Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934:
For the Quarterly Period ended December 31, 2019
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
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:
NONE
Securities registered pursuant to Section 12(g) of the Act:
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
| Common Stock |
WHSI |
OTC: PK |
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
and posted 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 and post 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 Exchange Act). Yes
[_] No [X]
Number of shares outstanding of each of the issuer’s classes of
common equity, as of December 31, 2019: 97,199,177 shares of
Common Stock, par value US $0.0001
Table of Contents
PART 1
PART I
Item 1. Financial
Statements
The following documents are filed as part of or are included in
this Report:
| |
1. |
Financial
statements listed in the Index to Financial Statements, filed as
part of this Report; and |
| |
2. |
Exhibits
listed in the Exhibit Index filed as part of this
Report. |
Wearable Healthcare Solutions, Inc.
Balance Sheet
As at December 31, 2019 (Unaudited)
| |
|
As at December 31,
2019
(Unaudited)
($)
|
|
|
As at June 30,
2019
(Unaudited)
($)
|
|
| ASSETS |
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
|
|
| Cash
and cash equivalents |
|
|
4,633 |
|
|
|
3,828 |
|
| Accounts
receivable, net |
|
|
12,287 |
|
|
|
12,287 |
|
| Inventory |
|
|
6,174 |
|
|
|
5,254 |
|
| Prepaid
expenses |
|
|
177,657 |
|
|
|
91,013 |
|
|
Advances to employees |
|
|
|
|
|
|
– |
|
| Total Current
Assets |
|
|
200,751 |
|
|
|
112,382 |
|
| |
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
– |
|
|
|
6,118 |
|
| |
|
|
|
|
|
|
|
|
| Total
Assets |
|
|
200,751 |
|
|
|
118,501 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND
SHAREHOLDER EQUITY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current
Liabilities |
|
|
|
|
|
|
|
|
| Accrued expenses
and other current liabilities |
|
|
512,672 |
|
|
|
412,102 |
|
| Accounts
payable |
|
|
170,687 |
|
|
|
222,924 |
|
| Deferred
revenue |
|
|
241,058 |
|
|
|
196,058 |
|
| Due to related
party |
|
|
203,699 |
|
|
|
113,712 |
|
| Notes payable |
|
|
114,710 |
|
|
|
145,014 |
|
| Notes payable -
Other |
|
|
– |
|
|
|
53,000 |
|
| Derivative
liabilities |
|
|
109,704 |
|
|
|
109,704 |
|
| Convertible notes
payable - net of discount |
|
|
673,750 |
|
|
|
673,750 |
|
| Derivative
liabilities - LEONITE |
|
|
72,214 |
|
|
|
– |
|
| LEONITE conv deb
net of $126,111 discount |
|
|
23,889 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Total Current
Liabilities |
|
|
2,122,383 |
|
|
|
1,926,265 |
|
| Long Term
Liabilities |
|
|
|
|
|
|
|
|
| Credit line
payable - related party |
|
|
397,500 |
|
|
|
397,500 |
|
| |
|
|
|
|
|
|
|
|
| Total
Liabilities |
|
|
2,519,883 |
|
|
|
2,323,765 |
|
| |
|
|
|
|
|
|
|
|
| COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
| Series A
Convertible Preferred Stock: $0.0001 par value; 100,000 shares
authorized, 688 shares issued and outstanding as of December 31,
2019 and June 30, 2019, respectively |
|
|
1 |
|
|
|
1 |
|
| Series B
Convertible Preferred Stock: $0.0001 par value; 62,500 shares
authorized, 9,938 shares issued and outstanding as of December 31,
2019 and June 30, 2019, respectively |
|
|
1 |
|
|
|
1 |
|
| Series C
Preferred Stock: $0.0001 par value; 6,944,445 authorized, 138,886
shares issued and outstanding as of December 31, 2019 and June 30,
2019, respectively |
|
|
14 |
|
|
|
14 |
|
| Series D
Preferred Stock: $0.0001 par value; 500,000 authorized, 425,000
shares issued and outstanding as of December 31, 2019 and June 30,
2019, respectively |
|
|
43 |
|
|
|
43 |
|
| Series E
Preferred Stock $0.0001 par value, -0- and 4,000,000 shares issued
and outstanding as of December 31, 2019 and June 30, 2019,
respectively |
|
|
– |
|
|
|
400 |
|
| Common
Stock: $0.0001 par value; 1,200,000,000 shares authorized,
97,199,177 and 94,699,177 shares issued and outstanding as of
December 31, 2019 and June 30, 2019, respectively |
|
|
9,720 |
|
|
|
9,470 |
|
|
Additional paid in capital |
|
|
16,580,114 |
|
|
|
16,709,964 |
|
|
Accumulated deficit |
|
|
(18,909,025 |
) |
|
|
(18,925,157 |
) |
| Total
Shareholders’ Equity |
|
|
(2,319,132 |
) |
|
|
(2,205,264 |
) |
| |
|
|
|
|
|
|
|
|
| Total
Liabilities and Shareholders’ Equity |
|
|
200,751 |
|
|
|
118,501 |
|
Wearable Healthcare Solutions, Inc.
Statement of Profit and loss
For the quarters ended December 31, 2019 and 2018
(Unaudited)
| |
|
For the three months
ended |
|
|
For the six months
ended |
|
| |
|
December 31,
2019 |
|
|
December 31,
2018 |
|
|
December 31,
2019 |
|
|
December 31,
2018 |
|
| |
|
(Amount in
$) |
|
|
(Amount in
$) |
|
|
(Amount in
$) |
|
|
(Amount in
$) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
|
|
222,193 |
|
|
|
223,454 |
|
|
|
448,046 |
|
|
|
448,202 |
|
| Cost of sales |
|
|
(77,193 |
) |
|
|
(107,915 |
) |
|
|
(118,174 |
) |
|
|
(194,185 |
) |
| Gross profit |
|
|
145,000 |
|
|
|
115,539 |
|
|
|
329,872 |
|
|
|
254,017 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling
expense |
|
|
(217 |
) |
|
|
(6,272 |
) |
|
|
(5,387 |
) |
|
|
(12,233 |
) |
| General and
administrative |
|
|
(186,801 |
) |
|
|
(177,133 |
) |
|
|
(383,365 |
) |
|
|
(369,429 |
) |
|
Research and development |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
(187,018 |
) |
|
|
(183,405 |
) |
|
|
(388,752 |
) |
|
|
(381,662 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income / (Loss)
from operations |
|
|
(42,018 |
) |
|
|
(67,866 |
) |
|
|
(58,880 |
) |
|
|
(127,645 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income /
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in fair
value of derivative instrument |
|
|
77,786 |
|
|
|
– |
|
|
|
77,786 |
|
|
|
– |
|
| Gain on
forgiveness of debt |
|
|
53,093 |
|
|
|
– |
|
|
|
53,093 |
|
|
|
– |
|
| Interest
expense |
|
|
(50,130 |
) |
|
|
(109,172 |
) |
|
|
(55,867 |
) |
|
|
(189,007 |
) |
| Other
income |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Profit / (loss)
before taxes |
|
|
38,731 |
|
|
|
(177,038 |
) |
|
|
16,132 |
|
|
|
(316,651 |
) |
| Income
tax |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| Net
Profit / (loss) |
|
|
38,731 |
|
|
|
(177,038 |
) |
|
|
16,132 |
|
|
|
(316,651 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
gain (loss) per common share - Basic and Diluted |
|
|
0.00018 |
|
|
|
(0.00194 |
) |
|
|
0.00009 |
|
|
|
(0.00417 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - Basic &
Diluted |
|
|
209,418,057 |
|
|
|
91,161,668 |
|
|
|
188,081,381 |
|
|
|
75,899,159 |
|
Wearable Healthcare Solutions, Inc.
Statement of Shareholders’ Equity
As at December 31, 2019 and 2018 (Unaudited)
| |
|
Preferred Stock |
|
| |
|
|
Series A |
|
|
|
Series B |
|
|
|
Series C |
|
|
|
Series D |
|
| |
|
|
Shares |
|
|
|
Amount |
|
|
|
Shares |
|
|
|
Amount |
|
|
|
Shares |
|
|
|
Amount |
|
|
|
Shares |
|
|
|
Amount |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2018
(Unaudited) |
|
|
688 |
|
|
$ |
0 |
|
|
|
9,938 |
|
|
$ |
1 |
|
|
|
138,886 |
|
|
$ |
14 |
|
|
|
425,000 |
|
|
$ |
43 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Profit/(loss) for the period |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock for services |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sale of common stock |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at December 31, 2018 (Unaudited) |
|
|
688 |
|
|
$ |
0 |
|
|
|
9,938 |
|
|
$ |
1 |
|
|
|
138,886 |
|
|
$ |
14 |
|
|
|
425,000 |
|
|
$ |
43 |
|
| |
|
Preferred Stock |
|
| |
|
|
Series A |
|
|
|
Series B |
|
|
|
Series C |
|
|
|
Series D |
|
| |
|
|
Shares |
|
|
|
Amount |
|
|
|
Shares |
|
|
|
Amount |
|
|
|
Shares |
|
|
|
Amount |
|
|
|
Shares |
|
|
|
Amount |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2019
(Unaudited) |
|
|
688 |
|
|
$ |
1 |
|
|
|
9,938 |
|
|
$ |
1 |
|
|
|
138,886 |
|
|
$ |
14 |
|
|
|
425,000 |
|
|
$ |
43 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Profit/(loss) for the period |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock for services |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cancellation of common & preferred stock/debt
purchase |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock for services - debt |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at December 31, 2019 (Unaudited) |
|
|
688 |
|
|
$ |
1 |
|
|
|
9,938 |
|
|
$ |
1 |
|
|
|
138,886 |
|
|
$ |
14 |
|
|
|
425,000 |
|
|
$ |
43 |
|
| |
|
Preferred Stock
Series E
|
|
|
Common Stock |
|
|
Additional
Paid in Capital
|
|
|
Accumulated
Profit/Deficit
|
|
|
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at June 30,
2018 (Unaudited) |
|
|
0 |
|
|
$ |
0 |
|
|
|
49,878,676 |
|
|
$ |
4,988 |
|
|
$ |
16,685,314 |
|
|
$ |
(18,209,695 |
) |
|
$ |
(1,519,335 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Profit/(loss) for the period |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(316,651 |
) |
|
|
(316,651 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common
stock for services |
|
|
– |
|
|
|
– |
|
|
|
41,320,501 |
|
|
|
4,132 |
|
|
|
– |
|
|
|
– |
|
|
|
4,132 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sale of common stock |
|
|
4,000,000 |
|
|
|
400 |
|
|
|
3,500,000 |
|
|
|
350 |
|
|
|
24,650 |
|
|
|
– |
|
|
|
25,400 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at December 31, 2018 (Unaudited) |
|
|
4,000,000 |
|
|
$ |
400 |
|
|
|
94,699,177 |
|
|
$ |
9,470 |
|
|
$ |
16,709,964 |
|
|
$ |
(18,526,346 |
) |
|
$ |
(1,806,454 |
) |
| |
|
Preferred Stock
Series E
|
|
|
Common Stock |
|
|
Additional
Paid in Capital
|
|
|
Accumulated
Profit/Deficit
|
|
|
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at June 30, 2019 (Unaudited) |
|
|
4,000,000 |
|
|
$ |
400 |
|
|
|
94,699,177 |
|
|
$ |
9,470 |
|
|
$ |
16,709,964 |
|
|
$ |
(18,925,157 |
) |
|
$ |
(2,205,264 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Profit/(loss) for the period |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
16,132 |
|
|
|
16,132 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common
stock for services |
|
|
– |
|
|
|
– |
|
|
|
200,000,000 |
|
|
|
20,000 |
|
|
|
– |
|
|
|
– |
|
|
|
20,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cancellation of common & preferred stock/debt
purchase |
|
|
(4,000,000 |
) |
|
|
(400 |
) |
|
|
(200,000,000 |
) |
|
|
(20,000 |
) |
|
|
– |
|
|
|
– |
|
|
|
(20,400 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock for services - debt |
|
|
– |
|
|
|
– |
|
|
|
2,500,000 |
|
|
|
250 |
|
|
|
(129,850 |
) |
|
|
– |
|
|
|
(129,600 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at December 31, 2019 (Unaudited) |
|
|
0 |
|
|
$ |
0 |
|
|
|
97,199,177 |
|
|
$ |
9,720 |
|
|
$ |
16,580,114 |
|
|
$ |
(18,909,025 |
) |
|
$ |
(2,319,132 |
) |
Wearable Healthcare Solutions, Inc.
Statement of Cash Flows
For the quarters ended December 31, 2019 and 2018
(Unaudited)
| |
|
December 31, 2019 |
|
|
December 31, 2018 |
|
| |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
| |
|
|
($) |
|
|
($) |
|
| Cash flow from
operating activities |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| (Loss) / profit before
income tax |
|
|
16,132 |
|
|
|
(316,651 |
) |
| |
|
|
|
|
|
|
|
|
| Adjustment for non
cash charges and other items: |
|
|
|
|
|
|
|
|
| Common stock
issued for services |
|
|
250 |
|
|
|
2,800 |
|
| Change in fair
value of derivative instrument |
|
|
(77,786 |
) |
|
|
– |
|
| Amortization of
debt discount and original issue discount |
|
|
(23,889 |
) |
|
|
79,250 |
|
| Amortization and
depreciation |
|
|
6,118 |
|
|
|
3,744 |
|
| Gain on debt
forgiveness |
|
|
(53,093 |
) |
|
|
– |
|
| Interest
expense |
|
|
55,867 |
|
|
|
189,007 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
(76,401 |
) |
|
|
(41,850 |
) |
| Changes in working capital |
|
|
|
|
|
|
|
|
| Decrease /
(increase) in Notes payable |
|
|
30,304 |
|
|
|
– |
|
| Decrease /
(increase) in accounts receivables |
|
|
– |
|
|
|
(22,659 |
) |
| Decrease /
(increase) in inventory |
|
|
(920 |
) |
|
|
55,605 |
|
| Decrease /
(increase) in prepaid expenses |
|
|
(86,644 |
) |
|
|
– |
|
| Decrease /
(increase) in advances to suppliers |
|
|
– |
|
|
|
108,771 |
|
| (Decrease) /
increase in trade and other payables |
|
|
(52,237 |
) |
|
|
33,777 |
|
| (Decrease) /
increase in accrued expenses |
|
|
100,570 |
|
|
|
24,574 |
|
|
(Decrease) / increase in deferred revenue |
|
|
45,000 |
|
|
|
(43,841 |
) |
| |
|
|
36,073 |
|
|
|
156,227 |
|
| |
|
|
|
|
|
|
|
|
| Cash flow from
operating activities |
|
|
(40,328 |
) |
|
|
114,377 |
|
| |
|
|
|
|
|
|
|
|
| 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 |
|
|
89,987 |
|
|
|
5,496 |
|
| Proceeds
(repayment) from note payable |
|
|
(48,854 |
) |
|
|
(130,516 |
) |
| |
|
|
|
|
|
|
|
|
| Cash flow from
financing activities |
|
|
41,133 |
|
|
|
(99,620 |
) |
| |
|
|
|
|
|
|
|
|
| Increase/(decrease)
in cash and cash equivalents |
|
|
805 |
|
|
|
14,757 |
|
| |
|
|
|
|
|
|
|
|
| Cash and cash
equivalents at beginning of the period |
|
|
3,828 |
|
|
|
4,517 |
|
| |
|
|
|
|
|
|
|
|
| Cash
and cash equivalents at end of the period |
|
|
4,633 |
|
|
|
19,274 |
|
Wearable Healthcare Solutions, Inc.
Notes to the Financial Statements
For the quarters ended December 31, 2019
WEARABLE HEALTHCARE SOLUTIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2019 and June 30, 2019
Note 1 – Nature and Continuance of Operations
Wearable Healthcare Solutions Inc. (the Company) was incorporated
as Medical Alarm Concepts Holding, Inc. on June 4, 2008 under the
laws of the State of Nevada. The Company was formed for the sole
purpose of acquiring all of the membership units of Medical Alarm
Concepts LLC, a Pennsylvania limited liability company (“Medical
LLC”). On May 26, 2016, the Company filed an Amended and Restated
Articles of Incorporation with the Secretary of State of the State
of Nevada to change its name from “Medical Alarm Concepts, Inc.” to
“Wearable Health Solutions Inc.”
The Company is primarily engaged in utilizing new technology in the
medical alarm industry to provide 24-hour personal response
monitoring services and related products to subscribers with
medical or age-related conditions.
Basis of presentation
The accompanying interim condensed consolidated financial
statements are unaudited, but in the opinion of management of
Wearable Healthcare Solutions, Inc. (the Company), contain all
adjustments, which include normal recurring adjustments, necessary
to present fairly the financial position at December 31, 2019 and
the results of operations and cash flows for the six months ended
December 31, 2019. The balance sheet as of June 30, 2019 is derived
from the Company’s unaudited financial statements.
Certain information and footnote disclosures normally included in
financial statements that have been prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, although management of the Company believes
that the disclosures contained in these financial statements are
adequate to make the information presented therein not misleading.
For further information, refer to the financial statements and the
notes thereto included in the Company’s Annual Amended Report on
Form 10-K for the fiscal year ended June 30, 2019.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expense during the reporting
period. Actual results could differ from those estimates.
The results of operations for the six months ended December 31,
2019 are not necessarily indicative of the results of operations to
be expected for the full fiscal year ending June 30, 2020.
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.
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.
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 December
31, 2019 and June 30, 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 December 31, 2019 and 2018, the
company recognized $225,853 and $224,748 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.
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. |
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.
Our financial instruments include cash, accounts payable and
accrued expenses.
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 periods ended December 31, 2019 or
2018.
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.
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 January 1, 2022.
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’s
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 is currently evaluating
the impact on the financial statements and expects to implement the
provisions of ASU 2018-13 as of January 1, 2020.
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.
Subsequent Events. The Company evaluated for subsequent
events through the issuance date of the Company’s financial
statements.
Note 3 – Going Concern
The accompanying financial statements for the three months ended
December 31, 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 at December 31, 2019, the Company has shown losses for
the last 2 years and has an accumulated deficit of ($18,909,025).
Management believes that the Company’s capital requirements will
depend on many factors including the success of the Company’s
development efforts and its efforts to raise capital. Management
also believes the Company needs to raise additional capital for
working capital purposes. There can be no assurance that the
Company will be able to obtain the additional capital resources
necessary to implement its business plan or that any assumptions
relating to its business plan will prove accurate.
These factors raise substantial doubt about our ability to continue
as a going concern. 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 inventories in house and purchases some
of its inventory overseas. Inventories, except for stock in
transit, are stated at lower of cost and net realizable value.
Stock in transit is valued at cost comprising invoice value plus
other charges thereon. Net realizable value is the estimated
selling price in ordinary course of business less estimated costs
of completion and selling expenses. The quantity of inventory may
vary from time to time depending on the delivery schedule of
overseas shipments.
As of December 31, 2019 and June 30, 2019, the Company had $6,174
and $5,254 in inventory in-house, respectively, as well as $177,657
and $91,013 in prepaid inventories 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 December 31, 2019 and June 30, 2019, the Company recorded
$-0- and $6,118 in net Property, Plant, and Equipment,
respectively:
| |
|
December 31, 2019 |
|
|
June 30, 2019 |
|
| 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 |
|
|
(85,589 |
) |
|
|
(79,471 |
) |
| Net property,
plant, and equipment |
|
$ |
-0- |
|
|
$ |
6,118 |
|
Note 6 – Accounts payable and accrued expenses and
liabilities
The Company recorded Accounts Payable of $170,687 and $222,924,
directly related to operating costs, as of December 31, 2019 and
June 30, 2019, respectively.
Accrued expenses are expenses that have been incurred but not yet
paid, mainly include legal fees, audit fees and other professional
fees as well as interests accrued in connection with credit line.
The Company recorded $512,672 and $412,102 in accrued expenses and
other current liabilities as of December 31, 2019 and June 30,
2019, respectively.
Note 7 – Notes Payable and Note payable-other
Notes payable:
In June, 2019, the Company negotiated a fixed repayment settlement
of some of its debt of $70,875, non-interest bearing.. 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%.
| |
|
December 31, 2019 |
|
|
June 30, 2019 |
|
| Kabbage |
|
$ |
15,179 |
|
|
$ |
11,842 |
|
| Wells Fargo |
|
|
21,769 |
|
|
|
33,970 |
|
| Prosper |
|
|
22,887 |
|
|
|
28,327 |
|
| Marcus |
|
|
34,500 |
|
|
|
– |
|
| Debt
settlement |
|
|
20,375 |
|
|
|
70,875 |
|
| Total Notes
Payable |
|
$ |
114,710 |
|
|
$ |
145,014 |
|
As of December 31, 2019 and June 30, 2019, the Company has
outstanding $114,710 and $145,014 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 secured by company
stock (convertible note) convertible as per default provisions 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.
In November 2019, the note was acquired by Mr. Mittler and Mr.
Pizzino, who forgave the $53,000 loan and accrued interest of
$93.
As of December 31 2019 and June 30, 2019, the Company recorded
Notes payable – other of $-0- and $53,000 and a gain on debt
forgiveness of $53,093 and -0-, respectively.
Note 8 – Convertible notes payable and warrants
Convertible notes payable
On March 1, 2016 and March 3, 2016, the Company closed the private
placement and received an aggregate of $612,500 by issuing $660,000
and $13,750 unsecured convertible notes (“convertible notes”) and
warrants to two investors, net of original issue discount of
$61,250 per the subscription agreements. The convertible notes bear
no interest and are due one year from the date of issuance. The
convertible notes are convertible into shares of the Company’s
common stock at a conversion price equal to $0.01 per share.
Warrants were issued to purchase 6,804,172 shares of Series C
Convertible Preferred Stock at $0.09 per share. The conversion and
warrant exercise prices are subject to certain price adjustment
terms. The Company is prohibited from effecting a conversion of
convertible notes and the Preferred C Shares to the extent that, as
a result of such conversion, such 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 conversion of the Preferred C Shares, which beneficial
ownership limitation may be increased by the holder up to, but not
exceeding, 9.99%.
The Company has determined that the conversion feature embedded in
the notes constitutes a derivative and has been bifurcated from the
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. 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.
Warrants
The Company has evaluated the application of ASC 815 Derivatives
and Hedging and ASC 815-40-25 to the warrants to purchase Series C
Convertible Preferred Stock issued with the Convertible Notes.
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 feature on the
conversion price and the exercise 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 warrants underlying the convertible notes
issued 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 convertible notes.
No warrants were exercised during the period, and as of December
31, 2019 and June 30, 2019, all outstanding warrants have
expired.
Note 9 – 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.
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 |
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.
During the three months ended September 30, 2019, the Company
issued 200,000,000 shares to its new owner, valued at $20,000 or
$0.0001 per share, for consulting services.
During the three months ended December 31, 2019, the Company
returned 200,000,000 shares of common stock to treasury for
cancellation and issued 2,500,000 shares of common stock to Leonite
Capital LLC in connection with debt financing,
As of December 31, 2019 and June 30, 2019, the Company has
97,199,177 and 94,699,177 shares of common stock issued and
outstanding.
Preferred Stock.
Series A Convertible Preferred Stock: The Company is
currently authorized to issue 100,000 shares of Series A
Convertible Preferred Stock, par value $0.0001, convertible at 1
share of Series A preferred stock for 2 shares of common stock.
These shares have no voting rights.
Series B Convertible Preferred Stock: The Company is
currently authorized to issue 62,500 shares of Series B Convertible
Preferred Stock, par value $0.0001, convertible at 1 share of
Series B preferred stock for 2 shares of common stock. These shares
have no voting rights.
Series C Convertible Preferred Stock: The Company is
currently authorized to issue 6,944,445 shares of Series C
Convertible Preferred Stock, par value $0.0001, convertible at 1
share of Series C Convertible Preferred Stock for 10 shares common
stock. These shares have no voting rights.
Series D Convertible Preferred Stock: The Company is
currently authorized to issue, 500,000 shares of Series D
Convertible Preferred Stock, par value $0.0001, convertible at 1
share of Series D Convertible Preferred stock for 10 shares of
common stock. These shares have no voting rights.
Series E Convertible Preferred Stock: In August 2018,
the Company authorized 4,000,000 shares of Series E Convertible
Preferred Stock, par value $0.0001, convertible at 1 share of
Series E Convertible Preferred Stock for 100 shares of common
stock. In addition, Series E Convertible Preferred Stock carry
voting rights of 10,000 votes per share of Series E Convertible
Preferred Stock.
On August 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.
In October 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. In
November, 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 in December, 2019.
As of December 31, 2019 and June 30,2019, the Company had 688
shares of Series A Convertible Preferred Stock, 9,938 shares of
Series B Convertible Preferred Stock, 138,886 shares of Series C
Convertible Preferred Stock, 425,000 shares of Series D Convertible
Preferred Stock, and -0- and 4,000,000 shares of Series E
Convertible Preferred Stock issued and outstanding,
respectively.
Note 11 – Related Party Transactions
Credit line – related party
On September 30, 2014, the Company entered into a line of credit
with Medi Pendant New York, Inc. (“MNY”), which is partially owned
by a principal of its subsidiary. . Under the line of credit
agreement, the Company will be able to borrow up to $500,000 with
the rate of interest of 6.5% per annum. The maturity date of the
credit line is September 30, 2017 with a one year extension to
September 30, 2018. On January 31, 2015, the limit on the line of
credit was increased to $500,000 with same interest rate and due
date. The Company recorded accrued interest on the credit line of
$25,653 and $8,436 for the years ended June 30, 2016 and 2015,
respectively. The company issued 200,000 shares of common stock to
one of the owners of MNY as consideration for the increase of line
of credit. These shares were issued on October 19, 2015 and value
at $28,000 which was the fair market value at the grant date.
Related party loans
In 2019 and 2018, from time to time, related parties loaned the
company working capital for day-to-day operations, respectively.
These are short-term loans which bear no interest, and the Company
expects to repay these loans within the coming year. As of December
31, 2019 and June 30, 2019, the Company owes $203,699 and $113,712
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 income of the Company, subject to anti-dilution
limitations.
| |
|
Basis of conversion |
|
Dilution |
|
December 31, 2019 |
|
|
December 31, 2018 |
|
| Convertible Notes |
|
$673,7530 |
|
Share price of $0.01 |
|
|
67,375,300 |
|
|
|
67,375,300 |
|
| Series A
Convertible Preferred |
|
688
shares outstanding |
|
1 share
A: 2 shares common |
|
|
1,288 |
|
|
|
1,288 |
|
| Series B
Convertible Preferred |
|
9,938
shares outstanding |
|
1 share
B: 2 shares common |
|
|
19,876 |
|
|
|
19,876 |
|
| Series C
Convertible Preferred |
|
138,886
share outstanding |
|
1 share
C: 10 shares common |
|
|
1,388,860 |
|
|
|
1,388,860 |
|
| Series D
Convertible Preferred |
|
425,000
share outstanding |
|
1 share
D: 10 shares common |
|
|
4,250,000 |
|
|
|
4,250,000 |
|
| Series E Convertible Preferred |
|
4,000,000 share outstanding |
|
1 share E: 100 shares common |
|
|
400,000,000 |
|
|
|
– |
|
| |
|
|
|
|
|
|
473,035,024 |
|
|
|
73,035,024 |
|
Because the company posted losses for the past two years, the basic
and diluted share bases will be presented as the same. For the six
months ended December 31, 2019 and 2018, the Company posted gains
of $0.00009 and losses of ($0.00417) per share, respectively, per
basic and diluted share.
Note 13 – Segment reporting - revenue and expenses
The Company’s wholly owned subsidiary generated the following
revenues and incurred the following expenses for the six months
ended December 31, 2019, and 2018, respectively.
| REVENUES |
|
2019 |
|
|
2018 |
|
| Service labor |
|
$ |
– |
|
|
$ |
50 |
|
| Med01 kit |
|
|
– |
|
|
|
109,915 |
|
| Replacement parts |
|
|
– |
|
|
|
210 |
|
| Other service revenue |
|
|
– |
|
|
|
115,796 |
|
| Monitoring |
|
|
448,046 |
|
|
|
222,231 |
|
| |
|
|
448,046 |
|
|
|
448,202 |
|
|
LESS: COST OF GOODS SOLD |
|
|
118,174 |
|
|
|
194,185 |
|
| GROSS
PROFIT |
|
$ |
329,872 |
|
|
$ |
254,017 |
|
| EXPENSES |
|
2019 |
|
|
2018 |
|
| Selling expenses |
|
$ |
5,387 |
|
|
$ |
12,233 |
|
| Consulting |
|
|
56,450 |
|
|
|
36,998 |
|
| Payroll |
|
|
141,089 |
|
|
|
134,061 |
|
| Payroll taxes |
|
|
57,075 |
|
|
|
63,471 |
|
| Professional services |
|
|
4,971 |
|
|
|
16,277 |
|
| Software |
|
|
6,024 |
|
|
|
30,587 |
|
| Other general
& administrative |
|
|
75,347 |
|
|
|
78,407 |
|
| |
|
|
346,343 |
|
|
|
372,034 |
|
| Interest
expense |
|
|
29,722 |
|
|
|
48,398 |
|
| TOTAL
EXPENSES |
|
|
376,065 |
|
|
|
420,432 |
|
| NET PROFIT
(LOSS) |
|
$ |
(46,195 |
) |
|
$ |
(166,414 |
) |
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:
| |
|
December 31, 2019 |
|
June 30, 2019 |
|
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 approximate the follows,
expiring in 2024 and 2023, on net operating losses of $18,909,025
and $18,526,345 for six months ended December 31, 2019 and 2018,
respectively:
| |
|
December 31, 2019 |
|
|
December 31, 2018 |
|
|
Net deferred tax assets |
|
$ |
3,979,029 |
|
|
$ |
3,890,532 |
|
|
Less valuation allowance |
|
|
(3,979,029 |
) |
|
|
(3,890,532 |
) |
|
Deferred tax asset - net valuation allowance |
|
$ |
– |
|
|
$ |
– |
|
Note 15 – Subsequent
Events
Convertible notes
payable:
The Company has negotiated a
debt settlement agreement with the note holders of $673,750 in
convertible debt which consists of stock and cash payments. The
stock is to be issued in Q1 2021, and partial cash payments can be
made up to December 31, 2020.
Employee/Contractor compensation:
On June 6, 2020, the Board of Directors, in a unanimous written
consent to take action, approved the employee/consulting agreements
for Harrysen Mittler, Chairman of the Board of Directors, CEO, and
CFO, and Peter Pizzino, President, Secretary, and Director,
effective December 20, 2019, which provide for $17,000 per month
compensation for each consultant, a $60,000 bonus at the 12 month
anniversary of each year, and one-time grants of 200,000,000 shares
of common stock for each director, 3,400,000 Series C Convertible
Preferred Stock, par value $0.0001, convertible at 1 share of
Series C Convertible Preferred Stock for 10 shares of common stock,
and 500,000 shares Series E Convertible Preferred Stock, par value
$0.0001, convertible at 1 share of Series E Convertible Preferred
Stock for 100 shares of common stock. The Series E Convertible
Preferred Stock carries voting rights of 1 share of Series E
Convertible Preferred Stock for 10,000 shares of common stock.
Convertible Note: Leonite Capital, LLC:
As of January 1, 2020, the Leonite Capital, LLC note is in default.
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 |
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of
Operation.
Cautionary Note
This Management’s Discussion and Analysis should be read in
conjunction with the accompanying unaudited financial statements
and related notes. The discussion and analysis of our financial
condition and results of operations are based upon the financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation
of financial statements in conformity with accounting principles
generally accepted in the United States requires us to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of any contingent liabilities at
the financial statement date and reported amounts of revenue and
expenses during the reporting period. On an on-going basis, we
review our estimates and assumptions. The estimates were based on
historical experience and other assumptions that we believe to be
reasonable under the circumstances. Actual results are likely to
differ from those estimates under different assumptions or
conditions. The following discussion should be read in conjunction
with our unaudited interim financial statements and the related
notes that appear elsewhere in this quarterly report.
This Quarterly Report on Form 10-Q for the current period ended
contains "forward-looking statements" within the meaning of Section
21E of the Securities and Exchange Act of 1934, as amended,
including statements that include the words "believes," "expects,"
"anticipates," or similar expressions. These forward-looking
statements include, among others, statements concerning our
expectations regarding our working capital requirements, financing
requirements, business, growth prospects, competition and results
of operations, and other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends, and
similar expressions concerning matters that are not historical
facts. The forward-looking statements in this Quarterly Report on
Form 10-Q involve known and unknown risks, uncertainties and other
factors that could cause our actual results, performance or
achievements to differ materially from those expressed in or
implied by the forward-looking statements contained herein.
GENERAL OVERVIEW
We were incorporated as Medical Alarm Concepts Holding, Inc. on
June 4, 2008 under the laws of the State of Nevada. The Company was
formed for the sole purpose of acquiring all of the membership
units of Medical Alarm Concepts LLC, a Pennsylvania limited
liability company (“Medical LLC”). On May 26, 2016, the Company
filed an Amended and Restated Articles of Incorporation with the
Secretary of State of the State of Nevada to change its name from
“Medical Alarm Concepts, Inc.” to “Wearable Health Solutions
Inc.”
The Company is primarily engaged in utilizing new technology in the
medical alarm industry to provide 24-hour personal response
monitoring services and related products to subscribers with
medical or age-related conditions.
Critical Accounting Policies
The accounting policies of the Company are in accordance with
generally accepted accounting principles of the United States of
America, and their basis of application is consistent. Outlined
below are those policies considered particularly significant.
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 the 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 revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Research and Development
Research and development costs are charged to operations when
incurred and are included in operating expenses.
Revenue Recognition
Sales will be recorded when users of the developed product
subscribe to the service and payment is processed. Provisions for
discounts and rebates to customers, estimated returns and
allowances, and other adjustments are provided for in the same
period the related sales are recorded. We have made provision for
discounts or rebates to customers, estimated returns and allowances
or other adjustments have been recognized as of December 31,
2019.
Results of Operations
Three Months Ended December 31, 2019 compared to the three
months ended December 31, 2018.
Our company recorded revenues of $222,193 with a cost of sales of
$77,193, generating a Gross Profit of $145,000 as of December 31,
2019, compared to revenues of $223,454 with a cost of sales of
$107,915, generating a Gross Profit of $115,539 as of December 31,
2018.
Other selling expenses of $217 and general and administrative
expenses of $186,801, with interest expense of $50,301, gain on
forgiveness of debt of $53,093, and a gain in the change in
valuation of derivative instrument of $77,786 generated a net gain
of $38,731 for the three months ending December 31, 2019. Selling
expenses of $6,272 and general and administrative expenses of
$177,133 with interest expense of $109,172 generated a net loss of
$177,038 for the three months ending December 31, 2018.
We attribute much of the gain in the three months ended December
31, 2019 to the initial valuation and subsequent revaluation of our
convertible debentures using the Black Scholes model.
Six Months Ended December 31, 2019 compared to the six months
ended December 31, 2018.
Our company recorded revenues of $448,046 with a cost of sales of
$118,174, generating a Gross Profit of $329,872 for the six months
ended December 31, 2019, as compared to revenues of $448,202 with a
cost of sales of $194,185, generating a Gross Profit of $254,017
for the six months ended December 31, 2018.
Other selling expenses of $5,387 and general and administrative
expenses of $383,365, with interest expense of $55,867, gain on
forgiveness of debt of $53,093, and a gain in the change in
valuation of derivative instrument of $77,786 generated a net gain
of $16,132 for the six months ended December 31, 2019. Selling
expenses of $12,233 and general and administrative expenses of
$369,429 with interest expense of 187,009, which included $79,250
in amortized discounts for debentures, generated a net loss of
$316,691 for the six months ending December 31, 2018.
Liquidity and Capital Resources
The Company’s financial statements have been prepared assuming that
the Company will continue as a going concern, which contemplates
the realization of assets and the settlement of liabilities and
commitments in the normal course of business. As reflected in the
accompanying financial statements, the company has net accumulated
losses since inception, and an accumulated deficit of
$18,909,025.
As at
December 31, 2019, the Company had $4,633
in cash. We had a working capital deficit of $1,921,632.
These factors raise substantial doubt about its ability to continue
as a going concern. The ability of the Company to continue as a
going concern is dependent on the company’s ability to raise
additional funds and implement its business plan. 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.
The financial statements of the Company do not include any
adjustments that might be necessary if the company is unable to
continue as a going concern.
Since inception, the Company has financed its activities
principally from shareholder equity investments. The Company
intends on financing its future development activities and its
working capital needs largely from the sale of equity securities,
debt financing and loans from private individuals, until such time
that funds provided by operations are sufficient to fund working
capital requirements. There can be no assurance that the Company
will be successful in achieving its financing goals at reasonably
commercial terms, if at all.
Unpredictability of Future Revenues
As a result of our limited operating history, the continued
development of our software, and whether the general public will
accept that software, we are unable to accurately forecast future
revenues. Our current and future expense levels are based largely
on software development and professional fees. Such costs are to a
significant extent fixed and expected to increase.
Sales and operating results generally depend on a number of
factors, which are difficult to forecast. We may be unable to
adjust spending in a timely manner to compensate for any unexpected
revenue shortfall in the future, nor may we be able to anticipate
significant obstacles to software development in a timely manner.
Accordingly, any significant shortfall in future sales or
unforeseen software development costs would have an immediate
adverse effect on our business, prospects, financial condition and
results of operations. Further, as a strategic response to changes
in the competitive environment, we may from time to time make
certain pricing, service or marketing decisions which could have a
material adverse effect on our business, prospects, financial
condition and results of operations.
We expect to experience fluctuations in our future quarterly
operating results due to a variety of factors, some of which are
outside of our control.
Off-Balance Sheet Arrangements
The Company is not currently engaged in any off-balance sheet
arrangements, as defined by Item 303(a)(4)(ii) of Regulation S-B.
The Company has not engaged in any off-balance sheet arrangements
during the last fiscal year, and is not reasonably likely to engage
in any off-balance sheet arrangements in the near future.
Item 3. Quantitative and
Qualitative Disclosures about Market Risk
The information to be reported under this item is not required of
smaller reporting companies.
Item 4. Controls and
Procedures
a) Evaluation of Disclosure Controls and Procedures
Harrysen
Mittler, the Company’s Executive Officer, evaluated the
effectiveness of the Company’s disclosure controls and procedures
as of the end of our 2019 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 files under the Exchange Act is
accumulated and communicated to its management, as appropriate, to
allow timely decisions regarding required disclosure. Based on his
evaluation, Mr. Mittler 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 the current period
ended, that our internal controls over financial reporting were
ineffective due to the material weakness identified.
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
| |
· |
The
Company is committed to establishing the disclosure controls and
procedures but due to limited qualified resources in the region,
the Company was not able to hire sufficient internal audit
resources by the period end. However, internally it has established
a central management center to recruit more senior qualified people
in order to improve its internal control procedures. Externally,
the Company is looking forward to engaging an accounting firm to
assist the Company in improving the Company’s internal control
system based on the COSO Framework. The Company will also increase
its efforts to hire the qualified resources. |
| |
|
|
| |
· |
The
Company intends to establish an audit committee of the board of
directors as soon as practicable. It envisions that the audit
committee will be primarily responsible for reviewing the services
performed by the Company’s independent auditors, evaluating its
accounting policies and its 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.
PART II
Item 1. 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 1A. Risk Factors
The information to be reported under this Item is not required of
smaller reporting companies. However, there have been no material
changes from the risk factors previously disclosed in our Report on
Form 8-K for the fiscal year ended immediately prior to the current
reporting, filed with the SEC.
Item 2. Unregistered Sales of
Equity Securities and Use of Proceeds
Other than as noted above and previously reported on the Company’s
Current Reports on Form 8-K, there have been no unregistered sales
of equity securities for the current reporting period.
Item 3. Defaults upon Senior
Securities
There has been no default in payment of principal, interest,
sinking or purchase fund installment, or any other material
default, with respect to any indebtedness of the Company.
Item 4. Mine Safety
Disclosure
Not applicable.
Item 5. Other
Information
There is no other information required to be disclosed under this
item which was not previously disclosed.
Item 6. Exhibits
INDEX TO EXHIBITS
| 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 |
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 |
| |
|
President,
Chief Executive Officer and Director |
| Date:
July 14, 2020 |
|
(Principal
Executive Officer) |
Wearable Health Solutions (PK) (USOTC:WHSI)
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