The following documents are filed as part of or are included
in this Report:
Notes
to the Financial Statements
For
the quarter ended September 30, 2017
1.
LEGAL STATUS AND OPERATIONS
Wearable Healthcare
Solutions Inc. (the Company) was incorporated as Medical Alarm Concepts Holding, Inc. on June 4, 2008 under the laws of the State
of Nevada. The Company was formed for the sole purpose of acquiring all of the membership units of Medical Alarm Concepts LLC,
a Pennsylvania limited liability company (“Medical LLC”). On May 26, 2016, the Company filed an Amended and Restated
Articles of Incorporation with the Secretary of State of the State of Nevada to change its name from “Medical Alarm Concepts,
Inc.” to “Wearable Health Solutions Inc.”
The Company is primarily engaged in utilizing new technology in the
medical alarm industry to provide 24- hour personal response monitoring services and related products to subscribers with medical
or age- related conditions.
2.
BASIS OF PREPARATION
2.1
Statement of compliance
The accompanying financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America and pursuant
to the rules and regulations of the Securities and Exchange Commission ("SEC") on a going concern.
2.2
Accounting Convention
These financial statements have been prepared on
the basis of 'historical cost convention using accrual basis of accounting except as otherwise stated in the respective accounting
policies notes.
Going concern
The
accompanying unaudited financial statements have been prepared on the assumption that the Company will continue as a going concern.
The Company historically has experienced significant losses and negative cash flows from operations. Further, the Company does
not have a revolving credit facility with any financial institution. These factors raise substantial doubt about the Company’s
ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on raising additional
capital, negotiating adequate financing arrangements and on achieving sufficiently profitable operations. The financial statements
do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern.
2.3
Critical accounting estimates and judgements
The preparation of financial
statements in conformity with the approved accounting standards require management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates.
The
estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future
periods.
The areas involving higher degree of judgment and complexity, or areas where assumptions and estimates made by the management
are significant to the financial statements are as follows:
|
i)
|
Equipment - estimated useful life of property, plant and
equipment (note - 3.8)
|
|
ii)
|
Provision for doubtful debts (note - 3.4)
|
|
iii)
|
Provision for income tax (note - 3.1)
|
|
iv)
|
Valuation of Inventory (note - 3.13)
|
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1
Income tax
The
tax expense for the year comprises of income tax, and is recognized in the statement of earnings. The income tax charge is calculated
on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is accounted
for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying
amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred income tax liabilities are recognised for all taxable temporary differences and deferred income tax assets are
recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences
and unused tax losses can be utilized. Deferred income tax is calculated at the rates that are expected to apply to the period
when the differences are expected to be reversed.
3.2
Trade and other payables
Liabilities for trade and other amounts payable
are carried at cost, which is the fair value of the consideration to be paid in future for goods and services received, whether
or not billed to the Company.
3.3
Provisions
A provision is recognized
in the financial statements when the Company has a legal or constructive obligation as a result of past events and it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can
be made of the amount of obligation.
3.4
Accounts Receivable
Accounts receivable are
non-interest bearing obligations due under normal course of business. The management reviews accounts receivable on a monthly basis
to determine if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in
evaluating the allowance for doubtful accounts. The Company includes any accounts receivable balances that are determined to be
uncollectible in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable
is written off against the allowance. Based on the information available, the Company believes its allowance for doubtful accounts
as of period ended is adequate.
3.5
Contingent liabilities
A contingent liability
is disclosed when the Company has a possible obligation as a result of past events, the existence of which will be confirmed only
by the occurrence or non-occurrence, of one or more uncertain future events, not wholly within the control of the Company; or when
the Company has a present legal or constructive obligation, that arises from past events, but it is not probable that an outflow
of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured
with sufficient reliability.
3.6
Financial liabilities
Financial liabilities
are recognized when the Company becomes party to the contractual provision of the instruments and the Company loses control of
the contractual right that comprise the financial liability when the obligation specified in the contract is discharged, cancelled
or expired. The Company classifies its financial liabilities in two categories: at fair value through profit or loss and financial
liabilities measured at amortized cost. The classification depends on the purpose for which the financial liabilities were incurred.
Management determines the classification of its financial liabilities at initial recognition.
(a)
Financial liabilities at fair value through profit or loss
Financial liabilities
at fair value through profit or loss are financial liabilities held for trading. A financial liability is classified in this category
if incurred principally for the purpose of trading or payment in the short-term. Derivatives (if any) are also categorized as held
for trading unless they are designated as hedges.
(b)
Financial liabilities measured at amortized cost
These are non-derivative
financial liabilities with fixed or determinable payments that are not quoted in an active market. These are recognized initially
at fair value, net of transaction costs incurred and are subsequently stated at amortized cost; any difference between the proceeds
(net of transaction costs) and the redemption value is recognized in the profit and loss account.
3.6.1
Derivative financial instruments and hedge accounting
Derivatives
are recognised initially at fair value, any directly attributable transaction costs are recognised in profit or loss as they are
incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised
in profit and loss account.
The Company also holds derivative financial instruments to hedge its foreign currency exposures. Embedded
derivatives are separated from the host contract and accounted for separately if certain criteria are met.
(a)
Fair value hedge
Derivatives which are
designated and qualify as fair value hedge, changes in the fair value of such derivatives are recorded in the profit and loss account,
together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
(b)
Cash flow hedges
When
a derivative is designated as cash flow hedging instrument, the effective portion of changes in the fair value of the derivative
is recognised in other comprehensive income and accumulated in the hedging reserve. Any ineffective portion of changes in the
fair value of the derivative is recognised immediately in profit or loss.
The
amount accumulated in equity is retained in other comprehensive income and reclassified to profit or loss in the same period or
periods during which the hedged item affects profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting,
expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively.
If the forecast transaction is no longer expected to occur, then the amount accumulated in equity is reclassified to profit or
loss.
3.7
Property, plant and equipment
All
equipment is stated at cost less accumulated depreciation and impairment loss. The cost of fixed assets includes its purchase
price, import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working
condition and location for its intended use.
Depreciation
on additions to property, plant and equipment is charged, using straight line method, on pro rata basis from the month in which
the relevant asset is acquired or capitalized, upto the month in which the asset is disposed off. Impairment loss, if any, or
its reversal, is also charged to income for the year. Where an impairment loss is recognized, the depreciation charge is adjusted
in future periods to allocate the asset’s revised carrying amount, less its residual value, over its estimated useful life.
Maintenance
and normal repair costs are expensed out as and when incurred. Major renewals and improvements are capitalized and assets so replaced,
if any are retired.
Gains and losses on disposal of fixed assets, if any, are recognized in statement of profit and loss.
3.8
Cash and cash equivalents
Cash and cash equivalents
include cash in hand and deposits held at call with banks. For the purpose of the statement of cash flows, cash and cash equivalents
bank balances and short term highly liquid investments subject to an insignificant risk of changes in value and with maturities
of less than three months.
3.9
Revenue recognition
The
Company’s revenues are derived principally from utilizing new technology in the medical alarm industry to provide 24-hour
personal response monitoring services and related products to subscribers with medical or age-related conditions. The Company
recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned
when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed
or determinable, and collectability is reasonably assured.
All revenues from subscription arrangements are recognized ratably over
the term of such arrangements. The excess of amounts received over the income recognized is recorded as deferred revenue on the
consolidated balance sheet.
3.10
Functional and presentation currency
Items included in the financial
statements are measured using the currency of the primary economic environment in which the Company operates. The financial statements
are presented in US (Dollars) which is the Company's presentation currency. All financial information presented in US Dollars has
been rounded to the nearest dollar unless otherwise stated.
3.11
Foreign currency transactions
Foreign currency transactions
are translated into the functional currency using the exchange rate prevailing on the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated into functional currency using the exchange rate prevailing at
the statement of financial position date. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates are recognized in the profit and loss account.
3.12
Contingencies
The
assessment of the contingencies inherently involves the exercise of significant judgment as the outcome of the future events cannot
be predicted with certainty. The Company, based on the availability of the latest information, estimates the value of contingent
assets and liabilities, which may differ on the occurrence / non-occurrence of the uncertain future event(s).
3.13
Inventories
Inventories, except for
stock in transit, are stated at lower of cost and net realizable value. Stock in transit is valued at cost comprising invoice value
plus other charges thereon. Net realizable value is the estimated selling price in ordinary course of business less estimated costs
of completion and selling expenses.
3.14
Stock based compensation
The
Company recognizes compensation expense for stock-based compensation in accordance with generally accepted accounting principles.
For employee stock-based awards, fair value of the award on the date of grant is calculated using the Black-Scholes method and
the quoted price of the Company's common stock for stock options and unrestricted shares respectively.
The
Company recognizes expense over the service period for awards expected to vest.
In
case of non-employee stock-based awards, fair value of the award on the date of grant is calculated in the same manner as employee
awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted
accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals
the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s
performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual
results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period
estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class,
and historical experience.
The Black-Scholes option valuation model is used to estimate the fair value of the warrants or options
granted. The model includes subjective input assumptions that can materially affect the fair value estimates. The model was developed
for use in estimating the fair value of traded options or warrants. The expected volatility is estimated based on the most recent
historical period of time equal to the weighted average life of the warrants or options granted.
3.15
Software Development cost
The
Company accounts for software development cost in accordance with ASC 985-20 whereby cost of developing computer software to be
sold, leased, or otherwise marketed includes software that is part of a product or process to be sold to a customer shall be accounted
for under ASC 985-20. All cost incurred to establish technological feasibility of a computer software product to be sold, leased
or otherwise marketed are research and development cost. These cost are charged to expense when incurred. The technological feasibility
of a computer software product is established when the entity has completed all planning, designing, coding, and testing activities
that are necessary to establish that the product can be produced to meet its design specifications including functions, features,
and technical performance requirements. Cost of producing product masters incurred subsequent to establishing technological feasibility
shall be capitalized. Those cost include coding and testing performed subsequent to establishing technological feasibility. Capitalization
of computer software cost shall cease when the product is available for general release to customers.
Once a project reaches the
development stage, the Company allocates a portion of salaries to be capitalized based on estimated hours spent developing the
software.
4
Cash
This represent cash in hand and cash deposited in
bank accounts (current) by the Company.
Amount in $
Primary Checking account
|
|
|
3,392
|
|
Checking account
|
|
|
130
|
|
Undeposited funds
|
|
|
4,146
|
|
|
|
|
7,668
|
|
5 Accounts Receivables
Opening balance
|
|
|
78,332
|
|
Net movement during the period
|
|
|
33,871
|
|
|
|
|
112,203
|
|
Less : Provision
|
|
|
(23,705
|
)
|
Account Receivable - Net
|
|
|
88,498
|
|
6 Inventory
Opening balance
|
|
|
146,892
|
|
Net movement during the period
|
|
|
4,807
|
|
|
|
|
151,699
|
|
7 Prepaid expenses
Opening balance
|
|
|
43,316
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
43,316
|
|
8 Advances to suppliers
Opening balance
|
|
|
108,771
|
|
Net movement in liabilities during the period
|
|
|
–
|
|
Closing balance
|
|
|
108,771
|
|
9 Property, plant and
equipment
Cost
|
|
|
|
Opening balance
|
|
|
85,589
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
85,589
|
|
|
|
|
|
|
Accumulated Depreciation
|
|
|
|
|
Opening balance
|
|
|
(54,107
|
)
|
Net movement during the period
|
|
|
(4,469
|
)
|
Closing balance
|
|
|
(58,576
|
)
|
Closing Book value
|
|
|
27,013
|
|
10 Credit line payable - related
party
Opening balance
|
|
|
397,500
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
397,500
|
|
11 Accounts payable
Opening balance
|
|
|
59,981
|
|
Net movement during the period
|
|
|
49,050
|
|
Closing balance
|
|
|
109,030
|
|
12 Deferred Revenue
Opening balance
|
|
|
259,721
|
|
Net movement during the period
|
|
|
89,829
|
|
Closing balance
|
|
|
349,549
|
|
13 Due to related
party
Opening balance
|
|
|
500
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
500
|
|
14 Notes payable
Opening balance
|
|
|
11,110
|
|
Net movement during the period
|
|
|
66,020
|
|
Closing balance
|
|
|
77,130
|
|
15 Notes payable - Other
Opening balance
|
|
|
50,000
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
50,000
|
|
16 Derivative
Liabilities
Opening balance
|
|
|
109,704
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
109,704
|
|
17 Convertible notes - net of
discount
Opening balance
|
|
|
597,500
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
597,500
|
|
18 Accrued expenses and other
current liabilities
Opening balance
|
|
|
169,795
|
|
Net movement during the period
|
|
|
3,420
|
|
Closing balance
|
|
|
173,216
|
|
19 Credit line payable - related party
Opening balance
|
|
|
–
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
–
|
|
20 Revenue
Sale of Lock boxes
|
|
|
630
|
|
Labor services
|
|
|
596
|
|
Sale of Medi-01 Kit
|
|
|
–
|
|
Sale of replacement parts
|
|
|
360
|
|
Accessories sale
|
|
|
120
|
|
Other Services
|
|
|
4,796
|
|
Monitoring activities
|
|
|
100,960
|
|
Shipping and Handling
|
|
|
1,547
|
|
Installation Revenue
|
|
|
–
|
|
Less: Discounts
|
|
|
(1,709
|
)
|
|
|
|
107,299
|
|
21 Cost of sales
COG-Material Purchases
|
|
|
2,690
|
|
COG-Service
|
|
|
287
|
|
COG-Other
|
|
|
3,413
|
|
COG - Monitoring
|
|
|
30,871
|
|
COG-Shipping & Packaging
|
|
|
8,110
|
|
|
|
|
45,372
|
|
22 Selling expense
Marketing
|
|
|
1,466
|
|
Shipping Expense
|
|
|
–
|
|
Advertising
|
|
|
–
|
|
|
|
|
1,466
|
|
23
Interest expense
Bank Fees
|
|
|
733
|
|
Interest Expense - Warrants
|
|
|
–
|
|
Interest on OID
|
|
|
–
|
|
Interest for credit 3rd party
|
|
|
–
|
|
|
|
|
733
|
|
24 General and Administrative
expense
Bad Debt Expense
|
|
|
–
|
|
Investor Relations
|
|
|
1,400
|
|
Administrative Pay
|
|
|
103,379
|
|
Consulting
|
|
|
6,747
|
|
Commissions
|
|
|
–
|
|
Payroll Taxes - Employer
|
|
|
42,182
|
|
Insurance - Workers Comp
|
|
|
1,750
|
|
Insurance - Liability
|
|
|
1,000
|
|
Security Services
|
|
|
–
|
|
Postage
|
|
|
595
|
|
Vehicles
|
|
|
7,039
|
|
Gas
|
|
|
1,217
|
|
Vehicle Maintenance
|
|
|
2,132
|
|
Legal & Professional Services
|
|
|
12,750
|
|
Accounting
|
|
|
12,600
|
|
Filing Fees
|
|
|
975
|
|
Merchant Fees
|
|
|
4,012
|
|
Dues & Subscriptions
|
|
|
380
|
|
Depreciation - Computers & Software
|
|
|
644
|
|
Software
|
|
|
12,986
|
|
Depreciation - Software Development Costs
|
|
|
3,825
|
|
Group Health Insurance
|
|
|
10,453
|
|
Dental Insurance
|
|
|
846
|
|
Insurance, Vehicle
|
|
|
2,502
|
|
Travel - Air Lines
|
|
|
4,167
|
|
Travel - Car Rental
|
|
|
118
|
|
Travel - lodging
|
|
|
104
|
|
Entertainment
|
|
|
612
|
|
Travel - Meals
|
|
|
2,310
|
|
Travel - Parking tolls train cab
|
|
|
1,979
|
|
Office Supplies
|
|
|
1,125
|
|
Cleaning / Janitorial
|
|
|
1,000
|
|
Rent
|
|
|
6,131
|
|
Telephone
|
|
|
7,410
|
|
Utilities - Electric and Gas
|
|
|
453
|
|
Utilities - Other
|
|
|
1,115
|
|
Payroll Processing Fees
|
|
|
778
|
|
Stock Compensation
|
|
|
–
|
|
Salaries-Officer's
|
|
|
84
|
|
Conferences
|
|
|
–
|
|
Administrative Costs
|
|
|
–
|
|
Computer Supplies & Maintenance
|
|
|
–
|
|
Income Taxes - Federal
|
|
|
–
|
|
|
|
|
256,800
|
|
14
Contingencies and Commitments
From time to time, the
Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As at the
end of current reporting period, there were no pending or threatened lawsuits that could reasonably be expected to have a material
effect on the results of operations and there are no proceedings in which any directors, officers or affiliates, or any registered
or beneficial stockholder, is an adverse party or has a material interest adverse to the Company’s interest.