The following documents are filed as part of or are included
in this Report:
Notes
to the Financial Statements
For
the Nine Months Ended March 31, 2019
|
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.
|
2.1
|
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
|
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.
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.
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.
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.
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.
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
equipments are 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.
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.
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).
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.
This represent cash in hand and cash deposited in
bank accounts (current) by the Company.
Amount in $
Primary Checking account
|
|
|
–
|
|
Checking account
|
|
|
59,580
|
|
Undeposited funds
|
|
|
–
|
|
|
|
|
59,580
|
|
Opening balance
|
|
|
82,704
|
|
Net movement during the period
|
|
|
–
|
|
|
|
|
82,704
|
|
Less : Provision
|
|
|
–
|
|
Account Receivable - Net
|
|
|
82,704
|
|
Opening balance
|
|
|
97,677
|
|
Net movement during the period
|
|
|
–
|
|
|
|
|
97,677
|
|
Opening balance
|
|
|
46,348
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
46,348
|
|
Opening balance
|
|
|
–
|
|
Net movement in liabilities during the period
|
|
|
–
|
|
Closing balance
|
|
|
–
|
|
|
9.
|
Property, plant and equipment
|
Cost
|
|
|
|
Opening balance
|
|
|
89,013
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
89,013
|
|
|
|
|
|
|
Accumulated Depreciation
|
|
|
|
|
Opening balance
|
|
|
(77,539
|
)
|
Net movement during the period
|
|
|
(2,678
|
)
|
Closing balance
|
|
|
(80,217
|
)
|
Closing Book value
|
|
|
8,796
|
|
|
10.
|
Credit line payable - related party
|
Opening balance
|
|
|
421,350
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
421,350
|
|
Opening balance
|
|
|
97,508
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
97,508
|
|
Opening balance
|
|
|
228,833
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
228,833
|
|
Opening balance
|
|
|
7,844
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
7,844
|
|
Opening balance
|
|
|
88,230
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
88,230
|
|
|
15.
|
Notes payable - Other
|
Opening balance
|
|
|
53,000
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
53,000
|
|
|
16.
|
Derivative Liabilities
|
Opening balance
|
|
|
119,578
|
|
Net movement during the period
|
|
|
–
|
|
Closing balance
|
|
|
119,578
|
|
|
17.
|
Convertible notes - net of discount
|
Opening balance
|
|
|
671,400
|
|
Net movement during the period
|
17.1
|
|
–
|
|
Closing balance
|
|
|
671,400
|
|
|
17.1
|
During the period, the company secured a $50,000 line of
credit from EMRY CAPITAL bearing interest at 8% Per annul secured by company stock (convertible note) convertible as per default
provisions. The Company has earmarked these funds exclusively towards the successful VR product line.
|
|
18.
|
Accrued expenses and other current liabilities
|
Opening balance
|
|
|
202,868
|
|
Rounding
|
|
|
–
|
|
Net movement during the period
|
|
|
1,709
|
|
Closing balance
|
|
|
204,577
|
|
Sale of Lock boxes
|
|
|
–
|
|
Labor services
|
|
|
–
|
|
Sale of Medi-01 Kit
|
|
|
–
|
|
Sale of replacement parts
|
|
|
–
|
|
Accessories sale
|
|
|
–
|
|
Other Services
|
|
|
–
|
|
Monitoring activities
|
|
|
–
|
|
Shipping and Handling
|
|
|
–
|
|
Installation Revenue
|
|
|
–
|
|
Less: Discounts
|
|
|
–
|
|
|
|
|
–
|
|
COG - Material Purchases
|
|
|
–
|
|
COG - Service
|
|
|
–
|
|
COG - Other
|
|
|
–
|
|
COG - Monitoring
|
|
|
–
|
|
COG - Shipping & Packaging
|
|
|
–
|
|
|
|
|
–
|
|
Marketing
|
|
|
–
|
|
Shipping Expense
|
|
|
–
|
|
Advertising
|
|
|
–
|
|
|
|
|
–
|
|
Bank Fees
|
|
|
–
|
|
Interest Expense - Warrants
|
|
|
–
|
|
Interest on OID
|
|
|
–
|
|
Interest for credit 3rd party
|
|
|
1,709
|
|
|
|
|
1,709
|
|
|
23.
|
General and Administrative expense
|
Bad Debt Expense
|
|
|
–
|
|
Investor Relations
|
|
|
–
|
|
Administrative Pay
|
|
|
–
|
|
Consulting
|
|
|
–
|
|
Commissions
|
|
|
–
|
|
Payroll Taxes - Employer
|
|
|
–
|
|
Insurance - Workers Comp
|
|
|
–
|
|
Insurance - Liability
|
|
|
–
|
|
Security Services
|
|
|
–
|
|
Postage
|
|
|
–
|
|
Vehicles
|
|
|
–
|
|
Gas
|
|
|
–
|
|
Vehicle Maintenance
|
|
|
–
|
|
Legal & Professional Services
|
|
|
–
|
|
Accounting
|
|
|
–
|
|
Filing Fees
|
|
|
–
|
|
Merchant Fees
|
|
|
–
|
|
Dues & Subscriptions
|
|
|
–
|
|
Depreciation - Computers & Software
|
|
|
2,678
|
|
Software
|
|
|
–
|
|
Depreciation - Software Development Costs
|
|
|
–
|
|
Group Health Insurance
|
|
|
–
|
|
Dental Insurance
|
|
|
–
|
|
Insurance, Vehicle
|
|
|
–
|
|
Travel - Air Lines
|
|
|
–
|
|
Travel - Car Rental
|
|
|
–
|
|
Travel - lodging
|
|
|
–
|
|
Entertainment
|
|
|
–
|
|
Travel - Meals
|
|
|
–
|
|
Travel - Parking tolls train cab
|
|
|
–
|
|
Office Supplies
|
|
|
–
|
|
Cleaning / Janitorial
|
|
|
–
|
|
Rent
|
|
|
–
|
|
Telephone
|
|
|
–
|
|
Utilities - Electric and Gas
|
|
|
–
|
|
Utilities - Other
|
|
|
–
|
|
Payroll Processing Fees
|
|
|
–
|
|
Stock Compensation
|
|
|
–
|
|
Salaries-Officer's
|
|
|
–
|
|
Conferences
|
|
|
–
|
|
Administrative Costs
|
|
|
–
|
|
Computer Supplies & Maintenance
|
|
|
–
|
|
Income Taxes - Federal
|
|
|
–
|
|
|
|
|
2,678
|
|
During
the current period, there has been no new issuance of any class of stock of the Company.
|
25.
|
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.