Table of Contents

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K/A

 

(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 2019

 

[_]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

 

Commission File Number 333-153290

 

WEARABLE HEALTH SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 26-3534190
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

2300 Yonge St., Suite 1600, Toronto, Ontario M4P 1E4 Canada

(Address of principal executive offices)

 

855 226 4827

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
N/A N/A N/A

 

Securities registered pursuant to Section 12(g) of the Act:

(Title of each class)

None.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes [_] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [X] No [_]

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [_] No [X]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [_] No [X]

  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [_] Smaller reporting company [X]
      Emerging growth company [_]

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [_] No [X]

 

The aggregate market value of the registrant’s common stock held by non-affiliates based upon the closing sales price of the common stock as reported by the OTCQB on June 30, 2019, the last trading day of the registrant’s second fiscal quarter, was approximately $84,648 ($.0120 per share of free trading shares). The determination of affiliate status for this purpose shall not be a conclusive determination for any other purpose.

 

Number of shares outstanding of each of the issuer’s classes of common equity, as of June 30, 2019: 94,699,177 shares of Common Stock, par value US $0.0001.

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

     
 

 

AMENDMENTS

 

This Annual Report on Form 10-K is hereby amended solely in respect of the Company’s Consolidated Financial Statements and Supplementary Data and the notes thereto. Except as so amended, nothing in the Company’s Annual Report on Form 10-K for its fiscal year ended June 30, 2019, has been amended and the Company does not undertake any responsibility to update any other sections thereof.

 

 

 

 

 

 

 

 

 

 

 

 

     

 

Table of Contents

 

PART I      
  ITEM 1. Description Of Business 1
  ITEM 1A. Risk Factors 5
  ITEM 1B. Unresolved Staff Comments 5
  ITEM 2. Description Of Property 5
  ITEM 3. Legal Proceedings 5
  ITEM 4. Mine Safety Disclosures 5
       
PART II      
  ITEM 5. Market For Registrant's Common Equity And Issuer Purchases Of Equity Securities 7
  ITEM 6. Selected Financial Data 7
  ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
  ITEM 8. Consolidated Financial Statements And Supplementary Data 8
  ITEM 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosures 8
  ITEM 9A. Controls And Procedures 9
  ITEM 9B. Other Information 10
       
PART III      
  ITEM 10. Directors, Executive Officers And Corporate Governance 11
  ITEM 11. Executive Compensation 12
  ITEM 12. Security Ownership Of Certain Beneficial Owners 13
  ITEM 13. Certain Relationships And Related Party Transactions, And Director Independence 13
  ITEM 14. Principal Accounting Fees And Services 13
       
PART IV      
  ITEM 15. Exhibits, Financial Statements 14
    Signatures 15

 

 

 

     
 

 

PART I

 

Item 1. Business

 

Company’s History

 

Wearable Health Solutions, Inc. (Formerly known as Medical Alarm Concepts Holding, Inc.) (the "Company" or "Wearable Health") was formed in June 2008 and, on June 24, 2008. The Company acquired 100% of the membership interests in Medical Alarm Concepts, LLC, a Delaware limited liability corporation.

 

The principal executive offices of the Company are located at 200 West Church Road, Suite B, King of Prussia, PA 19406.

 

Company Overview

 

The Company manufactures medical alarm devices that are used to summon help in the event of an emergency. While these devices are primarily designed for the elderly, there is also a market for those who are physically disabled, as well as for persons living alone.

 

The Company was organized in mid-2008. The operation was financed with a considerable amount of toxic convertible debt. This type of financing, along with several other issues, prevented the Company from realizing a robust growth rate for its first few years of operation. Since that time, considerable management time has been spent and investor money utilized to turn the Company's operation around.

 

Our flagship product is called the MediPendant®, which is a personal emergency alarm that is used to summon help in the event of an emergency at home. Currently, approximately 60% of all medical alarms being sold in the United States are first-generation technologies that require the user to speak and listen through a central base station unit. The MediPendant®, however, offers a product that has the speaker in the pendant, enabling the user to simply speak and listen directly through the pendant in the event of an emergency.

 

The Company also manufacture the iHelp™ mobile medical alarm device. The iHelp™ is a next- generation medical alarm that utilizes T-Mobile's 2G network. Users of the iHelp™ mobile medical alarm can take the device with them wherever there is cellular service. There is no base station and the iHelp™ only requires a cellular signal in order to work.

 

The company has invested time, manpower, and money into the development of this product. On September 30, 2014, the company signed an agreement for a $300,000 line of credit to enable it to launch the iHelp™, and to build the infrastructure that allowed the Company to buy and track air time from T-Mobile for cellular operation of this unit. The credit line was increased to $500,000 in January 2015. The iHelp™ has enhanced features and functions including an advanced GPS system, the ability to remotely locate a loved one, and a dealer portal that enables dealers to manage their own iHelp™ customer base. A significant amount of time was spent on the backend systems, including the dealer portal. iHelp™ dealers have significant benefits, most importantly the ease of use in ordering product, activating and deactivating customers, tracking their customer usage, and creating and printing a variety of reports to assist in billing and collecting revenues. The iHelp™ dealer program is a turn-key program that offers the dealer the opportunity to provide his/her customers with the latest products without having to change his/her own backend.

 

We are in the process of discontinuing the iHelp™ and implementing a new product called the iHelp+ 3G™. The iHelp+ 3G™ is a cellular medical alert system that operates on a 3G network. In March 2016 and May 2016 the company raised an additional $612,500 and $425,000 to further develop the 3G product. Initially, it will be operating on the AT&T network (GSM - Global), and ultimately it will be able to operate on the Verizon (CDMA - USA) network as well. It is Bluetooth and Wi-Fi enabled. It has a much broader reach than the iHelp™, as well as additional functions, such as fall detection and geo-fencing (ability to pre-set an area and alert loved ones if the user leaves or enters the pre-set area). As of this date we have gained FCC, CE, and PTCRB approval. Expected product launch date is now Dec 2016.

 

 

 

 

  1  
 

 

It is planned that by the end of 2017 the iHelp+3G™ will be used as the communication device for Low Energy Bluetooth 4.0-enabled devices, and used for collecting and sending vital sign data, in any requested manner, to encrypted HIPAA-compliant cloud servers for access by proper parties.

 

New Product Development

 

The design and development of wearable 'biosensor' devices, such as the iHelp+3G™ for health and wellness, has garnered much attention in the public and healthcare community during the last few years. This is primarily motivated by increasing healthcare costs and propelled by recent technology advances in miniature bio-sensing devices, micro-computing technology, and wireless communications. The advance of wearable sensor-based systems will potentially transform the future of "telehealth", personal emergency response (PERS, mPERS) and remote monitoring, by enabling ubiquitous, convenient-to-use, cost-effective and proactive personal health management with real and near real-time monitoring and archiving of personal safety, health, and environmental conditions.

 

Beyond the recent emergence of smart mobile wireless and geographic location solutions, these systems will integrate via Bluetooth low energy 4.0 and other technologies with FDA approved medical devices and biosensors. The Company will be able to collect data on vital signs, send this data to HIPAA compliant servers in the cloud, and allow access by caregivers, nurses, doctors, hospitals, and other health organizations. This process can facilitate low- monthly-cost wearable solutions for the implementation of monitoring of users, all day and anywhere, for emergency, health, and activity status changes. This evolution will change the face of the traditional PERS device into a WHAM (Wearable Health& Alarm Monitoring) market.

 

Market Background

 

Living arrangements have changed greatly in the United States among older people and other potentially vulnerable segments of the population, including those with physical disabilities and/or medical conditions. During the 20th century, one of the most dramatic changes in the lives of the aging in the United States was the rise of the number of aging people living at home alone. In 1910, for example, only 12% of widows age 65 or older lived alone. In 1970, this figure was 70% and today it is estimated to be impressively higher.

 

In the 21st century, this trend has gained momentum and become stronger than ever, with more of the aging and medically at risk population living alone at present than at any other time in the past, especially with the rise of the aging Baby Boomer population. The Baby Boomers, those born between 1946 and 1964, started turning 65 years old in 2011, with the number of older people set to increase dramatically during the 2010 to 2030 time period. According to a 2009 analysis of U.S. Current Population Survey data, "between 2010 and 2030, the number of people age 65 and older is projected to grow by 31.7 million or 79.2%." Thus, the older population in 2030 is projected to be twice as large as in 2000, growing from 35 million to 71.5 million, representing 20% of the total U.S. population around the year 2030.

 

This social dynamic of a rising older population is true in both the United States as well as in many developed nations worldwide. Likewise, social change, technological advancements, and general lifestyle choices have promoted increased independence and the ability to live alone among other potentially vulnerable segments of the population such as those with physical disabilities or medical conditions. These groups can be especially susceptible to health problems and concerns for their physical wellbeing. Experts and even common sense agree that in order to help facilitate independence and safety, more help is needed to provide these people with a point of contact in case of emergency, or the benefit of support in a time of need. It was in response to this situation that the personal emergency response systems (PERS) industry emerged in the United States and developed the first personal medical alarm. The most obvious and common use for personal medical alarms is as a safeguard for the aged and persons with certain medical conditions, in case of an age or health related incident that requires immediate attention, and in which the victim is unable to reach out for assistance via traditional means, including the ability to make a telephone call.

 

Effective personal emergency response systems with their emergency alert capabilities, are a key technology solution that can greatly help the vulnerable segment of the population live a more free and active life while maintaining the security of being able to access immediate assistance as needed. In fact, there has been a boom in the PERS market in recent years because of the growing aging population worldwide. According to Forrester Research, Inc., the PERS market in the United States has grown at double digit rates, from approximately $350 million in 2004 to $2 billion in 2012 and increasing every year thereafter.

 

 

 

 

  2  
 

 

Today, however, while the PERS industry has been around for a long time, much of the technology within the industry has unfortunately remained stagnant. Many of the original PERS solutions are still designed today to provide alerts whereby a push of a button simply triggers a call center operator to respond by calling the device user at home, with two-way voice communication done through a centralized speaker box and not the actual device itself. Thus, traditional PERS solutions currently on the market offer communication between user and a call center only through a speaker box. This greatly inhibits the user's freedom and limits their mobility to an area near the speaker box.

 

Mobile medical alerts have recently been introduced to the market. They are designed for the younger and more active person with medical issues, and also the active elderly adult.

 

And with the emergence of telehealth and biosensor technology, the market is changing again, to an even younger people with medical issues that need to be tracked on a regular basis.

 

Wearable Health Solutions offers a wide range of solutions for the user from a simple at home medical alarm to a mobile device that enables the user to get help anywhere they go. With the introduction of the telehealth product by the end of 2017, users will be able to get help, before they even know they need it.

 

Market Opportunity

 

The healthcare industry is the largest industry in the world, with the home healthcare market in developed countries in particular growing rapidly, driven in part by aging baby boomers and a growing shift toward moving some types of healthcare away from the hospital and into the home.

 

These trends help make the home healthcare sector an increasingly attractive market for successful companies that offer effective solutions in the PERS industry space. The most obvious and common use for personal medical alarms is as a safeguard for the aged and persons with certain medical conditions, not only in case of an age or health related incident that requires immediate attention, but in which the victim is unable to reach out for assistance via traditional means, including the placement of a telephone call. While very few things can prevent falls by aged persons or other unforeseen medical emergencies, medical alarms mitigate the potential harm and expensive hospital stays done by initiating a timely response to such an incident. And tracking devices, like the iHelp+3G™ for wearable biosensors will be able to monitor people with pre-existing conditions.

 

In fact, there has been a boom in the PERS market in recent years because of the growing aging population worldwide and in the United States in particular. According to the U.S. Census Bureau, the number of people over 65 in the United States is set to jump from approximately 34 million today to approximately 65 million in 2025. By 2050, this number is projected to reach 86.7 million, with many of them living at home or in an alternative home-type environment. Worldwide, this figure number is expected to double from some 550 million people currently at age 65 years old to over 1.2 billion seniors by the time period around the year 2025.

 

Not surprisingly, experts in the health care industry expect many of these seniors will want to continue living independently at home for as long as possible. Likewise, more than any aging generation of the past, this population is expected to be more technology-savvy as consumers of healthcare are very interested in playing an active role in personally managing their health and well-being. Importantly, they will likely look to technologies that help them gain access to medical care while being able to remain independent and outside a hospital environment.

 

Effective personal emergency response systems (PERS), with their emergency alert capabilities, are a key technology solution that can greatly help the vulnerable segment of the population live a more free and active life while maintaining the security of being able to access immediate assistance as needed. According to Forrester Research, Inc., the PERS market in the United States has grown at double digit rates, from approximately $350 million in 2004 to $2 billion in 2012 and increasing every year thereafter.

 

 

 

  3  
 

 

According to statistics from some of the industry's largest providers of traditional PERS solutions, customers of these emergency alert systems are typically individuals over the age of 75 years old whom are predominantly female and live alone, with the actual buyers of PERS systems often being the end user's children who purchase the medical alarms for their parents.

 

Regarding purchases of PERS solutions worldwide, the large majority of customers currently pay for their PERS products out-of-pocket, with government reimbursement for PERS items varying from country to country. In the United States, for example, 25% of PERS sales were government reimbursed in 2004, compared to 35% in Germany, just over 50% in France and nearly 100% in the United Kingdom. Furthermore, it is estimated government reimbursement for PERS will ramp up in a number of countries, further fueling demand for these products.

 

Interestingly, as an approximation of the potential PERS market size in the United States, Lifeline Systems, Inc., the founder of the PERS industry in the U.S. approximately 35 years ago, served 250,000 users in the United States and Canada around the time frame of 1992. Today, Philips Medical Systems' acquisition of Lifeline Medical Alarm has positioned it as the largest provider of traditional PERS systems with over 700,000 monitored accounts, implying that the total market size of users is likely much larger.

 

Sales and Marketing

 

The company's marketing efforts are focused in four main areas

 

i. Internet sales & marketing,
ii. retail distribution,
iii. wholesale distribution and
iv. International markets.

 

1) Internet Sales & Marketing

 

The Company markets the MediPendant® through its website at www.MediPendant.com and its iHelp™ mobile medical alarm to dealers at www.ihelpalarm.com. Due to the complex sales process for medical alarms, which often require several phone calls among the end user customer's family members before a decision is reached, the MediPendant® and iHelp™ websites are used mainly for informational purposes with the actual sale typically taking place over the phone with one of our customer service representatives or one of our many dealers. The company uses a variety of techniques, such as Internet paid ad campaigns and social media, in order to drive web traffic to the websites, and initiate potential customer sales calls.

 

2) Retail Distribution

 

During 2012, the company announced its plans to promote the MediPendant® product utilizing an e-commerce marketing strategy program designed specifically for Costco Wholesale Corporation and its members. Costco began offering the MediPendant® to its customers via its website during the spring of 2012.

 

3) Wholesale Distribution

 

The Company currently has several relationships with wholesalers who resell the MediPendant® and the iHelp™ in conjunction with their own monitoring services. The company believes its relationships with its strategic partners is good. The company is currently in discussions with several other wholesale groups looking to distribute our products through their own independent channels. With the introduction of the iHelp+ 3G™, Wearable Health Solutions will be selling only through Wholesale Distribution and in International Markets.

 

4) International Markets

 

The Company also distributes its products in a wholesale manner to selected international markets. To date, the company has made sales in Denmark, Ireland, Bermuda, and the People's Republic of China. There has recently been a lot of International interest in the company's new iHelp+ 3G™, and the company plans to distribute its product initially in Canada and Europe, and expand from there.

 

 

 

  4  
 

 

Competition

 

The market for Personal Emergency Response Systems (PERS) is highly fragmented. Because the vast majority of the market participants are private corporations, only limited information about competitors is available.

 

The vast majority of competitors market first generation PERS systems that rely on a centralized base station for communication between the user and the monitoring center. The second largest of these market participants is believed to be Life Alert, which was founded in 1987. The largest participant is thought to be Philips Medical Systems, which several years ago purchased Lifeline Medical Alarms. Additionally, there are dozens of smaller organizations marketing PERS devices and monitoring services.

 

Mobile Medical Alerts have recently been introduced to the market. They are designed for the younger and more active person with medical issues and also the active elderly adult.

 

Termination of Patent Purchase Agreement and New Patent Licensing Agreement

 

On July 10, 2008, the Company entered into a Purchase Agreement and Patent Assignment Agreement (the "Agreement") effective July 31, 2008. The Company was obligated to pay the seller $2,500,000 on June 30, 2012. The Agreement specifies interest of 6% payable monthly, commencing on July 31, 2008. The seller had the right to reacquire all patents and applications if payment was not made on June 30, 2012; however, this agreement has been extended quarterly since June 30, 2012. The patent purchase agreement refers to patent #RE41845 and RE41392. The scope of the patents are as follows: A personal emergency communication system includes a user-carried portable communication unit having a single button, which when depressed by the user, wirelessly sends a call request signal to a base unit. The base unit initiates a telephone call through a dial-up network to an emergency response center and places an operator at the emergency center responder in wireless voice communication with the portable unit when the call is connected. The telephone number to be called can be stored in at least one of the portable unit and the base unit. A speech synthesizer operating in combination with automated voice messages stored in at least one of the base unit and portable unit system memory are used to advise the user of the status of the call, and to provide the user with verbal confirmation that functional systems of the base unit are operating properly.

 

In June 2015, the Company made a decision to terminate its patent agreement with Nevin Jenkins, the patent holder. Mr. Jenkins and the Company agreed to a new revised licensing agreement whereby the company still has the ability to order and sell product utilizing the patent. The company feels that the old agreement was too costly, and money would be better served based on its decision of investing in more cellular type mPERS devices. Its new agreement with Mr. Jenkins will enable the Company to continue selling the MediPendant® based on a cost plus structure.

 

Products

 

The Company's primary focus is the sale of its medical alarm and safety alert devices, which are some of the most advanced systems on the market today.

 

a) MediPendant®

 

MediPendant® is the Company's traditional medical alarm product and the world's first monitored two-way voice speakerphone pendant for the PERS (personal emergency response) industry. It allows the user to speak and listen to the operator directly through the pendant. Wearable Health Solutions' alarm pendant also offers superior range radio frequency capabilities and an enhanced communication range that enable the user to move freely in and about the home, including up to an extended range that is revolutionary in the PERS industry. Specifically, the MediPendant® system enables the device wearer to move up to 600+ feet (line of sight) away from the main base station, a distance that far exceeds competitive offerings on the market today that instead require the user to be within speaking distance of the base station box, a situation that may not be conducive to an emergency if the end user is not at the base station.

 

As part of the MediPendant® product offering, users receive Wearable Health Solutions' two- way communication pendant, base station unit and a subscription to the Company's around- the-clock personal response service monitoring center.

 

 

 

  5  
 

 

Emergency calls made through the Company's MediPendant® device are always handled by certified operators who are available around the clock 24-hours a day and guaranteed to remain on the line with MediPendant® subscribers until the problem is resolved and/or help arrives. Operators are trained to immediately assess the situation and can either connect the caller to a loved-one or dispatch medical personnel to the user's location. All emergency operators are prepared to bring calm, professional, knowledgeable insight to any situation. Additionally, the call center can also maintain an important list of personal information for all MediPendant® users that includes an updated list of medications, health information and the subscriber's contact information including home address for location and dispatch purposes. This personal information and medical history are securely stored by the monitoring center and can be provided to the dispatched authority and emergency responders as necessary.

 

b) iHelp™

 

The company recently announced the launch of a new, advanced medical alarm device called the iHelp™. The iHelp™ is an advanced mobile medical alert system, designed to be easy to use, lightweight yet durable, but with significantly advanced features. The company has invested time, manpower, and money into the development and launch of this product. The iHelp™ has enhanced features and functions including an advanced GPS system, the ability to remotely locate a loved one, voice prompts, and a dealer portal that enables dealers to manage their own iHelp™ customer base. A significant amount of time was spent on the back end systems, including the dealer portal. iHelp™ dealers have significant benefits, most importantly the ease of use in ordering product, activating and deactivating customers, tracking their customer usage, and creating and printing a variety of reports. The iHelp™ dealer program is a turn-key program that offers the dealer the opportunity to provide his/her customers with the latest products without having to change his/her own "back end" systems. With the introduction of the new and greatly improved iHelp+ 3G™ unit, the iHelp™ will no longer be produced.

 

c) iHelp + ™ 3G

 

The iHelp+ 3G™ is currently in the final approval stage and is expected to be available to the marketplace by December 2016. The iHelp+ 3G™ is similar to the iHelp™ in that it is an mPERS product. However, the iHelp+ 3G™ will have more advanced features and functions, including the ability to detect if the wearer of the unit falls such as in the shower, have Geo-Fencing and Tracking ability, will operate on the "3G" networks, and be telehealth enabled via blue tooth low energy 4.0. The unit will have superior audio quality, an extended battery life, and will operate on GSM networks allowing for use with AT&T providers both domestically and internationally (with AT&T partners), therefore enabling extended coverage almost anywhere the user may go.

 

Item 1A. Risk Factors

 

The information to be reported under this Item is not required of smaller reporting companies.

 

Item 1B. Unresolved Staff Comments

 

Not Applicable

 

Item 2. Properties

 

The principal place of business of the Company is situated at 200 West Church Road Suite B, King of Prussia, PA 19406. This office is leased. The management believes that the facilities it is using now are adequate and suitable for business requirements.

 

Item 3. Legal Proceedings

 

The Company is not presently a party to any litigation nor, to our knowledge, is any litigation threatened against it, which may materially affect its business or its assets.

 

Item 4. Mine Safety Disclosures

 

Not Applicable

 

 

 

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PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

The common stock has been quoted on the OTC Bulletin Board system under the symbol “MDHI” since January 2, 2009. It is now quoted on the OTCQB under the symbol WHSI.

 

The market price of the Company's common stock will be subject to significant fluctuations in response to variations in its quarterly operating results, general trends in the market, and other factors, over which the Company has little or no control. In addition, broad market fluctuations, as well as general economic, business and political conditions, may adversely affect the market for the common stock, regardless of the Company's actual or projected performance.

 

    High     Low  
                 
2017                
First quarter   $ .50     $ .30  
Second quarter   $ .47     $ .15  
Third quarter   $ .35     $ .10  
Fourth quarter   $ .17     $ .11  
                 
2018                
First quarter   $ .0188      $ .0025   
Second quarter   $ .0140      $ .0003   
Third quarter   $ .0073      $ .0003   
Fourth quarter   $ 0.02      $ .0037   

 

Holders

 

As at the period end, there were approximately 130 shareholders of record of the common shares.

 

Dividends and Dividend Policy

 

The Company's policy is to reinvest earnings in order to fund future growth. Therefore, the Company has not paid, and currently do not plan to declare dividends on its common stock. Although the Company intend to retain its earnings, if any, to finance the exploration and growth of its business, its Board of Directors will have the discretion to declare and pay dividends in the future.

 

Payment of dividends in the future will depend upon the Company's earnings, capital requirements, and other factors, which its Board of Directors may deem relevant.

 

Equity Compensation Plan Information

 

The Company do not has any equity compensation plans under which equity securities of the Company are authorized for issuance and it has not granted any stock options.

 

Item 6. Selected Financial Data

 

The information to be reported under this item is not required of smaller reporting companies.

 

 

 

 

 

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

 

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto in Part II, Item 8 to this amended Annual Report on Form 10- K/A. This discussion contains forward-looking statements reflecting our current expectations. Actual results and the timing of events may differ significantly from those projected in forward- looking statements due to a number of factors, including those set forth in Item 1A “Risk Factors” of this Annual Report on Form 10-K. Given these uncertainties, readers of this filing and investors are cautioned not to place undue reliance on such forward-looking statements.

 

The Company believes it can satisfy its cash requirements for the next twelve months with its current cash flow from business operations, although there can be no assurance to that effect. If the Company is unable to satisfy its cash requirements, it may be unable to proceed with its plan of operation. The Company do not anticipate the purchase or sale of any significant equipment. The Company also do not expect any significant additions to the number of employees. The foregoing represents the Company's best estimate of its cash needs based on current planning and business conditions. In the event the Company is not successful in reaching its initial revenue targets, additional funds may be required, and it may not be able to proceed with its business plan for the development and marketing of its core services. If this occur, the Company may be forced to suspend or cease operations.

 

The Company anticipate incurring operating losses in the foreseeable future. Therefore, the Company's auditors have raised substantial doubt about its ability to continue as a going concern.

 

Going Concern

 

The Company has working capital deficit, did not generate cash from its operations, had stockholders' deficit, and had operating losses since inception. These circumstances, among others, raise substantial doubt about the Company's ability to continue as a going concern. While the Company is attempting to generate sufficient revenues, the Company's cash position may not be enough to support the Company's daily operations. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate sufficient revenues. The Company may incur operating losses in the foreseeable future. Therefore, the Company's auditors have raised substantial doubt about its ability to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

At June the period end, the Company did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, the Company is not exposed to any financing, liquidity, market or credit risk that could arise had it engaged in such relationships.

 

Item 8. Financial Statements and Supplementary Data

 

The Company's financial statements are contained in the pages beginning F-1, which appear at the end of this annual report.

 

Item 9. Changes In, and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

 

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Item 9A. Controls and Procedures

 

a) Evaluation of Disclosure Controls and Procedures

 

Ronnie Adams, the Company's Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of fiscal year pursuant to Rules 13a-15(b) or 15d-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) are controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it file under the Exchange Act is accumulated and communicated to its management, as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation, Mr. Adams concluded that the disclosure controls and procedures of the Company were ineffective as at the period end to ensure that information required to be disclosed by the Company in the reports that it file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

 

In order to rectify its ineffective disclosure controls and procedures, the Company is developing a plan to ensure that all information will be recorded, processed, summarized and reported accurately, and as of the date of this report, it has taken the following steps to address its ineffective disclosure controls and procedures:

 

· The Company will continue to educate its management personnel to comply with the disclosure requirements of the Exchange Act and Regulation S-K; and ·
· The Company will increase management oversight of accounting and reporting functions in the future.

 

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

(b) Management’s Annual Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control system over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

 

Under the supervision and with the participation of management, including the Company's Chief Executive Officer/Chief Financial Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included an assessment of the design of the Company's internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Based on this evaluation, our Chief Executive Officer/Chief Financial Officer concluded, as of June 30, 2018, that our internal controls over financial reporting were ineffective due to the material weakness identified.

 

 

 

 

  9  
 

 

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company's ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company's annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified the following material weakness in our internal control over financial reporting:

 

· The Company is lacking qualified resources to perform the internal audit functions properly. In addition, the scope and effectiveness of the Company's internal audit function are yet to be developed.
· The Company is relatively inexperienced with certain complexities within US GAAP and SEC reporting.

 

Remediation Initiative

 

· We are committed to establishing the disclosure controls and procedures but due to limited qualified resources in the region, we were not able to hire sufficient internal audit resources by the period end. However, internally we established a central management centre to recruit more senior qualified people in order to improve our internal control procedures. Externally, we are looking forward to engaging an accounting firm to assist the Company in improving the Company's internal control system based on the COSO Framework. We also will increase our efforts to hire the qualified resources.
· We intend to establish an audit committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls.

 

Conclusion

 

The Company did not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of generally accepted accounting principles accepted in the United States of America commensurate with the Company's disclosure controls and procedures requirements, which resulted in a number of deficiencies in disclosure controls and procedures that were identified as being significant. The Company's management believes that the number and nature of these significant deficiencies, when aggregated, was determined to be a material weakness.

 

Despite of the material weaknesses and deficiencies reported above, the Company's management believes that its consolidated financial statements included in this report fairly present in all material respects the Company's financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

 

This Annual Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this Annual Report.

 

Item 9B. Other Information

 

None.

 

  

 

 

  10  
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

The directors hold office until the next annual meeting of stockholders and until their successors are elected and qualified. Any director may resign his or her office at any time and may be removed at any time by the holders of a majority of the shares then entitled to vote. The Board of Directors appoints the executive officers, and the executive officers serve at the pleasure of the Company's Board of Directors.

 

The directors and executive officers, their ages, positions held, and duration of such are as follows:

 

Name Age Title
Harrysen Mittler 68 Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors
Peter Pizzino 45 President and Director

 

Professional Experience:

 

Set forth below is a brief description of the background and business experience of our executive officers and directors for the past five years.

 

Charles Langrill

 

Charles Langrill serves as our CEO, President, Chief Financial Officer, and Director. After attending the Argyos School of Business and Economics, at Chapman University, Mr. Langrill has spent over 22 years in the financial sector. For many years, he served on the board, and was Executive VP/CFO of various development stage gold mining companies including Temple Summit Financial Projects, Inc., which was fully reporting and publicly traded company on the OTC Markets.

 

To continue, Mr. Langrill has extensive experience in mining claim exploration and acquisitions, both domestically and abroad. Mr. Langrill also managed equipment acquisitions and contract negotiations for R&D and joint venture prospects. During his tenure with Temple Summit, Mr. Langrill was responsible for the liquidation of the company’s gold mining assets in order to acquire a tech company in China during the internet/tech stock boom in early 2000.

 

Moreover, Mr. Langrill was instrumental in negotiating the buyout, and the company saw an 800% price per share increase for shareholders. Mr. Langrill’s diverse experience in OTC Market traded companies, assisting start-ups in going public, and raising working capital and in senior management is poised to lead the company into a successful future.  

 

Section 16(a) Beneficial Ownership Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and certain persons holding more than 10 percent of a registered class of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors and certain other shareholders are required by the SEC to furnish the Company with copies of all Section 16(a) forms they file. To the best of the Company's knowledge, based solely upon a review of the copies of such reports. The Company's quarterly report on Form 10-Q for quarterly period ended March 31, 2019 was filed with the SEC on May 08, 2019. The Company's quarterly report on Form 10-Q for quarterly period ended December 31, 2018 was filed with the SEC on May 08, 2019. The Company's annual report on Form 10-K for fiscal year ended June 30, 2018 was filed with the SEC on August 24, 2018 respectively, all other required filings were not made on a timely basis.

 

Code of Ethics

 

We have adopted a Code of Business Conduct and Ethics (the "Code") that is applicable to all employees, consultants and members of the Board of Directors, including the Chief Executive Officer, Chief Financial Officer and Secretary. This Code embodies our commitment to conduct business in accordance with the highest ethical standards and applicable laws, rules and regulations. We will provide any person a copy of the Code, without charge, upon written request to the Company's Secretary. Requests should be addressed in writing to Mr. Charles Langrill at the Company's mailing address.

 

Director Nominees Recommended by Stockholders

 

We have not implemented any changes to the procedures by which stockholders may recommend nominees to our board of directors since we last disclosed those procedures in our most recent proxy statement filed with the SEC.

 

 

 

 

  11  
 

 

Board Composition; Audit Committee and Financial Expert

 

Our Board of Directors is currently composed solely of Charles Langrill. All board actions require the approval of a majority of the directors in attendance at a meeting at which a quorum is present.

 

We currently do not have an audit committee. We intend, however, to establish an audit committee of the board of directors as soon as practical. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. Currently such functions are performed by our Board of Directors.

 

The Board has determined that none of the board members qualifies as a "financial expert" as defined by SEC rules implementing Section 407 of the Sarbanes-Oxley Act. Neither Mr. Adams nor Mr. Polsky meet the definition of an "independent" director set forth in Rule 4200(a) (15) of the Market Place Rules of the Nasdaq Stock Market, which is the independence standard that we have chosen to report under.

 

Board meetings and committees; annual meeting attendance.

 

During current fiscal year, the Board of Directors had one meeting in total. All members of the Board of Directors attended the meetings. All members of the Board of Directors are required to attend the annual meetings of securities holders.

 

Item 11. Executive Compensation

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officer during the current and prior years ended in all capacities for the accounts of our executive officers, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO):

 

Summary Compensation Table

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officer during the current and prior years ended in all capacities for the accounts of our executive officers, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO):

 

Summary Compensation Table

 

Name Salary ($) All Other Compensation Total ($)
Charles Langrill Nil Nil Nil

 

Option Grants

 

There were no individual grants of stock options to purchase our common stock made to the executive officers named in the Summary Compensation Table through current year.

 

Aggregated Option Exercises and Fiscal Year-End Option Value.

 

There were no stock options exercised during current period ended by the executive officers named in the Summary Compensation Table.

 

Long-Term Incentive Plan (“LTIP”) Awards.

 

There were no awards made to the named executive officers in the last completed fiscal year under any LTIP.

 

Compensation of Directors

 

Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors.

 

Employment Agreements

 

We do not have any employment agreements in place with our executive officers and directors.

 

 

 

 

  12  
 

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security Ownership

 

The following table sets forth as of Oct 1 2016, certain information with respect to the beneficial ownership of our common stock by

 

(i) each of our executive officers,
(ii) each person who is known by us to beneficially own more than 5% of our outstanding common stock, and
(iii) all of our directors and executive officers as a group. Percentage ownership is calculated based on 44,874,177 shares of our common stock outstanding as of Oct 10, 2016.
(iv) None of the shares listed below are issuable pursuant to stock options or warrants of the Company.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

See financial statements for the related party transactions.

 

Item 14. Principal Accounting Fees and Services

 

Fees Paid to Independent Public Accountants for current and prior year.

 

Audit Fees

 

For the Company's current and prior fiscal years, the Company was billed approximately $0, respectively, for professional services rendered for the audit and review of our financial statements.

 

Tax Fees

 

For the Company's current and prior fiscal years ended, the Company was billed $1,500 and $1,000 for professional services rendered for tax compliance, tax advice, and tax planning.

 

All Other Fees

 

None.

 

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

The Company's board of directors served as members of audit committee. The Company has not adopted preapproval policies and procedures with respect to its accountants in current fiscal year. All of the services provided and fees charged by its independent registered accounting firms in current fiscal year were approved by the board of directors.

 

 

 

 

 

  13  
 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules

 

The following documents are filed as part of or are included in this Annual Report:

 

1. Financial statements listed in the Index to Financial Statements, filed as part of this Annual Report; and
2. Exhibits listed in the Exhibit Index filed as part of this Annual Report.

 

 


INDEX TO EXHIBITS

Exhibit No.   Description
     
31.1   Certification of Chief Executive Officer  
       
31.2   Certification of Chief Financial Officer  
       
32.1   Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002  
       
32.2   Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002  

 

101.INS   XBRL Instances Document  
101.SCH   XBRL Taxonomy Extension Schema Document  
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document  
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document  
101.LAB   XBRL Taxonomy Extension Label Linkbase Document  
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document  

 

 

 

  14  

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  WEARABLE HEALTHCARE SOLUTIONS, INC.  
       
  By: /s/ Harrysen Mittler  
    Harrysen Mittler  
    Chief Executive Officer,  
Date: June 2, 2020   (Principal Executive Officer)  

 

 

 

 

 

 

 

 

 

 

 

 

 

  15  

 

 

Wearable Healthcare Solutions, Inc.

Unaudited Consolidated Balance Sheets

As at June 30, 2019 and 2018

               

   

    As at June 30, 2019   As at June 30, 2018
    (Unaudited)   (Unaudited)
    ($)   ($)
ASSETS                
Current Assets                
Cash and cash equivalents     3,828       4,517  
Accounts receivable, net     12,287       77,287  
Inventory     5,254       91,287  
Prepaid expenses     91,013       43,316  
Advances to employees            
Total Current Assets     112,383       216,407  
                 
Property, plant and equipment, net     6,118       13,607  
                 
Total Assets     118,501       230,014  
                 
EQUITY & LIABILITIES                
                 
Current Liabilities                
Credit line payable - related party     397,500       397,500  
Accounts payable     222,924       93,758  
Deferred revenue     196,058       215,880  
Due to related party     113,712       7,400  
Notes payable     145,014       83,236  
Notes payable - Other     53,000       50,000  
Derivative liabilities     109,704       109,704  
Convertible notes payable - net of discount     673,750       597,500  
Accrued expenses and other current liabilities     412,102       194,370  
Total Current Liabilities     2,323,765       1,749,348  
                 
Credit line payable - Related party            
                 
Total Liabilities     2,323,765       1,749,348  
                 
SHAREHOLDERS’ EQUITY                
Series A Convertible Preferred Stock: $0.0001 par value; 100,000 shares authorized, 688 shares issued and outstanding as of June 30, 2019 and 2018, respectively     1       1  
Series B Convertible Preferred Stock: $0.0001 par value; 62,500 shares authorized, 9,938 shares issued and outstanding as of June 30, 2019 and 2018, respectively     1       1  
Series C Preferred Stock: $0.0001 par value; 6,944,445 authorized, 138,886 shares issued and outstanding as of June 30, 2019 and 2018, respectively     14       14  
Series D Preferred Stock: $0.0001 par value;     43       43  
Series E Preferred Stock $0.0001 par value, 4,000,000 and -0- shares issued and outstanding as of June 30, 2019 and 2018, respectively     400       0  
Common Stock: $0.0001 par value; 400,000,000 shares authorized, 94,699,177 and 49,878,676 shares issued and outstanding as of June 30, 2019 and 2018, respectively     9,470       4,988  
Additional paid in capital     16,709,964       16,685,314  
Accumulated deficit     (18,925,157 )     (18,209,693 )
Total Shareholders’ Equity     (2,205,264 )     (1,519,336 )
                 
Total Liabilities and Shareholders’ Equity     118,501       230,014  

 

 

 

  F- 1  

 

 

Wearable Healthcare Solutions, Inc.

Unaudited Consolidated Statement of Profit and loss

For the years ended June 30, 2019 and 2018              

 

 

    For the year ended   For the year ended
    June 30, 2019   June 30, 2018
    (Amount in $)   (Amount in $)
Revenue     770,396       976,003  
Cost of sales     (398,167 )     (261,498 )
Gross profit     372,229       714,505  
                 
Operating expenses                
Selling expense     (25,847 )     (34,691 )
General and administrative     (781,021 )     (924,178 )
Research and development            
      (806,868 )     (958,869 )
Income / (Loss) from operations     (434,639 )     (244,364 )
                 
Other Income / (expense)                
Change in fair value of derivative instrument            
Interest expense - related party            
Interest expense     (280,822 )     (34,378 )
Other income            
                 
Net Profit / (loss) before taxes     (715,462 )     (278,741 )
Income tax            
Net Profit / (loss)     (715,462 )     (278,741 )
                 
Net loss per common share - Basic and Diluted     (0.00828 )     (0.00559 )
                 
Weighted average common shares outstanding - Basic & Diluted     86,396,783       49,874,177  

 

 

 

  F- 2  

 

 

Wearable Healthcare Solutions, Inc.

Unaudited Consolidated Statement of Shareholders’ Equity

As at June 30, 2019 and 2018 (Unaudited)

                                                               

 

    Preferred Stock
    Series A   Series B   Series C   Series D   Series E
    Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount
                                         
As at July 1, 2017 (Unaudited)     688     $ 0       9,938     $ 1       138,886     $ 14       425,000     $ 43            $  
                                                                                 
Profit/(loss) for the period                                                            
                                                                                 
Issuance of preferred stocks                                                            
                                                                                 
As at June 30, 2018 (Unaudited)     688     $ 0       9,938     $ 1       138,886     $ 14       425,000     $ 43       0     $ 0  
                                                                                 
Profit/(loss) for the period                                                            
                                                                                 
Issuance of common stock                                                            
                                                                                 
Issuance of preferred stocks                                                     4,000,000       400  
                                                                                 
As at June 30, 2019 (Unaudited)     688     $ 1       9,938     $ 1       138,886     $ 14       425,000     $ 43       4,000,000     $ 400  

 

 

            Additional   Accumulated   Total
    Common Stock   Paid in   Profit/   Stockholders’
    Shares   Amount   Capital   Deficit   Equity
                     
As at July 1, 2017 (Unaudited)     49,878,676     $ 4,988     $ 16,685,314     $ (17,930,954 )   $ (1,240,594 )
                                         
Profit/(loss) for the period                       (278,741 )     (278,741 )
                                         
Issuance of preferred stocks                              
                                         
As at June 30, 2018 (Unaudited)     49,878,676     $ 4,988     $ 16,685,314     $ (18,209,695 )   $ (1,519,335 )
                                         
Profit/(loss) for the period                       (715,462 )     (715,462 )
                                         
Issuance of common stock     44,820,501       4,482       24,650             29,132  
                                         
Issuance of preferred stocks                             400  
                                         
As at June 30, 2019 (Unaudited)     94,699,177     $ 9,470     $ 16,709,964     $ (18,925,157 )   $ (2,205,264 )

 

 

  F- 3  

 

 

Wearable Healthcare Solutions, Inc.

Unaudited Consolidated Statement of Cash Flows

As at June 30, 2019 and 2018 (Unaudited)    

 

 

    As at June 30, 2019   As at June 30, 2018
    (Unaudited)   (Unaudited)
    ($)   ($)
Cash flow from operating activities                
                 
(Loss) / profit before income tax     (715,462 )     (278,741 )
                 
Adjustment for non cash charges and other items:                
Common stock issued for services     4,132        
Change in fair value of derivative instrument            
Amortization of debt discount and original issue discount     79,250        
Amortization and depreciation     7,489       17,875  
             
      (624,591 )     (330,746 )
Changes in working capital                
Decrease / (increase) in Notes payable     61,778        
Decrease / (increase) in accounts receivables     65,000       (22,659 )
Decrease / (increase) in inventory     86,033       55,605  
Decrease / (increase) in prepaid expenses     (47,697 )      
Decrease / (increase) in advances to suppliers           108,771  
(Decrease) / increase in trade and other payables     129,166       33,777  
(Decrease) / increase in accrued expenses     217,732       24,574  
(Decrease) / increase in deferred revenue     (19,822 )     (43,841 )
      492,190       156,227  
Cash flow from operating activities     (132,401 )     (104,639 )
Cash flow from investing activities                
Additions in intangibles assets            
Additions in property, plant and equipment            
Cash flow from / (used) in investing activities            
                 
Cash flow from financing activities                
Proceeds from issuance of stock     25,400        
Proceeds from advances - related party     106,312       6,389  
Proceeds(repayment) from note payable           72,126  
                 
Cash flow from financing activities     131,712       78,524  
                 
Increase/(decrease) in cash and cash equivalents     (689 )     (26,115 )
                 
Cash and cash equivalents at beginning of the year     4,517       30,632  
                 
Cash and cash equivalents at end of the year     3,828       4,517  

 

 

 

  F- 4  

 

 

WEARABLE HEALTHCARE SOLUTIONS INC.

NOTES TO THE FINANCIAL STATEMENTS

As at June 30, 2019 and 2018

 

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 its 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.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation – The accompanying financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of management’s estimates requires the exercise of judgment. We believe the following critical accounting policies affect its more significant judgments and estimates used in the preparation of financial statements.

 

Going Concern – The financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred net losses and negative operating cash flow. To the extent the Company may have negative cash flows in the future it will continue to require additional capital to fund operations. The Company obtained additional capital investments under various debt and common stock issuances. Although management continues to pursue its financing plans, there is no assurance that the Company will be successful in obtaining sufficient revenues to generate positive cash flow. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All intercompany accounts and transactions have been eliminated.

 

Use of Estimates – The preparation of 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.

 

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.

 

 

 

 

  F- 5  

 

 

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 $12,287 and $77,287 in Accounts receivables net of allowances of $23,705 and $23,705 at June 30, 2019 and 2018, respectively.

 

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 implemented this pronouncement as of July 1,2015.

 

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. As of June 30, 2019 and 2018, the Company recognized $770,396 and $976,003 in revenue and recorded $196,058 and $215,880 in deferred revenue, respectively.

 

Basis of Consolidation – The Consolidated Financial Statements include the accounts of Wearable Healthcare Solutions Inc. and all of our controlled subsidiary companies. All significant intercompany accounts and transactions have been eliminated. Operating results of acquired businesses are included in the Consolidated Statements of Income from the date of acquisition.

 

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.

 

 

 

 

  F- 6  

 

 

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 2019, 2018, and 2017 are subject to examination by the Internal Revenue Service and state taxing authorities for three (3) years from the date filed.

 

Related party transactions. The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include:

 

a. Affiliates of the Company;
b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity;
c. Trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management;
d. Principal owners of the Company;
e. Management of the Company;
f. Other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and
g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements. The disclosures shall include:

 

a. The nature of the relationship involved;
b. A description of the transactions, including transactions to which no amounts or nominal amounts were ascribed for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements;
c. The dollar amount of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and
d. Amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

 

 

 

  F- 7  

 

 

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.

 

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.

 

 

 

 

  F- 8  

 

 

Software Development Costs. 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 research and development expense until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are released to production. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products.

 

Risk and Uncertainties. The Company is subject to risks common to companies in the service industry, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel.

 

Off-Balance Sheet Arrangements. The Company does not have any off-balance sheet arrangements.

 

Uncertain Tax Positions. The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the years ended September 30, 2018 or 2017.

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), a new standard on revenue recognition. Further, the FASB issued a number of additional ASUs regarding the new revenue recognition standard. The new standard, as amended, will supersede existing revenue recognition guidance and apply to all entities that enter into contracts to provide goods or services to customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, which amends ASU 2014-09 to defer the effective date by one year. For public companies, the new standard is effective for annual reporting periods beginning after December 31, 2017, including interim periods within that reporting period. For all other entities, including emerging growth companies, this standard is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company is evaluating the impact on the financial statements and expects to implement the provisions of ASU 2014-09 for the annual financial statements for the year ended June 30, 2016.

 

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, which requires all investments in equity securities with readily determinable fair value to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). ASU 2016-01 is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and removes the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. For public companies, the new standard is effective for annual periods beginning after December 15, 2017, including interim periods within the fiscal year. For all other entities, including emerging growth companies, ASU 2016-01 is effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The Company evaluated the impact on the financial statements and implemented the provisions of ASU 2016-01 for the annual financial statements for the year ended June 30, 2019.

 

 

 

 

  F- 9  

 

 

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 June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Adoption of ASU 2016-13 will require financial institutions and other organizations to use forward-looking information to better formulate their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. This update will be effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. The Company is evaluating the impact on the financial statements and expects to implement the provisions of ASU 2016-13 for the annual financial statements for the interim periods beginning July 1, 2021.

 

In January 2017, the FASB issued ASU 2017-01, which changes the definition of a business. The new guidance requires an entity to first evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If that threshold is met, the set of assets and activities is not a business. If it is not met, the entity evaluates whether the set meets the definition of a business. The new definition requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in the new revenue recognition guidance. The new guidance is effective for public business entities for fiscal years beginning after 15 December 2017, and interim periods within those years. For all other entities, it is effective for fiscal years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019. The ASU will be applied prospectively to any transactions occurring within the period of adoption. Early adoption is permitted, including for interim or annual periods for which the financial statements have not been issued or made available for issuance. The Company implemented this for the year ended June 30, 2019.

 

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). ASU 2018-13 adds, modifies, and removes certain fair value measurement disclosure requirements. ASU 2018-13 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. The Company evaluated the impact on the financial statements and has implemented the provisions of ASU 2018-13 as of June 30, 2019.

 

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 years ended June 30, 2019 and 2018 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 of June 30, 2019, the Company has shown losses for the last 2 years, and has an accumulated deficit of ($18,925,157). 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.

 

 

 

 

 

  F- 10  

 

 

 

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The 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 and prepaid expenses

 

The Company maintains some inventory in-house and purchases some of its inventory overseas. Inventory, except for stock-in-transit, is 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 the 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.

 

    2019   2018
Finished goods   $ 5,254     $ 91,287  
Prepaid inventory in transit     91,013       43,316  
Inventory   $ 96,267     $ 134,603  

 

As of June 30, 2019 and 2018, the Company had $5,254 and $91,287 in inventory in-house, respectively, as well as $91,013 and $43,316 in prepaid inventory in transit, respectively.

 

Note 5 – Property, Plant, and Equipment

 

The Company has $20,000 in furnishings, which are fully depreciated, $19,689 in office computers and equipment, which are fully depreciated, and capitalized software development costs of $45,900, which are partially depreciated.

 

As of June 30, 2019 and 2018, the Company recorded $6,118 and $13,607 in Property, Plant, and Equipment, respectively:

 

    2019   2018
Furniture   $ 20,000     $ 20,000  
Office computers, equipment, software     19,689       19,689  
Software development costs     45,900       45,900  
Property, plant, and equipment     85,589       85,589  
Less accumulated depreciation     (79,471 )     (71,982 )
Net property, plant, and equipment   $ 6,118     $ 13,607  

 

Note 6 – Accounts payable and accrued expenses and liabilities

 

The Company recorded Accounts Payable of $222,924 and $93,758 directly related to operating costs, including credit cards used in operations, as of June 30, 2019 and 2018, respectively.

 

Accrued expenses are expenses that have been incurred but not yet paid and mainly include legal fees, audit fees, and other professional fees, as well as interest accrued in connection with credit lines. The Company recorded $412,102 and $197,370 in accrued expenses and other current liabilities as of June 30, 2019 and 2018, respectively.

 

 

 

 

  F- 11  

 

 

Note 7 – Notes Payable and Note Payable – Other

 

Notes Payable:

 

In 2019, the Company negotiated a fixed repayment settlement of some of its debt of $70,875 on a non-interest bearing basis. The Company has various loans and credit lines outstanding. The credit line carries an interest rate of 16.24%. The bank loans carry interest rates varying between 9.24% – 10.90%.

 

    2019   2018
Kabbage   $ 11,842     $ 24,604  
1st Merchant           24,511  
Wells Fargo     33,970       34,121  
Prosper     28,327        
Debt settlement     70,875        
Total Notes Payable   $ 145,014     $ 83,236  

 

As of June 30, 2019 and 2018, the Company has outstanding $145,014 (including the above-referenced $70,875) and $83,236 in bank loans and credit lines payable, respectively.

 

Note Payable – Other

 

In June 2018, the Company secured a $50,000 line of credit from Emry Capital, bearing interest at 8% per annum and convertible into shares of the Company’s capital stock pursuant to the default provisions of the line with a cost of $3,000, which was fully amortized. Originally, the Company earmarked these funds exclusively towards the successful VR product line development and integration.

 

The note that memorialized the line of credit has been sold several times, and, in November 2019, the note was acquired by Mr. Mittler and Mr. Pizzino, who forgave the obligation (See Note 15).

 

As of June 30, 2019 and 2018, the Company recorded Note Payable – Other of $53,000 and $50,000, respectively.

 

Note 8 -- Convertible Notes Payable (March 2016)

 

On March 1, 2016 and March 3, 2016, the Company closed a private placement and received an aggregate of $612,500 by selling $660,000 and $13,750 unsecured convertible notes (“March Convertible Notes”) and granted warrants (“March Warrants”) to two investors, net of an aggregate original issue discount of $61,250 pursuant to the terms of the related subscription agreements. The March Convertible Notes bear no interest and are due one year from the date of issuance. The March Convertible Notes are convertible into shares of the Company’s common stock at a conversion price equal to $0.01 per share. The Warrants are exercisable for the purchase of up to 6,804,172 shares of the Company’s Series C Convertible Preferred Stock at $0.09 per share. The conversion price of the March Convertible Notes and the exercise price of the March Warrants are subject to adjustment under certain circumstances. The Company is prohibited from effecting a conversion of the March Convertible Notes into shares of common stock and a conversion of shares of Series C Convertible Preferred Stock (if the March Warrants were exercised) into shares of common stock, if, as a result of any such conversion, the investor would beneficially own more than 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon either or both conversions, which beneficial ownership limitation may be increased by the investor up to, but not exceeding, 9.99%.

 

 

 

 

  F- 12  

 

 

The Company has determined that the conversion feature embedded in the March Convertible Notes constitutes a derivative and has been bifurcated from the March Convertible Notes 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. As of June 30, 2019, the remaining debt discount balance of $76,250 has been amortized and the Company recognized the full loan balance due of $673,750.

 

Note 9 – Warrants (March 2016)

 

The Company has evaluated the application of ASC 815 Derivatives and Hedging and ASC 815-40-25 to the March Warrants to purchase Series C Convertible Preferred Stock. Based on the guidance in ASC 815 and ASC 815-40-25, the Company concluded these instruments were required to be accounted for as derivatives due to the down-round protection features on the exercise price and the conversion price. The Company records the fair value of these derivatives on its balance sheet at fair value with changes in the values of these derivatives reflected in the statements of operations as “Change in fair value of derivative instrument” These derivative instruments are not designated as hedging instruments under ASC 815 and are disclosed on the balance sheet under Derivative Liabilities.

 

The fair value of the March Warrants at the time of their issuance was calculated pursuant to the Black-Scholes option pricing model. The fair value was recorded as a reduction to the convertible notes payable and was charged to operations as interest expense in accordance with effective interest method within the period of the March Convertible Notes with expiration March 2019. No March Warrants were exercised during the period, and as of June 30, 2019, all then-outstanding March Warrants have expired.

 

Note 10 – Stockholders’ Equity (Deficit)

 

Capital Stock:

 

The Company is currently authorized to issue 1,200,000,000 shares of common stock, par value of $0.0001 per share, and 14,000,000 shares of preferred stock, par value of $0.0001 per share.

 

During the period ended June 30, 2019, the Company issued 41,320,501 shares of common stock for services, valued at $4,132 or $0.0001 per share, and sold 3,500,000 shares of common stock to an unrelated party for $25,000, valued at $0.00714 per share.

 

As of June 30, 2019 and 2018, the Company had 94,699,177 and 49,878,676 shares of common stock issued and outstanding, respectively.

 

Preferred Stock:

 

Series A Convertible Preferred Stock: The Company is currently authorized to issue up to 100,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share, convertible at a ratio of 1 share of Series A Convertible Preferred Stock for 2 shares of common stock. These shares have no voting rights. As of June 30, 2019 and 2018, 688 shares of Series A Convertible Preferred Stock were issued and outstanding, respectively.

 

Series B Convertible Preferred Stock: The Company is currently authorized to issue up to 62,500 shares of Series B Convertible Preferred Stock, par value $0.0001 per share, convertible at a ratio of 1 share of Series B Convertible Preferred Stock for 2 shares of common stock. These shares have no voting rights. As of June 30, 2019 and 2018, 9,938 shares of Series B Convertible Preferred Stock were issued and outstanding, respectively.

 

 

 

 

  F- 13  

 

 

Series C Convertible Preferred Stock: The Company is currently authorized to issue up to 6,944,445 shares of Series C Convertible Preferred Stock, par value $0.0001 per share, convertible at a ratio of 1 share of Series C Convertible Preferred Stock for 10 shares common stock. These shares have no voting rights. As of June 30, 2019 and 2018, 138,886 shares of Series C Convertible Preferred Stock were issued and outstanding, respectively.

 

Series D Convertible Preferred Stock: The Company is currently authorized to issue up to 500,000 shares of Series D Convertible Preferred Stock, par value $0.0001 per share, convertible at a ratio of 1 share of Series D Convertible Preferred stock for 10 shares of common stock. These shares have no voting rights. As of June 30, 2019 and 2018, 425,000 shares of Series D Convertible Preferred Stock were issued and outstanding, respectively.

 

Series E Convertible Preferred Stock: The Company is currently authorized to issue up to 5,000,000 shares of Series E Convertible Preferred Stock, par value $0.0001 per share, convertible at a ratio of 1 share of Series E Convertible Preferred Stock for 100 shares of common stock. Each of these shares carries a voting right equivalent to 10,000 shares of common stock. The Company may not issue any other shares with extended voting rights. As of June 30, 2019 and 2018, 4,000,000 and -0- shares of Series E Convertible Preferred Stock were issued and outstanding, respectively.

 

In October 2018, the Company sold and issued 4,000,000 shares of Series E Convertible Preferred Stock to an otherwise unrelated third party for $400, or $0.0001 per share. Since these shares carry voting rights of an aggregate of 40,000,000,000 shares of common stock, which constituted more than the aggregate number of issued and outstanding shares of the Company’s other capital stock, this sale and issuance constituted a change of control in the Company. These shares were resold in a private transaction on August 27, 2018, and resold again in another private transaction on October 26, 2018. In November 2019, these shares were acquired in a subsequent private transaction by Mr. Mittler and Mr. Pizzino, together with 200,000,000 shares of common stock, when then vested in them control of the Company. In connection with the acquisition of such shares, Mr. Mittler and Mr. Pizzino also acquired the $53,000 Emry Capital note. As of November 2019, all of shares were to be returned to treasury for cancellation, and the debt was to be forgiven (see Note 15).

 

Note 11 – Related Party Transactions

 

Credit line – related party

 

On September 30, 2014, the Company received a line of credit with Medi Pendant New York, Inc. (“MNY”), which is partially owned by the Company’s CEO. 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 line of credit 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, in consideration of the Company’s issuance of 200,000 shares of common stock to one of the owners of MNY, which was memorialized on October 19, 2015. As of June 30, 2019 and 2018, the Company recorded line of credit balances of $397,500 and $397,500, respectively.

 

 

 

 

  F- 14  

 

 

Related party loans

 

In 2019 and 2018, from time to time, related parties lent to the Company funds for day-to-day operations. These are short-term loans which bear no interest, and the Company expects to repay these loans by the end of the fiscal year following the year in which the short-term loan was made

 

    2019   2018
Due to management   $ 85,716     $ 7,400  
Due to other related parties     29,996        
Total loans from related parties   $ 113,712     $ 7,400  

 

As of June 30, 2019 and 2018, the Company owes $113,713 and $7,400 in related party loans, respectively.

 

Note 12 – Net Income(Loss) Per Share

 

Income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. 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.

 

    Basis of conversion   Dilution   2019   2018
March Convertible Notes   $673,750   Share price of $0.01     67,375,300       67,375,300  
Series A Convertible   688 shares outstanding   1 share A: 2 shares     1,288       1,288  
Series B Convertible   9,938 shares outstanding   1 share B: 2 shares     19,876       19,876  
Series C Convertible   138,886 shares outstanding   1 share C: 10 shares     1,388,860       1,388,860  
Series D Convertible   425,000 shares outstanding   1 share D: 10 shares     4,250,000       4,250,000  
Series E Convertible   4,000,000 shares outstanding   1 share E: 100 shares     400,000,000        
              473,035,412       73,035,412  

 

Because the Company posted losses for the past two years, the basic and diluted share bases will be presented as the same. For the years ended June 30, 2019 and 2018, the Company posted losses of ($.00828) and ($0.005590) per basic share and diluted share, respectively.

 

 

 

 

  F- 15  

 

 

Note 13 – Revenue and expenses

 

The Company’s wholly owned subsidiary generated the following revenues and incurred the following expenses for the years ended June 30, 2019, and 2018, respectively.

 

REVENUES   2019   2018
Lock box sales   $     $ 763  
Service labor     50       597  
Med01 kit     969       109,915  
Replacement parts     210       705  
Accessory sales           4,114  
Other service     115,796       12,668  
Shipping, handling & reimbursable expenses           2,486  
      770,396       976,003  
LESS:  COST OF GOODS SOLD     398,167       261,498  
GROSS PROFIT   $ 372,229     $ 714,506  
                 
EXPENSES                
Selling expenses   $ 25,847     $ 34,361  
Consulting     39,467       30,107  
Payroll     304,404       413,527  
Payroll taxes     190,816       165,212  
Professional services     26,277       51,692  
Software     52,833       63,510  
Other general & administrative     132,197       200,460  
      771,841       958,869  
Interest expense     17,495       34,378  
TOTAL EXPENSES   $ 789,336     $ 993,247  
NET LOSS   $ (417,107 )   $ (278,741 )

 

 

 

 

  F- 16  

 

 

Note 14 – Income Taxes

 

Deferred income tax assets and liabilities are computed annually for differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

 

The effective tax rate on the net loss before income taxes differs from the U.S. statutory rate as follows:

 

    June 30, 2019   June 30, 2018
U.S. statutory rate   21%   21%
Less valuation allowance   (21%)   (21%)
Effective tax rate   0%   0%

 

The significant components of deferred tax assets and liabilities are as follows, expiring in 2023 and 2024, on net operating losses of $18,925,157 and $18,209,695 for fiscal years ended June 30, 2019 and 2018, respectively:

 

    June 30, 2019   June 30, 2018
Net deferred tax assets   $ 3,974,283     $ 3,824,036  
Less valuation allowance     (3,974,283 )     (3,824,036 )
Deferred tax asset - net valuation allowance     -0-       -0-  

 

Note 15 – Subsequent Events

 

Series E Convertible Preferred Stock:

 

On October 19, 2018, the Company issued 4,000,000 shares of Series E Convertible Preferred Stock to Mina Mar Group Corporation for $400, or $.0001 per share. Each of these shares carries a voting right equivalent to 10,000 shares of common stock, which issuance constituted a change of control of the Company.

 

 

 

 

 

  F- 17  

 

 

In August 2019, Mina Mar Group Corporation sold the 4,000,000 shares of Series E Convertible Preferred Stock to IMASK, which sale constituted a change in control. After that change in control, the Company issued 200,000,000 shares of its common stock, par value $0.0001, to IMASK for services rendered, valued at $20,000. IMASK then sold the shares Series E Convertible Preferred Stock and 200,000,000 shares of common stock to Mr. Mittler and Mr. Pizzino for $135,000 and assigned to Mr. Mittler and Mr. Pizzino the $53,000 Emry Note. Mr. Mittler and Mr. Pizzino subsequently returned all of the Series E Convertible Preferred Stock and the common stock to the Company for cancelation and forgave the $53,000 Emry Note. Leonite Capital LLC funded the Series E Convertible Preferred Stock, the common stock, and Emry Note transaction, encumbering the Company, as well as its co-maker Hypersoft Ventures, with $150,000 convertible note, convertible to common stock of the Company at the lower of $0.02 per share or 50% of the lowest bid price during the twenty-one (21) consecutive trading-day period immediate preceding the trading day on which the Company receives the notice of conversion or the discount to market based on subsequent financing. Leonite also received 2,500,000 shares of common stock in connection with the funding.

 

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”) to 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 2,500,000 shares of common stock, prorated for the initial tranche.

 

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.

 

 

 

 

  F- 18  

 

Significant assumptions used in calculating fair value of conversion feature of Leonite Convertible Note at issuance date are as follows.

 

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  

 

Revaluation at December 31, 2019 yielded a gain of $25,222 on change in fair value of derivative liability, amortization of discounts of $23,889, and interest expense of $2,256.

 

Balance at September 30, 2019   $  
Leonite Convertible Note issued     150,000  
Leonite Convertible Note converted      
Total     150,000  
Less: debt discount     (126,111 )
Balance at December 31, 2019   $ 23,889  

 

Significant assumptions used in calculating fair value of conversion feature of Leonite Convertible Note as of March 31, 2020 are as follows.

 

Expected Dividends   Expected volatility   Risk-free rate of interest   Expected term (year)  

Exercise

(Conversion)

price

  Common stock price per share
  0.00 %     826.28 %     0.0159 %     0.667     $ 0.02     $ 0.00950  

 

Revaluation at March 31, 2020 yielded a loss of $230,349 on change in fair value of derivative liability, primarily due to default on the Leonite Convertible Note and change in conversion price, amortization of $50,556, and interest and late fees expense of $4,778.

 

Balance at March 31, 2020   $  
Leonite Convertible Note issued     150,000  
Leonite Convertible Note converted      
Total     150,000  
Less: debt discount     (75,555 )
Balance at March 31, 2020   $ 74,445  

 

Significant assumptions used in calculating fair value of warrants and conversion feature of convertible notes as of March 31, 2020 are as follows.

 

Expected Dividends   Expected volatility   Risk-free rate of interest   Expected
term (year)
 

Exercise

(Conversion)

price

  Common stock price per share
  0.00 %     845.05 %     0.0170 %     0.458     $ 0.00250     $ 0.0050  

 

 

 

  F- 19  

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