F-7
WELLNESS CENTER USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2016 AND 2015
NOTE 1 BASIS OF PRESENTATION
Organization and Operations
Wellness Center USA, Inc. ("WCUI" or the Company) was incorporated in June 2010 under the laws of the State of Nevada. The Company initially engaged in online sports and nutrition supplements marketing and distribution. Upon consummation of the share exchange agreements with CNS-Wellness Florida, LLC and Psoria-Shield Inc., the Company currently operates in the following business segments: (i) distribution of targeted Ultra Violet ("UV") phototherapy devices for dermatology; (ii) management of top-tier medical practices in the interventional and multi-modal pain management sector; and (iii) authentication and encryption products and services.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the year ended September 30, 2016, the Company incurred a net loss of $2,471,312 and used cash in operations of $1,054,756, and had a shareholders deficit of $754,700 as of September 30, 2016. These factors raise substantial doubt about the Companys ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Companys ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
At September 30, 2016, the Company had cash on hand in the amount of $89,249. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital soon to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, we have funded our operations primarily through equity and debt financings, and we expect to continue to rely on these sources of capital in the future. During the year ended September 30, 2016, the Company raised $714,200 through the sale of its common stock.
No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case of equity financing.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The Company's consolidated subsidiaries and/or entities are as follows:
|
|
|
|
Name of consolidated subsidiary or entity
|
State or other jurisdiction of incorporation or organization
|
Date of incorporation or formation
(date of acquisition/disposition, if applicable)
|
Attributable interest
|
|
|
|
|
Psoria-Shield Inc. (PSI)
|
The State of Florida
|
June 17, 2009
(August 24, 2012)
|
100%
|
National Pain Centers, Inc. (NPC)
|
The State of Nevada
|
January 24, 2014
(February 28, 2014)
|
100%
|
StealthCo, Inc. (StealthCo)
|
The State of Illinois
|
March 18, 2014
|
100%
|
Psoria Development Company LLC. (PDC)
|
The State of Illinois
|
January 15, 2015
|
50%
|
Intercompany balances and transactions have been eliminated in consolidation.
The Company has determined that its existing management services agreement with National Pain Center, LLC (NPC, LLC) does not meet the requirements for consolidation under U.S. generally accepted accounting principles. Specifically, the Company does not have an equity ownership interest in NPC, LLC. Furthermore, the Company's service agreement specifically does not give the Company "control" of NPC, LLC as the Company does not have exclusive authority over decision making and the Company does not have a financial interest in NPC, LLC (See Note 9).
F-8
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in valuing our intangible assets and goodwill for impairment, valuation of inventory and obsolescence, valuations of stock-based compensation calculations and derivative liabilities, among others. Actual results could differ from these estimates.
Income (Loss) Per Share
Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. For the years ended September 30, 2016 and 2015, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At September 30, 2016 and 2015, the dilutive impact of outstanding stock options for 5,227,500 and 5,172,500 shares, respectively, and outstanding warrants for 54,938,158 and 36,371,578 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.
Revenue Recognition
The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. In addition to the aforementioned general policy, the following are the specific revenue recognition policies for each major category of revenue:
(i)
Sale of products
:
The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the vessel or rail company and title transfers upon shipment, based on free on board (FOB) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.
(ii)
Management fees of medical practice:
The Company receives management fees from the management services it provides to a medical practice owned by a director and shareholder of the Company. The Company earns and records 50% of the fees the medical practice collects as management fees when collected per management service agreement. Revenue is recorded net of $200,000 and $150,000 of salary paid to the director for the years ended September 30, 2016 and 2015.
(iii)
Consulting services:
Revenue is recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured.
Payments received before the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue. Deferred revenue at September 30, 2016 and 2015 was $77,375 and $37,500, respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is computed on a first-in, first-out basis. The Company provides inventory reserves based on excess and obsolete inventories determined primarily by future demand forecasts. The write down amount is measured as the difference between the cost of the inventory and market based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
F-9
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The Company has determined the estimated useful lives of its property and equipment, as follows:
|
|
Computer equipment
|
5 years
|
Medical equipment
|
5 years
|
Furniture and fixtures
|
7 years
|
Vehicles
|
3 years
|
Software
|
3 years
|
Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the related accounts and the resulting gain or loss is reflected in the statements of operations.
Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.
Income Taxes
Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The Company recorded a valuation allowance against its deferred tax assets as of September 30, 2016 and 2015.
The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.
Fair Value measurements
The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars 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 maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:
·
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 fair value of the assets or liabilities.
During the year ended September 30, 2015, the Companys operations included the fair value of derivative liabilities, which were based on Level 2 measurements.
The carrying amounts of financial instruments such as cash, inventories, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments.
F-10
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Certain of the convertible notes issued during the year ended September 30, 2015 gave rise to derivative liabilities. Such derivative liabilities were extinguished during the year ended September 30, 2015 upon conversion and extinguishment of the notes.
Goodwill
Goodwill represents the excess of the cost of an acquired entity over the fair value of the net assets at the date of acquisition. Goodwill recorded as part of a business combination is not amortized; rather, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired. At September 30, 2016 and 2015, the Company recorded impairment charges of $55,316 and $2,861,287 on its recorded goodwill based on impairment tests performed on those dates and recorded such charges in the accompanying consolidated statements of operations for the years ended September 30, 2016 and 2015.
Intangible Assets Other Than Goodwill
The Company amortizes the acquisition costs of intangible assets other than goodwill on a straight-line basis over the estimated useful lives of the respective assets. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. The Companys long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. At September 30, 2016 and 2015, the Company recorded impairment charges of $294,323 and $2,102,127 on its recorded intangible assets based on impairment tests performed on those dates, and recorded such charges in the accompanying consolidated statements of operations for the years ended September 30, 2016 and 2015.
Non-controlling Interest
Non-controlling interest represents the non-controlling interest holders proportionate share of the equity of the Companys majority-owned subsidiary, PDC. Non-controlling interest is adjusted for the non-controlling interest holders proportionate share of the earnings or losses and other comprehensive income (loss), if any, and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.
Stock-Based Compensation
The Company periodically grants stock options and warrants to employees and non-employees in non-capital raising transactions as compensation for services rendered. The Company accounts for stock option and stock warrant grants to employees based on the authoritative guidance provided by the Financial Accounting Standards Board where the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and stock warrant grants to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board where the value of the stock compensation is determined based upon the measurement date at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option or warrant grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.
F-11
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The fair value of the Companys common stock option and warrant grants are estimated using a Black-Scholes Merton option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes Merton option pricing model could materially affect compensation expense recorded in future periods.
Recently Issued Accounting Pronouncements
In July 2015, the FASB issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory, which requires that inventory within the scope of ASU 2015-11 be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not impacted by the new guidance. ASU 2015-11 applies to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for public business entities in fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2015-11 on the Companys financial statements and disclosures.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Companys financial statements and disclosures.
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Companys financial statements and disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Companys present or future consolidated financial statements.
Reclassifications
Certain amounts reported in the September 30, 2015 financial statements have been reclassified to conform to the current period presentation.
F-12
NOTE 3 INVENTORIES
Inventories consist of the following at September 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
|
September 30,
2015
|
|
|
|
|
|
|
Raw materials
|
|
$
|
-
|
|
|
$
|
12,718
|
Purchased parts for assembly
|
|
|
-
|
|
|
|
134,385
|
Finished goods
|
|
|
79,169
|
|
|
|
66,398
|
Total inventories
|
|
$
|
79,169
|
|
|
$
|
213,501
|
|
|
|
|
|
|
|
|
During the year ended September 30, 2016, the Company provided a reserve of $80,770 that is included in cost of goods sold to account for its estimate of slow moving and obsolete inventory.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at September 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
|
September 30,
2015
|
|
|
|
|
|
|
Vehicles
|
|
$
|
15,000
|
|
|
$
|
15,000
|
Computer equipment
|
|
|
9,058
|
|
|
|
6,810
|
Furniture and fixtures
|
|
|
24,966
|
|
|
|
24,966
|
Medical equipment
|
|
|
18,889
|
|
|
|
18,889
|
Software
|
|
|
23,207
|
|
|
|
23,207
|
Leasehold improvements
|
|
|
15,170
|
|
|
|
15,170
|
|
|
|
106,290
|
|
|
|
104,042
|
Less: accumulated depreciation and amortization
|
|
|
(90,469)
|
|
|
|
(74,418)
|
Property and equipment, net
|
|
$
|
15,821
|
|
|
$
|
29,624
|
|
|
|
|
|
|
|
|
Depreciation expense for the years ended September 30, 2016 and 2015 was $16,051 and $12,316, respectively.
NOTE 5 INTANGIBLE ASSETS
Intangible assets consisted of the following at September 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
|
September 30,
2015
|
|
|
|
|
|
|
Patents and exclusive licenses
|
|
$
|
366,537
|
|
|
$
|
361,291
|
Acquired technologies
|
|
|
2,095,000
|
|
|
|
2,095,000
|
Trademarks
|
|
|
630,000
|
|
|
|
630,000
|
|
|
|
3,091,537
|
|
|
|
3,086,291
|
Less: accumulated amortization
|
|
|
(722,587)
|
|
|
|
(655,321)
|
Less: accumulated impairment
|
|
|
(2,368,950)
|
|
|
|
(2,074,627)
|
Intangible assets, net
|
|
$
|
-
|
|
|
$
|
356,343
|
|
|
|
|
|
|
|
|
Amortization expense for the years ended September 30, 2016 and 2015 was $67,266 and $272,987, respectively. During the years ended September 30, 2016 and 2015, the Company recorded an impairment of $294,323 and $2,102,127 relating to the intangible assets.
F-13
NOTE 6 GOODWILL
Goodwill, stated at cost, less accumulated impairment, consists of the following at September 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
|
September 30,
2015
|
|
|
|
|
|
|
Goodwill
|
|
$
|
2,916,603
|
|
|
$
|
2,916,603
|
Less: accumulated impairment
|
|
|
(2,916,603)
|
|
|
|
(2,861,287)
|
Goodwill, net
|
|
$
|
-
|
|
|
$
|
55,316
|
|
|
|
|
|
|
|
|
During the years ended September 30, 2016 and 2015, the Company recorded impairment charges of $55,316 and $2,861,287, respectively, relating to the recorded goodwill.
NOTE 7 LOANS PAYABLE
Notes issued during the year ended September 30, 2015
As of September 30, 2014, the Company had outstanding notes payable of $24,000. During the year ended September 30, 2015, the Company issued $165,000 of notes payable for cash, and notes payable of $75,000 were converted in to 1,061,429 shares of common stock and warrants to acquire 2,142,858 shares of common stock valued in the aggregate at $218,300. The notes have various interest rates, varying between 3% and 10% per annum. Certain loans are due on demand and all loans are due by September 2016. At September 30, 2015, loans payable totaling to $114,000 was outstanding.
Upon conversion of the $75,000 notes payable during the year ended September 30, 2015, the Company issued 1,061,429 shares of common stock with a fair value of $74,300 as determined by the trading price on the date of conversion and warrants to acquire 2,142,858 shares of common stock with a fair value of $144,000 as determined by a Black-Scholes option pricing model with a stock price of $0.07, volatility of 148.04% and risk-free rate of 1.40%. The aggregate fair value of the common shares and warrants issued of $218,300 in excess of the $75,000 note converted was recorded as a loss on conversion of the note of $143,300.
Notes issued during the year ended September 30, 2016
During the year ended September 30, 2016, unsecured convertible loans of $82,300 with interest at a rate of 10% per annum were issued for cash. The notes also contained a conversion feature that allowed the note holder to convert the notes at a rate of $.09 per share, the trading value of the shares on the date of the issuance of the notes. As the conversion price embedded in the note agreements was equal to the trading price of the common stock on the date of issuance, no beneficial conversion feature was recognized at the date of issuance. In addition, upon issuance of certain of these notes, the Company granted 135,000 shares of common stock with a fair value of $18,900 to the holders, which has been recorded as an additional finance cost.
During the year ended September 30, 2016 notes with a face value of $187,500 were converted into 2,020,221 shares of common stock and 2,369,221 warrants with an aggregate fair value of $442,023 as follows:
Notes payable of $117,500 issued during the year ended September 30, 2016 were converted into 1,322,221 shares of common at $0.09 per share in accordance with their original conversion terms. In accordance with the note agreements, the company also issued to the holders of the notes warrants to acquire 1,322,221 shares of common stock valued at $108,422 upon their election to convert. The fair value of the warrants granted of $108,422 was recorded as a cost of conversion.
Notes payable of $69,800 issued during the year ended September 30, 2015 were converted into 698,000 shares of common stock with a fair value of $125,640 based on the trading price of the common shares on the date of conversion.. The Company also agreed to issue to the note holders warrants to acquire 1,047,000 shares of common stock with a fair value of $90,461.
F-14
NOTE 7 LOANS PAYABLE (CONTINUED)
Notes issued during the year ended September 30, 2016 (Continued)
The aggregate fair value of the common shares and warrants to acquire commons shares issued of $442,023 in excess of the face amount of the notes of $187,500 was recognized as a cost of $256,223 upon conversion of the notes. The fair value of the warrants was determined with the use of a Black-Scholes option pricing model with stock prices ranging from $0.09 to $0.10, volatility of 140.9% - 151.3% and risk-free rate of 0.86% - 1.44%.
As of September 30, 2016, 1,322,221 of the common shares granted with a value of $117,500 have yet to be issued and are reflected as common stock issuable on the accompanying balance sheet.
As of September 30, 2016, loans payable of $9,000 were outstanding and are due on demand.
NOTE 8 CONVERTIBLE NOTE AGREEMENT
On April 16, 2014, the Company (the Borrower) entered into a Promissory Note Agreement (the Note) with an investor (the Lender) for up to $350,000 principal that was to be transferred in tranches. Borrowings under this note were as follows:
On April 16, 2014 the Company issued a note in the principal amount of $166,667 with a 10% Original Issuance Discount ("OID") and 12% one-time interest if not being fully repaid on or before 90 days from the payment date. The note is due two year from the date of issuance, convertible after 180 days from the payment date as of October 16, 2014 at the lesser of $0.70 or 65% of the two lowest trade prices for the 25 trade day period before the conversion date. On July 15, 2014 the Company accrued the one-time interest charge of $20,000 on the note.
On June 23, 2014 the Company issued a note in the principal amount of $55,556 with a 10% Original Issuance Discount ("OID") and 12% one-time interest if not being fully repaid on or before 90 days from the payment date. The note is due two years from the date of issuance, convertible after 180 days from the payment date as January 22, 2015 at the lesser of $0.70 or 65% of the two lowest trade price for the 25 trade day period before the conversion date. On September 23, 2014 the Company accrued the one-time interest charge of $6,667 on the note.
As of September 30, 2014, $222,223 of principal and $26,667 of accrued interest was due under these note agreements.
During the period from October 16 to January 5, 2015, the note holder converted $90,572 of the principal to 1,550,000 shares of the Company's common stock ranging from $0.041 to $0.071 per share. On January 14, 2015, the note holder converted $4,250 of the principal and the accrued interest of $26,667 to 750,000 shares of the Company's common stock at $0.041 per share.
On March 19, 2015, the Company entered into a Note Termination Agreement terminating the Promissory Note with the remaining principal balance of $127,401 with the Lender. Pursuant to the Note Termination Agreement executed, the Lender agreed to permit full repayment of the Note in the sum of $200,000 payable in two installments of $100,000 each on March 20, 2015, and on April 24, 2015, respectively, resulting in an additional financing charge of $72,600. In exchange for the agreed upon premium to be paid by the Company, the Lender no longer has the right to convert any portion of the remaining loan balance into the Company's shares, unless the Company defaults on its repayment terms. On March 19, 2015 the Company completed the first payment to Lender in the amount of $100,000. On April 20, 2015, the Company completed all payments under the Note Termination Agreement and no further amounts were due as of September 30, 2015.
Upon issuance of the Convertible notes, the Company considered the current FASB guidance of "Contracts in Entitys Own Stock" which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability of whether or not within the issuers control means the instrument is not indexed to the issuers own stock. Accordingly, the Company determined that the conversion prices of the Notes were not a fixed amount because they were subject to an adjustment based on the occurrence of future offerings or events.
F-15
NOTE 8 CONVERTIBLE NOTE AGREEMENT (CONTINUED)
As a result, the Company determined that the conversion features of the Notes were not considered indexed to the Companys own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance. The Company determined that upon issuance of the Notes, the initial fair value of the embedded conversion feature was $171,124. As such, the Company recorded a $171,124 derivative liability was recorded as debt discount offsetting the fair value of the Notes. The discount was being amortized using the effective interest rate method over the life of the debt instruments. During the year ended September 30, 2015 the Company recorded a cost in the increase in the fair value of derivative of $47,404 during the time the derivative was outstanding. During the period notes with a corresponding derivative with a value of $92,398 were converted, and the remaining balance of $126,130 was extinguished upon termination of the note and the aggregate amount of $218,528 was recorded as a gain on extinguishment.
The Company utilized a third party valuation consultant to assist the Company to fair value the compound embedded derivatives using a multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model. The derivative instruments were valued as of issuance; conversion; redemption and each quarterly reporting period. The following assumptions were used for the valuation of the derivative liability related to the notes:
·
The underlying stock price $0.1348 down to $0.1082 was used as the fair value of the common stock;
·
The note face amounts (principal, plus OID, plus accrued interest) as of as 10/16/14 totaled $186,666 and $62,222 (includes 1 time interest payment of 12% after 90 days from issuance) with $90,571 in conversions netting $158,318 as of 12/31/14 and $30,966.88 in conversions on 1/14/15 netting $127,400.76. The note effectively converts at a discount of 45.63% to 55.58% at the quarters end.
·
The Holder would redeem based on availability of alternative financing, 0% of the time increasing 1.0% monthly to a maximum of 10%;
·
The Holder would automatically convert (most notes included 180 day conversion delay at issuance) the note at the maximum of 2 times the conversion price if the company was not in default. With the target conversion price dropping as maturity approaches; and the Holder would automatically convert the note at maturity if the registration (after 120 days) was effective and the company was not in default;
·
The projected annual volatility for each valuation period was based on the Company historical volatility;
|
|
|
|
|
1 year
|
|
1 year
|
12/31/14
|
119%
|
3/11/15
|
134%
|
1/26/15
|
124%
|
3/12/15
|
134%
|
1/29/15
|
125%
|
3/18/15
|
136%
|
2/9/15
|
127%
|
3/20/15
|
136%
|
2/26/15
|
131%
|
3/31/15
|
138%
|
NOTE 9 SHAREHOLDERS EQUITY
Authorized shares
During the year ended September 30, 2016, we were authorized by our Articles of Incorporation to issue up to 75,000,000 shares of common stock, par value $0.001 per share. As of September 30, 2016 there were 74,968,352 shares of common stock issued and outstanding. Holders of shares of common stock have full voting rights, one vote for each share held of record. Stockholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to stockholders upon liquidation. Stockholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable. Subsequent to September 30, 2016, the Company amended its Articles of Incorporation to authorize it to issue up to 185,000,000 shares of common stock, par value $0.001 per share, through filing of a Certificate of Amendment on January 12, 2017.
F-16
NOTE 9 SHAREHOLDERS EQUITY (CONTINUED)
Common shares issued for services
During the year ended September 30, 2015, the Company issued 1,978,333 shares of its common stock for services valued at $239,633. The shares were valued at the trading price of the common stock at the date of issuance.
During the year ended September 30, 2016, the Company issued 1,312,000 shares of its common stock for services valued at $119,800. The shares were valued at the trading price of the common stock at the date of issuance.
Common shares issued for repayment of accounts payable
During the year ended September 30, 2016, the Company issued 1,000,000 shares of its common stock valued at $100,000 for repayment of consulting fees due of $60,000. The shares were valued at the trading price of the common stock at the date of issuance. The Company recorded a $40,000 loss from extinguishment of debt relating to the repayment.
Common shares issued for cash
During the year ended September 30, 2015, the Company raised $950,425 from the sale of 11,563,127 shares of its common stock. In connection with the sale, the Company issued warrants to the shareholders to purchase 18,814,176 shares of the Companys common stock. The warrants expire five years from the date of grant and have exercise prices ranging from $0.15 per share to $0.25 per share.
During the year ended September 30, 2016, the Company raised $714,200 from the sale of 6,918,668 shares of its common stock. In connection with the sale, the Company issued warrants to the shareholders to purchase 9,687,168 shares of the Companys common stock. The warrants expire five years from the date of grant and have exercise prices ranging from $0.15 per share to $0.18 per share.
During the year ended September 30, 2016, the Company received $306,000 from several investors to purchase 3,591,429 shares of the Companys common stock. In connection with the sale, the Company issued warrants to the shareholders to purchase 7,982,857 shares of the Companys common stock. The warrants expire five years from the date of grant and have an exercise prices ranging from $0.12 to $0.15 per share. As of September 30, 2016, the shares had not been issued to the investors.
Stock Options
On December 22, 2010, effective retroactively as of June 30, 2010, the Companys board of directors approved the adoption of the 2010 Non-Qualified Stock Option Plan (2010 Option Plan) by unanimous consent. The 2010 Option Plan was initiated to encourage and enable officers, directors, consultants, advisors and key employees of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. A total of 7,500,000 of the authorized shares of the Companys common stock may be subject to, or issued pursuant to, the terms of the plan.
The Companys policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. Additionally, the Companys policy is to issue new shares of common stock to satisfy stock option exercises. The Company applied fair value accounting for all share based payments awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.
During the year ended September 30, 2015, the Company issued options to purchase 1,200,000 shares of its common stock to an officer and a Director of the Company with exercise prices ranging from $0.11 to $0.25 per share. The options vested immediately and expire five years from the date of grant. During the year ended September 30, 2015, the Company valued the options using a Black-Scholes option pricing model and recorded $111,490 of stock compensation for the value of the options.
F-17
NOTE 9 SHAREHOLDERS EQUITY (CONTINUED)
Stock Options (Continued)
The assumptions used for options granted during the year ended September 30, 2015 are as follows:
|
|
|
|
Exercise price
|
|
$
|
0.11 - 0.19
|
Expected dividends
|
|
|
-
|
Expected volatility
|
|
|
126.1% - 148.3%
|
Risk free interest rate
|
|
|
0.73% - 0.89%
|
Expected life of options
|
|
|
5
|
During the year ended September 30, 2015, stock options were exercised to purchase 1,600,000 shares of the Companys common stock for $16,000.
During the year ended September 30, 2016, the Company issued options to purchase 250,000 shares of its common stock to an officer of the Company with exercise prices ranging from $0.10 to $0.15 per share. The options vested immediately and expire five years from the date of grant. During the year ended September 30, 2016, the Company valued the options using a Black-Scholes option pricing model and recorded $22,631 of stock compensation for the value of the options.
During the year ended September 30, 2016, the Company issued options to purchase 5,000 shares of its common stock to a consultant with an exercise price of $0.09 per share. The options vested on August 31, 2016 and expire five years from the date of grant. During the year ended September 30, 2016, the Company valued the options using a Black-Scholes option pricing model and recorded $550 of stock compensation for the value of the options.
The assumptions used for options granted during the year ended September 30, 2016 are as follows:
|
|
|
|
Exercise price
|
|
$
|
0.10
|
Expected dividends
|
|
|
-
|
Expected volatility
|
|
|
139.0% - 152.2%
|
Risk free interest rate
|
|
|
0.65% - 1.19%
|
Expected life of options
|
|
|
5
|
During the year ended September 30, 2016, stock options were exercised to purchase 200,000 shares of the Companys common stock for $2,000.
The table below summarizes the Companys stock option activities for the year ended September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Option Shares
|
|
Exercise
Price Range
Per Share
|
|
Weighted Average Exercise Price
|
|
Fair Value
at Date of Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2014
|
|
5,572,500
|
|
$
|
0.01 2.00
|
|
$
|
0.54
|
|
$
|
1,404,598
|
Granted
|
|
1,200,000
|
|
|
0.11 0.25
|
|
|
0.15
|
|
|
111,490
|
Cancelled
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Exercised
|
|
(1,600,000)
|
|
|
0.01
|
|
|
0.01
|
|
|
-
|
Expired
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Balance, September 30, 2015
|
|
5,172,500
|
|
$
|
0.01 - 2.00
|
|
$
|
0.6
|
|
$
|
1,516,088
|
Granted
|
|
255,000
|
|
|
0.10 - 0.15
|
|
|
0.12
|
|
|
23,181
|
Cancelled
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Exercised
|
|
(200,000)
|
|
|
0.01
|
|
|
0.01
|
|
|
-
|
Expired
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Balance, September 30, 2016
|
|
5,227,500
|
|
$
|
0.01 2.00
|
|
$
|
0.6
|
|
$
|
1,539,269
|
Vested and exercisable, September 30, 2016
|
|
5,227,500
|
|
$
|
0.01 - 2.00
|
|
$
|
0.6
|
|
$
|
1,539,269
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested, September 30, 2016
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
The aggregate intrinsic value for option shares outstanding at September 30, 2016 was $4,550.
F-18
NOTE 9 SHAREHOLDERS EQUITY (CONTINUED)
Stock Options (Continued)
The following table summarizes information concerning outstanding and exercisable options as of September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Range of Exercise Prices
|
|
Number
Outstanding
|
|
Average Remaining Contractual
Life (in years)
|
|
Weighted Average
Exercise Price
|
|
Number
Exercisable
|
|
Average Remaining Contractual
Life (in years)
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.01- 0.39
|
|
1,767,500
|
|
3.59
|
$
|
0.14
|
|
1,767,000
|
|
3.59
|
$
|
0.14
|
0.40 - 0.99
|
|
2,060,000
|
|
2.47
|
|
0.40
|
|
2,060,000
|
|
2.47
|
|
0.40
|
1.00 - 1.99
|
|
750,000
|
|
4.25
|
|
1.00
|
|
750,000
|
|
4.25
|
|
1.00
|
2.00
|
|
650,000
|
|
4.25
|
|
2.00
|
|
650,000
|
|
4.25
|
|
2.00
|
$0.01 - 2.00
|
|
5,227,500
|
|
3.32
|
$
|
0.60
|
|
5,227,500
|
|
3.32
|
$
|
0.60
|
As of September 30, 2016, there were 2,272,500 shares of stock options remaining available for issuance under the 2010 Plan.
Stock Warrants
During the year ended September 30, 2015, the Company issued warrants to purchase 19,974,034 shares with exercise prices of $0.15 and $0.25 per share as part of the sale of equity units. The warrants expire five years from the date of grant.
During the year ended September 30, 2015, the Company issued warrants to purchase 500,000 shares with an exercise price of $0.25 per share expiring five years from the date of grant for consultant services. The value of the warrants using a Black-Scholes option pricing model, were valued at $23,600.
During the year ended September 30, 2015, the Company issued warrants to purchase 2,142,858 shares with an exercise price of $0.15 per share as part of the conversion of loans payable to equity. The warrants expire five years from the date of grant.
During the year ended September 30, 2015, warrants were exercised to purchase 800,000 shares of the Companys common stock for $8,000.
During the year ended September 30, 2016, the Company issued warrants to purchase 17,670,025 shares with exercise prices of $0.12 and $0.18 per share as part of the sale of equity units. The warrants expire five years from the date of grant.
Also during the year ended September 30, 2016, the Company issued warrants to purchase 2,369,221 shares with an exercise price of $0.15 per share as part of the conversion of loans payable to equity (see Note 7). The warrants expire five years from the date of grant.
During the year ended September 30, 2016, warrants were exercised to purchase 300,000 shares of the Companys common stock for $3,000.
F-19
NOTE 9 SHAREHOLDERS EQUITY (CONTINUED)
Stock Warrants (Continued)
The table below summarizes the Companys warrants activities for the years ended September 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Warrant Shares
|
|
Exercise
Price Range
Per Share
|
|
Weighted Average Exercise Price
|
|
Fair Value at Date of Issuance
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2014
|
14,554,686
|
|
$
|
0.01 - 2.31
|
|
$
|
0.46
|
|
$
|
1,469,871
|
|
$
|
-
|
Granted
|
22,616,892
|
|
|
0.15 - 0.25
|
|
|
0.18
|
|
|
427,183
|
|
|
-
|
Canceled
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Exercised
|
(800,000)
|
|
|
0.01
|
|
|
0.01
|
|
|
-
|
|
|
-
|
Expired
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Balance, September 30, 2015
|
36,371,578
|
|
$
|
0.01 - 2.31
|
|
$
|
0.32
|
|
$
|
1,840,934
|
|
$
|
-
|
Granted
|
20,039,246
|
|
|
0.12 - 0.18
|
|
|
0.14
|
|
|
222,703
|
|
|
-
|
Cancelled
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Exercised
|
(300,000)
|
|
|
0.01
|
|
|
0.01
|
|
|
-
|
|
|
-
|
Expired
|
(1384,334)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Balance, September 30, 2016
|
54,938,158
|
|
$
|
0.01 2.31
|
|
$
|
0.25
|
|
$
|
-
|
|
$
|
-
|
Earned and exercisable, September 30, 2016
|
54,938,158
|
|
$
|
0.01 - 2.31
|
|
$
|
0.28
|
|
$
|
2,119,957
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested, September 30, 2016
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
The following table summarizes information concerning outstanding and exercisable warrants as of
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Outstanding
|
|
Warrants Exercisable
|
Range of Exercise Prices
|
|
Number Outstanding
|
|
Average Remaining Contractual Life (in years)
|
|
Weighted Average Exercise Price
|
|
Number Exercisable
|
|
Average Remaining Contractual Life (in years)
|
|
Weighted Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.01 0.20
|
|
|
36,234,807
|
|
|
3.51
|
|
$
|
0.15
|
|
|
36,234,807
|
|
|
3.51
|
|
$
|
0.15
|
0.21 0.49
|
|
|
13,783,840
|
|
|
2.58
|
|
|
0.34
|
|
|
13,783,840
|
|
|
2.58
|
|
|
0.34
|
0.50 1.00
|
|
|
4,764,738
|
|
|
1.80
|
|
|
0.74
|
|
|
4,764,738
|
|
|
1.80
|
|
|
0.74
|
1.01 2.31
|
|
|
154,773
|
|
|
0.64
|
|
|
2.23
|
|
|
154,773
|
|
|
0.64
|
|
|
2.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.01 2.31
|
|
|
54,938,158
|
|
|
3.12
|
|
$
|
0.28
|
|
|
54,938,158
|
|
|
3.12
|
|
$
|
0.28
|
NOTE 10 RELATED PARTY TRANSACTIONS
Advances from Shareholders
From time to time, shareholders of the Company advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand. At September 30, 2016 and September 30, 2015, advances from shareholders were $50,545 and $40,773, respectively.
In addition, another shareholder advanced $224,444 to the Company as of September 30, 2016 and September 30, 2015. The advances are non-interest bearing, are unsecured and do not have a determined date of repayment.
Management service agreement between NPC and National Pain Centers, LLC
NPC was incorporated under the laws of the state of Nevada on January 24, 2014. It is an Illinois-based management services provider. It was acquired by the Company on February 28, 2014 and is operated as a wholly-owned subsidiary of the Company.
F-20
NOTE 10 RELATED PARTY TRANSACTIONS (CONTINUED)
Management service agreement between NPC and National Pain Centers, LLC (Continued)
NPC manages non-medical services in three clinics and two surgical centers in the Chicago-land area that provide diagnostic, surgical, treatment, research, advocacy, education, and setting standards and protocols within the interventional and multi-modal pain management, pursuant to a management service agreement dated as of February 28, 2014, by and between NPC and National Pain Centers, LLC ("NPC LLC"), which is owned by Dr. Jay Joshi, the president and CEO of NPC. Under the management agreement, NPC LLC engages NPC to provide management services for a term period of five years commencing on the effective date. During the term of this agreement, NPC LLC shall pay NPC the equivalent of 50% of all monies collected and as billed monthly to NPC LLC on net-30 term.
NPC is managed by its founder and CEO Dr. Jay Joshi, MD, DABA, DABAPM, FABAPM. Dr. Joshi also serves as the Companys Chief Medical Officer (CMO) and as a member of its Board of Directors.
Management service revenue related to the collections was $181,680 and $187,368 for the years ended September 30, 2016 and 2015, respectively. Salary payments of $200,000 and $150,000 paid to Dr. Joshi during the years ended September 30, 2016 and 2015 have been offset to revenue earned from NPC LLC.
In addition, during the year ended September 30, 2016, the Company sold one of its phototherapy devices to NPC LLC for a sales price of $54,117 that has been reflected as a related party sale on the Companys accompanying statement of operations for the year ended September 30, 2016.
Note Receivable Chairman, President and CEO
On September 30, 2013, the Company loaned $250,000 to its Chairman, President and CEO. At September 30, 2015, a balance of $197,028 was owed on the loan. During the year ended September 30, 2016, the Company determined the loan was impaired and the remaining outstanding amount of $187,163 was considered as additional compensation to the Chairman. No amounts were outstanding under the loan at September 30, 2016.
NOTE 11 SEGMENT REPORTING
Reportable segments are components of an enterprise about which separate financial information is available and that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
The Company operates in following business segments:
(i)
Medical Devices:
which it stems from PSI, its wholly-owned subsidiary it acquired on August 24, 2012, a developer, manufacturer, marketer and distributer of targeted Ultra Violet ("UV") phototherapy devices for the treatment of skin diseases.
(ii)
Management of Client Services:
which it stems from NPC, its wholly-owned subsidiary it acquired on February 28, 2014. NPC engages in management of top-tier medical practices in the interventional and multi-modal pain management sector.
(iii)
Authentication and Encryption Products and Services:
which it stems from StealthCo, its wholly-owned subsidiary formed on March 18, 2014. StealthCo engages in the business of selling, licensing or otherwise providing certain authentication and encryption products and services upon acquisition of certain assets from SMI.
F-21
NOTE 11 SEGMENT REPORTING (CONTINUED)
The detailed segment information of the Company is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellness Center USA, Inc.
|
Assets By Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
|
|
|
Corporate
|
|
Medical
Devices
|
|
Mgmt of
Medical
Practice
|
|
Authentication
and
Encryption
|
|
Total
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
$
|
16,241
|
$
|
13,463
|
$
|
7,771
|
$
|
51,774
|
$
|
89,249
|
|
Inventories
|
|
-
|
|
66,722
|
|
-
|
|
12,447
|
|
79,169
|
|
Prepaid expenses and other current assets
|
|
26,571
|
|
63
|
|
2,700
|
|
-
|
|
29,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
42,812
|
|
80,248
|
|
10,471
|
|
64,221
|
|
197,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
4,927
|
|
6,592
|
|
1,514
|
|
2,788
|
|
15,821
|
Intangible assets, net
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Goodwill, net
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Security deposits
|
|
15,000
|
|
1,760
|
|
-
|
|
-
|
|
16,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
19,927
|
|
8,352
|
|
1,514
|
|
2,788
|
|
32,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
62,739
|
$
|
88,600
|
$
|
11,985
|
$
|
67,009
|
$
|
230,333
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellness Center USA, Inc.
|
Operations by Segments
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
September 30, 2016
|
|
|
|
Corporate
|
|
Medical
Devices
|
|
Mgmt of
Medical
Practice
|
|
Authentication
and
Encryption
|
|
Total
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
Trade
|
$
|
6,402
|
$
|
94,117
|
$
|
-
|
$
|
108,343
|
$
|
208,862
|
|
Related party
|
|
-
|
|
54,117
|
|
-
|
|
-
|
|
54,117
|
|
Consulting services
|
|
-
|
|
-
|
|
-
|
|
36,625
|
|
36,625
|
|
Management services to related party
|
|
-
|
|
-
|
|
181,680
|
|
-
|
|
181,680
|
Total Sales
|
|
6,402
|
|
148,234
|
|
181,680
|
|
144,968
|
|
481,284
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
7,299
|
|
169,082
|
|
-
|
|
13,210
|
|
189,591
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
(897)
|
|
(20,848)
|
|
181,680
|
|
131,758
|
|
291,693
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
1,164,377
|
|
403,768
|
|
220,610
|
|
348,901
|
|
2,137,656
|
|
Impairment of goodwill and intangible assets
|
|
-
|
|
94,214
|
|
-
|
|
255,425
|
|
349,639
|
Total operating expenses
|
|
1,164,377
|
|
497,982
|
|
220,610
|
|
604,326
|
|
2,487,295
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
$
|
(1,165,274)
|
$
|
(518,830)
|
$
|
(38,930)
|
$
|
(472,568)
|
$
|
(2,195,602)
|
F-22