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WEARABLE HEALTH SOLUTIONS, INC. - Quarter Report: 2022 December (Form 10-Q)

 

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

Mark One

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2022

 

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

 

For the transition period from ______ to _______

 

COMMISSION FILE NO. 000-56368

 

 

 WEARABLE HEALTH SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   26-3534190   3669
(State or Other Jurisdiction of   IRS Employer   Primary Standard Industrial
Incorporation or Organization)   Identification Number   Classification Code
        Number

 

2901 W. Coast Highway, Suite 200,

Newport Beach, CA 92663

(Address of principal executive offices)

 

Phone: 949-270-7460

(Registrant’s telephone number)

 

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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

 

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.

 

 Large accelerated filer     Accelerated filer
 Non-accelerated filer     Smaller reporting company
        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 checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 

 

Class   Outstanding as of February 21, 2023
Common Stock, $0.0001   1,534,255,108

 

 

   

 

 

WEARABLE HEALTH SOLUTIONS, INC. 

TABLE OF CONTENTS 

 

 

PART I    
     
Item 1. Financial Statements 3
     
  Balance Sheets as of December 31, 2022 (unaudited) and June 30, 2022 3
  Statements of Operations for the Three and Six Months Ended December 31, 2022 and 2021 (Unaudited) 4
  Statements of Changes in Shareholders’ Deficit for the Three and Six Months Ended December 31, 2022 and 2021 (Unaudited) 5
  Statements of Cash Flows for the Six Months Ended December 31, 2022 and 2021 (Unaudited) 8
  Notes to the Financial Statements (Unaudited) 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
     
Item 4. Controls and Procedures 25
     
PART II    
     
Item 1. Legal Proceedings 27
     
Item 1A. Risk Factors 27
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
     
Item 3. Defaults Upon Senior Securities 27
     
Item 4. Mining Safety Disclosures 27
     
Item 5. Other Information 27
     
Item 6. Exhibits 28
     
  Signatures 29

 

 

 2 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Wearable Healthcare Solutions, Inc.

Consolidated Balance Sheets

As at December 31, 2022 and June 30, 2022

 

         
   December 31, 2022   June 30, 2022 
   (unaudited)     
ASSETS          
Current Assets          
Cash and cash equivalents  $45,474   $70,505 
Accounts receivable, net   9,206     
Due from related parties (See Footnote 11)       155,800 
Accounts receivable, other   2,000    2,000 
Inventory   64,170    7,064 
Prepaid Inventory       62,040 
Prepaid expenses   3,900     
Total Current Assets   124,750    297,409 
           
Property and Equipment          
Property and equipment (net of $14,180 and $8,349 depreciation, as of December 31, 2022 and June 30, 2022, respectively)   45,262    41,651 
Total Property and Equipment    45,262    41,651 
Right-of-use assets   38,786     
           
Total Assets  $208,798   $339,060 
           
LIABILITIES and SHAREHOLDERS' DEFICIT          
           
COMMITMENTS AND CONTINGENCIES (Note 12)        
           
Current liabilities          
Accounts payable  $45,861   $57,940 
Accrued expenses and other current liabilities   404,021    374,278 
Short-term lease liability   13,256     
Related party debt, net   240,654    213,840 
Deferred revenue   69,006    80,880 
Line of credit   397,500    397,500 
Notes payable   397,990    413,099 
Note payable - other   50,000    50,000 
Note payable - related party   170,000    170,000 
Convertible notes – Leonite, net of debt discount of $58,871 and $-0-, respectively, and deferred debt issuance costs of $56,456 and $-0-, respectively   93,006     
Convertible notes- other   673,750    673,750 
Total current liabilities   2,555,044    2,431,287 
Long-term lease liability   25,670     
Long-term convertible notes – Leonite   104,167     
           
TOTAL LIABILITIES   2,684,881    2,431,287 
           
SHAREHOLDERS’ DEFICIT          
Preferred stock - 25,000,000 Shares Authorized, par value $0.0001          
Series A Convertible Preferred Stock: $0.0001 par value; 100,000 shares authorized, 688 shares issued and outstanding as of December 31, 2022 and June 30, 2022, 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, 2022 and June 30, 2022, respectively   1    1 
Series C Preferred Stock: $0.0001 par value; 6,944,445 authorized, 6,838,889 shares issued and outstanding as of December 31, 2022 and June 30, 2022, respectively   684    684 
Series D Preferred Stock: $0.0001 par value; 500,000 shares authorized, 425,000 shares issued and outstanding as of December 31, 2022 and June 30, 2022, respectively   43    43 
Series E Preferred Stock $0.0001 par value, 4,000,000 shares designated, 4,000,000 shares issued and outstanding as of December 31, 2022 and June 30, 2022, respectively   400    400 
Common stock          
Common Stock: $0.0001 par value; 3,000,000,000 shares authorized,1,531,592,608 and 1,493,142,608 shares issued and outstanding as of December 31, 2022 and June 30, 2022, respectively   153,159    149,314 
Common stock to be issued (95,430,000 and 35,602,500 shares as of December 31, 2022 and June 30, 2022, respectively)   811,068    407,677 
Additional paid-in capital   37,270,501    36,773,035 
Accumulated deficit   (40,711,940)   (39,423,382)
Total Shareholders’ Deficit   (2,476,083)   (2,092,227)
Total Liabilities and Shareholders’ Deficit  $208,798   $339,060 

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

 3 

 

 

Wearable Healthcare Solutions, Inc.

Consolidated Statements of Operations

For the Three and Six Months Ended December 31, 2022 and 2021 (unaudited)

 

                 
   For the Three Months Ended   For the Six Months Ended 
   12/31/2022   12/31/2021   12/31/2022   12/31/2021 
Revenue  $198,039   $304,524   $414,499   $606,619 
Cost of sales   (99,418)   (143,138)   (219,420)   (345,873)
Gross profit   98,621    161,386    195,079    260,746 
                     
Operating expenses                    
Selling expense   80,272    126,124    270,282    274,362 
Depreciation   3,287    2,500    5,831    3,349 
Research and development expense       71,212    2,180    270,212 
Consulting and professional fees   65,505    183,920    107,819    381,374 
Insurance   27,326    6,973    56,518    22,381 
Rent   6,780    4,050    12,190    8,505 
Salaries and wages   354,429    277,013    857,285    3,806,466 
Software expense       29,633        123,110 
General and administrative   80,449    66,767    162,426    77,903 
Total Operating expenses   618,048    768,182    1,474,531    4,967,662 
                     
Loss from operations   (519,427)   (606,796)   (1,279,452)   (4,706,916)
                     
Other income / (expense), net                    
Change in fair value of derivative instrument       25,102        (213,053
Gain on debt extinguishment       80,313        96,145 
Gain on settlement of accounts payable       156,618        156,616 
Other income           19,500     
Interest income           1,500     
Interest expense   (20,364   (24,212   (30,106   (56,512
Total other income (expense), net   (20,364   237,821    (9,106   (16,804
Net loss before taxes   (539,791)   (368,985)   (1,288,558)   (4,723,720)
Income tax                
Net loss  $(539,791)  $(368,985)  $(1,288,558)  $(4,723,720)
                     
Net loss per common share - Basic and Diluted  $(0.00035)  $(0.00036)  $(0.00085)  $(0.00980)
                     
Weighted average common shares outstanding - Basic & Diluted   1,531,592,608    1,035,682,403    1,524,691,793    481,805,430 

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

 4 

 

 

Wearable Healthcare Solutions, Inc.

Consolidated Statement of Shareholders’ Deficit

For the Three and Six Months Ended December 31, 2022 and 2021 (unaudited)

 

                                 
   Series A   Series B   Series C   Series C to be issued 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount 
                                 
As at June 30, 2021   688   $1    9,938   $1    6,838,889   $684       $ 
                                         
Loss for the period                                
Common stock for comp                                
Common stock for debt conversion                                
Common stock for officer comp                                
Preferred stock for compensation                                
Shares sold for cash                                
                                         
As at September 30, 2021   688   $1    9,938   $1    6,838,889   $684       $ 
                                         
Loss for the period                                
Common stock for services                                
Common stock for comp                                
Common stock for debt conversion                                
Preferred stock for compensation                                
Subscription receivable                                
Shares sold for cash                                
                                         
As at December 31, 2021   688   $1    9,938   $1    6,838,889   $684       $ 
                                         
                                         
                                         
As at June 30, 2022   688   $1    9,938   $1    6,838,889   $684       $ 
                                         
Loss for the period                                
Common stock for compensation                                
Common stock to be issued for
compensation
                                
Common stock for officer compensation                                
Common stock to be issued for
officer comp
                                
Shares issued for services                                
Shares sold for cash – prior quarter                                
Shares sold for cash – current quarter                                
Payment of subscription receivable                                
                                         
As at September 30, 2022   688   $1    9,938   $1    6,838,889   $684       $ 
                                         
Loss for the period                                
Common stock for compensation                                
Common stock to be issued for
compensation
                                
Common stock for officer compensation                                
Common stock to be issued for officer
compensation
                                
Shares issued for services                                
Commitment shares – Leonite convertible
note
                                
Shares sold for cash – prior quarter                                
Shares sold for cash – current quarter                                
Payment of subscription receivable                                
                                         
As at December 31, 2022   688   $1    9,938   $1    6,838,889   $684       $ 

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

 5 

 

 

Wearable Healthcare Solutions, Inc.

Consolidated Statement of Shareholders’ Deficit

For the Three and Six Months Ended December 31, 2022 and 2021 (unaudited)

(continued)

 

                         
   Series D   Series E   Series E to be issued 
   Shares   Amount   Shares   Amount   Shares   Amount 
                         
As at June 30, 2021   425,000   $43    1,900,000   $190    100,000   $57,000 
                               
Loss for the period                        
Common stock for comp                        
Common stock for debt conversion                        
Common stock for officer comp                        
Preferred stock for compensation           2,000,000    200         
Shares sold for cash                        
                               
As at September 30, 2021   425,000   $43    3,900,000   $390    100,000   $57,000 
                               
Loss for the period                        
Common stock for services                        
Common stock for comp                        
Common stock for debt conversion                        
Preferred stock for compensation           100,000    10    (100,000)   (57,000)
Subscriptions receivable                        
Shares sold for cash                        
                               
As at December 31, 2021   425,000   $43    4,000,000   $400       $ 
                               
                               
                               
As at June 30, 2022   425,000   $43    4,000,000   $400       $ 
                               
Loss for the period                        
Common stock for compensation                        
Common stock to be issued for compensation                        
Common stock for officer compensation                        
Common stock to be issued for officer comp                        
Shares issued for services                        
Shares sold for cash – prior quarter                        
Shares sold for cash – current quarter                        
Payment of subscription receivable                        
                               
As at September 30, 2022   425,000   $43    4,000,000   $400       $ 
                               
Loss for the period                        
Common stock for compensation                        
Common stock to be issued for compensation                        
Common stock for officer compensation                        
Common stock to be issued for officer comp                        
Shares issued for services                        
Commitment shares – Leonite convertible note                        
Shares sold for cash – prior quarter                        
Shares sold for cash – current quarter                        
Payment of subscription receivable                        
                               
As at December 31, 2022   425,000   $43    4,000,000   $400       $ 

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

 6 

 

 

Wearable Healthcare Solutions, Inc.

Consolidated Statement of Shareholders’ Deficit

For the Three and Six Months Ended December 31, 2022 and 2021 (unaudited)

(continued)

 

                                                         
    Common Stock     Common Stock to be issued     Additional Paid in Capital     Accumulated Profit/Deficit     Total  
    Shares     Amount     Shares     Amount     Amount     Shares     Amount  
                                           
As at June 30, 2021     647,074,177     $ 64,708       20,050,000     $ 169,005     $ 22,732,295     $ (26,374,227 )   $ (3,350,300 )
                                                         
Loss for the period                                   (4,354,735 )     (4,354,735 )
Common stock for comp     7,000,000       700       5,000,000       60,000       74,300             135,000  
Common stock for debt conversion     25,269,253       2,527                   250,166             252,693  
Common stock for officer comp                 225,000       2,498                     2,498  
Preferred stock for compensation                             2,999,800             3,000,000  
Shares sold for cash     232,500,000       23,250       (10,000,000 )     (100,000 )     2,301,750             2,225,000  
                                                         
As at September 30, 2021     911,843,430     $ 91,185       15,275,000     $ 131,503     $ 28,358,311     $ (30,728,962 )   $ (2,089,845 )
                                                         
Loss for the period                                   (368,985 )     (368,985 )
Common stock for services     10,000,000       1,000       (10,000,000 )     (69,000 )     68,000              
Common stock for comp                 225,000       2,422                   2,422  
Common stock for debt conversion     41,149,178       4,114                   420,900             425,014  
Preferred stock for compensation                             56,990              
Subscriptions receivable                             (100,000 )           (100,000 )
Shares sold for cash     97,500,000       9,750       20,000,000       200,000       965,250             1,175,000  
                                                         
As at December 31, 2021     1,060,492,608     $ 106,049       25,500,000     $ 264,925     $ 29,769,450     $ (31,097,947 )   $ (956,394 )
                                                         
                                                         
                                                         
As at June 30, 2022     1,493,142,608     $ 149,314       35,602,500     $ 407,677     $ 36,773,035     $ (39,423,382 )   $ (2,092,227 )
                                                         
Loss for the period                                   (748,767 )     (748,767 )
Common stock for compensation     5,000,000       500       (2,000,000 )     (30,000 )     65,500             36,000  
Common stock to be issued for compensation                 32,500       441                   441  
Common stock for officer compensation     6,950,000       695       (6,950,000 )     (101,262 )     100,567              
Common stock to be issued for officer comp                 3,475,000       47,144                   47,144  
Shares issued for services     5,000,000       500                   88,500             89,000  
Shares sold for cash – prior quarter     21,500,000       2,150       (21,500,000 )     (215,000 )     212,850              
Shares sold for cash – current quarter                 67,950,000       604,500                   604,500  
Payment of subscription receivable                             30,000             30,000  
                                                         
As at September 30, 2022     1,531,592,608     $ 153,159       76,610,000     $ 713,500     $ 37,270,452     $ (40,172,149 )   $ (2,033,909 )
                                                         
Loss for the period                                   (539,791 )     (539,791 )
Common stock for compensation                                          
Common stock to be issued for compensation                 32,500       210                   210  
Common stock for officer compensation                                          
Common stock to be issued for officer comp                 3,475,000       22,422       49             22,471  
Shares issued for services                                          
Commitment shares – Leonite convertible note                 15,000,000       49,936                   49,936  
Shares sold for cash – prior quarter                                          
Shares sold for cash – current quarter                 312,500       25,000                   25,000  
Payment of subscription receivable                                          
                                                         
As at December 31, 2022     1,531,592,608     $ 153,159       95,430,000     $ 811,068     $ 37,270,501     $ (40,711,940 )   $ (2,476,083 )

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

 7 

 

 

Wearable Healthcare Solutions, Inc.

Consolidated Statement of Cash Flows

For the Six Months Ended December 31, 2022 and 2021 (unaudited)

 

         
   2022   2021 
Cash flow from operating activities          
Net loss  $(1,288,558)  $(4,723,720)
Adjustment for non-cash charges and other items:          
Depreciation   5,831    3,349 
Amortization of deferred debt issuance costs   3,480     
Stock compensation expense   195,266    3,139,920 
Change in fair value of derivative instrument       213,053 
Gain on debt extinguishment       (96,145)
Gain on settlement of accounts payable       (156,616)
Amortization of debt discount   3,629     
Total adjustments   (1,080,352)   (1,620,159)
Changes in working capital          
Decrease / (increase) in accounts receivable   (9,206)   12,936 
Decrease / (increase) in inventory   (57,106)    
Decrease / (increase) in prepaid inventory   62,040     
Decrease / (increase) in prepaid expenses   (3,900)   9,402 
(Decrease) / increase in trade and other payables   (12,079)   (61,688)
(Decrease) / increase in accrued expenses   29,883    73,424 
(Decrease) / increase in accrued expenses - related party   26,814    (207,444)
(Decrease) / increase in deferred revenue   (11,874)   (13,283)
Total changes in working capital   24,572    (186,653)
Cash flow used in operating activities  $(1,055,780)  $(1,806,812)
           
Cash flow from investing activities          
Purchase of property and equipment   (9,442)   (50,000)
Cash flow used in financing activities   (9,442)   (50,000)
           
Cash flow from financing activities          
Proceeds from note payable       25,000 
Proceeds received from related parties   155,800     
Proceeds from issuance of convertible notes   240,000     
Proceeds from issuance of stock for cash   659,500    3,300,000 
Repayments of note payable   (15,109)   (685,510)
Payments to related parties       (30,155)
Cash flow provided by financing activities   1,040,191    2,609,335 
(Decrease) Increase in cash and cash equivalents   (25,031)   752,523 
Cash and cash equivalents at the beginning of the period   70,505    847,430 
Cash and cash equivalents at end of the period  $45,474   $1,599,953 
           
Cash paid for interest and taxes          
Interest  $   $ 
Taxes  $   $ 

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

 8 

 

 

WEARABLE HEALTHCARE SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022 (unaudited) and June 30, 2022

 

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 provides mobile health (mHealth) products and services to be used by customers in case of an emergency. As a provider of personal emergency devices, the Company provides innovative wearable healthcare products, tracking services, and turn-key solutions that enable our users to be proactive with their health, as well as safe and protected.

 

The Company’s flagship products are the iHelp devices, the 3G and the next generation iHelp MAX™ – personal emergency alarm that are used to summon help in the event of an emergency at home.

 

Basis of presentation

 

The accompanying interim 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, 2022, and the results of operations and changes in shareholders’ deficit for the three and six months ended December 31, 2022 and cash flows for the six months ended December 31, 2022. The balance sheet as of June 30, 2022, is derived from the Company’s audited financial statements.

 

Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on this Form 10-K for the fiscal year ended June 30, 2022.

 

The results of operations for the three and six months ended December 31, 2022, are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 2023.

 

Note 2 – Summary of Significant Accounting Policies

 

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiary: Medical Alarm Concepts, LLC. All intercompany accounts and transactions have been eliminated in consolidation.

 

Use of EstimatesThe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of management’s estimates requires the exercise of judgment. The Company’s management evaluates these significant estimates and assumptions including those related to the fair value of acquired assets and liabilities, stock-based compensation, income taxes, allowance for doubtful accounts, long-lived assets, and inventories, and other matters that affect the consolidated financial statements and disclosures. 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.

 

 

 9 

 

 

Accounts Receivable – The Company estimates 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. The Company charges 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. The Company considers any balance unpaid after the contract payment period to be past due. There are $32,911 and $-0- in accounts receivable net of allowances of $23,705 and $-0- at December 31, 2022 and June 30, 2022, respectively.

 

Software Development for internal use - The Company accounts for software development costs in accordance with applicable guidelines. Software development costs include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development. Software development costs also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Such costs related to software development are included in software development expense until the point that technological feasibility is reached. Once technological feasibility is reached, such costs are capitalized and depreciated over the useful estimated lives of the software. For software modifications or developments, the Company expenses the costs. The Company purchased its dealer portal for $50,000 on August 30, 2021 which is being depreciated over 5 years.

 

Concentration of Credit Risk - Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.

 

Recognition of RevenuesRecognition 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 has adopted this pronouncement.

 

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. For hardware sales, the Company recognizes revenues at a point in time when the product is shipped. Customers are billed on Net 30 terms. For service revenue, the Company recognizes revenues over the term of the service contract and when the services are rendered. For customers who pay several months at a time, the Company records revenues for the month’s services and the balance of funds to deferred revenues, and records the balance of revenues as they become current.

                 
   3 months ended December 31,   6 months ended December 31, 
REVENUES  2022   2021   2022   2021 
Hardware revenue  $23,849    23,402   $50,725    76,985 
Service revenue   174,190    281,122    363,774    529,634 
TOTAL REVENUES  $198,039    304,524   $414,499    606,619 

 

The following table discloses changes in unearned revenue for the six months ended December 31, 2022 and 2021:

        
   2022   2021 
Balance at beginning of period - June 30,  $80,880   $108,298 
Deferred revenue   84,241    120,313 
Recognition of unearned revenue   (96,115)   (133,596)
Balance at the end of the period - December 31,  $69,006   $95,015 

 

Deferral of revenues at December 31, 2022 and December 31, 2021 was $69,006 and $95,015, respectively. The deferred revenue represents quarterly and annual prepaid service fees, which were invoiced and paid at the onset of customer service agreements and which pertain to service obligations not realized at December 31, 2022 and December 31, 2021, respectively. We have no agreements longer than 12 months.

 

 

 10 

 

 

Deferred TaxesThe Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

ASC 740, Income Taxes, requires a company to first determine whether it is more likely than not (which is defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

 

The Federal and state income tax returns of the Company for 2021, 2020, and 2019 are subject to examination by the Internal Revenue Service and state taxing authorities for three (3) years from the date filed.

 

Fair value of financial instruments. The Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASB Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation techniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable market prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.

 

From time to time, our financial instruments include cash, accounts payable and accrued expenses, convertible notes, lines of credit, and credit cards.

 

Research and Development - Research and development costs are charged to operations as they are incurred. Legal fees and other direct costs incurred in obtaining and protecting patents are also expensed as incurred, due to the uncertainty with respect to future cash flows resulting from the patents. For the three and six months ended December 31, 2022 and 2021, the Company recorded $-0- and $71,212 and $2,180 and $270,212 in research and development costs, respectively.

 

Basic and Diluted Loss per Common Share - Basic loss per common share excludes dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted loss per share gives effect to all potential dilutive common shares outstanding during the period of compensation. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the net income of the Company, subject to anti-dilution limitations.

                         
    Basis of conversion   Dilution   2022     2021  
Series A Convertible   688 shares outstanding   1 share A: 2 shares     1,376       1,376  
Series B Convertible   9,938 shares outstanding   1 share B: 2 shares     19,876       19,876  
Series C Convertible   6,838,889 shares outstanding   1 share C: 10 shares     68,388,890       68,388,890  
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       400,000,000  
              472,660,142       472,660,142  

 

The Company has incurred losses for the past two years, as a result, the basic and diluted share bases will be presented as the same. For the three-month periods ended December 31, 2022 and 2021, the Company incurred losses of ($0.00035) and ($0.00036) per basic share and diluted share, respectively. For the six months ended December 31, 2022 and 2021, the Company incurred losses of ($0.00085) and ($0.00980) per basic share and diluted share, respectively.

 

 

 11 

 

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes. The update is intended to simplify the current rules regarding the accounting for income taxes and addresses several technical topics including accounting for franchise taxes, allocating income taxes between a loss in continuing operations and in other categories such as discontinued operations, reporting income taxes for legal entities that are not subject to income taxes, and interim accounting for enacted changes in tax laws. The new standard is effective for fiscal years beginning after December 15, 2020; however, early adoption is permitted. The Company does not expect the adoption of this standard have a material impact on the consolidated financial statements.

 

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from shareholders’ equity to liabilities as it relates to the Company’s convertible senior notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis. The Company early adopted the ASU on July 1, 2022, the beginning of its fiscal year.

 

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 consolidated financial statements for the three and six months ended December 31, 2022 and 2021 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, 2022 and June 30, 2022, the Company has shown losses for the last two years and has an accumulated deficit of ($40,711,940) and ($39,423,382), respectively.

 

During the six months ended December 31, 2022, the Company has net cash used in operating activities of $1,055,780 as well as stock compensation non-cash expense of $195,266 and a net loss of $1,288,558. The Company had net cash flow of $1,040,191 from financing activities in the six months ended December 31, 2022, which resulted in a working capital deficit of $2,430,294 as of December 31, 2022. If the Company is unable to raise additional adequate capital, it could be forced to cease operations.

 

Management believes that the Company’s capital requirements will depend on many factors including the success of the Company’s development efforts and its efforts to raise capital. Management also believes the Company needs to raise additional capital for working capital purposes. There can be no assurance that the Company will be able to obtain the additional capital resources necessary to implement its business plan or that any assumptions relating to its business plan will prove accurate.

 

These factors raise substantial doubt about our ability to continue as a going concern for a period of 12 months from the issue date of this report. The consolidated financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 

 12 

 

 

Note 4 – Inventory, Prepaid Inventory, and Prepaid Expenses

 

The Company maintains some inventory in its warehouse 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, 2022 and June 30, 2022, the Company had $64,170 and $7,064 in inventory, respectively, as well as $-0- and $62,040 in prepaid inventory, respectively.

 

As of December 31, 2022 and June 30, 2022, the Company had $3,900 and $-0- in prepaid expenses, respectively.

 

Note 5 – Property and Equipment

 

The Company has $20,000 in furnishings, $19,689 in office computers and equipment, and capitalized software development costs of $45,900 which are fully depreciated. On August 30, 2021, the Company purchased its dealer portal for $50,000 for internal use, amortized over 60 months. On September 26, 2022, the Company purchased used furniture for $9,442 for its office warehouse located in Mequon, WI and the Company is depreciating the used furniture over 36 months.

 

As of December 31, 2022 and June 30, 2022, the Company recorded $45,262 and $41,651 in net Property and Equipment, respectively:

         
   December 31, 2022   June 30, 2022 
Furniture  $29,442   $20,000 
Office computers, equipment, software   19,689    19,689 
Software development costs   45,900    45,900 
Dealer Portal   50,000    50,000 
Property, plant, and equipment   145,031    135,589 
Less accumulated depreciation   (99,769)   (93,938)
Net property, plant, and equipment  $45,262   $41,651 

 

Note 6 – Accounts payable and accrued expenses and liabilities

 

The Company recorded Accounts Payable of $45,861 and $57,940, directly related to operating costs, as of December 31, 2022 and June 30, 2022, respectively.

 

Accrued expenses and other current liabilities are expenses that have been incurred but not yet paid, and mainly include legal fees, audit fees and other professional fees as well as accrued interest in connection with the credit line and notes payable. The Company recorded $404,021 and $374,278 in accrued expenses and other current liabilities as of December 31, 2022 and June 30, 2022, respectively.

 

Note 7 – Notes Payable and Note payable-other

 

Notes payable consists of notes payable from our subsidiary, notes payable-other, convertible notes payable, notes payable for stock purchases under Reg A, short term notes payable, and notes payable-BOAPIN portal, as follows: 

          
   December 31, 2022   June 30, 2022 
Notes from subsidiary  $159,134   $174,243 
Notes payable – Reg A deposits   138,856    138,856 
Short term bridge loan   100,000    100,000 
Total Notes Payable  $397,990   $413,099 

 

 

 13 

 

 

Notes Payable - subsidiary

 

The Company has various loans and credit lines outstanding. The credit line carries an interest rate of 6.24%. The bank loans carry interest rates varying between 9.24% – 10.90%.

          
  

December 31,

2022

  

June 30,

2022

 
Wells Fargo Loan  $8,770   $8,770 
On Deck Loan   139,569    139,569 
Susquehanna Salt Loan       10,500 
Prosper Loans   9,994    9,994 
Marcus Loan   801    5,410 
Total Notes from Subsidiary (See Table Above)  $159,134   $174,243 

 

Short term bridge loan - COHEN

 

On July 31, 2020, the Company secured a $500,000 short term bridge loan from an unaffiliated individual (“COHEN”), 12% interest, due and payable October 20, 2020. The loan is currently in default and continues to accrue interest at 12%.

 

On August 19, 2021, the Company repaid $300,000 of principal and in November 2021, the Company repaid an additional $100,000 in principal.

 

At December 31, 2022 and June 30, 2022, the Company recorded a short term note payable of $100,000, respectively. During the three and six months ended December 31, 2022, the Company expensed $3,000 and $6,000 in interest expense, respectively. During the three and six months ended December 31, 2021, the Company expensed $4,668 and $15,649, respectively. The accrued interest payable at December 31, 2022 and June 30, 2022 was $82,677 and $76,677, respectively. These notes are included in the Notes payable total on the Company’s balance sheet.

 

Note payable – stock purchases under Reg A

 

In March 2021 and June 2021, the Company accepted payments of $115,000 for stock purchases under the Reg A filing from two unaffiliated investors, pending blue sky registrations in two states. In July 2021, the Company accepted loans totaling $20,000 from two unaffiliated investors pending blue sky registrations in two additional states. The notes mature in one year and bear interest at 5%. The full amount of the note plus interest is convertible at the Reg A fixed price of $0.01, when possible.

 

In October 2021, the Company accepted a loan of $5,000 from two unaffiliated investors pending blue sky registrations in two additional states.

 

At December 31, 2022 and June 30, 2022, the Company has recorded $138,856 and $138,856 in notes payable for stock purchases under Reg A. During the three and six months ended December 31, 2022, the Company recorded interest expense of $2,700 and $5,400, respectively. During the three and six months ended December 31, 2021, the Company recorded interest expense of $2,700 and $8,736, respectively. The accrued interest payable at December 31, 2022 and June 30, 2022 was $17,707 and $12,307, respectively. These notes are included in the Notes payable total on the Company’s balance sheet.

 

Note Payable – Other

 

In November, 2016, the Company secured a $50,000 loan from a party related to a previous CEO, bearing 4% interest, the loan maturing after a successful money raise of $1,000,000 through the acquisition of convertible notes payable (See BENZA, D2CF). The $1,000,000 fundraising was never completed, and the Company has been accruing interest on the original principal amount at 4% since inception. On July 22, 2021, the Company filed suit for damages and the party filed a countersuit on August 26, 2021. There has been no resolution to this situation, and we continue to accrue interest at the face amount.

 

During the three and six months ended December 31, 2022, the Company recorded interest expense of $500 and $1,000, respectively. During the three and six months ended December 31, 2021, the Company recorded interest expense of $500 and $1,000, respectively. The accrued interest payable at December 31, 2022 and June 30, 2022 was $12,282 and $11,282, respectively. These notes are included in the Notes payable total on the Company’s balance sheet.

 

 

 14 

 

 

Convertible note payable – BENZA, D2CF

 

On March 1, 2016 and March 3, 2016, the Company closed a private placement of debt and received an aggregate of $612,500 by issuing $13,750 (“B2CF”) and $660,000 (“BENZA”) unsecured convertible notes (“convertible notes”) and warrants to two investors, net of original issue discount of $61,250 per the subscription agreements, maturity at March 1, 2017 and March 3, 2017, respectively, bearing 0% interest and 18% default interest. The notes are currently in default, and all outstanding warrants have expired.

 

The Company is currently in negotiations to settle the $660,000 BENZA loan with principles in the company, although there has been no settlement to date.

 

As of December 31, 2022 and June 30, 2022, the Company reported $673,750 and $673,750 in convertible notes payable, respectively.

 

Convertible Note – Leonite Capital, LLC

 

On December 5, 2022, the Company, (the “Borrower”), received $250,000 on issuing the first tranche of $1,000,000 senior secured convertible note (“Leonite Convertible Note”) from Leonite Capital, LLC, a Delaware limited liability company (“Leonite”), net of an original issue discount of $62,500. The term of the convertible note is fifteen months from the date of closing and matures on March 5, 2024. The Company is required to only pay interest expense on a monthly basis for the first six months of the term. During the three and six months ended December 31, 2022, the Company accrued $2,382 of interest expense related to the convertible notes. The Company will begin making nine equal amortization payments of $34,722 commencing in the month of July 2023. The last three months of the scheduled amortization payments are recorded as long-term convertible notes totaling $104,167 on the Company’s balance sheet at December 31, 2022. The Company is required to issue 15,000,000 commitment shares valued at $78,000 to Leonite of which $28,064 was charged to common stock to be issued. In addition, the Company also paid Leonite $10,000 for legal fees incurred by Leonite related to this transaction. The commitment shares and the legal fees have been recorded as deferred debt issuance costs totaling $59,936. The Company amortized $3,480 of the deferred debt issuance costs during the three and six months ended December 31, 2022 and the Company also amortized $3,629 of the original issue discount during the three and six months ended December 31, 2022. The Leonite Convertible Note bears annual interest at the greater of 10% or the Prime Rate plus three percent (3%). The Leonite Convertible Note is convertible into shares of the Company’s common stock at a conversion price equal to $0.007 per share with anti-dilution features.

 

Credit line – MediPendant New York Inc.

 

On September 30, 2014, our subsidiary entered into a line of credit with Medi Pendant New York, Inc. (“MNY”), which is partially owned by a principal of its subsidiary. Under the line of credit agreement, the Company will be able to borrow up to $500,000 with the rate of interest of 6.5% per annum. The maturity date of the credit line is September 30, 2017, with a one-year extension to September 30, 2018. On January 31, 2015, the limit on the line of credit was increased to $500,000 with same interest rate and due date. The company issued 200,000 shares of common stock to one of the owners of MNY as consideration for the increase of line of credit. These shares were issued on October 19, 2015 and value at $28,000 which was the fair market value at the grant date.

 

As of December 31, 2022 and June 30, 2022, the Company has recorded $397,500 and $397,500 in outstanding line of credit balance, respectively.

 

Debt settlement – On Deck, Susquehanna, MCA Cure

 

In 2019, our subsidiary engaged MCA CURE to negotiate settlements with two creditors: On Deck and Susquehanna Salt, noted in the table above. The Company ceased paying the loan payments and paid to MCA Cure $43,875 in 2019 and $47,000 in 2020, at which point the Company was contacted and MCA Cure assured they had enough funds to negotiate with the creditors. In 2020, the Company discovered MCA Cure had not performed when bank accounts were levied for $33,705 by the creditors. $18,705 was subsequently refunded by the collection firm. On September 30, 2020, the bank accounts were again levied for additional funds. Currently the Company has a settlement agreement in place with Susquehanna Salt Loan, and has booked a reserve against the $90,875 funds paid to MCA Cure. The Company has hired an attorney and is making every effort to recover funds and damages from MCA Cure. To date, there has been no resolution to the situation. As of December 31, 2022 and June 30, 2022, the Company recorded $-0- and $-0- in prepaid fund to MCA Cure, and $139,569 and $139,569 in indebtedness to On Deck. The Company negotiated a settlement with Susquehanna Salt for the loan balance, and as of December 31, 2022 and June 30, 2022, the Company recorded indebtedness to Susquehanna Salt of $-0- and $10,500, respectively.  

 

 

 15 

 

 

Note 10 – Stockholders’ Deficit

 

Preferred Stock:

 

The Company is currently authorized to issue 25,000,000 shares of preferred stock, par value of $0.0001.

 

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 December 31, 2022 and June 30, 2022, 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 voting rights and vote on an “as converted” basis in actions required to have Series B Preferred Stockholder approval. As of December 31, 2022 and June 30, 2022, 9,938 shares of Series B Convertible Preferred Stock were issued and outstanding, respectively.

  

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 voting rights and vote on an “as converted” basis on all matters submitted to our Stockholders for approval.

 

The Company issued 6,700,003 shares for the BOAPIN asset purchase; these shares were issued on September 1, 2020. As of December 31, 2022 and June 30, 2022, 6,838,889 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 voting rights and vote on an “as converted” basis in actions required to have Series D Preferred Stockholder approval. As of December 31, 2022 and June 30, 2022, 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 4,000,000 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.

 

During the year ended June 30, 2021, as part of the change in control, 4,000,000 shares were returned to treasury to be canceled. In December 2020 the Company issued 1,000,000 shares of Series E Convertible Preferred Stock accrued in the prior year and issued 450,000 shares of Series E Convertible Preferred Stock to each of its two directors, 900,000 shares total, valued at $513,000 or $0.57 per share, accrued 100,000 shares of Series E Preferred stock to be issued to directors for services, valued at $57,000 or $.57 per share, all pricing based on the conversion of one share of Series E Convertible Preferred Stock for 100 shares of common stock and the price of the common stock on the date of accrual. During the year ended June 30, 2022, the Company issued 1,000,000 shares of Series E Convertible Preferred shares to each of its two directors for services, valued at $3,000,000 or $1.50 per share, and issued 50,000 shares to each of its two directors, previously accrued for at $57,000 or $0.57 per share. All shares were recorded at the quoted common stock price of the date of agreement or grant on an as-converted basis.

 

As of December 31, 2022 and June 30, 2022, 4,000,000 and 4,000,000 shares of Series E Convertible Preferred Stock were issued and outstanding, respectively

 

 

 

 16 

 

 

Common Stock:

 

The Company is currently authorized to issue 3,000,000,000 shares of common stock, par value of $0.0001 per share.

 

During the six months ended December 31, 2022, the Company issued 6,950,000 shares to its officers as compensation (of which 6,162,500 shares were granted in a prior period), valued at $101,262 or $.0146 per share; 5,000,000 shares to an employee as compensation, valued at $66,000 or $0.0132 per share; 21,500,000 shares issued to investors, valued at $215,000 or $0.01 per share; and 5,000,000 shares issued for services, valued at $89,000 or $0.0178 per share. All shares were recorded at the stock price of the date of agreement or grant.

 

During the six months ended December 31, 2022, the Company also recorded shares to be issued of 6,950,000 to its officers as compensation, valued at $69,616 or $.0100 per share, and shares to be issued of 65,000 to an employee as compensation, valued at $651 or $0.0100 per share. In addition, the Company recorded commitment shares to be issued of 15,000,000 valued at $78,000 or $0.0052 per share to Leonite Capital LLC in connection with the issuance of convertible notes on December 5, 2022. All shares were recorded at the stock price of the date of agreement or grant.

 

During the six months ended December 31, 2022, the Company received proceeds totaling $629,500 in connection with the issuance of 68,262,500 shares of common stock. Of the total proceeds received, $325,000 in proceeds was received from the issuance of 37,812,500 common shares that were issued under the terms of subscription agreements at the contract price of $0.008. The remaining proceeds of $304,500 was received from the issuance of 30,450,000 common shares that were issued under the terms of subscription agreements at the contract price of $0.01. These shares are yet to be issued as of December 31, 2022.

 

For the six months ended December 31, 2021, the Company issued 7,000,000 common shares to employees and contractors for contractual bonuses, valued at $75,000 or $.0107 per share, accrued 5,000,000 shares in bonuses to be paid, valued at $52,500 or $.0105 per share, issued 66,418,431 for $260,000 in debt, $9,954 in interest, and $9,000 in fees, valued at $677,707, accrued 450,000 to be issued for management compensation, valued at $4,920 an average of $.0109 per share, and sold 340,000,000 shares under the Reg A at $3,400,000 or $.01 per share, 10,000,000 of which were accrued to be issued as of December 31, 2021. All shares were recorded at the quoted stock price of the date of agreement or grant.

 

As of December 31, 2022 and June 30, 2022, the Company has 1,531,592,608 and 1,493,142,608 shares of common stock issued and outstanding, respectively.

 

Note 11 – Related Party Transactions

 

Note payable – BOAPIN purchase

 

In August 2020, and effective as of June 30, 2020, the Company purchased the BOAPIN portal, including all software, licensing, and ownership rights from Hypersoft Ventures, Inc., a related party through common ownership, for $800,200, which includes six million seven hundred thousand three (6,700,003) shares of Series C Convertible Preferred stock, valued at $375,200 or $0.056 per share, based on the conversion of one share of Series C Preferred stock for 10 shares of common stock and the stock price on the date of the transaction, and a note payable for $425,000, bearing eight percent (8%) interest with no prepayment or delinquency clauses.

 

As of December 31, 2022 and June 30, 2022, the Company has recorded a Note payable-BOAPIN of $170,000 and $170,000, respectively. During the three and six months ended December 31, 2022, the Company recorded interest expense of $3,428 and $6,856, respectively. During the three and six months ended December 31, 2021, the Company recorded interest expense of $6,521 and $15,090, respectively. The accrued interest balance at December 31, 2022 and June 30, 2022 was $56,271 and $49,415, respectively.

 

 

 

 17 

 

 

Related party debt, net

 

From time to time, the Company received funds from related parties 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. The following table reflects the composition of the related party debt, net balance at December 31, 2022 and June 30, 2022. The Company had a receivable from certain management employees totaling $155,800 at June 30, 2022. The total receivable balance was subsequently collected by the Company on September 27, 2022.

          
   December 31,   June 30, 
   2022   2022 
Related parties – subsidiary  $177,320   $202,875 
Due from related parties       (155,800)
Accrued salaries, bonus, fees   63,334    10,965 
Total loans from related parties, net  $240,654   $58,040 

 

Note 12 – Commitments and contingencies

 

Legal Matters

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

  1) Wearable Health Solutions, Inc. v. Barry Honig, GRQ Consultants Inc., Benza Pharma LLC and John Does 1-10, Supreme Court of the State of New York County of New York, July 22, 2021. Company is disputing the validity of Notes from 3/2016 and seeking damages, reparations, and related costs.
     
  2) GRQ Consultants, Inc. v. Wearable Health Solutions, Inc., Supreme Court of the State of New York, County of New York, August 26, 2021, Parties are seeking summary judgment of $50,000 plus accrued interest in response to lawsuit by Company regarding $50,000 loan from 11/2016.
     
  3) Benza Pharma LLC, Sandor Capital, LP, and John Lemak v. Wearable Health Solutions, Inc., District Court, Clark County, Nevada, Parties are seeking summary judgment of $3,000,000 plus accrued interest in regards to convertible notes payable from March, 2016. The Company believes that there is a very low probability that it will pay this amount and as a result has   not accrued for it on the Company’s balance sheet. (See Note 15)
     
  4) Medical Alarm Concepts LLC v. MCA Cure, LLC, Superior Court of New Jersey, Law Division, Morris County. Company is seeking return of payments for non-performance plus attorney fees and court costs. A settlement was reached between the parties whereby MCA Cure will pay an initial $10,000 and $6,500 each month until debt is satisfied in 2023 (See Note 14).

 

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.

 

 

 18 

 

 

Note 13 – Office/Warehouse lease

 

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.

 

The Company maintains its corporate office at 2901 W. Coast Highway, Suite 200, Newport Beach, CA 92663. The Company currently pays $175 a month for its office space and the term is month-to-month. The Company’s subsidiary maintained a warehouse office in Pennsylvania to facilitate inventory arrival and product shipment. The three-year lease at $1,100 per month expired on September 30, 2021, and was renewed for 12 months at $1,300 per month beginning October 1, 2021 and expiring on September 30, 2022. The subsidiary subsequently entered into a month-to-month arrangement with this office warehouse and then terminated the arrangement and vacated the facility as of December 31, 2022. The Company entered into a new three-year lease agreement on September 9, 2022 for new warehouse space located in Mequon, Wisconsin. The monthly rent for this new warehouse space is currently $1,325 per month for the first twelve months of the lease agreement. Expenditures for the six months ending December 31, 2022 and 2021 are as follows:

        
   2022   2021 
Rent expense  $12,190   $7,700 

 

The Company leased a fulfillment center in the U.S., which was classified as an operating lease which subsequently expired on September 30, 2022. The Company determines if an arrangement qualifies as a lease at the lease inception. Operating lease liabilities are recorded based on the present value of the future lease payments over the lease term, assessed as of the commencement date. The Company’s real estate leases, which are for a fulfillment center, generally have a lease term between 3 and 5 years. The Company’s leases are comprised of fixed lease payments and also include executory costs such as common area maintenance, as well as property insurance and property taxes. The Company has elected to account for the lease and non-lease components as a single lease component for its real estate leases. Lease payments, which may include lease components and non-lease components, are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable amounts based on a rate or index (fixed in substance) as stipulated in the lease contract. Any actual costs in excess of such amounts are expensed as incurred as variable lease cost.

  

The Company’s lease agreements generally do not specify an implicit borrowing rate, and as such, the Company utilizes its incremental borrowing rate by lease term, in order to calculate the present value of the future lease payments. The discount rate represents a risk-adjusted rate on a secured basis, and is the rate at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term. The Company’s lease agreement for its warehouse space located in King of Prussia, Pennsylvania expired on September 30, 2022. The Company has terminated the month-to-month arrangement and has vacated the warehouse located in King of Prussia, Pennsylvania as of December 31, 2022. As a result, the Company entered into a new three-year lease agreement on September 9, 2022 for new warehouse space located in Mequon, Wisconsin. The monthly rent which commenced in September 2022 is $1,325 per month and increases approximately 3% annually thereafter. The discount rate used was determined based on the available data as of the lease commencement date. The Right-of-use (“ROU”) asset value added as a result of this new lease agreement was $43,058. The Company’s ROU asset and lease liability accounts reflect the inclusion of this new lease agreement on the Company’s consolidated balance sheet as of December 31, 2022.

 

Certain of the Company’s lease agreements, primarily related to real estate, include options for the Company to either renew (extend) or early terminate the lease. Leases with renewal options allow the Company to extend the lease term typically between 1 and 3 years. Renewal options are reviewed at lease commencement to determine if such options are reasonably certain of being exercised, which could impact the lease term. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, or specific characteristics unique to the particular lease that would make it reasonably certain that the Company would exercise such option. In most cases, the Company has concluded that renewal and early termination options are not reasonably certain of being exercised by the Company (and thus not included in the Company’s ROU asset and lease liability) unless there is an economic, financial or business reason to do so.

 

 

 19 

 

 

For the six months ended December 31, 2022, total operating lease cost was $12,190 and is recorded in general and administrative expenses, dependent on the nature of the leased asset. The operating lease cost is recognized on a straight-line basis over the lease term. The following summarizes (i) the future minimum undiscounted lease payments under non-cancelable lease for each of the next four years and thereafter, incorporating the practical expedient to account for lease and non-lease components as a single lease component for our existing real estate leases, (ii) a reconciliation of the undiscounted lease payments to the present value of the lease liabilities recognized, and (iii) the lease-related account balances on the Company’s consolidated balance sheet, as of December 31, 2022:

     
Fiscal Year Ending June 30,    
     
2023  $7,950 
2024   16,250 
2025   16,670 
July & August 2025   2,790 
Total future minimum lease payments   43,660 
Less imputed interest   (4,734)
Total present value of future minimum lease payments  $38,926 

 

     
As of December 31, 2022    
     
Operating lease right-of-use assets  $38,786 
      
Accrued lease liability   13,256 
Long-term lease liability   25,670 
   $38,926 
      
As of December 31, 2022     
      
Weighted Average Remaining Lease Term   2.67 years 
Weighted Average Discount Rate   8.44% 

 

Note 14 – Other income - settlement

 

Settlement

 

In 2019, the Company engaged MCA Cure to negotiate settlements with two note holders, and paid MCA Cure a total of $97,625. In 2020, the Company discovered MCA Cure had not performed when bank accounts were levied for $33,705 and $18,705, being subsequently refunded, and engaged an attorney to recover funds. Currently the Company has a settlement agreement in place with Susquehanna Salt Loan and has hired an attorney to recover funds and damages from MCA Cure. In February 2022, a settlement was reached with MCA Cure for fees and attorney costs of $105,125, amortized at 1.5%, by which the Company would receive an initial payment of $10,000, and $6,500 monthly until the debt is satisfied in May 2023, with stipulations for any potential default. MCA Cure ceased making payments to the Company in the three month period ended December 2022, and as a result the Company is currently in the process of reopening its legal case against MCA Cure.

 

For the six months ended December 31, 2022 and 2021, the Company recorded $19,500 and $-0- in other income related to this settlement agreement, respectively.

 

Note 15 – Subsequent Events

 

The Company evaluated events that have occurred after the balance sheet date but before the financial statements are issued and determined that there are no material events that are required to be disclosed.

 

On January 27, 2023, the Company terminated the employment of Jennifer Loria, the Chief Operating Officer of the Company’s operating subsidiary, Medical Alarm Concepts, LLC.

 

On February 3, 2023, the plaintiffs in the case of Sandor Capital, LP and John Lemak v. Wearable Health Solutions, Inc., informed the Company that they would be discontinuing their legal action against the Company.

 

On February 7, 2023, the Company issued 2,662,500 shares valued at $28,846 or $0.011 per share to certain members of management. These shares were recorded at the stock price of the date of agreement or grant.

 

 

 

 

 20 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking information includes statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other matters. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “continue” and similar expressions or the negative of these similar terms. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information.

 

These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In evaluating these forward-looking statements, you should consider various factors, including the following: (a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate profitable operations, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, (d) whether we are able to successfully fulfill our primary requirements for cash, which are explained below under “Liquidity and Capital Resources”. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws. Unless stated otherwise, terms such as the “Company,” “Wearable Health,” “we,” “us,” “our,” and similar terms shall refer to Wearable Health Solutions, Inc., a Nevada corporation, and its subsidiaries.

 

Results of Operations

 

Results for the Three Months Ended December 31, 2022, compared to the Three Months Ended December 31, 2021 

 

Working Capital 

December 31, 2022

$

  

June 30, 2022

$

 
Cash  45,474   70,505 
Current Assets   124,750    297,409 
Current Liabilities   2,555,044    2,431,287 
Working Capital (Deficit)   (2,430,294)   (2,133,878)

 

 

Cash Flows for the Six Months Ended: 

December 31,

2022

$

  

December 31,

2021

$

 
Cash Flows used in Operating Activities  (1,055,780)   (1,806,812) 
Cash Flows used in Investing Activities   (9,442)   (50,000)
Cash Flows provided by Financing Activities   1,040,191    2,609,335 
Net (Decrease) Increase in Cash During Period   (25,031)   752,523 

  

Operating Revenues

 

The Company had revenues of $198,039 and $304,524 for the three months ended December 31, 2022 and 2021, respectively.

 

 

 21 

 

 

Cost of Revenues

 

The Company’s cost of revenues for the three months ended December 31, 2022 and 2021 was $99,418 and $143,138, respectively. Cost of revenues decreased for the three months ended December 31, 2022 primarily due to less hardware purchases in 2022.

 

Gross Profit

 

The Company’s gross profit for the three months ended December 31, 2022 was $98,621, compared to $161,386 for the three months ended December 31, 2021. The decrease in the Company’s gross profit was due primarily to the decrease in hardware revenues in 2022 as compared to 2021.

 

General and Administrative Expenses

 

General and administrative expenses consisted primarily of consulting fees, professional fees, and legal and accounting expenses. For the three months ended December 31, 2022, general and administrative expenses were $618,048 compared to $768,162 for the three months ended December 31, 2021. The primary expenses for the three months ended December 31, 2022 were salaries and wages and consulting and professional fees totaling $419,934; the primary expenses for the three months ended December 31, 2021 were salaries and wages and consulting and professional fees totaling $460,933.

 

Other (Income) Expense, net

 

The Company had other (income) expense, net for the three months ended December 31, 2022 and 2021 of $20,364 and $(237,821), respectively. Other (income) expense, net for the three months ended December 31, 2022 was all interest expense. Other (income) expense, net for the three months ended December 31, 2021 consisted mainly of change in fair value of derivative instrument of $(25,102), gain on debt extinguishment of $(80,313), gain on settlement of accounts payable of $(156,618), and interest expense of $24,212.

 

Net loss

 

The net loss for the three months ended December 31, 2022, was $539,791 compared to $368,985 for the three months ended December 31, 2021.

 

Results for the Six Months Ended December 31, 2022, compared to the Six Months Ended December 31, 2021

 

Revenues

 

The Company had revenues of $414,499 and $606,619 for the six months ended December 31, 2022 and 2021, respectively.

 

Cost of Revenues

 

The Company’s cost of revenues for the six months ended December 31, 2022 and 2021 was $219,420 and $345,873, respectively.

 

Gross Profit

 

The Company’s gross profit for the six months ended December 31, 2022 and 2021 was $195,079, and $260,746, respectively. The decrease in the Company’s gross profit in 2022 as compared to 2021 was due primarily to the decrease in hardware sales.

 

 

 

 22 

 

 

General and Administrative Expenses

 

General and administrative expenses consisted primarily of consulting fees, professional fees, and legal and accounting expenses. For the six months ended December 31, 2022, general and administrative expenses were $1,474,531 compared to $4,967,662 for the six months ended December 31, 2021. The primary expenses for 2022 were salaries and wages of $857,285; the primary expenses for 2021 were salaries and wages and consulting and professional services of $3,806,466 and 381,374, respectively.

 

Other (Income) Expense, net

 

The Company had other (income) expense, net for the six months ended December 31, 2022 and 2021 of $9,106 and $16,804, respectively. Other (income) expense, net for the six months ended December 31, 2022 consisted of interest expense of $30,106 which was offset in part by $19,500 in settlement proceeds and interest income of $1,500. The Company had other income (expense), net for the six months ended December 31, 2021 of $16,804. Other (income) expense, net for the six months ended December 31, 2021 consisted of change in fair value of derivative instrument of $213,053, gain on debt extinguishment of $(96,145), gain on settlement of accounts payable of $(156,616), and interest expense of $56,512.

 

Net loss

 

The net loss for the six months ended December 31, 2022, was $1,288,558 compared to $4,723,720 for the comparable period ended December 31, 2021.

 

Liquidity and Capital Resources

 

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by related parties through capital investment and borrowing of funds and through the sale of equity.

 

At December 31, 2022, the Company had total current assets of $124,750. Current assets consisted primarily of cash and inventory. At December 31, 2022, the Company had total current liabilities of $2,555,044 compared to $2,431,287, at June 30, 2022. Current liabilities consisted primarily of accounts payable, accrued liabilities and accrued compensation, notes payable and convertible notes.

 

We had negative working capital of $2,430,294 as of December 31, 2022.

 

Cash flow from Operating Activities

 

During the six months ended December 31, 2022, cash used in operating activities was $(1,055,780) compared to $(1,806,812) for the same period ended December 31, 2021. The decrease in the amount of cash used in operating activities was primarily due to the decrease in the net loss resulting from the lower salaries and wages incurred in the six months ended December 31, 2022 as compared to the six months ended December 31, 2021.

 

Cash flow from Financing Activities

 

For the six months ended December 31, 2022, cash provided by financing activities was $1,040,191 compared to $2,609,335 provided during the six months ended December 31, 2021.

 

Quarterly Developments

 

None.

 

Subsequent Developments

 

The Company evaluated events that have occurred after the balance sheet date but before the financial statements are issued and determined that there are no material events that are required to be disclosed.

 

On January 27, 2023, the Company terminated the employment of Jennifer Loria, the Chief Operating Officer of the Company’s operating subsidiary, Medical Alarm Concepts, LLC.

 

On February 3, 2023, the plaintiffs in the case of Sandor Capital, LP and John Lemak v. Wearable Health Solutions, Inc., informed the Company that they would be discontinuing their legal action against the Company.

 

On February 7, 2023, the Company issued 2,662,500 shares valued at $28,846 or $0.011 per share to certain members of management. These shares were recorded at the stock price of the date of agreement or grant.

 

 

 23 

 

 

Going Concern

 

The accompanying unaudited interim consolidated condensed financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company on a going-concern basis. The going concern basis assumes that assets are realized, and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses from operations and has an accumulated deficit of $40,711,940 as of December 31, 2022. The Company’s ability to continue as a going concern depends upon its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes raising the necessary funds to finance the Company’s development and marketing efforts.

 

Critical Accounting Estimates and Policies

 

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 the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 1 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.

 

We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired, or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.

 

We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled. Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.

 

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from shareholders’ equity to liabilities as it relates to the Company’s convertible senior notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis. The Company early adopted the ASU on July 1, 2022, the beginning of its fiscal year.

 

 

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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.

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

Off Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable to smaller reporting companies.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were not effective for the quarterly period ended December 31, 2022.

 

The following aspects of the Company were noted as potential material weaknesses:

 

1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the period ended December 31, 2022; Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

2. We do not as yet have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

3. We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial personnel and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness.

 

4. Certain control procedures were unable to be verified due to performance not being sufficiently documented. As an example, some procedures requiring review of certain reports could not be verified due to there being no written documentation of such review. Management evaluated the impact of its failure to maintain proper documentation of the review process on its assessment of its reporting controls and procedures and has concluded deficiencies represented a material weakness.

 

 

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In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.

 

Changes in Internal Controls

 

Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no changes occurred in the Company’s internal controls over financial reporting during the quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

 

 

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PART II – OTHER INFORMATION

 

Item. 1. Legal Proceedings.

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

Item 1A. Risk Factors.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the six months ended December 31, 2022, the Company received proceeds totaling $629,500 in connection with the issuance of 68,262,500 shares of common stock. Of the total proceeds received, $325,000 in proceeds was received from the issuance of 37,812,500 common shares that were issued under the terms of subscription agreements at the contract price of $0.008. The remaining proceeds of $304,500 was received from the issuance of 30,450,000 common shares that were issued under the terms of subscription agreements at the contract price of $0.01.

 

The above securities were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act. These securities qualified for exemption under Section 4(a)(2) since the issuance by us did not involve a public offering. The offerings were not “public offerings” as defined in 4(a)(2) due to the insubstantial number of persons involved in the transactions, manner of the issuance and number of securities issued. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(a)(2) since they agreed to and received securities bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act for these transactions.

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

 

 

 

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Item 6. Exhibits

 

Exhibit
Number
 

Exhibit

Description

31.1   Certification of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
31.2   Certification of the Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
32.1   Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
EX-101.INS   Inline XBRL Instance Document the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.
EX-101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
EX-101.SCH   Inline XBRL Taxonomy Extension Schema Document
EX-101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
EX-101.LAB   Inline XBRL Taxonomy Extension Labels Linkbase Document
EX-101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   The cover page from this Report, formatted in Inline XBRL (included in Exhibit 101)

 

 

 

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SIGNATURES

 

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

WEARABLE HEALTH SOLUTIONS, INC.

 

Wearable Health Solutions, Inc.  
     
/s/ Harrysen Mittler   February 21, 2023
Harrysen Mittler, CEO, Principal Executive Officer, Director   Date
     
/s/ Vincent S. Miceli   February 21, 2023
Vincent S. Miceli, CFO, Principal Financial Officer and Principal Accounting Officer   Date
     
/s/ Peter Pizzino   February 21, 2023
Peter Pizzino, Director   Date
     

 

 

  

 

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