travel expenses related to this agreement.

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.

F-8

NOTE 11 - CAPITAL STOCK

The Company is authorized to issue an aggregate of 200,000,000 common shares with a par value of $0.001 per share. No preferred shares have been authorized or issued. At January 31, 2018 and July 31, 2017, the Company had 26,287,500 and 26,287,500 common shares issued and outstanding, respectively.

Shares Issued for Services:

On January 15, 2016, the Company entered into a three-year consulting and advisory agreement with Platinum Equity Advisors, LLC, a related party. Compensation consists of a monthly retainer fee of $20,000. In addition, for services rendered through January 15, 2016, the Company issued on February 15, 2016, 8,000,000 shares of the Company’s common stock at a value of $0.35 per share or $2,788,000. The first month’s retainer was offset by $8,000 for the shares issued, resulting in a reduction of accounts payable and the remainder will be amortized over the life of the agreement. As of July 31, 2017, the Company recorded $1,432,722 in consulting expense related to this agreement. During the six months ended January 31, 2018 the Company amortized an additional $464,667 leaving an unamortized balance of $890,611 as of January 31, 2018.

Warrants:

A summary of the Company’s warrant activity during the six months ended January 31, 2018 is presented below:

On February 21, 2018, the Company executed an agreement with Acorn pursuant to which the 6,000,000 warrants Acorn was issued in the March 29, 2016 agreement were automatically converted into 1,000,000 restricted shares of the Company’s common stock (See Note 13).

As of January 31, 2018, there are no options outstanding to acquire any additional shares of common stock of the Company.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

Legal Matters

In the normal course of business, the Company may become a party to litigation matters involving claims against the Company. The Company's management is unaware of any pending or threatened assertions and there are no current matters that would have a material effect on the Company’s financial position or results of operations.

F-9

NOTE 12 - COMMITMENTS AND CONTINGENCIES (continued)

The Company’s operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure.

Operating Leases

The Company’s executive offices are located at 200 S Victoria Ave, Pueblo, Co 81003.  The property was leased on a month to month basis through August 31, 2017 with a monthly rental payment of $800.  On September 1, 2017, the Company entered into a new one-year lease agreement for $900 per month effective September 1, 2017 through August 31, 2018.

NOTE 13 - SUBSEQUENT EVENTS

The Company follows the guidance in Sections 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company has evaluated the period after the balance sheet date up through the date of filing, which is the date that the consolidated financial statements were issued, and determined that, there were no subsequent events or transactions that required recognition or disclosure in the consolidated financial statements except for the following as disclosed below:

Acorn Management Transaction

On February 21, 2018 we entered into a letter agreement with Acorn Management Partners, LLC pursuant to which it converted warrants to purchase 6,000,000 shares of our common stock held by it into 1,000,000 shares of our common stock, which such inclusion also included full satisfaction of all amounts we may have owed Acorn Management Partners, LLC for amounts due or any contractual obligations.  

Related Party Advances

Through the date of filing there have been additional amounts representative of advances or amounts paid in satisfaction of liabilities from a director or member of management. The advances are considered temporary in nature and have not been formalized by a promissory note. As of the date of filing an additional $525 has been loaned to the Company. These loans are payable on demand and carry no interest (See Note 10).

Share Exchange Agreement

On March 13, 2018, the Company entered into a Share Exchange Agreement with IndeLiving Holdings, Inc., a Florida corporation (“IndeLiving”), and the shareholders of IndeLiving pursuant to which the Company acquired 100% of the outstanding capital stock of IndeLiving from its shareholders in exchange for an aggregate of 5,200,000 shares of the Company’s common stock, valued at approximately $6,968,000.

Change in Control

Concurrent with the closing of the Share Exchange Agreement with IndeLiving, a change of control of the Company has occurred.  Mr. Scott M. Boruff, was appointed the Company’s sole officer as Chief Executive Officer and Director at closing.  Jeremy Gindro resigned as a member of our Board of Directors and Melanie Osterman, who had previously served as the Company’s President, resigned as an officer of the company, but remains an officer and employee of the Grasshopper Staffing subsidiary.

F-10

NOTE 13 - SUBSEQUENT EVENTS (continued)

Employment Agreement and Issuance of Stock Options

On March 13, 2018 the Company entered into a three year Employment Agreement with Mr. Boruff to serve as its Chief Executive Officer.  He will be paid an annual salary of $300,000 and is entitled to discretionary bonuses as may be awarded from time to time by our Board of Directors.  As additional compensation he was granted stock options to purchase 2,500,000 shares of the Company’s common stock at an exercise price of $3.00 per share, which exceeded the fair market price of our common stock on the date of grant, vesting in four equal annual installments commencing on the grant date.

Securities Purchase Agreement

On March 13, 2018 the Company issued and sold $700,000 principal amount convertible promissory notes (the “Convertible Notes”) to 12 purchasers in a private transaction. The purchasers were accredited or otherwise sophisticated investors who had access to business and financial information on the Company.  The Company did not pay any commissions or finders fees in connection with the sale of the Convertible Notes.  The Company used approximately $63,000 of these proceeds to satisfy its outstanding payroll tax obligations to the IRS, and will use the balance for working capital.

The Convertible Notes are unsecured and will pay interest in cash at the rate of 5% per annum, in arrears, maturing one year from the date of issuance (the "Maturity Date").  The principal and accrued interest is convertible at any time prior to the Maturity Date at the option of the holder into shares of our common stock at a conversion price of $0.50 per share (the "Conversion Price").  At any time prior to the Maturity Date that we should conclude the sale of equity securities in a private offering (the “Qualified Private Offering Securities”) resulting in gross proceeds to us of at least $1,000,000 (a “Qualified Private Offering”), concurrent with the first closing of such Qualified Private Offering all principal and accrued interest due under the Convertible Note will automatically convert into shares of the our common stock at the Conversion Price.

F-11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included in Item 1 “Financial Statements” in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

Business Overview

Grasshopper Staffing, Inc (“Grasshopper Staffing”), formally Tomichi Creek Outfitters, was incorporated in the state of Nevada on June 25, 2013.

On March 2, 2015, we entered into a Business Acquisition Agreement under which we acquired the business and assets of Grasshopper Staffing, Inc., a Colorado corporation, in exchange for 250,000 shares of common stock. The assets purchased include the trademark and website, office supplies and office furniture.  Grasshopper is operating as a wholly-owned subsidiary of the Company and is now the primary operation of our business.

On November 2, 2015 we filed a Certificate of Amendment to our Articles of Incorporation changing the name of our company to Grasshopper Staffing, Inc.

Grasshopper Staffing was founded in 2015 by Wick, Melanie Osterman, Barbara Ianne, and Cheryl Zanotelli, as a solution to the staffing needs presented in the blossoming cannabis industry in Colorado. Grasshopper Staffing is an agency that serves the Colorado's cannabis employment needs by providing employee recruiting, training, securing proper credentials and ensuring compliance with the ever-changing local and state laws. Grasshopper Staffing specializes in providing budtenders, trimmers, janitorial, security, payroll, armored transport, edible production, infusion specialists, grow consultants, irrigation, retail sales, IT solutions, web design, and event services.

Acquisition of IndeLiving

In March 2018 we acquired 100% of the outstanding capital stock of IndeLiving Holdings, Inc. in exchange for 5,200,000 shares of our common stock.  The terms of this transaction are described later in this report.  Founded in 2016 and based in Knoxville, Tennessee, IndeLiving has developed a health monitoring system for assisted living centers.  IndeLiving is an early stage company that uses proprietary technology to monitor seniors in real time by both care givers and family assist.  This monitoring technology assists seniors living independently or in an assisted living facility and their caregivers. The monitoring system is customized to the needs of the individual senior and, if applicable, to assisted living facility requirements. It provides real-time information to a monitoring stations at the assisted living facilities. It also can be set up to provide real time information via text, voice and email to family members or other caregivers. The residential model called “Inde Home” is a monitoring concept with custom modifications that can be applied to individual seniors in a variety of applications including Seniors living independently in their own home, with family members or in an assisted living or retirement community. For the year ended December 31, 2017 IndeLiving had gross revenues in 2017 of approximately $135,000.

Immediately prior to the closing of the share exchange, we raised $700,000 through the sale of one year convertible promissory notes, the terms of which are described later in this report.  We used approximately $63,000 of the proceeds to satisfy our 941 tax liabilities to the IRS in full, and will use the balance for working capital.

The acquisition of IndeLiving resulted in a change of control of our company.  Concurrent with the closing of this transaction, our then current officers and directors resigned and Mr. Scott M. Boruff, Chief Executive Officer of IndeLiving, was appointed our sole officer and director.  Ms. Osterman remains affiliated with our Grasshopper Colorado subsidiary and will continue to be responsible for its daily operations.  We have relocated our offices to Tennessee and expect that a significant portion of our business and operations in the future will be related to IndeLiving.

2

RESULTS OF OPERATIONS

Results of Operations

For the three months ended January 31, 2018 compared to 2017

Revenue

The Company had $89,732 and $65,165 of revenue during the three months ended January 31, 2018 and 2017, respectively. The increase of $24,567 was due to increased revenue achieved by contract staffing services in the three months ended January 31, 2018.

Cost of Services

Cost of services was $67,908 in the three months ended January 31, 2018, an increase of $17,448 from $50,460 in the three months ended January 31, 2017.  The increase is primarily due to the cost of hiring additional workers in the three months ended January 31, 2018.

Gross Profit

The Company had a gross profit of $21,824 in the three months ended January 31, 2018, which is an increase of $7,119 from a gross profit of $14,705 in the three months ended January 31, 2017.  The increase is primarily due to the increase in revenue in the three months ended January 31, 2018.

General and Administrative Expenses

The Company’s general and administrative expenses were incurred in the amounts of $357,875 and $330,375 for the three months ended January 31, 2018 and 2017, respectively. This increase of $27,500 was primarily due to the increase in payroll and professional fees during the three months ended January 31, 2018.

Net Loss

The comparable net loss for the three months ended January 31, 2018 was $342,880 as compared to the net loss of $322,272 for the three months ended January 31, 2017. This increased net loss of $20,608 was primarily due to the increase in professional fees and payroll during the three months ended January 31, 2018.

For the six months ended January 31, 2018 compared to 2017

Revenue

The Company had $285,745 and $176,483 of revenue during the six months ended January 31, 2018 and 2017, respectively. The increase of $109,262 was due to increased revenue achieved by contract staffing services in the six months ended January 31, 2018.

Cost of Services

Cost of services was $216,445 in the six months ended January 31, 2018, an increase of $82,389 from $134,056 in the six months ended January 31, 2017.  The increase is primarily due to the cost of hiring additional workers in the six months ended January 31, 2018.

Gross Profit

The Company had a gross profit of $69,300 in the six months ended January 31, 2018, which is an increase of $26,873 from a gross profit of $42,427 in the six months ended January 31, 2017.  The increase is primarily due to the increase in revenue in the six months ended January 31, 2018.

3

General and Administrative Expenses

The Company’s general and administrative expenses were incurred in the amounts of $718,372 and $739,044 for the six months ended January 31, 2018 and 2017, respectively. This decrease of $20,672 was primarily due to the decrease in payroll offset by an increase in professional fees during the six months ended January 31, 2018.

Net Loss

The comparable net loss for the six months ended January 31, 2018 was $656,343, as compared to the net loss of $700,738 for the six months ended January 31, 2017. This decreased net loss of $44,395 was primarily due to the increase in revenue and the reduction of payroll expenses during the six months ended January 31, 2018.

Liquidity and Capital Resources

Working Capital

Current assets for the six months ended January 31, 2018 decreased compared to the year ended July 31, 2017, primarily due to a decrease in accounts receivable in the six months ended January 31, 2018.

Current liabilities for the six months ended January 31, 2018 increased compared to the year ended July 31, 2017 primarily due to an increase in  the related party accrual of consulting fees for Platinum Equity Advisors, LLC of $120,000, and an increase in third party loans of approximately $20,000 for the period ending January 31, 2018.  Concurrent with the closing of the acquisition of IndeLiving, the advisory agreement with Platinum Equity Advisors, LLC, an entity managed by Mr. Boruff, was terminated.

Net Cash Used in Operating Activities

Net cash used in operations was $33,097 for the six months ended January 31, 2018 compared to cash used in operations of $24,528 for the six months ended January 31, 2017. This increase was primarily attributable to a decrease in net loss along with a decrease in amortization expense of approximately $58,000 related to the amortization of deferred stock compensation, related party and a decrease in payroll liabilities of approximately $34,000 offset by an increase in accounts payable in the six months ended January 31, 2018.

Net Cash Provided by Financing Activities

Cash flows provided by financing activities for the six months ended January 31, 2018 were $35,500 compared to $26,313 for six months ended January 31, 2017. This increase is primarily attributed to an increase in proceeds from third party loans of approximately $23,000 offset by a decrease in repayments of factoring agreements of approximately $29,000 and a decrease in proceeds from shareholder loans of approximately $43,000 during the six months ended January 31, 2018.

Going Concern Qualification

As at January 31, 2018, the Company has an accumulated deficit of $8,151,987, a negative working capital deficit of $868,682 and has not generated cash from operations to support meaningful ongoing operations. Our Independent Registered Public Accounting Firm has included a “Going Concern Qualification” in their report for the years ended July 31, 2017 and 2016. The foregoing raises substantial doubt about the Company’s ability to continue as a going concern. We intend on financing our future development activities and working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements.

4

There is no guarantee that additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to us. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The “Going Concern Qualification” might make it substantially more difficult to raise capital.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to select appropriate accounting policies and to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying consolidated financial statements include the estimates of useful lives for depreciation.

Accounts Receivable

Accounts receivable represent amounts due from customers in the ordinary course of business from sales activities The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. At January 31, 2018 and July 31, 2017, the Company wrote off $17,050 and $7,935, respectively to the allowance.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for major additions and improvements are capitalized while minor replacements and maintenance and repairs, which do not improve or extend the life of such assets, are charged to operations as incurred. Disposals are removed at cost less accumulated depreciation, and any resulting gain or loss is reflected in the statement of operations. Depreciation is calculated using the straight-line method which depreciates the assets over the estimated useful lives of the depreciable assets ranging from five to seven years.

Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment at least annually or whenever facts and circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset.  The Company did not recognize any impairment losses for any periods presented.

Intangible Assets

Intangible assets with definite useful lives are recorded on the basis of cost and are amortized on a straight-line basis over their estimated useful lives. The Company uses a useful life of 3 years for website development. The Company evaluates the remaining useful life of intangible assets annually to determine whether events and circumstances warrant a revision to the remaining amortization period. If the estimate of the intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life. At January 31, 2018, no revision to the remaining amortization period of the intangible assets was made.

5

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 has the ability to access at the measurement date.

Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and borrowings. The fair value of current financial assets and current financial liabilities approximates their carrying value because of the short-term maturity of these financial instruments.

Revenue Recognition

Revenue is derived from the placement of temporary workers.  The Company recognizes revenue when it is realized or realizable and estimable in accordance with ASC 605, “Revenue Recognition”. The Company will recognize revenue only when all of the following criteria have been met:

•

Persuasive evidence for an agreement exists;

•

Service has been provided;

•

The fee is fixed or determinable; and,

•

Collection is reasonably assured.

Basic Net Loss Per Common Share

Basic net loss per common share is computed by dividing the loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.

Stock Based Compensation

The Company accounts for the grant of restricted stock awards in accordance with ASC 718, “Compensation-Stock Compensation.” ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of equity based compensation. The expense is recognized over the period during which the employee is required to provide service in exchange for the compensation.  Any remaining unrecognized balance will be recognized ratably over the life of the vesting period and is a reduction of stockholders' equity.

The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 505-50 “Equity-Based Payments to Non-Employees.”

6

Income Taxes

Under ASC 740, “Income Taxes,” deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of January 31, 2018, there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.

Recent Accounting Pronouncements

The Company has reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

Any new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements as of January 31, 2018.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We do not hold any derivative instruments and do not engage in any hedging activities.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We maintain “disclosure controls and procedures”, as that term is defined in Rule 13a-15(e), promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.  Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by paragraph (b) of Rules 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer who also serves as our principal financial and accounting officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were not effective as a result of continuing weaknesses in our internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended July 31, 2017.  Following the change of control of our company in March 2018 as described elsewhere herein, we expect to remediate those material weaknesses in our internal control over financial reporting prior to the end of fiscal 2018.  

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

7

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is currently not involved in any litigation that the Company believes could have a materially adverse effect on the Company’s financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or other body pending or, to the knowledge of the executive officers of the Company or any of the Company’s subsidiaries, threatened against or affecting the Company, the Company’s Common Stock, any of the Company’s subsidiaries or the Company’s or the Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors.

Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On February 21, 2018 we entered into a letter agreement with Acorn Management Partners, LLC pursuant to which it converted warrants to purchase 6,000,000 shares of our common stock held by it into 1,000,000 shares of our common stock, which such inclusion also included full satisfaction of all amounts we may have owed Acorn Management Partners, LLC for amounts due or any contractual obligations.  Acorn Management Partners, LLC is an accredited or otherwise sophisticated investor who had access to business and financial information on our company.  The issuance of the shares was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(a)(2) of that act.  

Item 3. Defaults Upon Senior Securities.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None except as previously reported.

8

Item 6. Exhibits.

The exhibits listed on the Exhibit Index immediately preceding such exhibits, which is incorporated herein by reference, are filed or furnished as part of this Quarterly Report on Form 10-Q.

*    Filed herewith.

¥    Management compensation agreement.

9

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.

10