AnTix Holdings, Inc 10-Q for FY2024 Q3
AnTix Holdings, Inc. (IMTH)
About this 10-Q
AnTix Holdings, Inc filed this 10-Q on May 20, 2024, covering the quarter ended March 31, 2024 (FY2024 Q3).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $455.16K
- down 4.6% from $477.12K a year earlier
- Net loss
- $909.87K
- compared with a net loss of $799.59K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
Or
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Not applicable. | Note applicable. | Not applicable. |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
| Emerging growth company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of May 20, 2024, there were
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Unless stated otherwise or the context otherwise requires, the words “we,” “us,” “our,” the “Company,” “Innovative MedTech” or “Innovative” in this Quarterly Report on Form 10-Q collectively refers to Innovative MedTech, Inc., a Delaware corporation (the “Company”), and its subsidiaries. The information in this Quarterly Report on Form 10-Q contains “forward-looking statements” relating to the Company, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
This report contains information that may be deemed forward-looking, that is based largely on the Company’s current expectations, and is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those anticipated.
Among such risks, trends and other uncertainties, which in some instances are beyond its control, may be the Company’s ability to generate cash flows and maintain liquidity sufficient to service its debt, and comply with or obtain amendments or waivers of the financial covenants contained in its credit facilities, if necessary. Other risks and uncertainties include the impact of continuing adverse economic conditions, potential changes in the adult day care industry, energy costs, interest rates and the availability of credit, labor costs, legislative and regulatory rulings and other results of operations or financial conditions, increased capital and other costs, competition and other risks detailed from time to time in the Company’s publicly filed documents.
The words “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions generally identify forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this report. The Company does not undertake to publicly update or revise its forward-looking statements.
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
INNOVATIVE MEDTECH, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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| March 31, 2024 |
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| June 30, 2023 |
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| Unaudited |
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Assets |
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Current assets |
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Cash and cash equivalents |
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Accounts receivable, net |
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Notes receivable, related party |
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Prepaid expenses |
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Total current assets |
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Deposits |
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Right-of-use asset |
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Finance lease asset, net |
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Property, plant and equipment, net of accumulated depreciation |
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Intangible assets, net of accumulated amortization |
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Goodwill |
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Total Assets |
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Liabilities & Stockholders' Deficit |
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Current liabilities |
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Accounts payable and accrued expenses |
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Accrued interest |
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Accrued interest, related parties |
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Notes payable, related parties, current |
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Notes payable, current |
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Convertible notes payable, current |
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SBA Loan, current |
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Line of credit |
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Derivative liability |
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Finance lease liability |
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Operating lease liability |
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Total current liabilities |
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Royalty liability |
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Finance lease liability, non-current |
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Operating lease liability, non-current |
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Notes payable, non-current |
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SBA Loan, non-current |
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Total Liabilities |
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Commitments and contingencies (Note 15) |
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Stockholders' Deficit |
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Series A Preferred stock, $ |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Total Stockholders' Deficit |
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Total Liabilities and Stockholders' Deficit |
| $ |
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| $ |
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See accompanying notes to unaudited consolidated financial statements.
| 3 |
INNOVATIVE MEDTECH, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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| For the three months ended |
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| March 31, |
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Revenue: |
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Participant fees |
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Franchise fees |
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Operating expenses: |
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General and administrative |
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Salaries and wages |
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Licensing fees |
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Consulting fees |
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Legal and professional fees |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest expense, related parties |
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Interest expense |
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Change in fair value of derivatives |
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Amortization of debt discount |
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Other income |
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Total other income (expense) |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Basic and diluted earnings per share on net loss |
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Weighted average shares outstanding - basic and diluted |
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See accompanying notes to unaudited consolidated financial statements
| 4 |
INNOVATIVE MEDTECH, INC.
AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024
(UNAUDITED)
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| Additional |
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| Series A Preferred Stock |
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| Common Stock |
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| Unearned |
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| Paid-in |
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| Accumulated |
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| Total |
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| Shares |
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| Amount |
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| Shares |
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| Compensation |
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| Capital |
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| Deficit |
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| Deficit |
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Balance, June 30, 2023 (Audited) |
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Warrants issued with notes payable |
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| - |
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Net loss |
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Balance, September 30, 2023 |
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Net loss |
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Balance, December 31, 2023 |
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Stock issued for services |
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Net loss |
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Balance, March 31, 2024 |
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See accompanying notes to unaudited consolidated financial statements
| 5 |
INNOVATIVE MEDTECH, INC.
AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023
(UNAUDITED)
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| Additional |
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| Series A Preferred Stock |
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| Common Stock |
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| Accumulated |
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| Total |
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| Shares |
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| Amount |
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| Amount |
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| Capital |
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| Deficit |
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| Deficit |
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Balance, June 30, 2022 (Audited) |
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Net income |
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Balance, September 30, 2022 |
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Net income |
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Balance, December 31, 2022 |
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Net income |
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Balance, March 31, 2023 |
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See accompanying notes to unaudited consolidated financial statements
| 6 |
INNOVATIVE MEDTECH, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| For the nine months ended |
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| March 31, |
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| 2024 |
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| 2023 |
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Cash Flows from Operating Activities |
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Net Loss |
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Adjustments to reconcile net loss to net |
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cash used by operating activities: |
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Depreciation and amortization |
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Amortization of royalty fee liability discount |
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Amortization of debt discount |
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Change in fair value of derivatives |
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Amortization of right-of-use |
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Amortization of unearned compensation |
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Changes in operating assets & liabilities |
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Accounts receivable |
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Prepaid expenses |
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Deposits |
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Accounts payable and accrued liabilities |
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Accrued interest, related party |
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Accrued interest |
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Net cash used by operating activities |
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Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Collections from notes receivable |
|
|
|
|
|
| ||
Acquisition of fixed assets |
|
| ( | ) |
|
|
| |
Net cash used by investing activities |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
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|
|
|
Proceeds from notes payable |
|
|
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|
|
| ||
Proceeds from notes payable, related party |
|
|
|
|
|
| ||
Payments on SBA loan |
|
| ( | ) |
|
| ( | ) |
Payments on notes payable |
|
| ( | ) |
|
| ( | ) |
Proceeds from line of credit |
|
|
|
|
|
| ||
Payments on line of credit |
|
| ( | ) |
|
|
| |
Payments on finance lease |
|
| ( | ) |
|
|
| |
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Decrease in Cash and cash equivalents |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash and equivalents at end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
See accompanying notes to unaudited consolidated financial statements.
| 7 |
INNOVATIVE MEDTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDING MARCH 31, 2024
(UNAUDITED)
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Innovative MedTech, Inc. (the “Company”), a Delaware corporation, is a provider of health and wellness services, primarily through its wholly owned subsidiaries Sarah Adult Day Services, Inc., and Sarah Day Care Centers, Inc. SarahCare (“SarahCare”), an adult day care franchisor with 25 centers (2 corporate and 23 franchise locations) located in 13 states. SarahCare offers seniors daytime care and activities focusing on meeting their physical and medical needs on a daily basis, and ranging from nursing care to salon services and providing meals, to offering engaging and enriching activities to allow them to continue to lead active and engaged lives.
On April 1, 2022, the Company partnered with TruCash Group of Companies Inc. (“TruCash”), a leading global payments provider, to launch an all-in-one Super Healthcare App, called RX Vitality Wallet, that was being designed to cater to consumers, patients, hospitals, Seniors, and governments, with a solid platform of benefits and online banking. On June 30, 2023 this agreement was canceled.
On April 5, 2022, the Company engaged mPulse Mobile, a leader in conversational AI and digital engagement solutions for the healthcare industry, to drive engagement with the Company’s digital app and wallet.
On April 28, 2022, the Company entered into a share exchange agreement to acquire RX Vitality, Inc. (“RX Vitality”), a media and finance advisory company.
On May 13, 2022, the Company entered into a partnership with VSUSA Corp. (“VSUSA”), a non-for-profit organization that empowers Veterans and Seniors by offering services designed to build successful life transitions with access to workforce and independent housing; health services; and social service programs in communities across the United States. The Company’s Chairman is a principal and co-Founder of VSUSA. On June 30, 2023 this agreement was canceled.
NOTE 2. LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business.
For the nine months ended March 31, 2024 and 2023, the Company reported a net loss of $
As of March 31, 2024, the Company maintained total assets of $
The Company continues to have limited capital resources and has experienced net losses and negative cash flows from operations and expects these conditions to continue for the foreseeable future. As of March 31, 2024, the Company had $
The Company believes that additional capital will be required to fund operations through March 31, 2025 and beyond, as it attempts to generate increasing revenue, and develop new products. The Company intends to attempt to raise capital through additional equity offerings and debt obligations. There can be no assurance that the Company will be successful in obtaining financing at the level needed or on terms acceptable to the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| 8 |
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the three and nine months ended March 31, 2024 and 2023.
Principles of Consolidation
The Company has two wholly-owned operating subsidiaries; Sarah Adult Day Services, Inc., and Sarah Day Care Centers, Inc., along with non-operating subsidiaries consisting of RX Vitality, Inc. and the 10 formed limited liability companies formed for the additional SarahCare location leases. The consolidated financial statements, which include the accounts of the Company and its two wholly-owned subsidiaries, are prepared in conformity with GAAP pursuant to the rules and regulations of the SEC. All significant intercompany balances and transactions have been eliminated. The consolidated financial statements have been prepared using the accrual basis of accounting in accordance with GAAP and presented in US dollars. The fiscal year end is June 30.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.
Cash and Cash Equivalents
The Company maintains cash balances in a non-interest-bearing account that does not exceeds $
Earnings Per Share Calculation
Basic earnings per common share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued.
Intangible Assets
Certain intangible assets arose from the acquisition of Sarah Adult Day Services, Inc., and Sarah Day Care Centers, Inc. on March 25, 2021 and consist of the following, which have been or are being amortized on a straight-line basis over the following estimated useful lives unless they have an indefinite life:
Asset |
| Estimated Useful Life |
|
Customer Relationships |
|
| |
Trademarks |
|
| |
Non-Compete Agreement |
|
| |
CARF Accreditation |
|
| |
Franchise Agreements |
|
|
| 9 |
An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. For the three and nine months ended March 31, 2024 and 2023, there were no impairment losses.
Revenue Recognition
Revenue is recognized when a customer obtains services. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the services it provides to the customer. Once a contract is determined to be within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct.
Patient Fees
Participant fee revenue is reported at the amount that reflects the consideration the Company expects to receive in exchange for the services provided. These amounts are due from participants or third-party payors and include variable consideration for retroactive adjustments from estimated reimbursements, if any, under reimbursement programs. Performance obligations are determined based on the nature of the services provided. Resident fee revenue is recognized as performance obligations are satisfied.
Under the Company’s day care agreements, which are generally for a contractual term of 30 days to one year, the Company provides services to participants for a stated daily or monthly fee. The Company has elected the lessor practical expedient within ASC 842, Leases (“ASC 842”) and recognizes, measures, presents, and discloses the revenue for services under the Company’s senior living residency agreements based upon the predominant component, either the lease or nonlease component, of the contracts. The Company has determined that the services included under the Company’s independent living, assisted living, and memory care residency agreements have the same timing and pattern of transfer and are performance obligations that are satisfied over time. The Company recognizes revenue under ASC 606, Revenue Recognition from Contracts with Customers (“ASC 606”) for its participants agreements for which it has estimated that the nonlease components of such agreements are the predominant component of the contract.
The Company enters into contracts to provide home assisted health, and certain outpatient services. Each service provided under the contract is capable of being distinct, and thus, the services are considered individual and separate performance obligations. The performance obligations are satisfied as services are provided and revenue is recognized as services are provided.
The Company receives payment for services under various third-party payor programs which include Medicaid, Veterans Affairs and other third-party payors. Estimates for settlements with third-party payors for retroactive adjustments from estimated reimbursements due to audits, reviews, or investigations are included in the determination of the estimated transaction price for providing services. The Company estimates the transaction price based on the terms of the contract with the payor, correspondence with the payor, and historical payment trends. Changes to these estimates for retroactive adjustments are recognized in the period the change or adjustment becomes known or when final settlements are determined.
| 10 |
Billings for services under third-party payor programs are recorded net of estimated retroactive adjustments, if any. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods or as final settlements are determined. Contractual or cost related adjustments from Medicaid or Veterans Affairs are accrued when assessed (without regard to when the assessment is paid or withheld). Subsequent adjustments to these accrued amounts are recorded in net revenues when known.
Franchise Fees
The Company franchises a number of its locations under franchise contracts which provide periodic franchise fee payments to the Company and reimbursement for costs and expense related to such franchises. The Company’s franchisees pay a variety of royalties and fees, including an agreed upon percentage of gross revenues (as defined in the franchise agreement). The Company estimates the amount of franchise fee revenue expected to be earned, if any, during the annual contract period and revenue is recognized as services are provided. The Company’s estimate of the transaction price for the franchise services also includes the amount of reimbursement due from the franchises for services provided and related costs incurred.
SarahCare, as the franchisor, supplies the franchisee’s with initial assistance and approval with the following: (1) Providing the site selection criteria for the SARAH Business and, upon a potential franchisee’s request, provide input regarding possible sites. The Company does not own and lease any site to franchisees. After the franchise selects and the Company approves a site, the Company will designate the geographic area within which they may establish the SARAH Business; (2) Approve the signage; (3) Identify the standards and specifications for products, services, and materials that comply with the System, and, if the Company requires, the approved suppliers of these items. The Company will furnish a potential Franchisee with the listing of the package of initial franchise items as detailed in the Operations Manual. Neither the Company or its affiliate provide, deliver, or install any of these items; (4) Provide an Initial Training Program; and (5) Provide an Operations Training Program.
Once the Franchisee’s SarahCare business is operational, the Company will: (1) Issue and modify System standards for SARAH Businesses; (2) Provide access to a copy of the Company’s Operations Manual as they make available through our intranet. The Operations Manual contains mandatory and suggested specifications, standards and operating procedure; (3) Provide additional or special guidance and assistance and training as the Company deem appropriate and for which a potential Franchisee are financially responsible; (4) Inspect and observe the operation of the SARAH Business to help a potential Franchisee comply with the Franchise Agreement and all System standards; (5) Let the Franchisee use the confidential information; and, (6) Let the Franchisee use the Marks (trademarks, trade names, service marks, and logos).
Income Taxes
The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements.
Leases
The Company accounts for leases in accordance with Accounting Standards Update (ASU) 2016-02, “Leases” (Topic 842). Based on this standard, the Company determines if an agreement is a lease at inception. Leases are included – right to use, current portion of lease liability, and operating lease liability, less current portion in the Company’s consolidated balance sheets. Finance leases are included in property, plant and equipment, net current portion of long-term debt, net and long-term debt, less current portion and debt issuance costs in the Company’s consolidated balance sheets.
Fair value of financial instruments
The Company’s financial instruments include cash and cash equivalents, accounts payable, accrued expenses, and debt. The carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. The carrying amount of the debt approximates fair value, because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company. The Company’s derivative liabilities were adjusted to fair market value at the end of each reporting period, using Level 3 inputs.
| 11 |
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.
The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable, accrued expenses and interest, certain notes payable and notes payable – due to related parties, approximate their fair values because of the short maturity of these instruments. The Company accounts for its derivative liabilities, at fair value, on a recurring basis under Level 3 (See Note 11).
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial feature.
Derivative financial instruments
When the Company issues debt that contains a conversion feature, it first evaluates whether the conversion feature meets the requirements to be treated as a derivative: a) one or more underlying, typically the price of the Company’s stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares.
If the conversion features within convertible debt meet the requirements to be treated as a derivative, the Company estimates the fair value of the derivative liability using the Monte Carlo Simulation Model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative liability is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the consolidated statements of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreement are classified on the consolidated balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the balance sheet date.
| 12 |
The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 “Derivatives and Hedging” (provides comprehensive guidance on derivative and hedging transactions) whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.
Debt Issue Costs and Debt Discount
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Reclassification of Presentation
Certain prior year amounts have been reclassified to conform with current year presentation. These reclassifications had no effect on the reported results of operations.
Recently Issued Accounting Pronouncements
The Company does not expect any of the recently issued accounting pronouncements to have a material impact on its financial condition or results of operations for the quarter ended as of March 31, 2024 or on a going forward basis.
Subsequent Events
In accordance with ASC 855, Subsequent Events, the Company evaluated subsequent events through the date of this report; the date the consolidated financial statements were available for issue.
NOTE 4. NOTES RECEIVABLE, RELATED PARTIES
The Company has several notes receivables from a related party. They are as follows:
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Notes receivable from related party (see Note 17), due in nine months, with no installments, no interest, and in default as of March 2022 |
|
|
|
|
|
| ||
Total notes receivable |
|
|
|
|
|
| ||
Less long-term |
|
|
|
|
|
| ||
Total short term notes receivable |
| $ |
|
| $ |
| ||
| 13 |
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at March 31, 2024 and June 30, 2023:
|
| March 31, |
|
| June 30, |
| ||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Leasehold improvements |
| $ |
|
| $ |
| ||
Vehicles |
|
|
|
|
|
| ||
Computer equipment |
|
|
|
|
|
| ||
Furniture and fixtures |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less: Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Property, plant and equipment – net |
| $ |
|
| $ |
| ||
Depreciation expense was $
NOTE 6. INTANGIBLE ASSETS
|
| March 31, |
|
| June 30, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Customer relationships |
| $ |
|
| $ |
| ||
Trademarks |
|
|
|
|
|
| ||
Non-Compete Agreement |
|
|
|
|
|
| ||
CARF Accreditation |
|
|
|
|
|
| ||
Franchise Agreements |
|
|
|
|
|
| ||
Website development |
|
|
|
|
|
| ||
Less: accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Intangible assets - net |
| $ |
|
| $ |
| ||
The Company is amortizing these intangible over their respective remaining useful lives. The Company recorded amortization expense in the amount of $
NOTE 7. NOTES PAYABLE
As of March 31, 2024 and June 30, 2023, the Company had $
|
|
|
|
| Original |
|
|
|
|
|
|
| Principal Balance as of |
| ||||||||
|
|
| Date of Note |
| Principal |
|
|
|
| Interest |
|
| March 31, |
|
| June 30, |
| |||||
Ref No. |
|
| Issuance |
| Balance |
|
| Maturity Date |
| Rate (%) |
|
| 2024 |
|
| 2023 |
| |||||
| 1 |
|
|
| $ |
|
| * |
|
|
|
| $ |
|
| $ |
| |||||
| 2 |
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|
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| |||||||
| 3 |
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| * |
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| |||||
| 4 |
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|
|
|
|
| * |
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|
|
|
|
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| |||||
| 5 |
|
|
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|
|
| * |
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| |||||
| 6 |
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|
|
|
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| ||||||
| 7 |
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| * |
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|
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| |||||
| 8 |
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|
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| ||||||
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
|
|
|
| Total Current |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
|
|
|
| Total Long Term |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
________
* As of March 31, 2024, these notes are in default.
| 14 |
|
| Amount Owed |
| |
|
|
|
| |
Year Ended June 30, 2024 |
|
|
| |
Year Ended June 30, 2025 |
|
|
| |
Year Ended June 30, 2026 |
|
|
| |
Year Ended June 30, 2027 |
|
|
| |
Year Ended June 30, 2028 |
|
|
| |
Total future payments |
|
|
| |
NOTE 8. NOTES PAYABLE, RELATED PARTIES
As of March 31, 2024 and June 30, 2023, the Company had $
Ref No. |
| Date of |
| Original Principal |
|
| Maturity Date |
| Interest |
|
| Principal |
|
|
|
| |||||
Note Issuance |
| Balance |
| Rate % |
|
|
| Rate % |
|
| Balance 3/31/24 |
|
| Principal Balance 6/30/23 |
| ||||||
| 1* |
|
|
|
|
|
|
| % |
| $ |
|
| $ |
| ||||||
| 2* |
|
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| % |
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| ||||||
| 3* |
|
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|
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| % |
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| ||||||
| 4* |
|
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|
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| % |
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| ||||||
| 5* |
|
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|
|
|
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| % |
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|
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| ||||||
| 6* |
|
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|
|
|
|
| % |
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|
|
|
|
| ||||||
| 7* |
|
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|
|
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| % |
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|
|
|
| ||||||
| 8* |
|
|
|
|
|
|
| % |
|
|
|
|
|
| ||||||
| 9* |
|
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|
|
|
|
| % |
|
|
|
|
|
| ||||||
| 10* |
|
|
|
|
|
|
| % |
|
|
|
|
|
| ||||||
| 11 |
|
|
|
|
|
|
| % |
|
|
|
|
|
| ||||||
| 12 |
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|
|
|
|
| % |
|
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|
|
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| ||||||
| 13 |
|
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|
|
|
| % |
|
|
|
|
|
| ||||||
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
* As of March 31, 2024, these notes are in default.
| 15 |
NOTE 9. CONVERTIBLE NOTES PAYABLE
As of March 31, 2024 and June 30, 2023, the convertible notes payable were as follows:
Date of Note Issuance |
| Original Principal Balance |
|
| Maturity Date |
| Interest Rate % |
|
| Conversion Rate |
|
| Principal Balance 3/31/24 |
|
| Principal Balance 6/30/23 |
| |||||
|
|
|
| * |
|
| % |
| $ |
|
| $ |
|
| $ |
| ||||||
|
|
|
| * |
|
| % |
| $ |
|
|
|
|
|
|
| ||||||
|
|
|
| * |
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| % |
|
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| |||||||
|
|
|
| * |
|
| % |
| |
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|
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| ||||||
|
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|
| * |
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| % |
|
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| |||||||
|
|
|
| * |
|
| % |
| |
|
|
|
|
|
|
| ||||||
|
|
|
| * |
|
| % |
| |
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| ||||||
|
|
|
| * |
|
| % |
| |
|
|
|
|
|
|
| ||||||
|
|
|
| * |
|
| % |
| $ |
|
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|
| ||||||
|
|
|
| * |
|
| % |
| |
|
|
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| ||||||
|
|
|
| * |
|
| % |
| $ |
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| ||||||
|
|
|
| * |
|
| % |
| $ |
|
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|
|
| ||||||
|
|
|
| * |
|
| % |
| $ |
|
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|
|
|
|
| ||||||
Total Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
* | As of March 31, 2024, these notes are in default. |
NOTE 10. SBA LOAN
On June 25, 2020 and January 6, 2022, the Company’s wholly-owned subsidiary, Sarah Day Care Centers, Inc. received proceeds of $
|
| Amount Owed |
| |
| ||||
Year Ended June 30, 2024 |
|
|
| |
Year Ended June 30, 2025 |
|
|
| |
Year Ended June 30, 2026 |
|
|
| |
Year Ended June 30, 2027 |
|
|
| |
Year Ended June 30, 2028 |
|
|
| |
|
|
|
|
|
Payments 2029 & Thereafter |
|
|
| |
Total Payments |
|
|
| |
| 16 |
NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS
The following tables summarize the components of the Company’s derivative liabilities and linked common shares.
|
| March 31, 2024 |
| |||||
|
| Indexed |
|
| Fair |
| ||
The financings giving rise to derivative financial instruments |
| Shares |
|
| Values |
| ||
Compound embedded derivative |
|
|
|
| $ |
| ||
|
| June 30, 2023 |
| |||||
|
| Indexed |
|
| Fair |
| ||
The financings giving rise to derivative financial instruments |
| Shares |
|
| Values |
| ||
Compound embedded derivative |
|
|
|
| $ |
| ||
The following tables summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three and nine months ended March 31, 2024 and 2023:
The financings giving rise to derivative financial instruments and the income effects:
|
| Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Compound embedded derivative |
| $ |
|
| $ | ( | ) | |
Day one derivative loss |
|
|
|
|
|
| ||
Total derivative gain (loss) |
| $ |
|
| $ | ( | ) | |
|
| Nine months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Compound embedded derivative |
| $ |
|
| $ |
| ||
Day one derivative loss |
|
|
|
|
|
| ||
Total derivative gain (loss) |
| $ |
|
| $ |
| ||
The Company’s convertible notes gave rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.
| 17 |
Current accounting principles that are provided in ASC 815 – Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. In addition, the standards do not permit an issuer to account separately for individual derivative terms and features embedded in hybrid financial instruments that require bifurcation and liability classification as derivative financial instruments. Rather, such terms and features must be bundled together and fair valued as a single, compound embedded derivative. The Company has selected the Monte Carlo Simulations valuation technique to fair value the compound embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Monte Carlo Simulations technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.
Significant inputs and results arising from the Monte Carlo Simulations process are as follows for the compound embedded derivative that has been bifurcated from the Convertible Notes and classified in liabilities:
|
| Inception |
|
| March 31,2024 |
|
| June 30, 2023 |
| |||
Quoted market price on valuation date |
| $ |
|
| $ |
|
| $ |
| |||
Contractual conversion rate |
| $ |
|
| $ |
|
| $ |
| |||
Range of effective contractual conversion rates |
| - |
|
| - |
|
| - |
| |||
Contractual term to maturity |
|
|
|
|
|
| ||||||
Market volatility: |
|
|
|
|
|
|
|
|
|
|
|
|
Volatility |
|
|
|
|
|
| ||||||
Contractual interest rate |
|
|
|
|
|
| ||||||
The following table reflects the issuances of compound embedded derivatives and changes in fair value inputs and assumptions related to the compound embedded derivatives during the nine months ended March 31, 2024 and June 30, 2023.
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
Beginning balance |
| $ |
|
| $ |
| ||
Issuances: |
|
|
|
|
|
|
|
|
Convertible Note Financing |
|
|
|
|
|
| ||
Removals |
|
|
|
|
|
| ||
Changes in fair value inputs and assumptions reflected |
|
| ( | ) |
|
| ( | ) |
Conversions |
|
|
|
|
|
| ||
Ending balance |
| $ |
|
| $ |
| ||
The fair value of the compound embedded derivative is significantly influenced by the Company’s trading market price, the price volatility in trading and the interest components of the Monte Carlo Simulation technique.
| 18 |
NOTE 12. STOCKHOLDERS’ DEFICIT
On or about April 26, 2022, the Company entered into an Agreement for Share Exchange (the “Share Exchange Agreement”) to obtain
Common Stock
On March 7, 2024, the Company issued
On August 21, 2023 the Company issued a Note (Note 7, Ref #7) which included
Series A Preferred Stock & Series B Preferred Stock
On April 26, 2022, the Company issued the Shareholders of Vitality
As of March 31, 2024, the Company had
Series A Preferred Stock & Series B Preferred Stock – Certificate of Designations
The Preferred Shares each have Certificate of Designations, which designate as follows:
Number
Dividends
Any dividends (other than dividends on common stock payable solely in common stock or dividends on the Series A Convertible Preferred Stock payable solely in Series A Convertible Preferred Stock or dividends on the Series B Preferred Convertible Stock payable solely in Series B Convertible Preferred Stock) declared or paid in any fiscal year will be declared or paid among the holders of the Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and common stock then outstanding in proportion to the greatest whole number of shares of common stock which would be held by each such holder if all shares of Series A Preferred Stock and Series B Convertible Preferred Stock were converted into shares of common stock pursuant to the terms of the Certificate of Designations. The Parent Company’s Board of Directors is under no obligation to declare dividends on the Series A Convertible Preferred Stock or Series B Convertible Preferred Stock.
Conversion
Each share of Preferred Stock is convertible into 100 shares of the Parent Company’s common stock (the “Conversion Rate”).
| 19 |
Liquidation
In the event of any liquidation, dissolution or winding up of the Parent Company, the assets of the Parent Company legally available for distribution by the Parent Company would be distributed with equal priority and pro rata among the holders of the Preferred Stock and common stock in proportion to the number of shares of common stock held by them, with the shares of Preferred Stock being treated for this purpose as if they had been converted to shares of common stock at the then applicable Conversion Rate.
Voting
On any matter presented to the stockholders of the Parent Company for their action or consideration at any meeting of stockholders of the Parent Company (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock would be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Parent Company’s Certificate of Incorporation, holders of Preferred Stock vote together with the holders of common stock as a single class.
NOTE 13. PROVISION FOR CORPORATE INCOME TAXES
The Company provides for income taxes by the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. This also requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The valuation allowance at March 31, 2024 was $
As of March 31, 2024, the Company has federal net operating loss carry forwards of approximately $
As of March 31, 2024 and 2023, the difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to loss before income taxes is as follows (in percentages):
Statutory federal income tax rate |
|
| ( | )% |
State taxes – net of federal benefits |
|
| ( | )% |
Valuation allowance |
|
| % | |
Income tax rate – net |
|
| % |
FASB Interpretation No. 48 (Fin 48) - Accounting for Uncertain Tax Positions
The Company files income tax returns in the U.S. federal jurisdiction and various state, and local jurisdictions. The Company is no longer subject to U.S. federal income tax examination by tax authorities, with limited exception, for the quarters prior to December 31, 2014. With respect to state and local jurisdictions, with limited exception, the Company is no longer subject to income tax audits prior to December 31, 2014. In the normal course of business, the Company is subject to examination by various taxing authorities. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result from these open tax years.
| 20 |
Based on management’s review of the Company’s tax position, the Company had no significant unrecognized corporate tax liabilities as of March 31, 2024 and June 30, 2023 payable to the Internal Revenue Service due to the net operating loss carry-forward, however, the Company had yet to file its 2005 through 2009 and 2012 through 2021 Federal, New Jersey nor New York Corporate Income Tax Returns.
NOTE 14. UNPAID PAYROLL TAXES
As of March 31, 2024 and June 30, 2023, the Company owed the Internal Revenue Service and New York State payroll related taxes in the amounts of $
IRS Tax Lien
The Internal Revenue Service has placed a federal tax lien on all of the assets of the Company.
NOTE 15. COMMITMENTS AND CONTINGENCIES
Licensing Agreement
On March 31, 2022, the Company entered into a management agreement with TruCash Group of Companies, Inc. (“TruCash’) where the Company is licensing from TruCash certain VISA ICAs and BINs to be used by the Company to offer certain pre-paid cards, mobile apps, loyalty programs, and other merchant related services to its potential clients. The Agreement has a term of five (
Rent
As of March 31, 2024, the Company maintains its corporate address in at 2310 York Street, Suite 200, Blue Island, IL, 60406. This space is provided by the Company’s Chairman, Charles Everhardt, a related party, on a rent free basis at the present time. The Company does not currently have a lease for this space but expects to enter into a month-to-month office lease for this space.
SarahCare leases two properties for its corporate office and its two corporate owned centers. SarahCare’s lease for its first corporate-owned
SarahCare’s lease for its second corporate-owned
On April 21, 2021, the Company, through ten wholly-owned limited liability companies, entered into lease agreements with entities controlled by our Chairman, Charles Everhardt, for ten additional SarahCare locations to be operated by the Company.
SarahCare
The Company is currently in default under its payment obligations in connection with the acquisition of SarahCare. Such default has made the entire balance of the Notes due and payable and has increased the interest rate to 10%, which has caused the original Shareholders of SarahCare to file a complaint against the Company seeking $
| 21 |
NOTE 16. LEASES
Operating Leases
Stow Professional Lease
In connection with the acquisition of Sarah Adult Day Centers, Inc. on March 25, 2021, the Company acquired a facilities lease with
|
| Monthly Rent Payments |
| |||||||||
|
| Base Rent |
|
| Covid-19 Recoup* |
|
| Total Rent |
| |||
April 1, 2021 |
| $ |
|
| $ |
|
| $ |
| |||
May 1, 2021 to December 31, 2021 |
| $ |
|
| $ |
|
| $ |
| |||
January 1, 2022 to December 31, 2022 |
| $ |
|
| $ |
|
| $ |
| |||
January 1, 2023 to December 31, 2023 |
| $ |
|
| $ |
|
| $ |
| |||
January 1, 2024 to December 31, 2024 |
| $ |
|
| $ |
|
| $ |
| |||
January 1, 2025 to December 31, 2025 |
| $ |
|
| $ |
|
| $ |
| |||
________
*The Company has to repay the lessor monthly payments as a result of COVID relief.
Harbor Lease
In connection with the acquisition of Sarah Adult Day Centers, Inc. on March 25, 2021, the Company acquired a facilities lease with
In connection with the acquisition of Sarah Day Care Centers, Inc. on March 25, 2021, the Company acquired a facilities lease with
S. Frank Professional Lease
Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is the incremental borrowing rate, estimated to be
Right-of-use asset is summarized below:
|
| March 31, 2024 |
| |||||||||
|
| Stow Professional Center Lease |
|
| S. Frank Professional Lease |
|
| Total |
| |||
Office lease |
| $ |
|
| $ |
|
| $ |
| |||
Less: accumulated amortization |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Right-of-use asset, net |
| $ |
|
| $ |
|
| $ |
| |||
| 22 |
Operating lease liability is summarized below:
|
| March 31, 2024 |
| |||||||||
|
| Stow Professional Center Lease |
|
| S. Frank Professional Lease |
|
| Total |
| |||
Office lease |
| $ |
|
| $ |
|
| $ |
| |||
Less: current portion |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Long term portion |
| $ |
|
| $ |
|
| $ |
| |||
Maturity of the lease liability is as follows:
Finance leases
|
| March 31, 2024 |
| |||||||||
|
| Stow Professional Center Lease |
|
| S. Frank Professional Lease |
|
| Total |
| |||
Year ending June 30, 2024 |
|
|
|
|
|
|
|
|
| |||
Year ending June 30, 2025 |
|
|
|
|
|
|
|
|
| |||
Year ending June 30, 2026 |
|
|
|
|
|
|
|
|
| |||
Year ending June 30, 2027 |
|
|
|
|
|
|
|
|
| |||
Present value discount |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Lease liability |
| $ |
|
| $ |
|
| $ |
| |||
Commencing during the quarter ended March 31, 2024, the Company leases office equipment under two finance leases with combined monthly payments of $
Finance right of use assets are summarized below:
|
| As of |
|
| As of |
| ||
|
| March 31, |
|
| June 30, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Equipment lease |
| $ |
|
| $ |
| ||
Less accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Finance right of use asset |
| $ |
|
| $ |
| ||
| 23 |
On October 1, 2021, the Company discontinued use of one of its copiers. As a result, the Company recorded an impairment of assets in the amount of $
Finance lease liabilities are summarized below:
|
| As of |
|
| As of |
| ||
|
| March 31, |
|
| June 30, |
| ||
|
| 2024 |
|
| 2022 |
| ||
Equipment lease |
| $ |
|
| $ |
| ||
Less: current portion |
|
| ( | ) |
|
| ( | ) |
Long term portion |
| $ |
|
| $ |
| ||
|
| Equipment |
| |
| Lease | |||
Year Ended June 30, 2024 |
|
|
| |
Year Ended June 30, 2025 |
|
|
| |
Year Ended June 30, 2026 |
|
|
| |
Year Ended June 30, 2027 |
|
|
| |
Total future minimum lease payments |
|
|
| |
Less imputed interest |
|
| ( | ) |
PV of payments |
| $ |
| |
NOTE 17. RELATED PARTY TRANSACTIONS
During the quarters ended March 31, 2024 and 2023, related party transactions were as follows:
As of March 31, 2024, the Company maintains its corporate address in at 2310 York Street, Suite 200, Blue Island, IL, 60406. This space is provided by the Company’s Chairman, Charles Everhardt, a related party, on a rent free basis at the present time. The Company does not currently have a lease for this space but expects to enter into a month-to-month office lease for this space.
On February 21, 2024, the Company signed a note receivable of $
On January 16, 2024, the Company signed a note receivable of $
| 24 |
On January 12, 2024, the Company signed a note receivable of $
As of June 30, 2023, a company founded and partially owned by the Company’s Chairman, Charles Everhardt, has been assigned the $
On January 17, 2023, the Company signed a note receivable of $
On February 8, 2023, the Company signed a note receivable of $
On May 5, 2022, the Company signed a note receivable of $
On March 25, 2022, the Company signed a note receivable of $
On September 28, 2021, the Company signed a note receivable of $
On September 8, 2021 the Company signed a note receivable of $
NOTE 18. SUBSEQUENT EVENTS
The Company has evaluated subsequent events for recognition and disclosure through May 20, 2024, the date the financial statements were available to be issued, and determined that there were no such events requiring adjustment to, or disclosure in, the accompanying consolidated financial statements except as described below.
On or about May 17, 2024, Innovative MedTech, Inc. (“Innovative” or the “Company”) entered into an Exclusive License Agreement (the “Exclusive License Agreement”) with Shear Kershman Labs, a Missouri corporation (“SKL”). SKL has developed Oral Thrush, a mouth wash that treats oral thrush, a condition in which a fungus, Candida albicans, accumulates on the lining of the mouth and sometimes overgrows and causes symptoms, such as creamy white lesions, usually on the tongue or inner cheeks. Under the Exclusive License Agreement, SKL will form a subsidiary to distribute Oral Thrush,
On April 18, 2024, Innovative MedTech, Inc. (the “Company”) terminated Merle Griff, PhD., as the Company’s CEO, and Michael Friedman, the Company’s President and CFO, was appointed as CEO of the Company.
On or about April 17, 2024, the Company was notified that a complaint had been filed against it in the United States District Court for the Northern District of Ohio, Eastern Division (case no. 5:24-cv-00687), by Merle Griff, Adam Griff and Brian Froelich (the “Plaintiffs”), who are the original shareholders of SarahCare, which is wholly owned by the Company, alleging breach of contract and related causes of action in connection with unpaid royalties pursuant to
On March 25, 2024, SarahCare began removing its property from one of its Stowe corporate locations and chose to close down this corporate location on April 30, 2024.
| 25 |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Forward Looking Statements
Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words.
We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this Quarterly Report on Form 10-Q.
Unless stated otherwise, the words “we,” “us,” “our,” “the Company” or “Innovative MedTech” in this Quarterly Report on Form 10-Q collectively refers to Innovative MedTech, Inc., a Delaware corporation (the “Parent Company”), and subsidiaries.
Overview
Innovative MedTech, Inc. (the “Company”), a Delaware corporation, is a provider of health and wellness services. On March 25, 2021, the Company acquired SarahCare for a total of $3,718,833; $2,000,110 was paid in cash and the Company assumed approximately $393,885 in debt due to sellers, and the remaining is payable through a royalty fee liability due in the amount of $1,500,000. With 25 centers (2 corporate and 23 franchise locations) located in 13 states, SarahCare offers seniors daytime care and activities focusing on meeting their physical and medical needs on a daily basis, and ranging from nursing care to salon services and providing meals, to offering engaging and enriching activities to allow them to continue to lead active and engaged lives.
The Company has also been working on launching an RX Vitality wallet digital offering and mobile app. Once implemented and live, the Company’s digital healthcare wallet will be accessible by customers via mobile wallet on both the Apple iOS and Android App Stores. The Company intends to have a physical healthcare card as well.
On April 1, 2022, the Company partnered with TruCash Group of Companies Inc. (“TruCash”), a leading global payments provider, to launch an all-in-one Super Healthcare App, called RX Vitality Wallet, that will be designed to cater to consumers, patients, hospitals, Seniors, and governments, with a solid platform of benefits and online banking. On June 30, 2023 this agreement was canceled.
On April 5, 2022, the Company engaged mPulse Mobile, a leader in conversational AI and digital engagement solutions for the healthcare industry, to drive engagement with the Company’s digital app and wallet (currently under development).
On April 28, 2022, the Company entered into a share exchange agreement to acquire RX Vitality, Inc. (“RX Vitality”), a media and finance advisory company.
On May 13, 2022, the Company entered into a partnership with VSUSA Corp. (“VSUSA”), a non-for-profit organization that empowers Veterans and Seniors by offering services designed to build successful life transitions with access to workforce and independent housing; health services; and social service programs in communities across the United States. The Company’s Chairman is a principal and co-Founder of VSUSA. On June 30, 2023 this agreement was canceled.
On June 1, 2022, the Company announced that Dr. Merle Griff, SarahCare’s Founder and CEO, would also be CEO of the Company.
| 26 |
As of March 31, 2024, the Company had current assets of $274,265. The Company has a limited amount of liquid cash and no other liquid assets on hand a of March 31, 2024, and this is not sufficient to fund operations for the next 12 months. Accordingly, we will be required to raise additional funds to meet our short and long-term planned goals. There can be no assurance that such funds, if available at all, can be obtained on terms reasonable to us. In this regard, we have obtained and will continue to attempt to obtain (short and long term) loans for inventory purchases, new product development, expansion, advertising and marketing. We cannot assure you that we will be successful in obtaining the aforementioned financings (either debt or equity) on terms acceptable to us, or otherwise.
Our unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q have been prepared on a going concern basis, which assumes that we will be able to realize our assets and discharge our obligations in the normal course of business.
Results of Operations for the Three Months Ended March 31, 2024, and March 31, 2023
For the quarter ended March 31, 2024, we recorded gross revenues of $455,164 versus $477,117 for the quarter ended March 31, 2023, as a result of the Company’s ability to close some of the centers for limited amounts of time, and fewer participants coming to the centers.
For the quarter ended March 31, 2024, operating expenses decreased to $1,357,170 from $1,399,220, a $42,050 decrease, or (3.10%), over the quarter ended March 31, 2023. The decrease is due to a decrease in expenses related to the Company’s licensing and general and administrative expenses.
For the quarter ended March 31, 2024, interest expense decreased to $38,644 from $45,226 a decrease of 17.03% over the quarter ended March 31, 2023. This decrease is primarily due to a decrease in interest expense.
For the quarter ended March 31, 2024, we realized a net loss of $909,871 as compared to a net loss of $799,590 for the quarter ended March 31, 2023. The decrease in our net loss of $110,281 was primarily due to a decrease in licensing and general and administrative expenses.
Results of Operations for the Nine months Ended March 31, 2024, and March 31, 2023
For the nine months ended March 31, 2024, we recorded gross revenues of $1,368,564 versus $1,281,619 for the nine months ended March 31, 2023, as a result of the Company’s ability to keep centers open for longer periods of time, and more participants coming to the center more often.
For the nine months ended March 31, 2024, operating expenses decreased to $2,574,131 from $4,099,132, a $1,525,001 decrease, or 59.24%, over the nine months ended March 31, 2023. The decrease is due to a decrease in expenses related to the Company’s licensing and general and administrative expenses.
For the nine months ended March 31, 2024, interest expense decreased to $83,521 from $147,726, a decrease of 76.87% over the nine months ended March 31, 2023. This decrease is primarily due to a decrease in interest expense.
For the nine months ended March 31, 2024, we realized a net loss of $1,263,079 as compared to a net loss of $2,777,154 for the nine months ended March 31, 2023. The decrease in our net loss of $1,514,075 was primarily due to a decrease in licensing and general and administrative expenses.
Liquidity and Capital Resources
Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
| 27 |
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
Inflation
We do not believe that inflation had a significant impact on our results of operations for the periods presented.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of March 31, 2024. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and that such information was not accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.
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Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the principal executive officer and the principal financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets; |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the board of directors; and |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, which assessment identified material weaknesses in internal control over financial reporting. A material weakness is a control deficiency, or a combination of deficiencies in internal control over financial reporting that creates a reasonable possibility that a material misstatement in annual or interim financial statements will not be prevented or detected on a timely basis. Since the assessment of the effectiveness of our internal control over financial reporting did identify a material weakness, management considers its internal control over financial reporting to be ineffective.
Management has concluded that our internal control over financial reporting had the following deficiency:
| ● | We were unable to maintain any segregation of duties within our business operations due to our reliance on just two individuals fulfilling the role of officers. This control deficiency did result in adjustments to our interim and annual financial statements. Accordingly, we have determined that this control deficiency constitutes a material weakness. |
To the extent reasonably possible, given our limited resources, our goal is, upon sufficient operating cash flow and/or capital, to separate the responsibilities of principal executive officer and principal financial officer, intending to rely on two or more individuals. We will also seek to expand our current board of directors to include additional individuals willing to perform directorial functions. Since the recited remedial actions will require that we hire or engage additional personnel, this material weakness may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants.
This Quarterly Report on Form 10-Q does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this Quarterly Report on Form 10-Q.
Changes in Internal Controls over Financial Reporting
During the quarter ended March 31, 2024, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other than disclosed herein, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
On or about April 17, 2024, the Company was notified that a complaint had been filed against it in the United States District Court for the Northern District of Ohio, Eastern Division (case no. 5:24-cv-00687), by Merle Griff, Adam Griff and Brian Froelich (the “Plaintiffs”), who are the original shareholders of SarahCare, which is wholly owned by the Company, alleging breach of breach of contract and related causes of action in connection with unpaid royalties pursuant to the Company’s original purchase agreement in connection with SarahCare, and seeking $1,841,537.01 in damages, plus interests, costs and attorney fees. The Company intends to vigorously defend itself in this matter. The Company has not yet been properly served and is currently in settlement negotiations with the Plaintiffs.
As of March 31, 2024, we were not a party to any material legal proceedings. We currently have thirteen (13) convertible promissory notes that are in default, and we may be subject to legal proceedings or lawsuits from any number of those convertible noteholders, including the below.
On April 7, 2013, three note holders (Brook Hazelton, Benjamin M. Manalaysay, Jr., and Diego McDonald, the “Plaintiffs”), whom together invested a total principal amount of $45,000 in the form of Convertible Promissory Notes (the ”Notes”) to the Company, together filed a “Notice of Commencement of Action Subject to Mandatory Electronic Filing” in the Supreme Count of the State of New York, County of New York. The Plaintiffs alleged that the Company breached their contracts with the Plaintiffs and included causes of action for unjust enrichment and related claims, seeking repayment of each of their respective convertible promissory notes plus interest. On or about February 24, 2014, the three Plaintiffs received judgment against the Company from the court in the amounts of $33,686.82, $8,546.87 and $33,696.69, respectively.
On or about April 17, 2024, the Company was notified that a complaint had been filed against it in the United States District Court for the Northern District of Ohio, Eastern Division (case no. 5:24-cv-00687), by Merle Griff, Adam Griff and Brian Froelich (the “Plaintiffs”), who are the original shareholders of SarahCare, which is wholly owned by the Company, alleging breach of breach of contract and related causes of action in connection with unpaid royalties pursuant to the Company’s original purchase agreement in connection with SarahCare, and seeking $1,841,537.01 in damages, plus interests, costs and attorney fees. The Company intends to vigorously defend itself in this matter.
Our wholly owned subsidiary, SarahCare, is not involved in any legal proceedings at this time.
Except as set forth herein, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings, and management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended March 31, 2024, the Company did not have any unregistered sales of any equity securities.
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Item 3. Defaults Upon Senior Securities.
During the quarter ended March 31, 2024, the Company was in default under the majority of its outstanding legacy convertible notes.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information.
On or about May 20, 2024, Innovative MedTech, Inc. (“Innovative” or the “Company”) entered into an Exclusive License Agreement (the “Exclusive License Agreement”) with Shear Kershman Labs, a Missouri corporation (“SKL”). SKL has developed Oral Thrush, a mouth wash that treats oral thrush, a condition in which a fungus, Candida albicans, accumulates on the lining of the mouth and sometimes overgrows and causes symptoms, such as creamy white lesions, usually on the tongue or inner cheeks. Under the Exclusive License Agreement, SKL will form a subsidiary to distribute Oral Thrush, the Company shall become an 80% owner of the subsidiary, and the Company will issue 2,000,000 shares of the Company’s Common Stock to SKL.
The foregoing description of the Exclusive License Agreement does not purport to be complete and is qualified in its entirety by reference to the Exclusive License Agreement, a copy of which is filed as Exhibit 10.8 to this Current Report on Form 10-Q and incorporated in this Item 5 by reference.
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Item 6. Exhibits.
Exhibit |
| Description |
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| Bylaws (Incorporated by reference to the Company’s Form 10SB filed with the SEC on June 29, 2005) | |
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| Certificate of Merger (redomiciling from New Jersey to Delaware) | |
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| Certificate of Designation of Series A Convertible Preferred Stock | |
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| Consulting Agreement between Innovative MedTech, Inc. and Red Halo, LLC, dated May 2, 2022 | |
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101.INS* |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith
+ Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) and/or Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Commission upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.
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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.
| Innovative MedTech, Inc. (Registrant) | |
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/s/ Michael Friedman | ||
| Michael Friedman Chief Executive Officer |
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| Date: May 20, 2024 |
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EXHIBIT 10.8
Exclusive License Agreement
This Exclusive License Agreement (this “Agreement”), effective as of May 17, 2024 (the “Effective Date”), is by and between Shear Kershman Labs, a Missouri corporation (“Licensor”) and Innovative Medtech Inc., a Delaware corporation, (“Licensee”) (collectively, the “Parties,” or each, individually, a “Party”).
In consideration of the mutual covenants, terms, and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Definitions. Capitalized terms used but not defined elsewhere in this Agreement have the following meanings:
“Affiliate” of a Party means any entity that, at any time during the Term, is more than 50% owned by such Party, owns more than 50% of such Party, or is more than 50% owned by a third party that owns more than 50% of such Party.
“Applicable Law” shall mean applicable laws, rules and regulations, including any rules, regulations, guidelines or other requirements of the Regulatory Authorities (as defined below), that may be in effect from time to time, including but not limited to those of the United States Food and Drug Administration or any successor agency, if applicable.
“Commercially Reasonable Efforts” shall mean, with respect to a Party, those commercially reasonable efforts by that Party similar to the efforts that Party, in good faith, would make in similar circumstances for its own operations without procrastination, taking into consideration safety and efficacy, costs, the market potential of the product, the stage of its development or product life, the clinical setting in which it is expected to be used, competitiveness of the marketplace, regulatory environment, the patent or other proprietary position of the product, and other conditions then prevailing. It is understood that a party’s Commercially Reasonable Efforts will not in any event require that Party to take any action that would be reasonably likely to result in a breach of any other provision of this Agreement, or that the Party in good faith believes may violate any Applicable Law or any order, permit, direction or license of any court or governmental authority having appropriate jurisdiction over the party and subject matter.
“Field” shall mean any and all human and non-human therapeutic uses, prescription and over-the-counter medications and preventatives.
"Know-How" means any and all know-how, technology, inventions, discoveries, ideas, processes, methods, designs, plans, instructions, specifications, formulas, testing and other protocols, settings, and procedures, vendor and supply chain contacts and information, and other confidential or proprietary technical, scientific, medical, engineering, business, or financial information Licensor owns relating to the Licensed Patents, Licensed Products, Trade Secrets and Trademarks.
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“Improvement” means any modification of or improvement or enhancement to any Licensed Patents or Know-How.
“Licensed Patents” means the patents and patent applications listed in Schedule 1 together with all patents that issue therefrom and all continuations, continuations-in-part, divisionals, extensions, substitutions, reissues, re-examinations, and renewals of any of the foregoing, in each case to the extent owned by Licensor.
“Licensed Product” means any product that (a) practices, uses, embodies, is based on, incorporates or utilizes any Licensed Proprietary Rights (b) but for the license granted and assignment made under this Agreement, infringes, misappropriates or otherwise violates any Licensed Proprietary Rights.
“Licensed Proprietary Rights” means the Licensed Patents, Licensed Trademarks, and Licensor’s proprietary rights in and to the Know-How under applicable trade secret law.
“Licensed Trademarks” means the registered trademarks listed in Schedule 2.
“Liquidation Event” means any transaction in which a third party acquires substantially all of equity or assets of Licensee, whether by merger, reorganization, acquisition, sale or otherwise.
“Net Sales” means the gross amount invoiced by Licensee or any of its Affiliates or sublicensees for the sale of Licensed Products during the Term of this Agreement, less the sum of: discounts allowed in amounts customary in the trade; tariff duties; sales, use, or value-added taxes; costs of packaging, transportation, and insurance; and amounts allowed or credited on returns. Transfers of Licensed Products to an Affiliate or a sublicensee for internal use (but not resale) by the Affiliate or sublicensee will be treated as sales by Licensee at Licensee’s list price. The Net Sales calculation for sales or transfers by Licensee to its Affiliates or sublicensees for resale will be based on the amounts invoiced by such Affiliate or sublicensee on the resale of such Licensed Products.
“Regulatory Authority” shall mean any applicable supra-national, federal, national, regional, state, provincial or local regulatory agencies, departments, bureaus, commissions, councils or other government entities regulating or otherwise exercising authority with respect to the distribution, importation, exportation, manufacture, production, use, storage, transport, or clinical testing, pricing or sale of Licensed Product in the FIELD in the TERRITORY, including the FDA or any counterpart of the FDA outside the United States.
“Term” has the meaning set forth in Section 12(a).
"Territory" means worldwide.
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“Valid Claim” means a claim of an unexpired issued patent or pending patent application falling within Licensed Patent, which claim shall not have been withdrawn, cancelled, disclaimed, or held invalid by a court, tribunal, arbitrator, or governmental agency of competent jurisdiction in a final or unappealed or unappealable decision.
2. Grant of Rights.
(a) License Grant. Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee and its Affiliates for the Term an exclusive and non-transferable (except in accordance with Section 16 (Assignment)) license, with the right to sublicense in accordance with Section 2(b), under the Licensed Proprietary Rights to make, have made, use, offer to sell, sell, and import Licensed Products and to use the Know-How in connection therewith, in each case in the Territory. No license or rights are granted to Licensee by implication, estoppel, or otherwise, other than as expressly granted by Licensor under this Section 2.
3. Liquidation. In the event Licensee enters into a definitive agreement for a transaction that would result in a Liquidation Event, Licensee and Licensor work in good faith to negotiate an agreement to assign the Licensed Propriety Rights to the proposed acquirer of Licensee.1
4. Payments/Consideration
(a1) SKL shall set up a subsidiary for Oral Thrush. SK will transfer license into Subsidiary.
IMTH will issue 2,000,000 shares of stock to SKL or its designees for the license and will receive 80% of the Subsidiary
(a2) Royalty. Licensee shall pay to Licensor a royalty on Net Sales of Licensed Products during the Term, in the following amounts:
(i) 10% of Net Sales up to $5,000,000;
(ii) 7.5% of Net Sales in excess of $5,000,000 and up to $10,000,000; and
(iii) 5% of Net Sales in excess of $10,000,000.
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(b) Payment Terms. Licensee shall pay the royalty due under Section 6(a) within thirty (30) days after the end of the calendar quarter in which such payments become due. Licensee shall make all payments due hereunder (i) in US dollars by wire transfer of immediately available funds to a bank account Licensor designates in writing; and (ii) without deduction of exchange, collection, or other charges or withholding or other government-imposed fees or taxes. If Licensor does not receive any payment on or before such payment’s due date, Licensee shall pay to Licensor interest on the overdue payment from the due date to the date Licensor receives such payment at a 1% per month, or if lower, the maximum amount permitted under applicable law.
(c) Royalty Reports. On or before the due date for all payments to Licensor, Licensee shall submit to Licensor a written report setting forth its royalty calculation for the applicable calendar quarter in sufficient detail to permit confirmation of the accuracy of the royalty payment made, including: (i) the gross sales of Licensed Products; (ii) the type and amount of all deductions and offsets allocated with respect to such sales of Licensed Products; (iii) the calculation of Net Sales; and (iv) the applicable royalty rate.
(d) Records and Audit.
(i) Licensee shall keep, in accordance with generally accepted accounting principles, records in sufficient detail to verify the completeness and accuracy of any royalty report submitted under Section 5(c) and the calculation of payments due to Licensor hereunder. Licensee shall maintain such records for at least three (3) years after expiration or termination of this Agreement.
(ii) Licensor may at any time within five (5) years after receiving any royalty report from Licensee, nominate an independent certified public accountant (“Auditor”) to verify such royalty report and payments made to Licensor hereunder. Licensee shall give the Auditor access to Licensee’s records kept in accordance with Section 5(d)(i) upon reasonable notice to Licensee and during Licensee’s normal business hours. All information and materials made available to the Auditor in connection with such audit will be deemed to be Licensee’s Confidential Information. Licensor shall provide to Licensee a copy of the Auditor’s audit report within five (5) days of Licensor’s receipt of the report. If the report shows that payments made by Licensee are deficient, Licensee shall pay Licensor the deficient amount plus interest on the deficient amount, calculated in accordance with Section 5(b), within thirty (30) days after Licensee’s receipt of the audit report. If payments made by Licensee are found to be deficient by more than 5%, Licensee shall pay for the cost of the audit.
5. Intellectual Property Matters.
(a) Existing Intellectual Property. Other than as provided in this Agreement, neither of the Parties grants any right, title, or interest in any patent, information, or other intellectual property right controlled by such Party to any other Party.
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(b) Prosecution and Maintenance.
(i) Licensor shall have the right to control the preparation, filing, prosecution and maintenance of all patents and trademark applications within the Licensed Proprietary Rights, and shall diligently prepare, file, prosecute and maintain such patents and patent applications in the United States and any other jurisdiction(s) elected by Licensee. Licensor will keep Licensee reasonably informed as to material developments with respect to the prosecution and maintenance of the Licensed Patents and Licensed Trademarks. Licensor shall consider in good faith, take into account, and implement where possible the reasonable comments made by Company respecting the preparation and content of any Licensed Patents and Licensed Trademarks. For the purposes of this Agreement, “maintenance” of the Licensed Patent Rights includes post-grant proceedings before the USPTO (including inter partes review, post grant review, and derivation proceedings) or a similar proceeding before a patent administration outside the US, provided that (a) before commencing defense of any such proceedings, Licensor shall reasonably consult with Licensee, including with respect to the choice of legal counsel, and (b) Licensor shall take such acts as reasonably requested by Licensee to ensure coordination between any such proceedings and any enforcement proceedings controlled by the Company pursuant to Section 7(d), and/or any related defense proceedings. The Licensor shall provide the Licensee with all reasonable assistance and cooperation in the patent prosecution efforts provided Section 7(b), including providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution.
(ii) Payment of Patent Prosecution Expenses. Licensee shall be responsible for reimbursing Licensor for all fees and costs incurred on or after the Effective Date for the prosecution and maintenance of all Licensed Patents, including attorneys’ fees, relating to the filing, prosecution and maintenance of the Licensed Patents. License shall reimburse Licensor with such amount within thirty (30) days from the date of receiving an original invoice from Licensor.
(c) Enforcement. Each Party shall promptly notify the other Party in writing of any actual or suspected infringement or misappropriation of the Licensed Proprietary Rights in the Territory, including any known details of such infringement or misappropriation. Licensor has the first right, in its discretion, to bring any action or proceeding with respect to such infringement or misappropriation and to control its conduct (including any settlement). If Licensor does not commence an action or proceeding within sixty (60) days after receipt or delivery of notice concerning any infringement or misappropriation, Licensee may, in its discretion, bring, and control the conduct (including any settlement) of, such action. The Party that does not control any action or proceeding brought under this Section 7(d) shall provide the other Party with all cooperation and assistance that such other Party may reasonably request in connection with such action or proceeding, including joining as a plaintiff if necessary to establish standing. Any damages, profits, and other monetary awards resulting from any such action or proceeding will be applied first to satisfy any unreimbursed expenses and legal fees of the Party bringing such action or proceeding.
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(d) Common Interest. All information exchanged between Licensee’s and Licensor’s representatives pursuant to this Section 7 regarding the preparation, filing, prosecution, maintenance, or enforcement of Licensed Proprietary Rights will be the disclosing Party’s Confidential Information. In addition, the Parties acknowledge and agree that, with regard to such preparation, filing, prosecution, maintenance, and enforcement of the Licensed Proprietary Rights, the interests of the Parties as licensor and licensee are to obtain the strongest patent protection possible, and as such, are aligned and are legal in nature. The Parties agree and acknowledge that they have not waived, and nothing in this Agreement constitutes a waiver of, any legal privilege concerning such Patents, including privilege under the common interest doctrine and similar or related doctrines.
6. Compliance with Laws. Each Party shall comply with all Applicable Laws and regulations in the Territory in exercising its rights and performing its obligations under this Agreement. Without limiting the foregoing, Licensee shall comply with: (a) the patent marking provisions of 35 U.S.C. § 287(a) and the patent marking laws of all applicable countries in the Territory such that Licensee shall mark, and shall cause its Affiliates and Sublicensees to mark, all Licensed Product that are manufactured or sold under this Agreement with the number of each issued patent under the Licensed Patent that applies to such Licensed Product to the extent commercially feasible and consistent with prevailing business practices; and (b) all Applicable Laws concerning the export of any Licensed Product and any associated technical data, materials, or information, including any requirements for obtaining an export license or other governmental approval.
7. Confidentiality. Each Party acknowledges that in connection with this Agreement it will gain access to certain non-public, confidential, or proprietary information of the other Party (“Confidential Information”). Without limiting the foregoing, Licensor’s Confidential Information includes the Know-How and all trade secrets and any confidential information included in or related to the Licensed Patents, including unpublished patent applications and invention disclosures, or the Licensed Trademarks. Confidential Information does not include information that at the time of disclosure is: (a) in the public domain; (b) known to the Party receiving it; (c) rightfully obtained by the receiving Party on a non-confidential basis from a third party; or (d) independently developed by the receiving Party. Each Party shall maintain the other Party's Confidential Information in strict confidence and not disclose it to any other person or entity, except to its employees who have a need to know such Confidential Information for such Party to exercise its rights or perform its obligations hereunder and are bound by written nondisclosure agreements. Notwithstanding the foregoing, each Party may disclose Confidential Information to the limited extent required to comply with an order of a court or other governmental body, or as otherwise necessary to comply with applicable law, provided that the Party making the disclosure pursuant to the order shall first have given written notice to the other Party and made a reasonable effort to obtain a protective order (each an “Authorized Disclosure”). With respect to any Confidential Information that constitutes a trade secret as determined under applicable law, such obligations of non-disclosure will survive the termination or expiration of this Agreement for as long as such Confidential Information remains subject to trade secret protection under applicable law.
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8. Press Releases; SEC Filings. Neither Party shall issue any press release or other public announcement disclosing the existence of this Agreement or any of the terms or conditions of this Agreement or the transaction contemplated by this Agreement without the prior written consent of the other Party, which consent may be given or withheld in the sole discretion of the other Party. Notwithstanding the above, each Party may file a copy of this Agreement or portions thereof with the SEC or other Government Authorities to the extent required under Applicable Law, subject to the legally permissible redaction of either Party’s confidential information.
9. Diligence Requirement. Licensee shall use its Commercially Reasonable Efforts, including through its Affiliates and Sublicensees, to market and commercialize the Licensed Product in the Territory; provided, however, that this obligation will not require that Licensee attempt to commercialize Licensed Product in any country or countries where Licensee or its Affiliate or Sublicensee determines, in an exercise of its reasonable business judgment, that such commercialization could have an adverse effect on concurrent or future commercialization or Net Sales of Licensed Product in one or more other countries, whether due to regulatory factors, reimbursement or pricing policies, or other factors, whether or not similar to the foregoing. Licensor’s sole and exclusive remedy with respect to any failures by Licensee to use such Commercially Reasonable Efforts shall be Licensor’s rights of termination pursuant to Section 15(b)(ii)(A).
10. Representations.
(a) Mutual Representations. Each Party represents and warrants to the other Party that, as of the Effective Date: (i) it is duly organized, validly existing, and in good standing under the laws of the state or jurisdiction of its organization; (ii) it has the full right, power, and authority to enter into and perform its obligations under this Agreement; (iii) the execution of this Agreement by its representative whose signature is set forth at the end hereof has been duly authorized by all necessary corporate action of such Party; and (iv) when executed and delivered by such Party, this Agreement will constitute the legal, valid, and binding obligation of that Party, enforceable against that Party in accordance with its terms.
(b) Licensor Representations. Licensor represents and warrants that: (i) Licensor is the owner of the entire right, title, and interest in and to the Licensed Proprietary Rights; and (ii) Licensor has the right to grant the licenses hereunder; and (iii) Licensor has not granted to any third party any licenses or other rights under the Licensed Proprietary Rights that conflict with rights granted to Licensee under this Agreement.
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(c) Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 9, LICENSOR DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, CONCERNING THE LICENSED PROPRIETARY RIGHTS OR KNOW-HOW, INCLUDING THE VALIDITY, ENFORCEABILITY, OR SCOPE OF ANY LICENSED PATENT OR THE ACCURACY, COMPLETENESS, OR USEFULNESS FOR ANY PURPOSE OF ANY KNOW-HOW OR OTHER INFORMATION OR MATERIALS MADE AVAILABLE BY LICENSOR UNDER THIS AGREEMENT. LICENSOR SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT AND WARRANTIES ARISING FROM A COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE, OR TRADE PRACTICE.
11. Indemnification.
(a) Licensee Indemnification. Licensee shall indemnify, defend, and hold harmless Licensor and officers, directors, employees, and agents against all losses, damages, liabilities, costs (including reasonable attorneys’ fees) resulting from any third-party claim, suit, action, or other proceeding arising out of: (i) Licensee’s or any of its sublicensees’ use of any Licensed Proprietary Rights or Know-How; or (ii) the manufacture, use, or sale of any Licensed Product by or on behalf of Licensee or any of its sublicensees, including any product liability claim, except to the extent caused by Licensor’s gross negligence or willful misconduct.
(b) Indemnification Procedure. Licensor shall promptly notify Licensee in writing of any claim, suit, action, or other proceeding for which it is entitled to indemnification under Section 13(a) (“Indemnified Claim”). Licensee shall control the investigation and defense of the Indemnified Claim and shall employ counsel reasonably acceptable to Licensor to handle and defend the Indemnified Claim, at Licensee’s expense. Licensor shall provide all assistance reasonably requested by Licensee, at Licensee’s expense. Licensee shall not settle any Indemnified Claim in a manner that adversely affects the rights of Licensor without Licensor’s prior written consent. Licensor may participate in and observe the proceedings at its own cost and expense with counsel of its choice.
12. Limitation of Liability. EXCEPT FOR INDEMNIFICATION OBLIGATIONS AND LIABILITY FOR BREACH OF CONFIDENTIALITY, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER OR IN CONNECTION WITH THIS AGREEMENT FOR ANY LOSS OF USE, REVENUE, OR PROFIT OR FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, EXEMPLARY, SPECIAL, OR PUNITIVE DAMAGES, WHETHER ARISING OUT OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, REGARDLESS OF WHETHER SUCH DAMAGE WAS FORESEEABLE AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
13. Term and Termination.
(a) Term. This Agreement shall commence on the Effective Date and, unless terminated earlier in accordance with Section 15(b), shall remain in effect on a Licensed Product-by-Licensed Product basis until the later of: (i) expiration of the last to expire Valid Claim of the Licensed Patents covering such Licensed Product and (ii) ten (10) years after such Licensed Product’s first commercial sale (the “Term”).
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(b) Termination.
(i) Voluntary Termination by Licensee. Licensee shall have the right to terminate this Agreement any time by written notice at least six (6) months in advance and fully settle all payments due to Licensor on or before the effective date of termination. In no event shall the termination of the Agreement release Licensee from the obligation to pay any amounts that became due on or before the effective date of termination.
(ii) By Licensor. Licensor may terminate this Agreement on written notice to Licensee:
(A) if Licensee materially breaches this Agreement and fails to cure such breach within sixty (60) days after receiving written notice thereof;
(B) immediately if Licensee ceases to carry on its business related to this Agreement, liquidates or dissolves;
(C) if Licensee or any of its Affiliates institutes or actively participates as an adverse party in, or otherwise provides material support to, any action, suit, or other proceeding in the Territory to invalidate or limit the scope of any Licensed Patent claim or obtain a ruling that any Licensed Patent claim is unenforceable or not patentable; or
(D) immediately if Licensee fails to pay any amounts due and payable to Licensor under Section 6, and fails to make such overdue payments within thirty (30) days after receiving written notice of such failure.
(c) Effect of Expiration or Termination.
(i) Upon the expiration of this Agreement with respect to a Licensed Product in any country in the Territory, the licenses granted to Licensee under this Agreement with respect to such Licensed Product will become fully-paid, perpetual, and irrevocable in such country.
(ii) Upon any termination of this Agreement:
(A) Licensee shall immediately cease exercising all rights granted under the Licensed Proprietary Rights;
(B) Each Party shall promptly return to the other Party, or delete or destroy, all relevant records and materials in such Party’s possession or control containing the other Party’s Confidential Information; and
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(C) All sublicenses granted by Licensee will automatically terminate; provided, however, that upon the request of any sublicensee who is in good standing under this Agreement and the applicable sublicense agreement, Licensor may, in its discretion, elect to continue such sublicense under a direct license agreement with such sublicensee under the Licensed Proprietary Rights.
(iii) Inventory. Upon the early termination of this Agreement, Licensee and its Affiliates and Sublicensees may complete and sell any work-in-progress and inventory of Licensed Product that exist as of the effective date of termination, provided that (i) Licensee pays Licensor the applicable amounts due on such sales of Licensed Product in accordance with the terms and conditions of this Agreement, and (ii) Licensee and its Affiliates and Sublicensees shall complete and sell all work-in-progress and inventory of Licensed Product within six (6) months after the effective date of termination.
(iv) Pre-termination Obligations. Expiration or termination of this Agreement will not relieve the Parties of any obligations accruing before the effective date of expiration or termination.
(v) Survival. The rights and obligations of the Parties set forth in Section 15(c) and Section 6(d) (Records and Audit), Section 9 (Confidentiality), Section 13 (Indemnification), Section 14 (Limitation of Liability), and Section 17 (Miscellaneous), and any right, obligation, or required performance of the Parties under this Agreement which, by its express terms or nature and context is intended to survive expiration or termination of this Agreement, will survive any such expiration or termination.
14. Assignment. Licensee shall not assign or otherwise transfer any of its rights, or delegate or otherwise transfer any of its obligations or performance, under this Agreement, in each case whether voluntarily, involuntarily, by operation of law, change in control, or otherwise, without Licensor’s prior written consent, except that Licensee may make such an assignment, delegation, or other transfer, in whole or in part, without the Licensor’s consent to an Affiliate. No delegation or other transfer will relieve Licensee of any of its obligations or performance under this Agreement. Any purported assignment, delegation, or transfer in violation of this Section 13 is void. This Agreement is binding upon and inures to the benefit of the Parties and their respective permitted successors and assigns.
15. Miscellaneous.
(a) Further Assurances. Each Party shall, and shall cause their respective Affiliates to, upon the reasonable request, and at the sole cost and expense, of the other Party, promptly execute such documents and take such further actions as may be necessary to give full effect to the terms of this Agreement.
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(b) Independent Contractors. The relationship between the Parties is that of independent contractors. Nothing contained in this Agreement creates any agency, partnership, joint venture, or other form of joint enterprise, employment, or fiduciary relationship between the Parties, and neither Party has authority to contract for or bind the other Party in any manner whatsoever.
(c) Force Majeure. Neither Party will be responsible for delays resulting from causes beyond the reasonable control of such party, including without limitation fire, explosion, flood, war, strike, or riot, provided that the nonperforming party uses commercially reasonable efforts to avoid or remove such causes of nonperformance and continues performance under this Agreement with reasonable dispatch whenever such causes are removed.
(d) No Public Statements. Neither Party may issue or release any announcement, statement, press release, or other publicity or marketing materials relating to this Agreement or, unless expressly permitted under this Agreement, otherwise use the other Party’s trademarks, service marks, trade names, logos, domain names, or other indicia of source, association, or sponsorship, in each case, without the other Party’s prior written consent.
(e) Notices. All notices, requests, consents, claims, demands, waivers, and other communications hereunder (other than routine communications having no legal effect) must be in writing and sent to the respective Party at the addresses indicated below (or at such other address for a Party as may be specified in a notice given in accordance with this Section):
| If to Licensor: | Shear Kershman Labs Email: frank@saratogaequity.com Attention: Frank Maresca
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| If to Licensee: | Innovative MedTech Inc. 2310 York Street Suite 200 Blue Island, Illinois 60406 Attention: Michael Friedman |
Notices sent in accordance with this Section will be deemed effective: (a) when received, if delivered by hand (with written confirmation of receipt); (b) when received, if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or email (in each case, with confirmation of transmission), if sent during normal business hours of the recipient, and on the next day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.
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(f) Interpretation. For purposes of this Agreement: (a) the words “include,” “includes,” and “including” will be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto,” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Sections and Schedules refer to the Sections of and Schedules attached to this Agreement; (y) to an agreement, instrument, or other document means such agreement, instrument, or other document as amended, supplemented, and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement will be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting an instrument or causing any instrument to be drafted.
(g) No Third-Party Beneficiaries. This Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or will confer upon any other Person any legal or equitable right, benefit, or remedy of any nature whatsoever, under or by reason of this Agreement.
(h) Amendment; Waiver. No amendment to this Agreement will be effective unless it is in writing and signed by both Parties. No waiver by any Party of any of the provisions hereof will be effective unless explicitly set forth in writing and signed by the waiving Party. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power, or privilege arising from this Agreement will operate or be construed as a waiver thereof; nor will any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.
(i) Severability. If any term or provision of this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability will not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.
(j) Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Missouri without giving effect to any choice or conflict of law provision or rule that would cause the application of laws of any jurisdiction other than those of the State of Missouri. Any legal suit, action, or proceeding arising out of this Agreement or the matters contemplated hereunder shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules. The arbitration hearing shall take place in St Louis, Missouri before a single arbitrator. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Service of process, summons, notice, or other document by mail to such Party’s address set out herein shall be effective service of process for any suit, action, or other proceeding brought in any such court. Before commencing any legal suit, action or proceeding over any dispute under this Agreement, the Parties agree to, in good faith, attempt to resolve their differences through negotiation and, if negotiation is unsuccessful, then in voluntary, confidential, non-binding mediation using a mediator chosen by their respective attorneys. Good faith is satisfied by preparing a written statement of a Party’s position to be submitted in advance to the mediator and the other Party and attending one-day mediation session. Costs of the mediator will be borne equally by the Parties.
(k) Headings. All headings are for convenience only and shall not affect the meaning of any provision of this Agreement.
(l) Entire Agreement. This Agreement, together with all Schedules and any other documents incorporated herein by reference, constitutes the sole and entire agreement of the Parties with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.
(m) Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will be deemed to be one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| SHEAR KERSHMAN LAB | |||
| By: | |||
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| Name: | Frank Maresca | |
| Title: | CEO | ||
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| INNOVATIVE MEDTECH INC. |
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| By |
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| Name: | Michael Friedman |
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| Title: | CEO |
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SCHEDULE 1
LICENSED PATENTS
| Product Type | Country | Official No. | Status | Title |
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Schedule 2
LICENSED TRADEMARKS
| Application No. | Registration No. | Country | Case Status | Title |
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EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Jordan Friedman, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Innovative MedTech, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 20, 2024 | By: | /s/ Michael Friedman |
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| Michael Friedman Chief Executive Officer (Principal Executive Officer) |
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EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Jordan Friedman, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Innovative MedTech, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 20, 2024 | By: | /s/ Michael Jordan Friedman |
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| Michael Jordan Friedman Chief Financial Officer (Principal Accounting Officer) |
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EXHIBIT 32.1
CERTIFICATION OF
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
I, Michael Jordan Friedman, Chief Executive Officer of Innovative MedTech, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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| (1) | the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: May 20, 2024 | By: | /s/ Michael Friedman |
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| Michael Friedman Chief Executive Officer (Principal Executive Officer) |
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EXHIBIT 32.2
CERTIFICATION OF
PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
I, Michael Jordan Friedman, Chief Financial Officer of Innovative MedTech, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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| (1) | the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: May 20, 2024 | By: | /s/ Michael Jordan Friedman |
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| Michael Jordan Friedman Chief Financial Officer (Principal Accounting Officer) |
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