In March 2017, the Company entered into a Final Settlement Agreement with certain former owners of PSI and relating to certain agreements executed by them prior to the 2012 share exchange with the Company. Under the agreement, the Company released the former owners, and the former owners released the Company, PSI and the Companys CEO, from any and all claims and liabilities claimed by or owed to each of the others, including a debt of $253,194 the Company owed to two of the former owners as of March 31, 2017. This amount is recorded as Other Income on the March 31, 2017 Statements of Operations. The Company also received 250,000 shares of its common stock from the former owners as part of the settlement. The shares were then cancelled by the Company and are not included in outstanding shares as of March 31, 2017.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
Except for historical information, the following discussion contains forward-looking statements based upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding, among other things, (a) our projected sales and profitability, (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans, (e) our anticipated needs for working capital, (f) our lack of operational experience and (g) the benefits related to ownership of our common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words may, will, should, expect, anticipate, estimate, believe, intend, or project or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under Description of Business, and Analysis of Financial Condition and Results of Operations, as well as in this Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under Risk Factors in our Annual Report on Form 10-K and in other Reports we have filed with the Securities and Exchange Commission, as well as matters described in this Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Report will in fact occur as projected.
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Description of Business
Background
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. Later, the Company expanded into additional businesses within the healthcare and medical sectors through acquisitions, including PsoriaShield Inc. (PSI), National Pain Centers, Inc. (NPC), and StealthCo Inc. (SCI), d/b/a Stealth Mark, Inc. The Company currently operates in the following business segments: (i) distribution of targeted Ultra Violet ("UV") phototherapy devices for dermatology; (ii) management of toptier medical practices in the interventional and multimodal pain management sector; and (iii) authentication and encryption products and services. The segments are operated, respectively, through PSI, NPC and SCI.
PSI
PSI was incorporated under the laws of the state of Florida on June 17, 2009. On August 24, 2012, we acquired all of the issued and outstanding shares of stock in PSI. PSI is a whollyowned subsidiary of the Company and operated by Psoria Development Company LLC, an Illinois limited liability company (PDC), a joint venture between WCUI/PSI and The Medical Alliance, Inc., a Florida corporation (TMA).
PSI designs, develops and markets a targeted ultraviolet (UV) phototherapy device called the PsoriaLight. The PsoriaLight is designated for use in targeted PUVA photochemistry and UVB phototherapy and is designed to treat certain skin conditions including psoriasis, vitiligo, atopic dermatitis (eczema), seborrheic dermatitis, and leukoderma.
Psoriasis, eczema, and vitiligo, are common skin conditions that can be challenging to treat, and often cause the client significant psychosocial stress. Clients may undergo a variety of treatments to address these skin conditions, including routine consumption of systemic and biologic drug therapies which are highly toxic, reduce systemic immune system function, and come with a host of chemotherapylike side effects. Ultraviolet (UV) phototherapy is a clinically validated alternate treatment modality for these disorders.
Traditionally, non-targeted UV phototherapy was administered by lamps that emitted either UVA or UVB light to both diseased and healthy skin. While sunblocks or other UV barriers may be used to protect healthy skin, the UV administered in this manner must be low dosage to avoid excessive exposure of healthy tissue. Today, targeted UV phototherapy devices administer much higher dosages of light only to affected tissue, resulting in clearance in the case of psoriasis and eczema, and repigmentation in the case of vitiligo, at much faster rates than non-targeted (low dosage) UV treatments.
16
Targeted UV treatments are typically administered to smaller total body surface areas, and are therefore used to treat the most intense parts of a clients disease. Non-targeted UV treatment is typically used as a follow-up and for maintenance, capable of treating large surfaces of the body. Excimer laser devices (UVB at 308nm) are expensive and consume dangerous chemicals (Xenon and Chlorine). Mercury lamp devices (UVB and/or UVA) require expensive lamp replacements regularly and require special disposal (due to mercury content). Additionally, mercury lamp devices typically deliver wavelengths of light below 300nm. While within the UVB spectrum, it has been shown that wavelengths below 300nm produce significantly more sunburn type side effects than do wavelengths between 300 and 320nm without improvement in therapeutic benefit.
The Psoria-Light is a targeted UV phototherapy device that produces UVB light between 300 and 320 nm as well as UVA light between 350 and 395nm. It does not require consumption of dangerous chemicals or require special environmental disposal, and is cost effective for clinicians, which should result in increased patient access to this type of treatment. It has several unique and advanced features that we believe will distinguish it from the non-targeted and targeted UV phototherapy devices that are currently being used by dermatologists and other healthcare providers. These features include the following: the utilization of deep narrow-band UVB (NB-UVB) LEDs as light sources; the ability to produce both UVA or NB-UVB therapeutic wavelengths; an integrated high resolution digital camera and client record integration capabilities; the ability to export to an external USB memory device a PDF file of treatment information including a patent pending graph that includes digital images plotted against user tracked metrics which can be submitted to improve medical reimbursements; an accessory port and ability to update software; ease of placement and portability; advanced treatment site detection safety sensor; international language support; a warranty which includes the UV lamp(s); and a non-changeable treatment log (that does not include HIPPA information).
The Psoria-Light consists of three components: a base console, a color display with touchscreen control, and a hand-held delivery device with a conduit (or tether) between the handheld device and the base console. PSI requires clearance by the United States Food and Drug Administration (FDA) to market and sell the device in the United States as well as permission from TUV SUD America Inc., PSIs Notified Body, to affix the CE mark to the Psoria-Light in order to market and sell the device in countries of the European Union.
To obtain FDA clearance and permission to affix the CE mark, PSI was required to conduct EMC and electrical safety testing, which it completed in the second quarter of 2011. PSI received FDA clearance on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark on November 10, 2011. In its 510(k) application with the FDA (application number K103540), PSI asserted that the Psoria-Light was substantially equivalent in intended use and technology to two predicate devices, the X -Trac Excimer Laser, which has wide acceptance in the medical billing literature and has a large installed base in the U.S., and the Dualight, another competing targeted UV phototherapy device.
PSI has established an ISO 13485 compliant quality system for the Psoria-Light, which was first audited in the third quarter of 2011. This system is intended to ensure PSI devices will be manufactured in a controlled and reliable environment and that its resources follow similar practices and is required for sales in countries requiring a CE mark. PSI has also received Certified Space Technology designation from the Space Foundation, based on PSIs incorporation of established NASA-funded LED technology.
PSI began Psoria-Light Beta deployment in January 2012. It is currently operating at a loss, and there is no assurance that its business development plans and strategies will ever be successful. PSIs success depends upon the acceptance by healthcare providers and clients of Psoria-Light treatment as a preferred method of treatment for psoriasis and other UV-treatable skin conditions. Psoria-Light treatment appears to have been beneficial to clients, without demonstrable harmful side effects or safety issues, as evidenced by more than 10,000 treatments completed on more than 1,000 clients, domestically and Mexico, since 2012. In order for the Company to continue PSI operations it will need additional capital and it will have to successfully coordinate integration of PSI operations without materially and adversely affecting continuation and development of other Company operations.
NPC
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.
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 (5) years commencing on the effective date. During the term of this agreement, NPCLLC shall pay NPC the equivalent of 50% of all monies collected and as billed monthly to NPCLLC on net-30 term.
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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. Dr. Joshi is a nationally recognized double board certified Anesthesiologist and fellowship trained Interventional Spine and Pain Management physician whose capabilities combine clinical medicine, research, creativity, marketing, inventions, and business development. He is considered a National Key Opinion Leader in pain management. He has presented to a variety of audiences over 500 times, and has worked internationally at the World Health Organization (WHO).
SCI
SCI was incorporated under the laws of the state of Illinois on March 18, 2014. It is a Tennessee-based provider of Stealth Mark encryption and authentication solutions offering advanced product security technologies within the security and supply chain management vertical sectors. SCI acquired certain Stealth Mark assets on April 4, 2014 and operates as a wholly-owned subsidiary of the Company.
SCI provides clients premiere authentication technology for the protection of a variety of products and brands from illicit counterfeiting and diversion activities. Its technology is applicable to a wide range of industries affected by counterfeiting, diversion and theft including, but not limited to, pharmaceuticals, defense/aerospace, automotive, electronics, technology, consumer and personal care goods, designer products, beverage/spirits, and many others. SCI enables the client a complete, simple to use, easy to implement, and cost effective turnkey system that is extremely difficult to compromise.
SCIs technology includes use of intelligent micro particles that are unduplicatable and undetectable to the human eye. These taggants are created with a proprietary material that creates a unique numerical code that is assigned meaning by the client and is machine readable without the use of rare earth or chemical tracers. They have been used in covert and overt operations with easy to implement technology and do-it-yourself in-the-field forensic caliber verification.
SCI is managed by its CEO, Ricky Howard. Mr. Howard has over thirty years of experience in operations management and executive positions in a variety of industries ranging from entrepreneurial startups to Fortune 500 companies. He joined Stealth Mark as V.P. of Operations at the early stage of development in 2006 and played an integral role in bringing the companys capabilities to its present status including design and creation of its manufacturing capabilities, implementation of its ERP inventory controls system, software and hardware development, marketing and sales materials processes and day-to-day operational procedures and processes.
Management
Presently, all business functions of the Company are managed by our CEO/director and founder, Andrew J. Kandalepas. He is responsible for developing and planning our business units, including product development, organizational structure, financing and administrational functions. His services shall be utilized until the Company is financially capable to engage additional staffing.
On January 12, 2015, the Company entered into the PDC Joint Venture Agreement with TMA to further develop, market, license and/or sell PSI technology and products. Mr. Kandalepas manages PSI activities with John Yorke of TMA. Mr. Yorke started his career with Abbott Labs as an FDA specialist and then joined Kendall as a product manager for OR and CV products. He formed and operated Cardiomax, a $45M medical products distributorship. In 1991, he formed TFGI to assist start-up and small-cap companies to develop business plans, source funding and secure strategic partners. TFGI clients included PMG (Pennsylvania Merchant Group), J&J Development Company, Zures Medical Group, SCA Capital Partners, Forest Health Group and Hillman Medical. In 2013, TFGI merged with The ComedIT Group and Ocean Medical to form TMA.
Jay Joshi, M.D., DABA, DABAPM, FABAPM manages NPCs business. Dr. Joshi is a nationally recognized double board certified Anesthesiologist and fellowship trained Interventional Spine and Pain Management physician whose capabilities combine clinical medicine, research, creativity, marketing, inventions, and business development. He is considered a National Key Opinion Leader in pain management. He has presented to a variety of audiences over 500 times, and has worked internationally at the World Health Organization (WHO). Although we have an Employment Agreement with Dr. Joshi, we cannot guarantee that he will remain affiliated with us.
Mr. Ricky Howard manages SCIs business. Mr. Howard has over thirty years of experience in operations management and executive positions in a variety of industries ranging from entrepreneurial startups to Fortune 500 companies. He joined Stealth Mark as V.P. of Operations at the early stage of development in 2006 and played an integral role in bringing the companys capabilities to its present status including design and creation of its manufacturing capabilities, implementation of its ERP inventory controls system, software and hardware development, marketing and sales materials processes and day-to-day operational procedures and processes. Although we have an Employment Agreement with Mr. Howard, we cannot guarantee that he will remain affiliated with us.
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Analysis of Financial Condition and Results of Operations
Results of Operations for the three months ended March 31, 2017 compared to the three months ended March 31, 2016.
Revenue and Cost of Goods Sold
Revenue for the three months ended March 31, 2017 and 2016 was $174,225 and $174,747, respectively, a decrease of $522. PSIs revenues increased $1,596, from $110,404 in fiscal 2016 to $112,000 in fiscal 2017. NPCs revenues decreased $11,843, from $51,843 in fiscal 2016 to $40,000 in fiscal 2017, while SCIs revenues increased $9,725, from $12,500 in fiscal 2016 to $22,225 in fiscal 2017.
Cost of sales for the three months ended March 31, 2017 and 2016, was $53,407 and $39,641, respectively. Gross profit for the three months ended March 31, 2017 and 2016, was $120,818 and $135,106, respectively. The gross profit decrease of $14,288 was primarily due to lower sales prices on PSIs PsoriaLight devices during fiscal 2017, as compared to the same period in 2016.
Operating Expenses
Operating expenses for the three months ended March 31, 2017 and 2016 was $678,985 and $671,393, respectively. The increase in operating expenses of $7,592 was due primarily to the increase in consulting and stock compensation costs during fiscal 2017, offset by a decrease in patent expenses and the write-off of a note receivable from an officer written-off as compensation expense in fiscal 2016.
Other Income (Expense)
During the three months ended March 31, 2017, the Company recognized $288,777 of other income relating to the final settlement agreement with the former owners of PSI and other vendors. During the three months ended March 31, 2016, the Company recognized a $146,301 loss relating to the loss on conversion of loans payable to equity.
Net Loss
The net loss for the three months ended March 31, 2017 was $269,390, compared to a net loss of $682,588 for the three months ended March 31, 2016. The decrease in the net loss of $413,198 in fiscal 2017 was primarily due to other income of $288,777 in fiscal 2017, compared to the $146,301 loss relating to the loss on conversion of loans payable to equity in fiscal 2016.
Results of Operations for the six months ended March 31, 2017 compared to the six months ended March 31, 2016.
Revenue and Cost of Goods Sold
Revenue for the six months ended March 31, 2017 and 2016 was $314,752 and $251,173, respectively, an increase of $63,579 in fiscal 2017. PSIs revenues increased $83,372, from $112,628 in fiscal 2016 to $196,000 in fiscal 2017. NPCs revenues decreased $36,143, from $113,545 in fiscal 2016 to $77,402 in fiscal 2017, while SCIs revenues increased $16,350, from $25,000 in fiscal 2016 to $41,350 in fiscal 2017.
Cost of sales for the six months ended March 31, 2017 and 2016, was $113,907 and $42,128, respectively. Gross profit for the six months ended March 31, 2017 and 2016, was $200,845 and $209,045, respectively. The gross profit decrease of $8,200 was primarily due to lower sales prices on PSIs PsoriaLight devices during fiscal 2017, as compared to fiscal 2016, and also lower revenues at NPC.
Operating Expenses
Operating expenses for the six months ended March 31, 2017 and 2016 was $1,174,512 and $1,322,439, respectively. The decrease in operating expenses of $147,927 was due primarily to the reduction of patent expenses and the write-off of a note receivable from officer written-off as compensation expense in fiscal 2016, offset by higher consulting and stock compensation costs in fiscal 2017.
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Other Income (Expense)
During the six months ended March 31, 2017, the Company recognized $288,777 of other income relating to the final settlement agreement with the former owners of PSI and other vendors. During the six months ended March 31, 2016, the Company recognized a $146,301 loss relating to the loss on conversion of loans payable to equity. Other income during the six months ended March 31, 2016 was $2,913 and related to interest income from a related party.
Net Loss
Our net loss for the six months ended March 31, 2017 was $684,890, compared to a net loss of $1,256,782 for the six months ended March 31, 2016. The decrease in the net loss of $571,892 in fiscal 2017 was due to other income of $288,777 in 2017, compared to the $146,301 loss relating to the loss on conversion of loans payable to equity in 2016. It was also due to the decrease in operating expenses of $147,927 in fiscal 2017.
Results of Operations by Segment
The Company maintained three (3) business segments through the end of the period covered by this Report:
(i)
Medical Devices:
which it provided through PSI, its wholly-owned subsidiary 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) Practice Management Services:
which it provided through NPC, its wholly-owned subsidiary acquired on February 28, 2014, which manages non-medical services in three clinics and two surgical centers in the Chicago-land area; and
(iii)
Authentication and Encryption Products and Services:
which it provided through SCI, its wholly-owned subsidiary that on April 4, 2014 acquired certain assets of SMI Holdings, Inc. d/b/a Stealth Mark, Inc., including Stealth Mark tradenames and marks, and related encryption and authentication solutions offering advanced product security technologies within the security and supply chain management vertical sectors.
The detailed segment information of the Company for the six months ended March 31, 2017 and 2016 is as follows:
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Wellness Center USA, Inc.
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Operations by Segments
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For the Six Months Ended
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March 31, 2017
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Corporate
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Medical Devices
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Mgmt of Medical Practice
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Authentication and Encryption
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Total
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Sales:
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Trade
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$
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-
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$
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196,000
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$
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-
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$
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13,100
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$
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209,100
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Consulting services
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-
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-
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-
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28,250
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28,250
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Management services to related party
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-
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-
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77,402
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-
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77,402
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Total Sales
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-
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196,000
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77,402
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41,350
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314,752
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Cost of goods sold
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-
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75,117
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-
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38,790
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113,907
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Gross profit
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-
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120,883
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77,402
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2,560
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200,845
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Operating expenses
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568,610
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157,039
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148,325
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300,538
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1,174,512
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Loss from operations
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$
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(568,610)
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$
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(36,156)
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$
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(70,923)
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$
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(297,978)
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$
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(973,667)
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Revenue for the Medical Devices segment for the six months ended March 31, 2017 and 2016 was $196,000 and $112,628, respectively. The increase in revenues of $83,372 was due to the increased number of sales of PsoriaLight devices. Cost of sales for the six months ended March 31, 2017 and 2016 was $75,117 and $41,220, respectively. Gross profit for the six months ended March 31, 2017 and 2016 was $120,883 and $71,408, respectively. The increase in gross profit of $49,475 in fiscal 2017 was due primarily to the increase in sales. Operating expenses for the six months ended March 31, 2017 and 2016 was $157,039 and $210,705, respectively. The decrease in operating expenses of $53,666 in fiscal 2017 was due primarily to the reduction in professional fees. The loss from operations for the six months ended March 31, 2017 and 2016 was $36,156 and $139,297, respectively.
Revenue for the Practice Management Services segment for the six months ended March 31, 2017 and 2016 was $77,402 and $113,545, respectively. The decrease of $36,143 was due to the decrease in management fees received during fiscal 2017. Operating expenses for the six months ended March 31, 2017 and 2016 was $148,325 and $105,457, respectively. The increase in operating expenses of $42,868 in fiscal 2017 was due primarily to the increase in salaries and third party billing services. The loss from operations for the six months ended March 31, 2017 was $70,923 and the income from operations for the six months ended March 31, 2016 was $8,088.
Revenue for the Authentication and Encryption segment for the six months ended March 31, 2017 and 2016 was $41,350 and $25,000, respectively. The increase of $16,350 was primarily due to the increase in consulting services during fiscal 2017. Cost of goods sold for the six months ended March 31, 2017 and 2016 was $38,790 and $908, respectively, and the gross profit was $2,560 and $24,092, respectively. The gross profit decrease in fiscal 2017 was primarily due to the very low cost of goods sold for the first six months of fiscal 2016. Operating expenses for the six months ended March 31, 2017 and 2016 was $300,538 and $167,810, respectively. The increase in operating expenses of $132,728 in fiscal 2017 was due primarily to the increase in stock compensation costs and consulting expenses. The loss from operations for the six months ended March 31, 2017 and 2016 was $297,978 and $143,718, respectively.
The Corporate segment primarily provides executive management services for the Company. Operating expenses for the six months ended March 31, 2017 and 2016 was $568,610 and $838,467, respectively. The decrease in operating expenses of $269,857 in fiscal 2017 was due primarily to the decrease in professional and consulting fees and stock compensation costs in fiscal 2017 and the write-off of a note receivable from an officer written-off as compensation expenses in fiscal 2016. The loss from operations for the six months ended March 31, 2017 and 2016 was $568,610 and $838,467, respectively.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate adequate amounts of cash to meet its cash needs.
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 six months ended March 31, 2017, the Company incurred a net loss of $684,890 and used cash in operations of $670,614, and had a shareholders deficit of $382,907 as of March 31, 2017. These factors raise substantial doubt about the Companys ability to continue as a going concern within one year after the date that the financial statements are issued. 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.
As of March 31, 2017, our cash balance was $297,000. Our current cash on hand is not sufficient to maintain our daily operations for the next 12 months unless the Company is able to generate positive cash flows from operating activities. If needed, management intends to raise additional capital through equity financing to fund our daily operations through next 12 months and during the six months ended March 31, 2017, received $424,600 through the sale of its common stock and $428,015 from the exercise of stock warrants. Subsequent to March 31, 2017, the Company received $460,000 from the sale of its common stock and $53,571 from the exercise of stock warrants. However no assurance can be given that we will be successful in raising sufficient capital through debt or equity financing, or that we will be able to raise the required working capital on terms favorable, or that such working capital will be available on any terms when needed during next 12 months. Any failure to secure sufficient debt or equity financing may force the Company to modify its business plan. In addition, we have incurred recurring losses from inception and such losses are expected to continue for the foreseeable future and until such time, if ever, as the Company is able to attain sales levels sufficient to support its operations.
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.
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The Companys independent registered public accounting firm, in their report on the Companys consolidated financial statements for the year ended September 30, 2016, has expressed substantial doubt about the Companys ability to continue as a going concern.
Comparison of six months for the years ended March 31, 2017 and 2016
As of March 31, 2017, we had $297,000 in cash, negative working capital of $412,336 and an accumulated deficit of $18,225,619.
As of March 31, 2016, we had $200,948 in cash, negative working capital of $485,843 and an accumulated deficit of $15,748,659.
Cash flows used in operating activities
During the six months ended March 31, 2017, the Company used cash flows in operating activities of $670,614 compared to $647,491 used in the six months ended March 31, 2016. During the six months ended March 31, 2017, the Company incurred a net loss of $684,890 with $79,307 of negative non-cash expenses compared to a net loss of $1,256,782 and $558,521 of non-cash expenses during the six months ended March 31, 2016.
Cash flows used in investing activities
During the six months ended March 31, 2017, we had purchases of property and equipment of $2,250. During the six months ended March 31, 2016, we had purchases of property and equipment of $520.
Cash flows provided by financing activities
During the six months ended March 31, 2017, we had proceeds from loans payable of $30,000, from the sale of common stock and warrants of $424,600 and from the exercise of stock warrants of $428,015. We used cash to repay advances from a related party of $2,000. During the six months ended March 31, 2016, we had proceeds from notes payable of $82,300, from the sale of common stock of $655,701, from common stock issuable of $75,000 and from the exercise of stock warrants of $5,000. We used cash to repay advances from related parties of $3,269.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts
PSI received FDA clearance for the Psoria-Light on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark for the Psoria-Light in the fourth quarter of 2011.
PSIs founder and past president filed a provisional patent application covering certain aspects of the technology that we intend to utilize in the development and commercialization of the Psoria-Light, including handheld ergonomics, emitter platform and LED arrangements, methods for treatment site detection, cooling methods, useful information displays, collection of digital images and graphical correlation to quantitative metrics, and base console designs. Two non-provisional patent applications were submitted claiming the prior filing date of the initial provisional application.
The first non-provisional application describes a unique distance sensor located at the tip of the Psoria-Light hand-piece, which detects the treatment site based on a projected field. The sensor can detect electrolytic/conductive surfaces, such as human skin, without requiring any physical or direct electrical contact. Further, the unique sensor can sense the treatment site at any point about the tip of the hand-piece and without causing any attenuation of the therapeutic UV light output.
The second non-provisional application describes the integration and use of a digital camera in the Psoria-Light, including the location of the digital camera and how and when it is used to conveniently correspond to real-life treatment routines, how images are displayed and captured to memory, and how the images are arranged in patient records are illustrated. Additionally, the second non-provisional application describes the inclusion of clinician defined variables, such as health-related quality of life scores, and their placement into a graphical arrangement relative to treatment site images.
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Both the initial provisional patent application and the two non-provisional patent applications are owned by PSIs past president, who has granted PSI the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under the initial provisional patent application, any non-provisional patent applications filed by him covering the technology described in the initial provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.
PSIs past president filed a second provisional patent application containing concepts for the improvement of microelectronics packages and thermal management solutions, the improvement of handheld phototherapy devices in general (either used on humans, animals, or plants, or used on inanimate objects), and replacement of laser therapy devices with LED devices. PSI was granted the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under this second provisional patent application, any non-provisional patent applications covering the technology described in the second provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.
In addition to the foregoing, Stealth Mark devoted substantial effort and resources to develop and advance micro-particle security technologies in support of its business activities. Protection of the acquired Stealth Mark intellectual property is maintained through a combination of Patents, Trademarks, and Trade Secrets consisting of the following: