Wearable Healthcare Solutions, Inc.
The footnotes are an integral part of these unaudited financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and June 30, 2021 (unaudited)
Note 1 – Nature and Continuance of 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.
Basis of presentation
The accompanying interim condensed consolidated
financial statements are unaudited, but in the opinion of management of Wearable Healthcare Solutions, Inc. (the Company), contain all
adjustments, which include normal recurring adjustments, necessary to present fairly the financial position at December 31, 2021 and the
results of operations and cash flows for the three and six months ended December 31, 2021. The balance sheet as of June 30, 2021, is derived
from the Company’s audited financial statements.
Certain information and footnote disclosures normally
included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes
that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For
further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on this Form
10 for the fiscal year ended June 30, 2021.
The results of operations for the three and six
months ended December 31, 2021, are not necessarily indicative of the results of operations to be expected for the full fiscal year ending
June 30, 2022.
Note 2 – Summary of Significant Accounting
Policies
Principles of Consolidation – The
consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries: Medical
Alarm Concepts, LLC and Boapin. All intercompany accounts and transactions have been eliminated.
Use of Estimates – The preparation
of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. Such estimates include valuation of stock compensation, valuation of derivative liabilities,
allowance for doubtful accounts.
Cash and Cash Equivalents – For purposes
of the Statement of Cash Flows, the Company considers highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
Accounts
Receivable – We estimate credit loss reserves for accounts receivable on an individual receivable basis. A specific
impairment allowance reserve is established based on expected future cash flows and the financial condition of the debtor. We charge
off customer balances in part or in full when it is more likely than not that we will not collect that amount of the balance due. We
consider any balance unpaid after the contract payment period to be past due. There are $12,758
and $25,694 in accounts
receivables net of allowances of $23,705
and $23,705
at December 31, 2021 and June 30, 2021, respectively.
Software Development for internal use -
The Company accounts for software development costs in accordance with applicable guidelines. Software development costs include payroll,
employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development. Software
development costs also include third-party development and programming costs, localization costs incurred to translate software for international
markets, and the amortization of purchased software code and services content. Such costs related to software development are included
in software development expense until the point that technological feasibility is reached. Once technological feasibility is reached,
such costs are capitalized and depreciated over the useful estimated lives of the software. For software modifications or developments,
the Company expenses the costs. The Company purchased its dealer portal for $50,000 on August 30, 2021, to be depreciated over 5 years.
Concentration
of Credit Risk - Financial instruments that potentially subject us to concentrations of credit risk consist primarily
of cash and cash equivalents and accounts receivable. The Company currently maintains cash balances in excess of FDIC insurance maximums.
The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.
Recognition of Revenues – In May
2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 establishes a single comprehensive
model for entities to use in accounting for revenue arising from outside contracts with customers and supersedes most of the existing
revenue recognition guidance and notes that lease contracts with customers are a scope exception. ASU 2014-09 requires an entity to recognize
revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which an entity expects
to be entitled in exchange for those goods or services and also requires certain additional disclosures. On August 12, 2015, the FASB
issued ASU 2015-14 to defer the effective date of ASU 2014-09. Public business entities may elect to adopt the amendments as of the original
effective date; however, adoption is required for annual reporting periods beginning after December 15, 2017. The Company adopted
this pronouncement July 1, 2018.
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
for services over time as the performance obligations are met and for product sales at a point in time when the performance obligations
are met. For hardware sales, the Company recognizes revenues when the product is shipped. Customers are billed on Net 30 terms. For service
revenue, the Company recognizes revenues when the service is provided. For customers who pay several months at a time, the Company records
revenues for the month’s services and the balance of funds to deferred revenues and records the balance of revenues as they become
current.
| Schedule of revenues | |
| | | |
| | | |
| | | |
| | |
| | |
3 months ended December 31, | | |
6 months ended December 31, | |
| REVENUES | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
| Hardware revenue | |
$ | 23,402 | | |
| 76,773 | | |
$ | 76,985 | | |
| 206,014 | |
| Service revenue | |
| 281,122 | | |
| 313,024 | | |
| 529,634 | | |
| 546,436 | |
| TOTAL REVENUES | |
$ | 304,524 | | |
| 389,797 | | |
$ | 606,619 | | |
| 752,450 | |
The following table discloses changes in unearned
revenue for the three and six months ended December 31, 2021 and 2020:
| Schedule of unearned revenue | |
| | | |
| | |
| | |
2021 | | |
2020 | |
| Balance at beginning of period - June 30, | |
$ | 108,298 | | |
$ | 127,107 | |
| Deferred revenue | |
| 120,313 | | |
| 146,506 | |
| Recognition of unearned revenue | |
| (133,596 | ) | |
| (157,055 | ) |
| Balance at the end of the period - December 31, | |
$ | 95,015 | | |
$ | 116,558 | |
Deferral of revenues at December 31, 2021
and June 30, 2020 was $95,015
and $108,298,
respectively. The deferred revenue represents quarterly and annual prepaid service fees, which were invoiced and paid at the onset
of customer service agreements and which pertain to service obligations not realized at December 31, 2021 and June 30, 2021,
respectively. We have no agreements longer than 12 months.
Deferred Taxes – The Company accounts
for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are
determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation
allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and
liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements
of operations in the period that includes the enactment date.
ASC 740, Income Taxes, requires a company to first
determine whether it is more likely than not (which is defined as a likelihood of more than fifty percent) that a tax position will be
sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have
full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized
at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.
The Federal and state income tax returns of the
Company for 2021, 2020, and 2019 are subject to examination by the Internal Revenue Service and state taxing authorities for three (3)
years from the date filed.
Fair value of financial instruments. The
Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASB
Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation
techniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable
market prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the
service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such
as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted
prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets
and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs
in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from
valuation techniques in which one more significant inputs or significant value drivers are unobservable.
From time to time, our financial instruments include
cash, accounts payable and accrued expenses, convertible notes, lines of credit, and credit cards.
Research
and Development - Research and development costs are charged to operations as they are incurred. Legal fees and other
direct costs incurred in obtaining and protecting patents are also expensed as incurred, due to the uncertainty with respect to
future cash flows resulting from the patents. For the three and six months ended December 31, 2021 and 2020, the Company recorded
$71,212 and $270,212 and $-0-
and $-0- in research and development costs, respectively.
Basic
and Diluted Loss per Common Share - Basic loss per common share excludes dilution and is computed by dividing loss
available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted
loss per share gives effect to all potential dilutive common shares outstanding during the period of compensation. Diluted income (loss)
per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that would then share in the net income of the Company, subject to anti-dilution
limitations.
| Schedule of anti-dilutive shares | |
| |
| |
| | | |
| | |
| | |
Basis of conversion | |
Dilution | |
2021 | | |
2020 | |
| Series A Convertible | |
688 shares outstanding | |
1 share A: 2 shares | |
| 1,376 | | |
| 1,376 | |
| Series B Convertible | |
9,938 shares outstanding | |
1 share B: 2 shares | |
| 19,876 | | |
| 19,876 | |
| Series C Convertible | |
6,838,889 and 138,886 shares outstanding in 2021 and 2020, respectively | |
1 share C: 10 shares | |
| 68,388,890 | | |
| 1,388,860 | |
| Series C Convertible | |
-0- and 6,700,003 shares to be issue in 2021 and 2020, respectively | |
1 share C: 10 shares | |
| – | | |
| 67,000,030 | |
| Series D Convertible | |
425,000 shares outstanding | |
1 share D: 10 shares | |
| 4,250,000 | | |
| 4,250,000 | |
| Series E Convertible | |
4,000,000 and 1,900,000 shares outstanding in 2021 and 2020, respectively | |
1 share E: 100 shares | |
| 400,000,000 | | |
| 190,000,000 | |
| Series E Convertible Shares to be issued | |
-0- and 100,000 Series E shares to be issued in 2021 and 2020, respectively | |
1 share E: 100 shares | |
| – | | |
| 10,000,000 | |
| | |
| |
| |
| 472,660,142 | | |
| 268,410,142 | |
Because the Company incurred losses for the past
two years, the basic and diluted share bases will be presented as the same. For the three and six months ended December 31, 2021 and 2020,
the Company incurred losses of ($0.00) and ($0.00) per basic share and diluted share, respectively.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842), which supersedes the current accounting for leases and while retaining two distinct types of leases, finance and operating,
(1) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease,
regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (2) eliminates most real
estate specific lease provisions, and (3) aligns many of the underlying lessor model principles with those in the new revenue standard.
Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. For public companies,
the new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018. For all other entities,
including emerging growth companies, this standard is effective for annual reporting periods beginning after December 15, 2019, and interim
periods within fiscal years beginning after December 2020. Earlier application is permitted. The Company evaluated the impact on the financial
statements and implemented the provisions of ASU 2016-02 for the annual financial statements for the year ended June 30, 2019.
In December 2019, the FASB issued ASU No. 2019-12,
Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in
the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard
is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company is
currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.
The Company reviewed all recent accounting pronouncements
issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC, and they did not or are not believed by management
to have a material impact on the Company’s present or future financial statements.
Note 3 – Going Concern
The accompanying financial statements for the
three and six months ended December 31, 2021 and 2020 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 at December 31, 2021 and June 30, 2021,
the Company has shown losses for the last 2 years and has an accumulated deficit of ($31,097,947) and ($26,374,227), respectively. Management
believes that the Company’s capital requirements will depend on many factors including the success of the Company’s development
efforts and its efforts to raise capital. Management also believes the Company needs to raise additional capital for working capital purposes.
There can be no assurance that the Company will be able to obtain the additional capital resources necessary to implement its business
plan or that any assumptions relating to its business plan will prove accurate.
These factors raise substantial doubt about
our ability to continue as a going concern for a period of 12 months from the issue date of this report. The consolidated financial
statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or
the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going
concern.
Note
4 – Inventory, Prepaid Inventory, and Prepaid Expenses
The Company maintains some inventories in house
and purchases some of its inventory overseas. 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. The quantity of inventory may vary from
time to time depending on the delivery schedule of overseas shipments.
As of December 31, 2021 and June 30, 2021, the
Company had $-0- and $-0- in inventory in-house, respectively, as well as $1,680 and $22,682 in prepaid inventories in transit, respectively.
The Company recorded prepaid public relations
and investor relations (PR/IR) services of $21,600 and $10,000 in December 31, 2021 and June 30, 2021, respectively.
As of December 31, 2021 and June 30, 2021, the
Company had $21,600 and $10,000 in prepaid expenses, respectively.
Note 5 – Property, Plant, and Equipment
The Company has $20,000 in furnishings, $19,689
in office computers and equipment, and capitalized software development costs of $45,900 which are fully depreciated. On August 30, 2021,
the Company purchased its dealer portal for $50,000 for internal use, amortized over 60 months.
As of December 31, 2021 and June 30, 2021, the
Company recorded $46,651 and $-0-
in net Property, Plant, and Equipment, respectively:
| Schedule of property, plant and equipment | |
| | | |
| | |
| | |
December 31, 2021 | | |
June 30, 2021 | |
| Furniture | |
$ | 20,000 | | |
$ | 20,000 | |
| Office computers, equipment, software | |
| 19,689 | | |
| 19,689 | |
| Software development costs | |
| 45,900 | | |
| 45,900 | |
| Dealer Portal | |
| 50,000 | | |
| – | |
| Property, plant, and equipment | |
| 135,589 | | |
| 85,589 | |
| Less accumulated depreciation – portal | |
| (3,349 | ) | |
| – | |
| Less accumulated depreciation | |
| (85,589 | ) | |
| (85,589 | ) |
| Net property, plant, and equipment | |
$ | 46,651 | | |
$ | -0- | |
Note 6 – Accounts payable and accrued
expenses and liabilities
The Company recorded Accounts Payable of $113,573
and $331,876, directly related to operating costs, as of December 31, 2021 and June 30, 2021, respectively.
Accrued expenses are expenses that have been
incurred but not yet paid, mainly include legal fees, audit fees and other professional fees as well as interests accrued in
connection with notes payable and credit line. The Company recorded $351,390
and $296,920
in accrued expenses and other current liabilities as of December 31, 2021 and June 30, 2021, respectively.
3a10 filing
On August 17, 2020, the Wearable Health
Solutions, Inc., (the “Company”) entered into a settlement agreement and stipulation
(“Settlement Agreement”) with Trillium Partners LP (“Trillium”) in connection with the
settlement of $310,494.38
of bona fide obligations the Company owed to certain of its creditors. The Settlement Agreement was subject to a fairness
hearing, and on September 15, 2020, a Federal court in the District of Maryland held a fairness hearing and granted
approval of the Settlement Agreement. If the Settlement Agreement is satisfied in full, the Company shall reduce the
Company’s debt obligations equal to $310,494.38 in exchange for the issuance of settlement shares of Company’s common
stock pursuant to the terms of section 3(a)(10) of the Securities Act of 1933, in multiple tranches, at a price that is sixty
percent to the lowest closing bid price for the common stock for the delivery of such tranche. At no time may Trillium beneficially
own more than 9.99% of the Company’s outstanding common stock.
In October 2020, the Company issued 48,989,000
shares of WHSI common stock, to be valued at 60% of the lowest bid price for the common stock on the date of the stock issuance. Subsequently,
in April 2021, the agreement was voided for non-participation, and all 48,989,000 shares were returned to treasury.
Note 7 – Notes Payable and Note
payable-other
From time to time in the past, the Company borrowed
money for operating capital. These notes bear interest at varying rates. All notes are current except for one note of $139,569 which
is in default. At December 31, 2021 and June 30, 2021, the Company recorded $207,734 and $238,244 in notes related to operating capital,
respectively.
Short term bridge loan - COHEN
On July 31, 2020, the Company secured a $500,000
short term bridge loan from an unaffiliated individual (“COHEN”), 12% interest, due and payable October 20, 2020. The loan
is currently in default and continues to accrue interest at 12%.
At December 31, 2020, the Company recorded short-term
note payable of $500,000, expensed $10,027 in interest and accrued the same in interest liability for the three months ended September
30, 2020.
At June 30, 2021, the Company recorded short term
note payable of $500,000, expensed $55,047 in interest and accrued the same in interest liability for the year ended June 30, 2021.
On August 19, 2021, the Company repaid $300,000
of principle. In November 2021, the Company repaid an additional $100,000 in principle. At December 31, 2021, the Company recorded short
term note payable of $100,000, expensed $15,649 in interest and accrued the same in interest liability for the six months ended December
31, 2021.
Note payable – stock purchases under
Reg A
In March 2021 and June 2021, the Company accepted
loans of $115,000 from two unaffiliated investors, pending blue sky registrations in two states. In July 2021, the Company accepted loans
of $20,000 from two unaffiliated investors, pending blue sky registrations in two additional states. The notes bear interest at 5% and
the full amount of the note plus interest is convertible at the Reg A fixed price of $0.01, when possible.
In October 2021, the Company accepted a loan of
$5,000 from one unaffiliated investor, pending blue sky registration in his state. As of December 31, 2021 and June 30, 2021, the Company
recorded $140,000 and $115,000 in notes payable for stock purchases under Reg A, accrued and expensed interest of $8,736 and $1,594, respectively.
As of December 31, 2021 and June 30, 2021, the
Company has outstanding $447,734 and $853,244 in notes payable, respectively.
Note Payable – Other
In November 2016, the Company secured a $50,000
loan from a party related to a previous CEO, bearing 4% interest, the loan maturing after a successful money raise of $1,000,000 through
the acquisition of convertible notes payable (See BENZA, D2CF). The $1,000,000 fundraising was never completed, and the Company has been
accruing interest on the original principal amount at 4% since inception. On July 22, 2021, the Company filed suit for damages and the
party filed a countersuit on August 26, 2021. There has been no resolution to this situation, and we continue to accrue interest at the
face amount.
As of December 31, 2021 and June 30, 2021, the
Company expensed $1,000 and $2,000 in interest fees and has accrued $10,483 and $9,283 in interest payable, respectively.
Convertible note payable – other
On March 1, 2016 and March 3, 2016, the Company
closed a private placement and received an aggregate of $612,500 by issuing $660,000 (“BENZA”) and $13,750 (“B2CF”)
unsecured convertible notes (“convertible notes”) and warrants to two investors, net of original issue discount of $61,250
per the subscription agreements. All outstanding warrants have expired.
As of December 31, 2021 and June 30, 2021, the
Company reported $673,750 and $673,750 in convertible notes payable, respectively.
On July 22, 2021, the Company filed suit for damages
resulting from the related party. On November 4, 2021, Benza Pharma LLC filed a countersuit. To date, there has been no resolution or
settlement. The loans are recognized on the financials with no discount.
Convertible Note: Leonite Capital, LLC:
On November 19, 2019, the Company, together with
Hypersoft Ventures (collectively, the “Borrower”), received $135,000 on issuing the first tranche of $150,000 (prorated original
issue discount of $15,000) of a $250,000 unsecured convertible note (“Leonite Convertible Note”) from Leonite Capital, LLC,
a Delaware limited liability company (“Leonite”), net of an aggregate original issue discount of up to $77,778. The Leonite
Convertible Note bears annual interest at the Prime Rate plus eight percent (8%), not to exceed twelve percent (12%) per annum, computed
on a 365/360 basis, and is due nine months from the date of issuance. The Leonite Convertible Note is convertible into shares of the Company’s
common stock at a conversion price equal to $0.02 per share with anti-dilution features. In connection with its purchase of the Leonite
Convertible Note, the Company issued to Leonite 2,700,000 shares of common stock, prorated for the initial tranche. On June 4, 2021, the
Company and Leonite amended the convertible note to $260,000 which included interest and penalties and extended the due date to June 4,
2023.
The Company has determined that the conversion
feature embedded in the Leonite Convertible Note constitutes a derivative and has been bifurcated from the Leonite Convertible Note and
recorded as a derivative liability, with a corresponding discount recorded to the associated debt, on the accompanying balance sheet,
and revalued to fair market value at each reporting period. The initial issuance yielded a derivative liability of $94,225, with a discount
of $150,000 to be amortized over the 9-month life of the Leonite Convertible Note.
Significant assumptions used in calculating fair
value of conversion feature of Leonite Convertible Note at issuance date are as follows:
| Schedule of fair value of conversion feature |
|
|
|
|
|
|
|
|
|
|
Expected
Dividends |
|
Expected
volatility |
|
Risk-free
rate of interest |
|
Expected
term (year) |
|
Exercise
(Conversion)
price |
|
Common stock
price per share |
| 0.00% |
|
809.71% |
|
0.0154% |
|
0.75 |
|
$0.02 |
|
$0.01300 |
On June 4, 2021, the Company and Leonite renegotiated
the convertible note for two years, face value of $260,000. At June 30, 2021, the Company recorded $281,8445 in derivative liabilities
On July 29, 2021, Leonite converted $42,750 in
debt plus $2,250 in fees to 15,000,000 shares, and on August 27, 2021, Leonite converted $44,475 and $2,250 in fees to 10,269,253 shares,
collectively resulting in a $15,832 gain on debt extinguishment.
On October 6, 2021, Leonite converted $57,952
in debt and interest plus $2,250
in fees to 13,231,209
shares, and on October 26, 2021, Leonite converted the remaining balance of $125,000
in debt and interest, and $2,250
in fees, to 27,917,969
shares, collectively resulting in a $96,145
gain on debt extinguishment.
| Schedule of extinguishment of debt | |
| | |
| Balance at June 30, 2021 | |
$ | 260,000 | |
| Accrued interest | |
| 9,954 | |
| Leonite Convertible Note converted | |
| (269,954 | ) |
| Total | |
| 0 | |
| Less: debt discount | |
| (0 | ) |
| Balance at December 31, 2021 | |
$ | 0 | |
The resulting derivative valuation is calculated as follows:
| Schedule of derivative liabilities at fair value | |
| | |
| Derivative as of June 30, 2021 | |
$ | 281,845 | |
| Change in fair value | |
| 238,155 | |
| | |
| 520,000 | |
| Write off due to conversions | |
| (176,800 | ) |
| Derivative value as of September 30, 2021 | |
$ | 343,200 | |
| Change in fair value | |
| (25,102 | ) |
| | |
| 318,098 | |
| Write off due to conversion | |
| (221,953 | ) |
| | |
| 96,145 | |
| Gain on extinguishment | |
| (96,145 | ) |
| Derivative as of December 31, 2021 | |
$ | – | |
Significant assumptions used in calculating fair
value of conversion feature of Leonite Convertible Note as of December 31, 2021 are as follows:
| Schedule of fair value of conversion features |
|
|
|
|
|
|
|
|
|
|
Expected
Dividends |
|
Expected
Volatility |
|
Risk-free
rate of interest |
|
Expected term
(year) |
|
Exercise
(Conversion)
price |
|
Common stock
price per share |
| 0.00% |
|
269.75% |
|
0.0007% |
|
1.9288 |
|
$0.00550 |
|
$0.01 |
In October 2021, Leonite converted the balance
of the loan, conversion fees, and accrued interest, and extinguished the debt.
Credit line – MediPendant New York
Inc.
On September 30, 2014, our subsidiary entered
into a line of credit with Medi Pendant New York, Inc. (“MNY”), which is partially owned by a principal of its subsidiary.
Under the line of credit agreement, the Company will be able to borrow up to $500,000 with the rate of interest of 6.5% per annum. The
maturity date of the credit line is September 30, 2017, with a one-year extension to September 30, 2018. On January 31, 2015, the limit
on the line of credit was increased to $500,000 with same interest rate and due date. The Company issued 200,000 shares of common stock
to one of the owners of MNY as consideration for the increase of line of credit. These shares were issued on October 19, 2015 and value
at $28,000 which was the fair market value at the grant date. The line of credit is currently in default.
As of December 31, 2021 and June 30, 2021, the
Company has recorded $397,500 and $397,500 in outstanding line of credit balance, respectively.
Note
10 – Stockholders’ Deficit
Capital Stock:
The Company is currently authorized to issue 3,000,000,000
shares of common stock, par value of $0.0001 per share, and 25,000,000 shares of preferred stock, par value of $0.0001.
For the six months ended December 31, 2020, the
Company issued 200,000,000 shares to its officers as compensation, valued at $1,140,000 or $.0057 per share, accrued 150,000 shares as
a bonus, valued at $1,500 or $.01 per share, and accrued 525,000 shares as officer compensation, valued at $3,861. All shares were recorded
at the stock price of the date of agreement or grant
For the six months ended December 31, 2021,
the Company issued 7,000,000 common shares to
employees and contractors for contractual bonuses, valued at $75,000
or $.0107
per share, accrued 5,000,000 shares in bonuses
to be paid, valued at $52,500
or $.0105 per share, issued 66,418,431 for $260,000 in debt, $9,954 in interest, and $9,000 in fees, valued at $677,707, accrued
450,000 to be issued for management compensation, valued at $4,920 an average of $.0109 per share, and sold 340,000,000 shares under
the Reg A at $3,400,000 or $.01 per share, 10,000,000 of which were accrued to be issued as of December 31, 2021. All shares were
recorded at the quoted stock price of the date of agreement or grant.
As of December 31, 2021 and June
30, 2021, the Company has 1,060,492,608 and 697,074,199 shares of common stock issued and outstanding and 25,500,000 and 20,050,000 issuable
common stock shares, respectively.
Offering pursuant to Regulation A
On September 11, 2020, the Company filed a 1-A offering statement
with the Securities and Exchange commission, offering up to 500,000,000 shares of common stock at $.01 to raise up to $5,000,000. The
offering was amended on October 14, 2020 and can be viewed on the SEC website.
Preferred Stock.
Series A Convertible Preferred Stock: The
Company is currently authorized to issue 100,000 shares of Series A Convertible Preferred Stock, par value $0.0001, convertible at 1 share
of Series A preferred stock for 2 shares of common stock. These shares have no voting rights.
Series B Convertible Preferred Stock: The
Company is currently authorized to issue 62,500 shares of Series B Convertible Preferred Stock, par value $0.0001, convertible at 1 share
of Series B preferred stock for 2 shares of common stock. These shares have voting rights and vote on an “as converted” basis
in actions required to have Series B Preferred Stockholder approval.
Series C Convertible Preferred Stock: The
Company is currently authorized to issue 6,944,445 shares of Series C Convertible Preferred Stock, par value $0.0001, convertible at 1
share of Series C Convertible Preferred Stock for 10 shares common stock. These shares have voting rights and vote on an “as converted”
basis in actions required to have Series C Preferred Stockholder approvals.
Series D Convertible Preferred Stock: The Company
is currently authorized to issue, 500,000 shares of Series D Convertible Preferred Stock, par value $0.0001, convertible at 1 share of
Series D Convertible Preferred stock for 10 shares of common stock These shares have voting rights and vote on an “as converted”
basis in actions required to have Series D Preferred Stockholder approval.
Series E Convertible Preferred Stock: The Company
is currently authorized to issue 4,000,000 shares of Series E Convertible Preferred Stock, par value $0.0001, convertible at 1 share of
Series E Convertible Preferred Stock for 100 shares of common stock. In addition, Series E Convertible Preferred Stock carry voting rights
of 10,000 votes per share of Series E Convertible Preferred Stock.
During the six months ended December 30, 2020,
the Company issued 6,700,003 shares of Series C Convertible Preferred Stock, valued at $375,000 or $.056 per shares in conjunction with
the purchase of the Boapin portal (See Note 11), returned 4,000,000 shares of Series E Convertible Preferred Stock, valued at $400 or
$.0001, and issued 1,900,000 shares of Series E Convertible Preferred shares to two officers for services, valued at $1,223,000 an average
of $.64 per share. All shares were recorded at the stock price of the date of agreement or grant on an as-converted basis.
During the six months ended December 31,
2021, the Company issued 1,000,000
shares of Series E Convertible Preferred shares to each of its two directors for services, valued at $3,000,000
or $1.50
per share, and issued 50,000
shares to each of its two directors, previously accrued, valued at $57,000
or $.57
per share. All shares were recorded at the quoted common stock price of the date of agreement or grant on an as-converted basis.
As of December 31, 2021 and June 30, 2021, the
Company had 688 shares of Series A Convertible Preferred Stock, 9,938 shares of Series B Convertible Preferred Stock, 6,838,889 shares
of Series C Convertible Preferred Stock, 425,000 shares of Series D Convertible Preferred Stock, and 4,000,000 shares of Series E Convertible
Preferred Stock issued and outstanding, respectively.
All shares were valued at the stock price on the
day of transaction or conversion.
Note 11 – Related Party Transactions
Note payable – BOAPIN purchase
In June 2019, the Company purchased the
BOAPIN portal, including all software, licensing, and ownership rights from Hypersoft Ventures, Inc., a related party, for $425,670,
which includes six million seven hundred thousand (6,700,003) shares of Series C Convertible Preferred stock and a note for
$425,000, bearing twelve percent (12%) interest with no prepayment or delinquency clauses.
On October 28, 2021, the Company repaid $105,000 in principle, and
on December 1, 2021, the Company repaid $150,000 in principle.
As of December 31, 2021 and June 30, 2021, the
Company has recorded Note payable-BOAPIN of $170,000 and $425,000, and accrued interest of $42,905 and $28,225, respectively.
Accrued expenses and due to related party
From time to time, related parties loaned the
company working capital for day-to-day operations, respectively. These are short-term loans which bear no interest, and the Company expects
to repay these loans within the coming year. In addition, salary accruals owed to the officers of the Company have been included in the
Due to related party line item.
As of December 31, 2021 and June 30, 2021, the
Company owes $342,075 and $579,673 in related party payables, respectively.
Note 12 – Commitments and contingencies
Commitments and Contingencies. The Company
follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist
as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one
or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves
an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted
claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as
well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that
it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would
be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not
probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate
of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon
information available at this time that these matters will have a material adverse effect on the Company’s financial position, results
of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s
business, financial position, and results of operations or cash flows.
The Company is currently involved in the below
litigation matters. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm our business.
| |
1) |
Wearable Health Solutions, In. v. Barry Honig, GRQ Consultants Inc., Benza Pharma LLC and John Does 1-10, Supreme Court of the State of New York County of New York, July 22, 2021. Company is disputing the validity of Notes from 3/2016 and seeking damages, reparations, and related costs. |
| |
2) |
GRQ Consultants, Inc. v. Wearable Health Solutions, Inc., Supreme Court of the State of New York, County of New York, August 26, 2021, Parties are seeking summary judgment of $50,000 plus accrued interest in response to lawsuit by Company regarding $50,000 loan from 11/2016. |
Note 13 – Office lease
The Company maintains its corporate offices in
Toronto on a month-to-month basis. The subsidiary maintains a warehouse office in Pennsylvania to facilitate inventory arrival and product
shipment. The 3-year lease at $1,100 per month expired on September 30, 2021. The lease has been renewed for 12 months at $1,300 per
month beginning October 1, 2021. Expenditures for the six months ending December 31, 2021 and 2020 are as follows:
| Schedule lease cost | |
| | |
| |
| | |
2021 | | |
2020 | |
| Rent expense | |
$ | 7,700 | | |
$ | 6,600 | |
Note 14 – Subsequent Events
Capital Stock
On January 6, 2022, 20,000,000 shares which had been accrued to be issued were issued by the transfer agent.
As of the date of this filing, the Company has 1,080,492,608 shares of common stock issued and outstanding, and 5,500,000 common shares
issuable.
Settlement
In 2019, the Company engaged MCA Cure to negotiate settlements with
two note holders, and paid MCA Cure a total of $97,625. In 2020, the Company discovered MCA Cure had not performed when bank accounts
were levied for $33,705, $18,705 being subsequently refunded, and engaged an attorney to recover funds. Currently the Company
has a settlement agreement in place with Susquehanna Salt Loan and has hired an attorney to recover funds and damages from MCA Cure. In
February 2022, a settlement was reached with MCA Cure for fees and attorney costs of $105,125, amortized at 1.5%, by which the Company
would receive an initial payment of $10,000, and $6,500 monthly until the debt is satisfied in May, 2023, with stipulations for any potential
default.