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Healthcare Integrated Technologies Inc. 10-Q Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Healthcare Integrated Technolog

Filing date:

03/14/2025

TLDR:

ELI5:

This company is trying to make money with new AI safety tech, but they haven’t sold anything yet. They have a lot more cash now because they sold stock, but they’re losing money and need to start making sales to survive.

Accession #:

0001493152-25-010277

Published on

Analyst Summary

  • HITC reported no revenue for the three and six months ended January 31, 2025, compared to $21,769 in the prior year, indicating a failure to monetize its products.
  • Operating expenses increased significantly due to increased staffing, marketing, and stock-based compensation, leading to a substantial net loss of $(1,950,574) for the six months ended January 31, 2025.
  • Cash and cash equivalents increased substantially to $6,206,216 due to proceeds from the issuance of common stock, providing the company with short-term financial stability.
  • Management emphasizes the company’s focus on ambient AI technology solutions and expansion into new markets, but acknowledges the lack of revenue and continued negative cash flow from operations.
  • The company is in default on certain promissory notes and faces litigation related to a guarantee of a loan to a related entity, adding to its financial challenges.
  • Gross Profit Margin, Operating Profit Margin, and Net Profit Margin are not applicable due to zero revenue.
  • Return on Assets (ROA) is -53.6% and Return on Equity (ROE) is -60.7%, indicating significant losses relative to assets and equity.
  • The current ratio is 8.23, indicating strong short-term liquidity due to the recent cash infusion.
  • The debt-to-equity ratio is 0.13, indicating that the company is primarily funded through equity.
  • Revenue growth is -100% due to the lack of revenue in the current period.

Opportunities and Risks

  • Risk: The company has not generated revenue in the current or prior periods, raising concerns about its ability to monetize its products and services.
  • Risk: Significant increases in operating expenses, particularly stock-based compensation, are not sustainable without revenue generation.
  • Risk: The company is in default on certain promissory notes, which could lead to legal action and further financial strain.
  • Risk: The company’s subsidiaries are named as defendants in a lawsuit related to a guarantee of a loan to a related entity.
  • Risk: Management acknowledges that the company’s disclosure controls and procedures are not effective.
  • Opportunity: The company’s expansion into new markets, such as schools and transportation, presents opportunities for revenue growth.
  • Opportunity: The recent capital raises provide the company with the financial resources to invest in product development and marketing.
  • Opportunity: The company’s focus on strategic partnerships could lead to new revenue streams and market access.

Potential Implications

Company Performance

  • Continued losses and lack of revenue generation could lead to further financial strain and potential insolvency.
  • Successful monetization of new product offerings is critical for the company’s long-term viability.
  • Effective management of operating expenses is essential to reduce the cash burn rate and improve financial performance.

Stock Price

  • The lack of revenue and continued losses could negatively impact the company’s stock price.
  • Positive news regarding new product adoption and revenue generation could boost investor confidence and increase the stock price.
  • The company’s high cash burn rate and reliance on stock issuance could create downward pressure on the stock price.

SEC Filing Report: Healthcare Integrated Technologies, Inc. (10-Q)

Executive Summary

This report analyzes Healthcare Integrated Technologies, Inc.’s (HITC) Form 10-Q for the quarterly period ended January 31, 2025. HITC is an AI-ambient technology solutions company focused on safety and security across various sectors. The company reported no revenue for the current and prior periods. However, the company has raised significant capital through private placements. Operating expenses increased substantially due to increased staffing, marketing, and stock-based compensation. The company’s future success hinges on its ability to generate revenue from its new product offerings. Given the lack of revenue and continued losses, a hold rating is recommended. Investors should closely monitor the company’s ability to convert its product offerings into revenue.

Company Overview

Healthcare Integrated Technologies, Inc. (HITC) is an AI-ambient technology solutions company focused on enhancing safety and security across various sectors. The company is marketing products and solutions that utilize advanced AI monitoring tools. Key products include SafeSpace® Fall Monitoring, SafeFace™ Access Control, SafeFace™ Time Compliance, SafeGuard™ Wander Protection, SafeTrace™ Rapid Investigations, and SafeSchool™.

Detailed Analysis

Financial Statement Analysis

Income Statement

HITC reported no revenue for the three and six months ended January 31, 2025, compared to $21,769 in revenue for the same periods in 2024. Operating expenses increased significantly, driven by increased selling, general, and administrative expenses, stock-based compensation, and amortization of intangibles. The net loss for the six months ended January 31, 2025, was $(1,950,574) compared to $(383,663) for the same period in 2024.

Metric Six Months Ended Jan 31, 2025 Six Months Ended Jan 31, 2024 Change
Revenue $0 $21,769 $(21,769)
Operating Expenses $1,918,937 $379,383 $1,539,554
Net Loss $(1,950,574) $(383,663) $(1,566,911)

Balance Sheet

HITC’s cash and cash equivalents increased substantially from $175,562 at July 31, 2024, to $6,206,216 at January 31, 2025, primarily due to proceeds from the issuance of common stock. Total assets increased from $729,327 to $7,277,805. Total liabilities decreased from $1,022,522 to $849,403. Stockholders’ equity (deficit) improved from $(293,195) to $6,428,402.

Metric January 31, 2025 July 31, 2024 Change
Cash and Cash Equivalents $6,206,216 $175,562 $6,030,654
Total Assets $7,277,805 $729,327 $6,548,478
Total Liabilities $849,403 $1,022,522 $(173,119)
Stockholders’ Equity (Deficit) $6,428,402 $(293,195) $6,721,597

Cash Flow Statement

Net cash used in operating activities was $(873,002) for the six months ended January 31, 2025, compared to net cash provided by operating activities of $187,571 for the same period in 2024. Net cash provided by financing activities was $6,903,656 for the six months ended January 31, 2025, compared to $127,797 for the same period in 2024. The increase in cash from financing activities is primarily due to proceeds from the issuance of common stock.

Metric Six Months Ended Jan 31, 2025 Six Months Ended Jan 31, 2024 Change
Net Cash Used in Operating Activities $(873,002) $187,571 $(1,060,573)
Net Cash Provided by Financing Activities $6,903,656 $127,797 $6,775,859

Management’s Discussion and Analysis (MD&A)

Management highlights the company’s focus on ambient AI technology solutions and its expansion into new markets, including schools and transportation. The MD&A emphasizes the company’s world-class executive experience and the addition of new technology team members. Management believes the current cash position adequately supports the company’s five-year strategic plan. However, the MD&A also acknowledges the company’s lack of revenue and continued negative cash flow from operations.

Risks and Opportunities

Risks

  • Lack of Revenue: The company has not generated revenue in the current or prior periods, raising concerns about its ability to monetize its products and services.
  • Increased Operating Expenses: Significant increases in operating expenses, particularly stock-based compensation, are not sustainable without revenue generation.
  • Default on Debt: The company is in default on certain promissory notes, which could lead to legal action and further financial strain.
  • Litigation: The company’s subsidiaries are named as defendants in a lawsuit related to a guarantee of a loan to a related entity.
  • Internal Control Weaknesses: Management acknowledges that the company’s disclosure controls and procedures are not effective.

Opportunities

  • New Product Offerings: The company’s expansion into new markets, such as schools and transportation, presents opportunities for revenue growth.
  • Strong Cash Position: The recent capital raises provide the company with the financial resources to invest in product development and marketing.
  • Strategic Partnerships: The company’s focus on strategic partnerships could lead to new revenue streams and market access.

Uncommon Metrics

  • Stock-Based Compensation as a Percentage of Operating Expenses: Stock-based compensation represents a significant portion of operating expenses, indicating a reliance on equity to compensate employees and consultants.
  • Cash Burn Rate: The company’s negative cash flow from operations indicates a high cash burn rate, which needs to be addressed through revenue generation.

Conclusion and Actionable Insights

HITC has made progress in developing new products and raising capital. However, the company’s lack of revenue and continued losses remain significant concerns. The company’s future success depends on its ability to generate revenue from its new product offerings and manage its operating expenses effectively.

Recommendation: Hold. Investors should closely monitor the company’s ability to convert its product offerings into revenue and improve its financial performance. Key metrics to watch include revenue growth, operating expense management, and cash flow from operations.

1. Commentary

Healthcare Integrated Technologies, Inc. is in a precarious financial position. The company has minimal revenue and substantial operating losses, relying heavily on stock issuance and debt financing. While cash reserves have significantly increased due to recent stock sales, this is unsustainable in the long term without revenue generation. The company’s ability to continue as a going concern is highly dependent on its ability to generate revenue from its SafeSchool™ and other product offerings.

2. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Metric: N/A (Revenue is zero for the three and six months ended January 31, 2025)
    • Trend: Not applicable due to zero revenue.
    • Industry: N/A
  • Operating Profit Margin

    • Metric (3 months ended Jan 31, 2025): N/A (Operating Loss / Revenue = (-1,248,736) / 0)
    • Metric (6 months ended Jan 31, 2025): N/A (Operating Loss / Revenue = (-1,918,937) / 0)
    • Trend: Not applicable due to zero revenue.
    • Industry: N/A
  • Net Profit Margin

    • Metric (3 months ended Jan 31, 2025): N/A (Net Loss / Revenue = (-1,266,436) / 0)
    • Metric (6 months ended Jan 31, 2025): N/A (Net Loss / Revenue = (-1,950,574) / 0)
    • Trend: Not applicable due to zero revenue.
    • Industry: N/A
  • Return on Assets (ROA)

    • Metric (Approximated Annualized): Net Loss (6 months) * 2 / Total Assets = (-1,950,574 * 2) / 7,277,805 = -0.536 or -53.6%
    • Industry: The industry average ROA varies significantly. Given the company’s focus on technology and security solutions, a comparison to software companies might be relevant. However, early-stage companies often have negative ROAs.
  • Return on Equity (ROE)

    • Metric (Approximated Annualized): Net Loss (6 months) * 2 / Total Stockholders’ Equity = (-1,950,574 * 2) / 6,428,402 = -0.607 or -60.7%
    • Industry: Similar to ROA, a negative ROE is not uncommon for early-stage companies.
  • Earnings Per Share (EPS)

    • Metric (Basic and Diluted, 3 months ended Jan 31, 2025): ($0.01)
    • Metric (Basic and Diluted, 6 months ended Jan 31, 2025): ($0.02)

Liquidity

  • Current Ratio

    • Metric: Current Assets / Current Liabilities = 6,995,238 / 849,403 = 8.23
    • Trend: Previous period Current Assets / Current Liabilities = 222,584 / 1,022,522 = 0.22.
    • Industry: A current ratio above 1 indicates that a company’s assets are able to cover its short term liabilities.
  • Quick Ratio (Acid-Test Ratio)

    • Metric: (Current Assets – Inventory) / Current Liabilities = (6,995,238 – 0) / 849,403 = 8.23 (Assuming no inventory)
    • Trend: Previous period (Current Assets – Inventory) / Current Liabilities = (222,584 – 0) / 1,022,522 = 0.22.
    • Industry: A quick ratio above 1 indicates that a company’s assets are able to cover its short term liabilities.
  • Cash Ratio

    • Metric: (Cash and Cash Equivalents + Restricted Cash) / Current Liabilities = (6,206,216 + 756,000) / 849,403 = 8.19
    • Trend: Previous period (Cash and Cash Equivalents + Restricted Cash) / Current Liabilities = (175,562 + 0) / 1,022,522 = 0.17.
    • Industry: A cash ratio above 1 indicates that a company’s assets are able to cover its short term liabilities.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Metric: Total Liabilities / Total Stockholders’ Equity = 849,403 / 6,428,402 = 0.13
    • Trend: Previous period Total Liabilities / Total Stockholders’ Equity = 1,022,522 / (-293,195) = -3.49.
    • Industry: A debt-to-equity ratio below 1 indicates that a company is primarily funded through equity.
  • Debt-to-Assets Ratio

    • Metric: Total Liabilities / Total Assets = 849,403 / 7,277,805 = 0.12
    • Trend: Previous period Total Liabilities / Total Assets = 1,022,522 / 729,327 = 1.40.
    • Industry: A debt-to-assets ratio below 1 indicates that a company is primarily funded through assets.
  • Interest Coverage Ratio (Times Interest Earned)

    • Metric (Approximated Annualized): EBIT (Operating Loss * -2) / Interest Expense (6 months * 2) = (-1,918,937 * -2) / (31,637 * 2) = 60.65
    • Industry: An interest coverage ratio above 1.5 indicates that a company is able to cover its interest payments.

Activity/Efficiency

  • Asset Turnover

    • Metric (Approximated Annualized): Revenue (6 months * 2) / Total Assets = (0 * 2) / 7,277,805 = 0
    • Industry: An asset turnover ratio above 1 indicates that a company is efficiently using its assets to generate revenue.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Metric: Market Cap / Annualized Net Loss. Market Cap = Shares Outstanding * Stock Price = 150,060,450 * 0.28 = 42,016,926. Annualized Net Loss = Net Loss (6 months) * 2 = -1,950,574 * 2 = -3,901,148. P/E = 42,016,926 / -3,901,148 = -10.77
    • Industry: A negative P/E ratio indicates that a company is not profitable.
  • Price-to-Book Ratio (P/B)

    • Metric: Market Cap / Total Stockholders’ Equity = 42,016,926 / 6,428,402 = 6.54
    • Industry: A price-to-book ratio above 1 indicates that a company is overvalued.
  • Price-to-Sales Ratio (P/S)

    • Metric: Market Cap / Annualized Revenue = 42,016,926 / (0 * 2) = N/A
    • Industry: N/A
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Metric: EV = Market Cap + Total Debt – Cash and Cash Equivalents = 42,016,926 + 849,403 – 6,206,216 = 36,660,113. EBITDA = Operating Loss * -1 = 1,918,937. EV/EBITDA = 36,660,113 / 1,918,937 = 19.10
    • Industry: An EV/EBITDA ratio above 10 indicates that a company is overvalued.

Growth Rates

  • Revenue Growth

    • Metric (6 months ended Jan 31): (Current Period Revenue – Prior Period Revenue) / Prior Period Revenue = (0 – 21,769) / 21,769 = -100%
  • Net Income Growth

    • Metric (6 months ended Jan 31): (Current Period Net Income – Prior Period Net Income) / Prior Period Net Income = (-1,950,574 – (-383,663)) / (-383,663) = 408.5%
  • EPS Growth

    • Metric (6 months ended Jan 31): (Current Period EPS – Prior Period EPS) / Prior Period EPS = (-0.02 – (-0.01)) / (-0.01) = 100%

Other Relevant Metrics

  • Company-Specific KPIs

    • The company highlights its SafeSchool™ product and service, and the first order received is a significant milestone. However, no specific KPIs are provided regarding sales pipeline, customer acquisition cost, or product adoption rates.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️