Wellness Center USA, Inc. - Annual Report: 2017 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended September 30, 2017

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

For the transition period from ___________ to ___________

WELLNESS CENTER USA, INC.

(Name of small business issuer in its charter)

NEVADA

333-173216

27-2980395

(State or other jurisdiction of

incorporation or organization)

Commission File Number

(IRS Employee Identification No.)

2500 West Higgins Road, Ste. 780, Hoffman Estates, IL, 60169

(Address of Principal Executive Offices)

(847) 925-1885

(Issuer Telephone number)

Not Applicable

(Former name or former address, if changed since last report)

Copies of communication to:

Ronald P. Duplack, Esq.

Rieck and Crotty, P.C.

55 West Monroe Street, Suite 3625, Chicago, IL 60603

Telephone (312) 726-4646 Fax (312) 726-0647

Securities registered under Section 12(b) of the Exchange Act:

Title of each class registered:	Name of each exchange on which registered:
None	None

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001 (Title of class)

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 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 [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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

Large accelerated filer	[ ]	Accelerated filer	[ ]

Non-accelerated filer	[ ] (Do not check if a smaller reporting company)	Smaller reporting company	[X]

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

There is no established public trading market for our common stock.

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant's most recently completed fiscal quarter ended March 31, 2017: $30,342,729.

As of September 30, 2017, the registrant had 90,284,916 shares of its common stock issued and outstanding.

Documents Incorporated by Reference: See Item 15.

TABLE OF CONTENTS

		PAGE
	PART I
ITEM 1.	Business	4
ITEM 1A.	Risk Factors	6
ITEM 2.	Properties	15
ITEM 3.	Legal Proceedings	15
ITEM 4.	Mine Safety Disclosures	15

	PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	16
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	17
ITEM7A.	Quantitative and Qualitative Disclosures About Market Risk	25
ITEM 8.	Financial Statements and Supplementary Data	25
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	25
ITEM 9A.	Controls and Procedures	25

	PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	28
ITEM 11.	Executive Compensation	29
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	30
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	30
ITEM 14	Principal Accounting Fees and Services	31

	PART IV
ITEM 15.	Exhibits, Financial Statement Schedules	33

SIGNATURES		36

PART I

ITEM 1.BUSINESS

Background.

Wellness Center USA, Inc. ("WCUI" or the “Company”) was incorporated in June 2010 under the laws of the State of Nevada. The Company initially engaged in online sports and nutrition supplements marketing and distribution. Later, the Company expanded into additional businesses within the healthcare and medical sectors through acquisitions, including PsoriaShield Inc. (“PSI”), National Pain Centers, Inc. (“NPC”), and StealthCo Inc. (“SCI”), d/b/a Stealth Mark, Inc. During the period covered by this Report, the Company operated in the following business segments: (i) distribution of targeted Ultra Violet ("UV") phototherapy devices for dermatology; (ii) management of top-tier medical practices in the interventional and multimodal pain management sector; and (iii) authentication and encryption products and services. The segments were operated, respectively, through PSI, NPC and SCI.

On August 11, 2017, the Company entered into an agreement to sell 100% of the issued and outstanding shares of NPC, which has been accounted for as a discontinued operation on the consolidated financial statements for the years ended September 30, 2017 and 2016.

PSI

PSI was incorporated under the laws of the state of Florida on June 17, 2009. On August 24, 2012, we acquired all of the issued and outstanding shares of stock in PSI. PSI is a wholly-owned subsidiary of the Company and operated by Psoria Development Company LLC, an Illinois limited liability company (“PDC”), a joint venture between WCUI/PSI and The Medical Alliance, Inc., a Florida corporation (“TMA”).

PSI designs, develops and markets a targeted ultraviolet (“UV”) phototherapy device called the Psoria-Light. The Psoria-Light is designated for use in targeted PUVA photochemistry and UVB phototherapy and is designed to treat certain skin conditions including psoriasis, vitiligo, atopic dermatitis (eczema), seborrheic dermatitis, and leukoderma.

Psoriasis, eczema, and vitiligo, are common skin conditions that can be challenging to treat, and often cause the client significant psychosocial stress. Clients may undergo a variety of treatments to address these skin conditions, including routine consumption of systemic and biologic drug therapies which are highly toxic, reduce systemic immune system function, and come with a host of chemotherapy like side effects. Ultraviolet (UV) phototherapy is a clinically validated alternate treatment modality for these disorders.

Traditionally, “non-targeted” UV phototherapy was administered by lamps that emitted either UVA or UVB light to both diseased and healthy skin. While sunblocks or other UV barriers may be used to protect healthy skin, the UV administered in this manner must be low dosage to avoid excessive exposure of healthy tissue. Today, “targeted” UV phototherapy devices administer much higher dosages of light only to affected tissue, resulting in “clearance” in the case of psoriasis and eczema, and “repigmentation” in the case of vitiligo, at much faster rates than non-targeted (low dosage) UV treatments.

Targeted UV treatments are typically administered to smaller total body surface areas, and are therefore used to treat the most intense parts of a client’s disease. Non-targeted UV treatment is typically used as a follow-up and for maintenance, capable of treating large surfaces of the body. Excimer laser devices (UVB at 308nm) are expensive and consume dangerous chemicals (Xenon and Chlorine). Mercury lamp devices (UVB and/or UVA) require expensive lamp replacements regularly and require special disposal (due to mercury content). Additionally, mercury lamp devices typically deliver wavelengths of light below 300nm. While within the UVB spectrum, it has been shown that wavelengths below 300nm produce significantly more “sunburn” type side effects than do wavelengths between 300 and 320nm without improvement in therapeutic benefit.

The Psoria-Light is a targeted UV phototherapy device that produces UVB light between 300 and 320 nm as well as UVA light between 350 and 395nm. It does not require consumption of dangerous chemicals or require special environmental disposal, and is cost effective for clinicians, which should result in increased patient access to this type of treatment. It has several unique and advanced features that we believe will distinguish it from the non-targeted and targeted UV phototherapy devices that are currently being used by dermatologists and other healthcare providers. These features include the following: the utilization of deep narrow-band UVB (“NB-UVB”) LEDs as light sources; the ability to produce both UVA or NB-UVB therapeutic wavelengths; an integrated high resolution digital camera and client record integration capabilities; the ability to export to an external USB memory device a PDF file of treatment information including a patent pending graph that includes digital images plotted against user tracked metrics which can be submitted to improve medical reimbursements; an accessory port and ability to update software; ease of placement and portability; advanced treatment site detection safety sensor; international language support; a warranty which includes the UV lamp(s); and a non-changeable treatment log (that does not include HIPPA information).

The Psoria-Light consists of three components: a base console, a color display with touchscreen control, and a hand-held delivery device with a conduit (or tether) between the handheld device and the base console. PSI requires clearance by the United States Food and Drug Administration (“FDA”) to market and sell the device in the United States as well as permission from TUV SUD America Inc., PSI’s Notified Body, to affix the CE mark to the Psoria-Light in order to market and sell the device in countries of the European Union.

To obtain FDA clearance and permission to affix the CE mark, PSI was required to conduct EMC and electrical safety testing, which it completed in the second quarter of 2011. PSI received FDA clearance on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark on November 10, 2011. In its 510(k) application with the FDA (application number K103540), PSI asserted that the Psoria-Light was “substantially equivalent” in intended use and technology to two predicate devices, the X -Trac Excimer Laser, which has wide acceptance in the medical billing literature and has a large installed base in the U.S., and the Dualight, another competing targeted UV phototherapy device.

PSI has established an ISO 13485 compliant quality system for the Psoria-Light, which was first audited in the third quarter of 2011. This system is intended to ensure PSI devices will be manufactured in a controlled and reliable environment and that its resources follow similar practices and is required for sales in countries requiring a CE mark. PSI has also received Certified Space Technology designation from the Space Foundation, based on PSI’s incorporation of established NASA-funded LED technology.

PSI began Psoria-Light Beta deployment in January 2012. It is currently operating at a loss, and there is no assurance that its business development plans and strategies will ever be successful. PSI’s success depends upon the acceptance by healthcare providers and clients of Psoria-Light treatment as a preferred method of treatment for psoriasis and other UV-treatable skin conditions. Psoria-Light treatment appears to have been beneficial to clients, without demonstrable harmful side effects or safety issues, as evidenced by more than 10,000 treatments completed on more than 1,000 clients, domestically and Mexico, since 2012. In order for the Company to continue PSI operations it will need additional capital and it will have to successfully coordinate integration of PSI operations without materially and adversely affecting continuation and development of other Company operations.

NPC

NPC was incorporated under the laws of the state of Nevada on January 24, 2014. It is an Illinois-based management services provider. It was acquired by the Company on February 28, 2014 and is operated as a wholly-owned subsidiary of the Company.

SCI

SCI was incorporated under the laws of the state of Illinois on March 18, 2014. SCI acquired certain Stealth Mark assets on April 4, 2014 and operates as a wholly-owned subsidiary of the Company. It is a Tennessee-based provider of: a) Stealth Mark encryption and authentication solutions offering advanced technologies within the security and supply chain management vertical sectors (Microparticles), and b) advanced data intelligence services offering proprietary, unprecedented, and actionable technology for industries, companies, and agencies on a global scale (ActiveDuty^TM).

Intelligent Microparticles

SCI provides clients premiere authentication technology for the protection of a variety of products and brands from illicit counterfeiting and diversion activities. Its technology is applicable to a wide range of industries affected by counterfeiting, diversion and theft including, but not limited to, pharmaceuticals, defense/aerospace, automotive, electronics, technology, consumer and personal care goods, designer products, beverage/spirits, and many others.

SCI delivers the client a complete, simple to use, easy to implement, and cost effective turnkey system that is extremely difficult to compromise. SCI’s technology includes a combination of proprietary software and intelligent microparticle marks that are unduplicatable and undetectable to the human eye. These taggants are created with proprietary materials that create unique numerical codes that are assigned meaning by the client and are machine readable without the use of rare earth or chemical tracers. They have been used in covert and overt operations with easy to implement technology and do-it-yourself in-the-field forensic caliber verification.

ActiveDuty^TM

SCI’s ActiveDuty^TM data intelligence services offer unique, unprecedented, actionable technology for industries, companies, and agencies on a global scale. Comprised of a suite of powerful analytical tools, including artificial intelligence and social-psychology, the service provides timely and actionable intelligence to clients. ActiveDuty^TM is adaptable to a broad spectrum of illicit activities within both private and public sectors such as, but not limited to, counterfeiting, sex and human trafficking, money laundering, and a variety of other markets.

The proprietary algorithmic architecture of ActiveDuty^TM creates the first systemic reporting mechanism to deliver strategic and tactical results supported by an intense worldwide analysis of patterns of human behavior. The ActiveDuty^TM global framework is heuristic in nature, capable of comprehending big data across the digital spectrum and speaks all the major languages. Up until now, there has not existed a unified system that could actively measure this lifecycle that is a collection of discreet and seemingly random behaviors of criminals anywhere within the digital domain. Criminals change their identities but not their basic behaviors.

SCI is managed by its CEO, Ricky Howard. Mr. Howard has over thirty years of experience in operations management and executive positions in a variety of industries ranging from entrepreneurial startups to Fortune 500 companies. He joined Stealth Mark as V.P. of Operations at the early stage of development in 2006 and played an integral role in bringing the company’s capabilities to its present status including design and creation of its manufacturing capabilities, implementation of its ERP inventory controls system, software and hardware development, marketing and sales materials processes and day-to-day operational procedures and processes.

ITEM 1A.RISK FACTORS

An investment in our securities involves an exceptionally high degree of risk and is extremely speculative in nature. The risks described below are the ones we believe are most important for you to consider. These risks are not the only ones that we face. If events anticipated by any of the following risks actually occur, our business, operating results or financial condition could suffer and the price of our common stock could decline.

WE HAVE RECEIVED A GOING CONCERN OPINION FROM OUR AUDITORS AND WE ARE CURRENTLY OPERATING AT A LOSS, WHICH RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

We have received a “Going Concern” opinion from our auditors. As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit at September 30, 2017, a net loss and net cash used in operating activities for the fiscal year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is attempting to generate sufficient revenue; however, the Company’s cash position may not be sufficient enough to support the Company’s daily operations. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.

IT IS MOST LIKELY THAT WE WILL NEED TO SEEK ADDITIONAL FINANCING THROUGH SUBSEQUENT FUTURE PRIVATE OFFERING OF OUR SECURITIES.

Because the Company does not currently have any financing arrangements, and may not be able to secure favorable terms for future financing, the Company may need to raise capital through the sale of its common stock. The sale of additional equity securities will result in dilution to our shareholders.

UNFAVORABLE PUBLICITY OR CLIENT REJECTION OF OUR PRODUCTS OR SERVICES GENERALLY COULD REDUCE OUR SALES.

We will be highly dependent upon client acceptance of the safety, efficacy and quality of our products and services, as well as similar products or services offered by other companies. Client acceptance of products or services can be significantly influenced by scientific research or findings, national media attention and other publicity about product use or services. A product or service may be received favorably, resulting in high sales associated with that product or service that may not be sustainable as client preferences change. Future scientific research or publicity could be unfavorable to our industry or any of our particular products and services and may not be consistent with earlier favorable research or publicity. A future research report or publicity that is perceived by our consumers as less than favorable or that question earlier favorable research or publicity could have a material adverse effect on our ability to generate revenue. Adverse publicity in the form of published scientific research, statements by regulatory authorities or otherwise, whether or not accurate, that associates consumption or use of our products or services, or any other similar products and services, with illness or other adverse effects, or that questions the benefits of our or similar products or services, or claims that they are ineffective, could have a material adverse effect on our business, reputation, financial condition or results of operations.

COMPLYING WITH NEW AND EXISTING GOVERNMENT REGULATION, BOTH IN THE U.S. AND ABROAD, COULD SIGNIFICANTLY INCREASE OUR COSTS AND LIMIT OUR ABILITY TO MARKET OUR PRODUCTS AND SERVICES.

The production, packaging, labeling, advertising, distribution, licensing and/or sale of our products and services may be subject to regulation by several U.S. federal agencies, including the FDA, the Federal Trade Commission, the Consumer Product Safety Commission, and the Environmental Protection Agency, as well as various state, local and international laws and agencies of the localities in which our products and services are offered or are sold. Government regulations may prevent or delay the introduction or require design modifications of our products. Regulatory authorities may not accept the evidence of safety we present for existing or new products or services that we wish to market, or they may determine that a particular product or service presents an unacceptable health risk. If that occurs, we could be required to cease distribution of and/or recall products or terminate marketing of services that present such risks. Authorities may also determine that certain advertising and promotional claims, statements or activities are not in compliance with applicable laws and regulations and may determine that a particular statement is unacceptable as a “health claim.” Failure to comply with any regulatory requirements could prevent us from marketing particular existing or new products or services, or subject us to administrative, civil or criminal penalties.

WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY, AND OUR FAILURE TO COMPETE EFFECTIVELY COULD ADVERSELY AFFECT OUR MARKET SHARE, FINANCIAL CONDITION AND GROWTH PROSPECTS.

The U.S. healthcare solutions industry is a large and highly fragmented industry. The principle elements of competition in the industry are price, selection and distribution channel offerings. We believe the market is highly sensitive to the introduction of new products and services, which may rapidly capture a significant share of the market. We will compete for sales with heavily advertised national brands offered by large and well-funded companies. In addition, as certain products or services gain market acceptance, we may experience increased competition for those products or services as more participants enter the market. To the extent that we manufacture or engage third party manufacturers to produce any product, our manufacturing capabilities may not be adequate or sufficient to compete with large scale, direct or third-party manufacturers. Certain of our potential competitors are much larger than us and have longer operating histories, larger customer bases, greater brand recognition and greater resources for marketing, advertising and promotion of their products and services. They may be able to secure inventory from vendors on more favorable terms, operate with a lower cost structure or adopt more aggressive pricing policies. In addition, our potential competitors may be more effective and efficient in introducing new products or services. We may not be able to compete effectively, and our attempt to do so may require us to increase marketing and/or reduce our prices, which may result in lower margins. Failure to effectively compete could adversely affect our market share, financial condition and growth prospects.

OUR DECISIONS TO ACQUIRE PSI AND SCI WERE BASED UPON ASSUMPTIONS WHICH MAY PROVE TO BE ERRONEOUS.

Our decisions to acquire PSI and SCI were based upon assumptions regarding their respective existing and prospective operations, products and services, the potential market for their respective products and services, and our ability to integrate their respective operations in a manner that would enable us to launch the marketing and sale of their respective products and services. Our decisions were based upon information available to management, and assumptions made by management, at the time of each respective acquisition, regarding the potential viability of such products and services and our ability to integrate operations.

Our assumptions may prove to be erroneous. Each company is a small development stage company with a limited operating history. Each is currently operating at a loss, and there is no assurance that its business development plans and strategies will ever be successful, or that their respective products and services will be favorably perceived and accepted by our assumed potential customer populations.

PSI PROVIDES AN ALTERNATIVE APPROACH TO SKIN TREATMENT THAT IS NOVEL.

Psoriasis, eczema, and vitiligo, are common skin conditions that can be challenging to treat, and often cause clients significant psychosocial stress. Clients may elect a variety of treatments to address these skin conditions, including routine consumption of systemic and biologic drug therapies which are highly toxic, reduce systemic immune system function, and come with a host of chemotherapylike side effects. Ultraviolet (UV) phototherapy has been clinically validated as an alternate treatment modality for these disorders.

“Non-targeted” UV phototherapy may be administered by lamps that emit either UVA or UVB light to both diseased and healthy skin, with sun blocks and other UV barriers used to protect healthy skin. Non-targeted UV must be low dosage to avoid excessive exposure of healthy tissue. “Targeted” UV phototherapy may be administered at much higher dosages of light only to affected tissue, resulting in “clearance” in the case of psoriasis and eczema, and “repigmentation” in the case of vitiligo, at much faster rates than non-targeted, low dosage UV treatments.

Psoria-Light treatment provides a targeted UV phototherapy that produces UVB light between 300 and 320 nm and UVA light between 350 and 395nm. It does not require consumption of dangerous chemicals or special environmental disposal, and is cost effective for clinicians. We believe these factors will increase client access to this type of treatment. We also believe that Psoria-Light treatment offers several unique and advanced features that will distinguish it from the non-targeted and targeted UV phototherapy devices that are currently being used by dermatologists and other healthcare providers. These features include the following: the utilization of deep narrow-band UVB (“NB-UVB”) LEDs as light sources; the ability to produce both UVA or NB-UVB therapeutic wavelengths; an integrated high resolution digital camera and patient record integration capabilities; the ability to export to an external USB memory device a PDF file of patient treatment information including a patent pending graph that includes digital images plotted against user tracked metrics which can be submitted to improve medical reimbursements; an accessory port and ability to update software; ease of placement and portability; advanced treatment site detection safety sensor; international language support; a warranty which includes the UV lamp(s); and a non-changeable treatment log (that does not include HIPPA information).

PSI’s success depends upon the acceptance by healthcare providers and clients of Psoria-Light treatment as a preferred method of treatment for psoriasis and other UV-treatable skin conditions. While Psoria-Light treatment appears to have been beneficial to clients, without demonstrable harmful side effects or safety issues, there can be no assurance that we will be able to achieve and maintain such market acceptance by healthcare providers or clients.

WE RELY UPON PSI AND SCI PERSONNEL TO OPERATE THEIR RESPECTIVE BUSINESSES AND THE LOSS OF KEY PERSONNEL COULD HAVE A MATERIALLY ADVERSE AFFECT ON OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

We rely upon the current executive management of PSI and SCI to operate their respective business operations. Although we have executed employment agreements with certain key management personnel, we cannot guarantee that any such personnel will remain affiliated with us.

If any of our key personnel were to cease their affiliation with us, our operating results could suffer. Further, we do not maintain key person life insurance on any executive officer. If we lose or are unable to obtain the services of key personnel, our business, financial condition or results of operations could be materially and adversely affected.

PSI AND SCI HAVE LIMITED EXPERIENCE IN MARKETING THEIR RESPECTIVE PRODUCTS AND SERVICES.

PSI and SCI each has undertaken initial, limited marketing efforts for their respective products and services. Their sales and marketing personnel will compete against the experienced and well-funded sales organizations of competitors. Their revenues and ability to achieve profitability will depend largely on the effectiveness of their respective sales and marketing personnel. Each will face significant challenges and risks related to marketing its services, including, but not limited to, the following:

the ability to obtain access to or persuade adequate numbers of healthcare providers or clients to purchase and use their respective products and services;

the ability to recruit, properly motivate, retain, and train adequate numbers of qualified sales and marketing personnel;

the costs associated with hiring, training, maintaining, and expanding an effective sales and marketing team; and

assuring compliance with applicable government regulatory requirements.

In addition, PSI plans to establish a network of distributors in selected foreign markets to market, sell and distribute the Psoria-Light device. If PSI fails to select or use appropriate foreign distributors, or if the sales and marketing strategies of such distributors prove ineffective in generating sales of the device, our revenues would be adversely affected and we might never become profitable.

COMMERCIALIZATION OF PRODUCTS AND SERVICES WILL REQUIRE US TO BUILD AND MAINTAIN SOPHISTICATED SALES AND MARKETING TEAMS.

None of our subsidiaries has any prior experience with commercializing their respective products and services. To successfully commercialize their products and services we will need to establish and maintain sophisticated sales and marketing teams. Experienced sales representatives may be difficult to locate and retain, and all new sales representatives will need to undergo extensive training. There is no assurance that we will be able to recruit and retain sufficiently skilled sales representatives, or that any new sales representatives will ultimately become productive. If we are unable to recruit and retain qualified and productive sales personnel, our ability to commercialize our products and services, and to generate revenues, will be impaired, and our business will be harmed.

WE FACE SIGNIFICANT COMPETITION FROM COMPANIES WITH GREATER RESOURCES AND WELL-ESTABLISHED SALES CHANNELS, WHICH MAY MAKE IT DIFFICULT FOR US TO ACHIEVE MARKET PENETRATION.

The markets for our subsidiaries’ respective products and services are highly competitive and are significantly affected by new treatment and product introductions. Direct competitors may enjoy competitive advantages, including:

established service and product lines with proven results;

brand awareness;

name recognition;

established product acceptance by healthcare providers and clients;

established relationships with healthcare providers and clients;

integrated distribution networks; and

greater financial resources for product development, sales and marketing, and patent litigation.

Many competitors may have significantly greater funds to spend on the research, development, promotion and sale of new and existing services and products. These resources can enable them to respond more quickly to new or emerging technologies and changes in the market.

WE MAY BECOME INVOLVED IN FUTURE LITIGATION OR CLAIMS THAT MAY NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.

Healthcare providers and clients that use our subsidiaries’ products or services may bring product liability or other claims against us. To limit such exposure, each subsidiary plans to develop a comprehensive training and education program for persons using their respective products and services. There can be no assurance that such training and education programs will help avoid complications resulting from any provision of products or services. In addition, although they may provide such training and education, they may not be able to ensure proper provision of products or services in each instance and may be unsuccessful at avoiding significant liability exposure as a result. While we may currently maintain and plan to continue to maintain liability insurance in amounts we consider sufficient, such insurance may prove insufficient to provide coverage against any or all asserted claims. In addition, experience ratings and general market conditions may change at any time so as to render us unable to obtain or maintain insurance on acceptable terms, or at all. In addition, regardless of merit or eventual outcome, product liability and other claims may result in:

the diversion of management’s time and attention from our business and operations;

the expenditure of large amounts of cash on legal fees, expenses and payment of settlements or damages;

decreased demand for our products and services; and

negative publicity and injury to our reputation.

Each and every one of the foregoing consequences of claims and litigation could have a material adverse effect on us, our subsidiaries, and our business operations and financial condition.

HEALTHCARE PROVIDERS MAY BE UNABLE TO OBTAIN COVERAGE OR REIMBURSEMENT FROM THIRD-PARTY PAYORS FOR PSORIA-LIGHT TREATMENTS, WHICH COULD LIMIT OUR ABILITY TO MARKET PSI PRODUCTS AND SERVICES.

We expect that healthcare providers will bill various third-party payers, such as Medicare, Medicaid, other governmental programs, and private insurers, for Psoria-Light treatments. We believe that the cost of Psoria-Light treatments is generally already reimbursable under governmental programs and most private plans. Accordingly, we believe that healthcare providers will generally not require new billing authorizations or codes in order to be compensated for performing medically necessary procedures using Psoria-Light treatments. There can be no assurance, however, that coverage, coding and reimbursement policies of third-party payers will not change in the future. PSI’s success in selected foreign markets will also depend upon the eligibility of the Psoria-Light device for coverage and reimbursement by government-sponsored healthcare payment systems and third-party payers. In both the United States and foreign markets, healthcare cost-containment efforts are prevalent and are expected to continue. Prospective clients’ failure to obtain sufficient reimbursement could limit our ability to market PSI products and services and decrease our ability to generate revenue.

WE PLAN TO RELY ON THIRD PARTY DISTRIBUTORS FOR PSI SALES, MARKETING AND DISTRIBUTION ACTIVITIES IN FOREIGN COUNTRIES.

Although we plan to market and sell our products and services directly through sales representatives in the domestic market, we plan to rely on third party distributors to sell, market, and distribute the Psoria-Light device in selected international markets. Because we intend to rely on third party distributors for sales, marketing and distribution activities in international markets, we will be subject to a number of risks associated with our dependence on these third party distributors, including:

lack of day-to-day control over the activities of third-party distributors;

third-party distributors may not fulfill their obligations to us or otherwise meet our expectations;

third-party distributors may terminate their arrangements with us on limited or no notice or may change the terms of these arrangements in a manner unfavorable to us for reasons outside of our control; and

disagreements with our distributors could require or result in costly and time-consuming litigation or arbitration.

If we fail to establish and maintain satisfactory relationships with third-party distributors, we may be unable to sell, market and distribute the Psoria-Light device in international markets, our revenues and market share may not grow as anticipated, and we could be subject to unexpected costs which would harm our results of operations and financial condition.

TO THE EXTENT WE ENGAGE IN MARKETING AND SALES ACTIVITIES OUTSIDE THE UNITED STATES, WE WILL BE EXPOSED TO RISKS ASSOCIATED WITH EXCHANGE RATE FLUCTUATIONS, TRADE RESTRICTIONS AND POLITICAL, ECONOMIC AND SOCIAL INSTABILITY.

If we follow through with our plans to sell the Psoria-Light device in foreign markets, we will be subject to various risks associated with conducting business abroad. A foreign government may require us to obtain export licenses or may impose trade barriers or tariffs that could limit our ability to build our international presence. Our operations in some markets also may be adversely affected by political, economic and social instability in foreign countries. We may also face difficulties in managing foreign operations, longer payment cycles, problems with collecting accounts receivable, and limits on our ability to enforce our intellectual property rights. In addition, for financial reporting purposes, our foreign sales will be translated from local currency into U.S. dollars based on exchange rates and, if we do not hedge our foreign currency transactions, we will be subject to the risk of changes in exchange rates. If we are unable to adequately address the risks of doing business abroad, our business may be harmed.

THE PSORIA-LIGHT AND ANY FUTURE MEDICAL DEVICE PRODUCTS ARE SUBJECT TO A LENGTHY AND UNCERTAIN DOMESTIC REGULATORY PROCESS.

PSI’s Psoria-Light device and future medical device products, if any, are subject to extensive regulation in the United States by the FDA. The FDA regulates the research, testing, manufacturing, safety, labeling, storage, record keeping, promotion, distribution and production of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses. In order for us to market the Psoria-Light for use in the United States, we were required to first obtain clearance from the FDA pursuant to Section 510(k) of the Federal Food, Drug, and Cosmetic Act (the “FFDCA”).

Clearance under Section 510(k) requires demonstration that a new device is substantially equivalent to another device with 510(k) clearance or grandfather status. If the FDA agrees that a device is substantially equivalent to a predicate device, it will grant clearance to commercially market the device. The FDA has a statutory 90-day period to respond to a 510(k) submission. As a practical matter, clearance often takes longer. The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence. If the FDA determines that a device, or its intended use, is not “substantially equivalent,” the FDA will place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill much more rigorous pre-marketing requirements.

If the FDA does not act favorably or quickly in its review of a 501(k) submission, the submitting party may encounter significant difficulties and costs in its efforts to obtain FDA clearance or approval, all of which could delay or preclude the sale of a device. The FDA may request additional data or require the submitting party to conduct further testing or compile more data, including clinical data and clinical studies, in support of a 510(k) submission. Instead of accepting a 510(k) submission, the FDA may require the submitting party to submit a pre-market approval application (“PMA”), which is typically a much more complex and burdensome application than a 510(k). To support a PMA, the FDA may require that the submitting party conduct one or more clinical studies to demonstrate that the device is safe and effective. In addition, the FDA may place significant limitations upon the intended use of a device as a condition to a 510(k) clearance or PMA approval. Product applications can also be denied or withdrawn due to failure to comply with regulatory requirements or the occurrence of unforeseen problems following clearance or approval. Any delays or failure to obtain FDA clearance or approvals of any future medical device products we develop, any limitations imposed by the FDA on product use, or the costs of obtaining FDA clearance or approvals could have a material adverse effect on our business, financial condition and results of operations.

PSI submitted its 510(k) for the Psoria-Light to the FDA and on December 3, 2010 was assigned application number K103540. The 510(k) application for Psoria-Light was a traditional application and asserted that the Psoria-Light is “substantially equivalent” in intended use and technology to two predicate devices, the X-Trac Excimer Laser and the Dualight, which are competing targeted UV phototherapy devices. PSI began regulatory testing of the Psoria-Light in December 2010 for EMC and electrical safety (required for FDA and CE mark sales), and completed that testing in the second quarter of 2011. PSI received FDA clearance of the Psoria-Light on February11, 2011 (no. K103540). If and as the Psoria-Light is significantly modified subsequent to its FDA clearance, the FDA may require submission of a separate 510(k) or PMA for the modified product before it may be marketed in the United States.

If we develop any future medical device products we will be required to seek and obtain FDA approval prior to any marketing or sales in the United States and in accordance with the 510(k) or PMA process.

THE PSORIA-LIGHT WILL BE SUBJECT TO VARIOUS INTERNATIONAL REGULATORY PROCESSES AND APPROVAL REQUIREMENTS. IF WE DO NOT OBTAIN AND MAINTAIN THE NECESSARY INTERNATIONAL REGULATORY APPROVALS, WE WILL NOT BE ABLE TO MARKET AND SELL OUR PRODUCTS IN FOREIGN COUNTRIES.

To be able to market and sell PSI’s Psoria-Light device in other countries, we must obtain regulatory approvals and comply with the regulations of those countries. These regulations, including the requirements for approvals and the time required for regulatory review, vary from country to country. Obtaining and maintaining foreign regulatory approvals are expensive, and we cannot be certain that we will receive regulatory approvals in any foreign country in which we plan to market our product. If we fail to obtain or maintain regulatory approval in any foreign country in which we plan to market our product, our ability to generate revenue will be harmed.

The European Union requires that manufacturers of medical products obtain the right to affix the CE mark to their products before selling them in member countries of the European Union. The CE mark is an international symbol of adherence to quality assurance standards and compliance with applicable European medical device directives. In order to obtain the right to affix the CE mark to products, a manufacturer must obtain certification that its processes meet certain European quality standards.

PSI began regulatory testing of the Psoria-Light in December 2010 for EMC and electrical safety (required for FDA and CE mark sales), and completed that testing in the second quarter of 2011. PSI was granted permission to affix the CE mark to the Psoria-Light in the fourth quarter of 2011. If and as we modify the Psoria-Light product or develop other new products in the future, we would expect to apply for permission to affix the CE mark to such products. In addition, we would be subject to annual regulatory audits in order to maintain any CE mark permissions we may obtain. We do not know whether PSI will be able to obtain permission to affix the CE mark to its initial, future or modified products or that it will continue to meet the quality and safety standards required to maintain any permission it may receive. If we are unable to obtain permission to affix the CE mark to any of our products, we will not be permitted to sell our products in member countries of the European Union, which will have a material adverse effect on our business, financial condition and results of operations. In addition, if after receiving permission to affix the CE mark to any products, we are unable to maintain such permission, we will no longer be able to sell such products in member countries of the European Union.

OUR ABILITY TO ACHIEVE COMMERCIAL SUCCESS WILL DEPEND IN PART ON OBTAINING AND MAINTAINING PATENT PROTECTION (IF ANY) AND TRADE SECRET PROTECTION RELATING TO OUR PRODUCTS, THE TECHNOLOGY ASSOCIATED WITH OUR PRODUCTS, AND ANY OTHER PRODUCTS AND TECHNOLOGY WE MAY DEVELOP, AS WELL AS SUCCESSFULLY DEFENDING OUR PATENT(S) (IF ANY) AND LICENSED PATENTS (IF ISSUED) AGAINST THIRD PARTY CHALLENGES. IF WE ARE UNABLE TO OBTAIN AND MAINTAIN PROTECTION FOR OUR INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY, THE VALUE OF OUR PRODUCTS WILL BE ADVERSELY AFFECTED, AND WE WILL NOT BE ABLE TO PROTECT SUCH TECHNOLOGY FROM UNAUTHORIZED USE BY THIRD PARTIES.

Our commercial success will depend largely on our ability to obtain and maintain patent protection and intellectual property protection covering certain aspects of the technology that we intend to utilize in the development and commercialization of PSI’s initial medical device product, the Psoria-Light, and existing and future SCI products, to obtain and maintain patent and intellectual property protection for any other products that we may develop and seek to market. In order to protect our competitive position for the Psoria-Light, SCI products, and any other products that we may develop and seek to market, we, or our executive officers, as the case may be, will have to:

prevent others from successfully challenging the validity or enforceability of our issued, pending, or licensed patents (if any);

prevent others from infringing upon, our issued, pending, or licensed patents (if any) and our other proprietary rights;

operate our business, including the production, sale and use of the Psoria-Light, SCI encryption products, and any other products, without infringing upon the proprietary rights of others;

successfully enforce our rights to issued, pending, or licensed patents (if any) against third parties when necessary and appropriate; and

obtain and protect commercially valuable patents or the rights to patents both domestically and abroad.

PSI was issued one patent on its Psoria-Light technology on July 9^th 2013, US 8,481,982, covering a unique patient safety feature. No other patents have been issued for PSI products or methods, or any of the other technology associated with such products, and we cannot guarantee that any other patents will be issued for such products or any of the technology associated with such products.

Stealth Mark devoted substantial effort and resources to develop and advance micro-particle security technologies in support of its business activities. Protection of the acquired Stealth Mark intellectual property is maintained through, among other things, six patents issued between November 18, 2003 and July 17, 2012 as US 6,647,649; 7,720,254; 7,831,042; 7,885,428; 8,033,450 and 8,223,964, and two pending European Applications.

Protection of intellectual property in the markets in which we compete is highly uncertain and involves complex legal and scientific questions. It may be difficult to obtain patents relating to our products or technology. Furthermore, any changes in, or unexpected interpretations of, the patent laws may adversely affect our ability to enforce our patent position.

WE EXPECT TO RELY ON TRADEMARKS, TRADE SECRET PROTECTIONS, KNOW-HOW AND CONTRACTUAL SAFEGUARDS TO PROTECT OUR NON-PATENTED INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY.

We expect to rely on trademarks, trade secret protections, know-how and contractual safeguards to protect our non-patented intellectual property and proprietary technology. Current employees, consultants and advisors have entered into, and future employees, consultants and advisors will be required to enter into, confidentiality agreements that prohibit the disclosure or use of confidential information. We also intend to enter into confidentiality agreements to protect our confidential information delivered to third parties for research and other purposes. There can be no assurance that we will be able to effectively enforce these agreements or that the subject confidential information will not be disclosed, that others will not independently develop substantially equivalent confidential information and techniques or otherwise gain access to our confidential information or that we can meaningfully protect our confidential information.

Costly and time-consuming litigation could be necessary to enforce and determine the scope and protect ability of confidential information, and failure to maintain the confidentiality of confidential information could adversely affect our business by causing us to lose any competitive advantage maintained through such confidential information.

The protection of proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies, both to protect proprietary rights and for competitive reasons, even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area.

Disputes may arise in the future with respect to the ownership of rights to any technology developed with consultants, advisors or collaborators. These and other possible disagreements could lead to delays in the collaborative research, development or commercialization of our products, or could require or result in costly and time-consuming litigation that may not be decided in our favor. Any such event could have a material adverse effect on our business, financial condition and results of operations by delaying or preventing our commercialization of innovations or by diverting our resources away from revenue-generating projects.

OUR ABILITY TO MARKET PRODUCTS IN FOREIGN COUNTRIES MAY BE IMPAIRED BY THE ACTIVITIES AND INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

We may elect to market and sell products in select international markets. Except for certain pending Stealth Mark European Applications, neither the Company nor any of our officers or directors has filed (nor does the Company or any of our officers or directors currently have an intention to file) for any international patent protection for any of our products or any of the technology associated with our products. However, to successfully enter into these international markets and achieve desired revenues internationally, we may need to enforce our patent and trademark rights (if any) against third parties that we believe may be infringing on our rights. The laws of some foreign countries do not protect intellectual property, including patents, to as great an extent as do the laws of the United States. Policing unauthorized use of our intellectual property is difficult, and there is a risk that despite the expenditure of significant financial resources and the diversion of management attention, any measures that we take to protect our intellectual property may prove inadequate in these countries. Our competitors in these countries may independently develop similar technology or duplicate our products, thus likely reducing our potential sales in these countries. Furthermore, our future patent rights (if any) may be limited in enforceability to the United States or certain other select countries, which may limit our intellectual property rights abroad.

NO MARKET CURRENTLY EXISTS FOR OUR SECURITIES AND WE CANNOT ASSURE YOU THAT SUCH A MARKET WILL EVER DEVELOP, OR IF DEVELOPED, WILL BE SUSTAINED.

Our common stock is not currently eligible for trading on any stock exchange and there can be no assurance that our common stock will be listed on any stock exchange in the future. We presently are listed on the NASD OTCQB Bulletin Board trading system pursuant to Rule 15c2-11 of the Securities Exchange Act of 1934, but there can be no assurance we will maintain such a listing. The bulletin board tends to be highly illiquid, in part because there is no national quotation system by which potential investors can track the market price of shares except through information received or generated by a limited number of broker-dealers that make a market in particular stocks. There is a greater chance of market volatility for securities that trade on the bulletin board as opposed to a national exchange or quotation system. This volatility may be caused by a variety of factors, including: the lack of readily available price quotations; the absence of consistent administrative supervision of "bid" and "ask" quotations; lower trading volume; and general market conditions. If no market for our shares materializes, you may not be able to sell your shares or may have to sell your shares at a significantly reduced price.

IF OUR SHARES OF COMMON STOCK ARE ACTIVELY TRADED ON A PUBLIC MARKET, THEY WILL IN ALL LIKELIHOOD BE PENNY STOCKS.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price per share of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.

WE WILL INCUR ONGOING COSTS AND EXPENSES FOR SEC REPORTING AND COMPLIANCE, AND WITHOUT REVENUE WE MAY NOT BE ABLE TO REMAIN IN COMPLIANCE, MAKING IT DIFFICULT FOR INVESTORS TO SELL THEIR SHARES, IF AT ALL.

We have a very limited number of market makers and are quoted on the OTC Electronic Bulletin Board. To be eligible for quotation, issuers must remain current in their filings with the SEC. In order for us to remain in compliance we will require future revenues to cover the cost of these filings, which could comprise a substantial portion of our available cash resources. If we are unable to generate sufficient revenues to remain in compliance it may be difficult for you to resell any shares you may purchase, if at all.

FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002 COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND STOCK PRICE.

Section 404 of the Sarbanes-Oxley Act of 2002 (“the Sarbanes-Oxley Act”) requires that we establish and maintain an adequate internal control structure and procedures for financial reporting and include a report of management on our internal control over financial reporting in our annual report on Form 10-K. That report must contain an assessment by management of the effectiveness of our internal control over financial reporting and must include disclosure of any material weaknesses in internal control over financial reporting that we have identified. During the period covered by this Report, the Company had three or fewer directors, with only one that was independent; accordingly, during such period, we could not establish board committees with independent members to oversee certain functions such as compensation or audit issues for internal control and reporting purposes. Until a majority of our board is comprised of independent members, if ever, there will be limited oversight of our management’s decisions and activities and little ability of shareholders to challenge or reverse those activities and decisions, even if they are not in the best interests of our shareholders.

THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products and services. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

WE DO NOT PAY DIVIDENDS ON OUR COMMON STOCK.

We have not paid any dividends on our common stock and do not anticipate paying dividends in the foreseeable future. We plan to retain earnings, if any, to finance the development and expansion of our business.

ITEM 2. PROPERTIES

Our principal executive offices are located at 2500 West Higgins Road, Ste. 780, Hoffman Estates, IL, 60169. Our telephone number is (847) 925-1885. We occupy approximately 11,625 square feet of office space pursuant to a lease executed as of May 26, 2016, for a period of ninety-two (92) months, with an initial base rent of $5,090.32 per month, and subject to annual escalation after month twelve (12), resulting in an ultimate monthly base rent of $13,574.17 during months eighty-five (85) through ninety-two (92).

PSI offices are located at 6408 West Linebaugh Avenue, Suite 103, Tampa, Florida 33625. PSI’s telephone number is (866) 725-0969. PSI occupies the office space pursuant to a lease executed as of July 7, 2014, for an initial period of six months and thereafter extended on a month-to-month basis, with monthly base rent of $2,140, subject to additional rent in the form of a pro-rata share of common area maintenance operating and maintenance expenses. Suite 103 comprises approximately 2,000 square feet and included office space, a sales area, space for inventory, manufacturing and receiving operations, as well as an engineering lab and video conferencing room.

SCI offices are located at 273 Midway Lane, Oak Ridge, Tennessee 37830. Its telephone number is 651-765-9560. SCI occupies approximately 6,400 square of office space pursuant to a lease executed as of September 19, 2016, for a period of sixty (60) months, with an initial monthly base rent of $3,930.83, and subject to escalation after month twenty-four (24), resulting in an ultimate monthly base rent of $4,049.94 during months forty-nine (49) through sixty (60).

ITEM 3. LEGAL PROCEEDINGS

The Company is periodically engaged in legal proceedings arising from and relating to its business operations. We currently are not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect on our financial condition or results of operations.

In June, 2015, the Company and its CEO received a formal order of investigation from the Chicago Regional Staff of the SEC. The Company and its CEO cooperated and delivered requested documents, testimony, and tolling agreements.

In May, 2017, the Staff issued a Wells Notice stating its preliminary determination to recommend an enforcement action against the Company and its CEO based on possible violations of Section 17(a) of the Securities Act, Sections 15 (a) and 10(b) of the Exchange Act, and Rule 10b-5 thereunder. The Staff would allege, among other things, that periodic reports issued during 2013 and 2014 were misleading because they failed to disclose or mischaracterized as “salary”, “prepayments” or “loans,” several payments totaling $450,000 made to our CEO during those years without prior Board approval; that two press releases issued in 2015 touted shipments of several Psoria-Light devices that were not closed sales; and that we used an unregistered broker-dealer to identify and solicit potential investors during 2013, 2015 and 2017.

Subsequent discussions resulted in our submission of an Offer of Settlement (“Offer”) through an administrative cease and desist action on November 17, 2017. Pursuant to the Offer, we neither admit nor deny any of the proposed allegations, but are enjoined from violating the above-referenced Sections and Rule. The Offer imposes no financial penalties or sanctions against the Company, and is subject to final SEC approval. The CEO did not join in the Offer and may contest any action that may be asserted against him.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

No Public Market for Our Common Stock

The market price of our common stock is subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market, and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general economic, business and political conditions, may adversely affect the market for our common stock, regardless of our actual or projected performance.

Common Stock

During the year ended September 30, 2016, the Company was authorized by its Articles of Incorporation to issue up to 75,000,000 shares of common stock, par value $0.001 per share. Holders of shares of common stock have full voting rights, one vote for each share held of record. Shareholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to shareholders upon liquidation. Shareholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable. During the year ended September 30, 2017, the Company amended its Articles of Incorporation to authorize it to issue up to 185,000,000 shares of common stock, par value $0.001 per share, through a filing of a Certificate of Amendment on January 12, 2017. As of September 30, 2017 there were 90,284,916 shares of common stock issued and outstanding.

Preferred Stock

The Company does not have any Preferred Stock authorized.

Dividends

We have not paid any cash dividends to our shareholders. The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.

Options

2010 Non-Qualified Stock Option Plan (“2010 Option Plan”)

On December 22, 2010, effective retroactively as of June 30, 2010, the Company’s board of directors approved the adoption of the “2010 Non-Qualified Stock Option Plan” (“2010 Option Plan”) by unanimous consent. The 2010 Option Plan was initiated to encourage and enable officers, directors, consultants, advisors and key employees of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. A total of 7,500,000 of the authorized shares of the Company’s common stock may be subject to, or issued pursuant to, the terms of the plan.

As of September 30, 2017 and 2016, 6,822,500 and 5,227,500 shares, respectively, were outstanding under the 2010 Option Plan.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Action Stock Transfer Corp., having an office situated at 2469 E. Fort Union Blvd, Suite 214, Salt Lake City, UT 84121 and its telephone number is (801) 274-1088.

ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS.

Forward Looking Statements

Except for historical information, the following Plan of Operation contains forward-looking statements based upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding, among other things, (a) our projected sales and profitability, (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans, (e) our anticipated needs for working capital, (f) our lack of operational experience and (g) the benefits related to ownership of our common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis or Plan of Operations” and “Description of Business,” as well as in this Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Report will in fact occur as projected.

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

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Background.

PSI

PSI designs, develops and markets a targeted ultraviolet (“UV”) phototherapy device called the PsoriaLight. The Psoria-Light is designated for use in targeted PUVA photochemistry and UVB phototherapy and is designed to treat certain skin conditions including psoriasis, vitiligo, atopic dermatitis (eczema), seborrheic dermatitis, and leukoderma.

Psoriasis, eczema, and vitiligo, are common skin conditions that can be challenging to treat, and often cause the client significant psychosocial stress. Clients may undergo a variety of treatments to address these skin conditions, including routine consumption of systemic and biologic drug therapies which are highly toxic, reduce systemic immune system function, and come with a host of chemotherapylike side effects. Ultraviolet (UV) phototherapy is a clinically validated alternate treatment modality for these disorders.

NPC

SCI

Intelligent Microparticles

ActiveDuty^TM

The proprietary algorithmic architecture of ActiveDuty^TM creates the first systemic reporting mechanism to deliver strategic and tactical results supported by an intense worldwide analysis of patterns of human behavior. The ActiveDuty^TMglobal framework is heuristic in nature, capable of comprehending big data across the digital spectrum and speaks all the major languages. Up until now, there has not existed a unified system that could actively measure this lifecycle that is a collection of discreet and seemingly random behaviors of criminals anywhere within the digital domain. Criminals change their identities but not their basic behaviors.

Management

During the period covered by this Report, business functions of the Company were managed by our CEO/director and founder, Andrew J. Kandalepas. He is responsible for developing and planning our business units, including product development, organizational structure, financing and administrational functions.

On January 12, 2015, the Company entered into the PDC Joint Venture Agreement with TMA to further develop, market, license and/or sell PSI technology and products. Mr. Kandalepas manages PSI activities with John Yorke of TMA. Mr. Yorke started his career with Abbott Labs as an FDA specialist and then joined Kendall as a product manager for OR and CV products. He formed and operated Cardiomax, a $45M medical products distributorship. In 1991, he formed TFGI to assist start-up and small-cap companies to develop business plans, source funding and secure strategic partners. TFGI clients included PMG (Pennsylvania Merchant Group), J&J Development Company, Zures Medical Group, SCA Capital Partners, Forest Health Group and Hillman Medical. In 2013, TFGI merged with The ComedIT Group and Ocean Medical to form TMA.

Mr. Ricky Howard manages SCI’s business. Mr. Howard has over thirty years of experience in operations management and executive positions in a variety of industries ranging from entrepreneurial startups to Fortune 500 companies. He joined Stealth Mark as V.P. of Operations at the early stage of development in 2006 and played an integral role in bringing the company’s capabilities to its present status including design and creation of its manufacturing capabilities, implementation of its ERP inventory controls system, software and hardware development, marketing and sales materials processes and day-to-day operational procedures and processes. Although we have an Employment Agreement with Mr. Howard, we cannot guarantee that he will remain affiliated with us.

Results of Operations for the year ended September 30, 2017 compared to the year ended September 30, 2016

Revenue and Cost of Goods Sold

Revenue for the years ended September 30, 2017 and 2016 was $272,724 and $299,604, respectively. The decrease of $26,880 was due to the decrease in related party sales of $54,117 in 2017, offset by the increase in consulting services of $26,500 in 2017. Reported sales in 2017 and 2016 are also affected by the sale of NPC Inc. during 2017, which has been accounted for as a discontinued operation.

Cost of sales for the years ended September 30, 2017 and 2016, was $146,944 and $189,591, respectively. Gross profit for the years ended September 30, 2017 and 2016, was $125,780 and $110,013, respectively. The gross profit increase of $15,767 was primarily due to the increase in SCI consulting service revenues, which had a higher gross profit margin, and the decrease in PSI related party sales, which had a lower gross profit margin.

Operating Expenses

Operating expenses for the years ended September 30, 2017 and 2016 was $2,129,184 and $2,266,685, respectively. The decrease in operating expenses of $137,501 was due to the impairment of goodwill and intangible assets in 2016 totaling to $349,639, offset by the increase of selling, general and administrative (SG&A) expenses of $263,288. The increase in SG&A expenses in 2017 primarily related to the significant funds and resources the Company’s SCI subsidiary spent on the development of its ActiveDuty^TM data intelligence product and services.

Other Income (Expenses)

Other income and expenses during the year ended September 30, 2017 consisted of a gain on extinguishment of debt of $288,777, the amortization of debt discount of $49,884, financing costs of $51,150 and interest expense of $2,351. Other income and expenses during the year ended September 30, 2016 consisted of the loss on conversion of loans payable to equity of $254,723, a loss from the write-off of liabilities of $5,000, financing costs of $18,900 and interest income from a related party of $2,913.

Net Loss from Continuing Operations

Our net loss from continuing operations for the years ended September 30, 2017 and 2016 was $1,818,012 and $2,432,382, respectively. The decrease in the net loss from continuing operations of $614,370 was primarily due to the write-off of goodwill and intangible assets in 2016 totaling to $349,639, offset by the increase of selling, general and administrative expenses of $263,288 and by the increase in gross profit in 2017 of $15,767. It was also due to total other income in 2017 of $236,542 compared to total other expenses in 2016 of $275,710.

Net Loss

Our net loss for the years ended September 30, 2017 and 2016 was $1,712,980 and $2,471,312, respectively. The decrease in the net loss of $758,332 was due to the decrease in the net loss from continuing operations for 2017 of $614,370, and to the income from discontinued operations in 2017 of $105,032, compared to a loss from discontinued operations of $38,930 in 2016.

Segment Information

The Company maintained two (2) business segments through the end of the period covered by this Report, as the Company sold its NPC segment during 2017:

(i)Medical Devices: which it provided through PSI, its wholly-owned subsidiary acquired on August 24, 2012, a developer, manufacturer, marketer and distributer of targeted Ultra Violet ("UV") phototherapy devices for the treatment of skin diseases; and

(ii)Authentication and Encryption Products and Services: which it provided through SCI, its wholly-owned subsidiary that on April 4, 2014 acquired certain assets of SMI Holdings, Inc. d/b/a Stealth Mark, Inc., including Stealth Mark tradenames and marks, and related encryption and authentication solutions offering advanced product security technologies within the security and supply chain management vertical sectors.

The detailed segment information of the Company is as follows:

Wellness Center USA, Inc.
Operations by Segments

			For the Year Ended
			September 30, 2016
			Corporate		Medical Devices		Authentication and Encryption		Total
Sales:
	Trade	$	-	$	100,519	$	108,343	$	208,862
	Trade - related party		-		54,117		-		54,117
	Consulting services		-		-		36,625		36,625
Total Sales			-		154,636		144,968		299,604

Cost of goods sold			-		176,381		13,210		189,591

Gross profit (loss)			-		(21,745)		131,758		110,013

Operating expenses
Selling, general and administrative expenses			1,164,377		403,768		348,901		1,917,046
Impairment of goodwill and intangible assets			-		94,214		255,425		349,639
Total operating expenses			1,164,377		497,982		604,326		2,266,685

Loss from operations		$	(1,164,377)	$	(519,727)	$	(472,568)	$	(2,156,672)

Wellness Center USA, Inc.
Operations by Segments

			For the Year Ended
			September 30, 2017
			Corporate		Medical Devices		Authentication and Encryption		Total
Sales:
	Trade	$	-	$	180,999	$	28,600	$	209,599
	Consulting services		-		-		63,125		63,125

Total Sales			-		180,999		91,725		272,724

Cost of goods sold			-		71,827		75,117		146,944

Gross profit			-		109,172		16,608		125,780

Operating expenses			1,066,227		436,557		626,400		2,129,184

Loss from operations		$	(1,066,227)	$	(327,385)	$	(609,792)	$	(2,003,404)

Revenue for the Medical Devices segment for the years ended September 30, 2017 and 2016 was $180,999 and $100,519, respectively. The increase of $80,480 was due to the increase in sales of their Psoria-Light devices. Cost of sales for the years ended September 30, 2017 and 2016 was $71,827 and $176,381. Gross profit for the year ended September 30, 2017 was $109,172 and the gross loss for the year ended September 30, 2016 was $21,745. The increase in gross profit of $130,917 was primarily due to the increased sales in 2017 plus the recording of a reserve for excess and obsolete inventories of $80,770 in 2016. Operating expenses for the years ended September 30, 2017 and 2016 was $436,557 and $497,982, respectively. The decrease in operating expenses of $61,425 was due primarily to the impairment of goodwill and intangible assets in 2016 of $94,214. The loss from operations for the years ended September 30, 2017 and 2016 was $327,385 and $519,727, respectively.

Revenue for the Authentication and Encryption segment for the years ended September 30, 2017 and 2016 was $91,725 and $144,968, respectively. The decrease of $53,243 was due to the decrease in trade sales of $79,743. Cost of goods sold for the years ended September 30, 2017 and 2016 was $75,117 and $13,210, respectively. Gross profit for the years ended September 30, 2017 and 2016 was $16,608 and $131,758, respectively. The decrease in gross profit of $115,150 was primarily due to the decrease in sales. Operating expenses for the years ended September 30, 2017 and 2016 was $626,400 and $604,326, respectively. The increase in operating expenses of $22,074 was due primarily to the increase in consulting fees and contract labor in 2017 related to the development of its ActiveDuty^TMdata intelligence product and services, offset by the write-off of goodwill and intangible assets of $255,425 in 2016. The loss from operations for the years ended September 30, 2017 and 2016 was $609,792 and $472,568, respectively.

The Corporate segment primarily provides executive management services for the Company. Operating expenses for the years ended September 30, 2017 and 2016 was $1,066,227 and $1,164,377, respectively. The decrease in operating expenses of $98,150 was primarily due to the write-off of a note receivable from an officer recorded as compensation of $197,028 in 2016. The loss from operations for the years ended September 30, 2017 and 2016 was $1,066,227 and $1,164,377, respectively.

Liquidity and Capital Resources

The accompanying consolidated financial statements 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 reflected in the accompanying consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the year ended September 30, 2017, the Company incurred a net loss from continuing operations of $1,818,012 and used cash in operations from continuing operations of $1,634,176, and had a shareholders’ deficit of $290,449 as of September 30, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

At September 30, 2017, the Company had cash on hand in the amount of $29,369. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital soon to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, we have funded our operations primarily through equity and debt financings, and we expect to continue to rely on these sources of capital in the future. During the year ended September 30, 2017, the Company received $1,511,222 through the sale of its common stock and the exercise of stock warrants.

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case of equity financing.

Our independent registered public accounting firm issued a going concern opinion. This means that they expressed substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital.

Comparison of years ended September 30, 2017 and 2016

As of September 30, 2017, we had $29,369 in cash, negative working capital of $312,335 and an accumulated deficit of $19,132,557.

As of September 30, 2016, we had $81,479 in cash, negative working capital of $787,281 and an accumulated deficit of $17,541,827.

Cash flows used in operating activities

During the year ended September 30, 2017, the Company used cash flows in operating activities from continuing operations of $1,634,176, compared to $1,062,844 used in the year ended September 30, 2016. During the year ended September 30, 2017, the Company incurred a net loss of $1,712,980 and had non-cash expenses of $183,209, compared to a net loss of $2,471,312 and non-cash expenses of $1,125,518 during the year ended September 30, 2016.

Cash flows used in investing activities

During the year ended September 30, 2017, we had purchases of property and equipment of $3,649. During the year ended September 30, 2016 we had purchases of property and equipment of $2,248 and had patent application costs of $5,246.

Cash flows provided by financing activities

During year ended September 30, 2017, we had proceeds from loans payable of $50,000, proceeds from a convertible note payable of $150,000, proceeds from the sale of common stock of $884,600, proceeds from the exercise of stock warrants of $626,622 and the repayment of advances from a related party of $13,041. During year ended September 30, 2016, we had proceeds from loans payable of $82,300, advances from a related party of $13,041, proceeds from the sale of common stock and stock warrants of $714,200, proceeds from the exercise of stock options and warrants of $5,000 and proceeds from common stock issuable of $306,000.

Off-Balance Sheet Arrangements

We have no 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.

Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts

PSI received FDA clearance for the Psoria-Light on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark for the Psoria-Light in the fourth quarter of 2011.

PSI’s founder and past president filed a provisional patent application covering certain aspects of the technology that we intend to utilize in the development and commercialization of the Psoria-Light, including handheld ergonomics, emitter platform and LED arrangements, methods for treatment site detection, cooling methods, useful information displays, collection of digital images and graphical correlation to quantitative metrics, and base console designs. Two non-provisional patent applications were submitted claiming the prior filing date of the initial provisional application.

The first non-provisional application describes a unique distance sensor located at the tip of the Psoria-Light hand-piece, which detects the treatment site based on a projected field. The sensor can detect electrolytic/conductive surfaces, such as human skin, without requiring any physical or direct electrical contact. Further, the unique sensor can sense the treatment site at any point about the tip of the hand-piece and without causing any attenuation of the therapeutic UV light output.

The second non-provisional application describes the integration and use of a digital camera in the Psoria-Light, including the location of the digital camera and how and when it is used to conveniently correspond to real-life treatment routines, how images are displayed and captured to memory, and how the images are arranged in patient records are illustrated. Additionally, the second non-provisional application describes the inclusion of clinician defined variables, such as health-related quality of life scores, and their placement into a graphical arrangement relative to treatment site images.

Both the initial provisional patent application and the two non-provisional patent applications are owned by PSI’s past president, who has granted PSI the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under the initial provisional patent application, any non-provisional patent applications filed by him covering the technology described in the initial provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.

PSI’s past president filed a second provisional patent application containing concepts for the improvement of microelectronics packages and thermal management solutions, the improvement of handheld phototherapy devices in general (either used on humans, animals, or plants, or used on inanimate objects), and replacement of laser therapy devices with LED devices. PSI was granted the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under this second provisional patent application, any non-provisional patent applications covering the technology described in the second provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.

In addition to the foregoing, Stealth Mark devoted substantial effort and resources to develop and advance micro-particle security technologies in support of its business activities. Protection of the acquired Stealth Mark intellectual property is maintained through a combination of Patents, Trademarks, and Trade Secrets consisting of the following:

U.S. Patent	Issued	“Title” – Summary

No. 6,647,649	November 18, 2003	“Micro-particle Taggant Systems” - Generation of Micro-particle codes from marks containing encrypted Micro-particles.

No. 7,720,254	May 18, 2010	“Automatic Micro-particle Mark Reader” - Automatic readers for interrogating Micro-particle marks.

No. 7,831.042	November 9, 2010	“Three-Dimensional Authentication Of Micro-particle Mark - Validation of 3D nature of micro-particle mark to protect against counterfeiting of mark.

No. 7,885,428	February 8, 2011	“Automatic Micro-particle Mark Reader” - Automatic readers for interrogating micro-particle marks (broadened protection).

No. 8,033,450	October 11, 2011	“Expression Codes For Micro-particle Marks Based On Signature Strings” - Generation of expression codes (“fingerprints”) unique to each micro-particle mark to protect against counterfeiting of marks.

No. 8,223,964	July 17, 2012	“Three-Dimensional Authentication Of Micro-particle Mark - Validation of 3D nature of micro-particle mark to protect against counterfeiting of marks (broadened protection).

Europe WO/EP Patent	Issued	“Title” – Summary

Appl. No. 07753043.4	Pending	“Expression Codes For Micro-particle Marks Based On Signature Strings” - Generation of expression codes (“fingerprints”) unique to each micro-particle mark to protect against counterfeiting of marks.

Appl. No. 07753034.3	Pending	“Three-Dimensional Authentication Of Micro-particle Mark - Validation of 3D nature of Micro-particle mark to protect against counterfeiting of mark.

Trademarks	Type	Countries

Stealth Mark^®	Registered	United States European Community Australia

StealthFire	Not Registered	United States European Community

ActiveDuty™

Not Registered

United States

Trade Secrets

Stealth Mark proprietary technologies and capabilities being maintained as Trade Secrets include, but are not limited to:

Micro-particle Manufacturing

Micro-particle Color Systems

Technology advancements providing improvements in Automatic Reader performance

Software solutions supporting Micro-particle security solutions

Algorithms, artificial intelligence, and technologies related to Data Intelligence

We will assess the need for any additional patent, trademark or copyright applications, franchises, concessions royalty agreements or labor contracts on an ongoing basis.

Employees

We currently employ our executive officers. PDC has several independent contractors; SCI has four part-time employees and independent contractors. We have employment agreements with key executive management personnel with each subsidiary company, but none with Mr. Kandalepas, who served as our Chairman, CEO/President and CFO during the period covered by this Report.

Summary of Significant Accounting Policies.

The Company’s significant accounting policies are presented in the Notes to the Consolidated Financial Statements (see Note 2 of the audited consolidated financial statements included herein).

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to a smaller reporting company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements are contained in pages F-1 through F-27 which appear at the end of this annual report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

The Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of September 30, 2017, the end of the period covered by this report. Based upon that evaluation, the Company’s CEO concluded that the Company’s disclosure controls and procedures are not effective at the reasonable assurance level due to the material weaknesses described below:

1.The Company does not have written documentation of its 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 the Company. Management evaluated the impact of its failure to have written documentation of its internal controls and procedures on its assessment of its disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2.The Company’s board of directors has no audit committee, independent director or member with financial expertise which causes ineffective oversight of the Company’s external financial reporting and internal control over financial reporting.

3.The Company does not have sufficient segregation of duties within its accounting functions, which is a basic internal control. Due to its 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 its failure to have segregation of duties on its assessment of its disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

4.The Company does not have sufficient segregation of duties so that one person can initiate, authorize and execute transactions.

5.Lack of Board of Director approval of debt and equity instruments before issuance.

6.Weaknesses in the controls over press releases before being disseminated.

7.Absence of a compensation committee to approve all officer compensation.

In light of the material weaknesses, the management of the Company performed additional analysis and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with the accounting principles generally accepted in the United States of America. Accordingly, we believe that our consolidated financial statements included herein fairly present, in all material respects, our consolidated financial condition, consolidated results of operations and cash flows as of and for the reporting periods then ended.

Remediation of Material Weaknesses

The Company remediated certain of the material weaknesses in our disclosure controls and procedures identified above by adding independent directors and by hiring a CFO with SEC reporting experience. Effective November 17, 2017, the Board of Directors filled then existing vacancies in the Board by appointing each of the following persons as a member of the Board: William E. Kingsford; Thomas E. Scott, CPA; Paul D. Jones; and Roy M. Harsch, each to serve until the next annual meeting of the shareholders, or until his successor has been duly qualified and appointed. On December 1, 2017, the Board of Directors consisting of Andrew J. Kandalepas, Jay Joshi, M.D., Messrs. Kingsford, Scott, Jones, and Harsch, accepted the voluntary resignation of Mr. Kandalepas, as President, and appointed Mr. Jones as President. Mr. Kandalepas’ resignation and Mr. Jones’ appointment were effective immediately. On February 5, 2018, the Board of Directors appointed Calvin R. O’Harrow as Chief Operating Officer and a member of the Board. It accepted the resignation of Andrew J. Kandalepas as Chief Financial Officer (CFO) and Principal Accounting Officer (PAO) and appointed Douglas W. Samuelson, CPA, as CFO and PAO. It also removed Jay Joshi, M.D., as a Director. The Board of Directors also appointed a Compensation Committee consisting of Messrs. Jones, Scott and Kingsford.

The company has implemented the following corporate policies to remediate the noted material weaknesses:

•All Debt agreements must be approved by the Board

•All Equity grants must be approved by the Board

•All Officers must have an agreement approved by the Board

•All employees must have a written agreement

•Consultant agreements with payments totaling over $20,000 must be approved by the Board

•Create a Board compensation plan

•Create an Audit Committee with an Audit Committee Charter

•Create a policy for Board approval on cash disbursements over $20,000

•Create a policy to ensure no one at any entity can initiate a payment to themselves

•Create controls over all Press Releases

•Ensure the Company will only work with licensed dealer/brokers relating to the sale of equity instruments

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officer and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

only in accordance with authorizations of management and directors of the issuer; and Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of the end of our most recent fiscal year, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, as of September 30, 2017, such internal control over financial reporting was not effective. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal control over financial reporting that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives of having segregation of the initiation of transactions, the recording of transactions and the custody of assets; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of September 30, 2017.

To address the material weaknesses set forth in items (2) and (3) discussed above, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

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

Management's Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, all of the series of measures noted above in Remediation of Material Weaknesses.

Changes in internal controls

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during the fourth quarter of our fiscal year 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Directors, Executive Officer and Control Persons

The following table sets forth the names and ages of our directors and executive officers during the period covered by this Report. Also the principal offices and positions with us held by each person and the date such person became a director or executive officer. Each executive officer was appointed by our Board of Directors. Our directors serve until the earlier occurrence of the election of his or her successor at the next meeting of shareholders, death, resignation or removal by the Board of Directors. There are no family relationships among our directors, and executive officers.

Name	Age	Position	Date

Andrew J. Kandalepas	66	Chairman, Chief Executive Officer and Chief Financial Officer	June 2010

Dr. Jay Joshi, M.D.	41	Director, Secretary, President, NPC	Feb. 2014

Ricky Howard	64	President, CEO, SCI	April 2014

Audit Committee

During the period covered by this Report, the Board of Directors determined not to establish an audit committee because our limited resources and limited operating activities do not warrant the formation of an audit committee or the expense of doing so. We do not have a financial expert serving on the Board of Directors who meets the criteria for a financial expert under Item 401(e) of Regulation S-B due to our limited financial resources.

Certain Legal Proceedings

Except as otherwise disclosed within, no director, nominee for director, or executive officer of the Company has appeared as a party in any legal proceeding material to an evaluation of his ability or integrity during the past five years.

Compliance with Section 16(A) Of the Exchange Act.

Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and are required to furnish copies to the Company.

ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation

Summary Compensation Table

Name and Position	Year ($)	Salary ($)	Other Annual Compensation Bonus ($)	Restricted Stock (Shares)	Options Awards (Shares)	LTIP SARs ($)	Payouts ($)	All Other Compensation ($)

Andrew J. Kandalepas,	2017	250,000	-	-	-	-	-	-
Chairman, President and CEO (1)	2016	250,000	-	-	-	-	-	187,163

Dr. Jay Joshi, Director,	2017	200,000	-	-	500,000	-	-	-
President, NPC, Inc. (2)	2016	200,000	-	-	-	-	-	-

Rick Howard, President,	2017	120,000	-	-	250,000	-	-	-
CEO of StealthCo	2016	100,000	-	-	250,000	-	-	-

(1)Upon formation the Company issued to the Company’s founder (i) 3,665,000 shares of its common stock valued at par, or $3,665 and (ii) an option to purchase 1,600,000 shares of its common stock with an exercise price of $0.01 per share expiring five (5) years from the date of issuance valued at nil, on the date of grant, as officer's compensation. In 2016, the Company determined a loan due from the Chairman was impaired and the remaining outstanding amount of $187,163 was considered as additional compensation to the Chairman.

(2)On August 11, 2017, the Company entered into an agreement to sell 100% of the issued and outstanding shares of NPC, Inc. In February 2018, Dr. Joshi was removed from the Company’s Board of Directors.

There are no annuity, pension or retirement benefits proposed to be paid to officers, directors or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the Company or any of its subsidiaries, if any.

Employment Agreements

On July 1, 2014, the Company entered into an employment agreement (the “Agreement”) with Ricky Howard, (the “Executive”). The Executive’s employment under this Agreement commenced on the date hereof, and continued in effect until January 1, 2018 at which time it was extended for a period of three years. The Executive is engaged to serve as the Chief Executive Officer of the Company’s wholly-owned Subsidiary “StealthCo. The Company shall pay to the Executive as compensation for services rendered by the Executive hereunder a base annual salary of $130,000, beginning January 1, 2018, subject to increase, but not decrease, from time to time by the CEO and/or the Board of Directors of the Company. Employment under the Agreement is at will and terminable by either party at any time. If the Agreement is terminated by the Executive for good reason (as defined therein), or by the Company other than for cause (as defined therein), the Executive is entitled to pay through the termination date plus severance pay of up to three (3) month’s base pay for each full year of service then remaining. If the Agreement is terminated by the Executive for other than good reason, or by the Company for cause, the executive is entitled only to pay through the termination date and a portion of Company shares, options or warrants, if any, held by him or for his benefit are subject to forfeiture. The Agreement contains covenants not to compete, secrecy and non-interference which apply during employment and continue for a period of two years following termination.

Stock Option Plan

On December 22, 2010, effective retroactively as of June 30, 2010, the Company’s Board of Directors approved the adoption of the “2010 Non-Qualified Stock Option Plan” (“2010 Option Plan”) by unanimous consent. The 2010 Option Plan was initiated to encourage and enable officers, directors, consultants, advisors and key employees of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. A total of 7,500,000 of the authorized shares of the Company’s common stock may be subject to, or issued pursuant to, the terms of the plan. The number of shares to be received upon the exercise of an option and the exercise price to be paid for a share may be adjusted from time to time as provided in Section 7 of the plan, which is presented in the Notes to the Consolidated Financial Statements (see Note 7 of the audited consolidated financial statements included herein).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders

The following table presents certain information regarding the beneficial ownership of all shares of common stock at the date of this Report, for each executive officer and director of our Company and for each person known to us who owns beneficially more than five percent (5%) of the issued and outstanding shares of our common stock, during the period covered by this Report.

Name and Address of Beneficial Owner (1)	Number of Shares (2)	Options to Acquire Number of Shares (2)	Warrants to Acquire Number of Shares (2)	Number of Shares Inclusive of Options and Warrants	Percentage (%) of Security Ownership
Andrew J. Kandalepas, Chairman, President and CEO (*)	5,265,000	-	-	5,265,000	3.26%

Dr. Jay Joshi, Director (*)	5,283,334	1,900,000	-	7,183,334	4.45%

Ricky Howard (*)	-	1,062,500	-	1,062,500	0.66%

Officers and Directors as a group	10,773,334	1,962,500	-	12,735,834	7.90%

Total issued and outstanding	90,284,916	6,822,500	64,161,304	161,268,720	100.00%

(1)Except as otherwise noted below, the address of each of the persons shown in the above table is c/o Wellness Center USA, Inc. 2500 West Higgins Road, Ste. 780, Hoffman Estates, IL, 60169.

(2)Includes, where applicable, shares of common stock issuable upon the exercise of options or warrants to acquire common stock held by such person that may be exercised within sixty (60) days after September 30, 2017. Also includes unvested shares of restricted stock as to which such person has voting power but no dispositive power. Unless otherwise indicated, we believe that all persons named in the table above have sole voting power and/or investment power with respect to all shares of common stock beneficially owned by them.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Party Transactions

During the period covered by this Report, related parties with whom the Company had transactions were:

Related Parties	Relationship	Related Party Transactions	Business Purpose of Transactions
Management and significant shareholder

Andrew J. Kandalepas	Chairman, CEO and significant shareholder	Note receivable - Officer	Working capital

Jay Joshi, MD	Chief Medical Officer of the Company, President and CEO of NPC, shareholder and director	Shareholder Loan	Working capital

Entity controlled by significant shareholder

National Pain Centers, LLC	An entity owned and controlled by Dr. Jay Joshi, MD, Chief Medical Officer of the Company, President and CEO of NPC, shareholder and director	Management services provided to NPC LLC	Management of medical practices.

Sale of Psoria-Light Device to National Pain Centers, LLC

During the year ended September 30, 2016, the Company sold one of its Psoria-Light phototherapy devices to NPC LLC for a sales price of $54,117. The sale has been reflected as a related party sale on the statement of operations for the year ended September 30, 2016.

Advances from Shareholders

From time to time, shareholders of the Company advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand. At September 30, 2016, advances from shareholders were $50,545. There were no advances from shareholders outstanding as of September 30, 2017.

In addition, another shareholder advanced $224,444 to the Company as of September 30, 2016. The advance was non-interest bearing, was unsecured and did not have a determined date of repayment. During the year ended September 30, 2017, the Company reached a settlement with the shareholder and the $224,444 balance was forgiven, along with 250,000 shares owned by the shareholder being returned to the Company (see Note 7). The $224,444 gain is recorded as a gain on extinguishment of debt on the consolidated statement of operations for the year ended September 30, 2017.

Note Receivable – Chairman, President and CEO

Pursuant to a note dated September 30, 2013, the Company’s Chairman, President and CEO agreed to pay $250,000 to the Company in consideration of advances paid to him. At September 30, 2015, a balance of $197,028 was owed on the loan. During the year ended September 30, 2016, the Company determined the note was impaired and the remaining outstanding amount of $187,163 was considered as additional compensation to the Chairman. No amounts were outstanding under the note at September 30, 2016.

Director Independence

Currently, the Company does not have a policy that its directors or a majority of its directors be independent of management. The Company intends to implement a policy that a majority of the Board members be independent of the Company’s management as the members of the board of director’s increases.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

The following table sets forth the fees billed to the Company for professional services rendered by the Company's independent registered public accounting firm, for the years ended September 30, 2017 and 2016:

Fees		2017		2016

Audit fees	$	90,000	$	90,000
Audit Related Fees	$	-	$	-
Tax fees	$	-	$	-
All other fees	$	-	$	-

Total Fees	$	90,000	$	90,000

Audit Fees. Consist of fees billed for professional services rendered for the audits of our financial statements and reviews of our interim consolidated financial statements included in quarterly reports.

Tax Fees. Our auditors did not provide us with professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.

Pre-approval of All Services from the Independent Auditors

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us or our subsidiaries to render any auditing or permitted non-audit related service, the engagement be:

approved by our audit committee; or

entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.

We do not have an audit committee, however our board of directors acts as the audit committee, established pre-approval policies and procedures as to the particular service which do not include delegation of the audit committee's responsibilities to management. Our board of directors pre-approves all services provided by our independent auditors and is informed of each service.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

a) Documents filed as part of this Annual Report

1. Financial Statements

2. Financial Statement Schedules

3. Exhibits

Exhibit Number	Description of Document	Filed Herewith	Incorporated by Reference To:

2.2	Exchange Agreement dated June 21, 2012 by and between Psoria-Shield Inc. and Wellness Center USA, Inc.		Exhibit 2.2 to the Registrant’s Amended Current Report on Form 8-KA3 filed on January 22, 2013.

2.4	Exchange Agreement dated February 28, 2014 by and between National Pain Centers, Inc. and Wellness Center USA, Inc.		Exhibit 2.4 to the Registrant’s Current Report on Form 8-K filed on February 28, 2014.
2.5	Purchase Agreement dated March 31, 2014 by and between SMI Holdings, Inc. d/b/a Stealth Mark, Inc. and Stealthco, Inc., a wholly-owned subsidiary of Wellness Center USA, Inc.		Exhibit 2.5 to the Registrant’s Current Report on Form 8-K filed on April 9, 2014.

3.1	Articles of Incorporation of the Registrant as filed with the Secretary of State of Nevada.		Exhibits 3.2 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.

3.2	Bylaws of the registrant.		Exhibits 3.2 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.

3.3	Certificate of Amendment as filed with the Secretary of State of Nevada on January 12, 2017.

4.1	Subscription Agreement		Exhibits 99.1 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.

4.2	Form of warrant		Exhibits 99.2 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.

4.3	2010 Non-Qualified Stock Compensation Plan		Exhibits 99.3 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.

5.4	Employment Agreement dated as of February 28, 2014 by and between Jay Joshi, M.D. and Wellness Center USA, Inc.		Exhibit 5.4 to the Registrant’s Current Report on Form 8-K filed on February 28, 2014.

5.5	Employment Agreement dated as of July 1, 2014 by and between Rick Howard and Wellness Center USA, Inc.		Exhibit 5.5 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015.


5.6	Employment Agreement dated as of January 1, 2018 by and between Rick Howard and Wellness Center USA, Inc.	X	Exhibit 5.6 to the Registrant’s Annual Report on Form 10-K filed on February 20, 2018.

5.7	Employment Agreement dated as of January 1, 2018 by and between Lee Anne Patterson and Wellness Center USA, Inc.	X	Exhibit 5.7 to the Registrant’s Annual Report on Form 10-K filed on February 20, 2018.

5.8	Employment Agreement dated as of January 1, 2018 by and between Richard Neal and Wellness Center USA, Inc.	X	Exhibit 5.8 to the Registrant’s Annual Report on Form 10-K filed on February 20, 2018.

10.4	License Agreement dated as of August 25, 2009 by and between Psoria-Shield Inc. and Scot L. Johnson.		Exhibit 10.4 to the Registrant’s Amended Current Report on Form 8-KA3 filed on January 22, 2013.

10.5	License Agreement dated as of December 11, 2010 by and between Psoria-Shield Inc. and Scot L. Johnson.		Exhibit 10.5 to the Registrant’s Amended Current Report on Form 8-KA3 filed on January 22, 2013.

10.6	Management Service Agreement dated as of February 28, 2014 by and between National Pain Centers, Inc. and National Pain Centers, LLC		Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015

10.7	Agency Agreement dated as of October 24, 2014 by and between The Medical Alliance, Inc., Psoria-Shield, Inc. and Wellness Center USA, Inc.		Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015

10.8	Joint Venture Agreement dated as of January12, 2015 by and between The Medical Alliance, Inc., Psoria-Shield, Inc. and Wellness Center USA, Inc.		Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015

21.1	List of subsidiaries of the Registrant		Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)	X

31.2	Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (**)	X

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)	X

32.2	Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (***)	X


101.INS	XBRL Instance Document ****	X

101. SCH	XBRL Taxonomy Extension Schema Linkbase Document ****	X

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document ****	X

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document ****	X

101.LAB	XBRL Taxonomy Extension Label Linkbase Document ****	X

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document ****	X

(*)Filed herewith.

(**)Included in Exhibit 32.1

(***)Included in Exhibit 32.2

(****)Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

SIGNATURES

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

	WELLNESS CENTER USA, INC.

Date: February 20, 2018	By: /s/ Paul D. Jones
	Paul D. Jones President (Duly Authorized Principal Executive Officer)

	WELLNESS CENTER USA, INC.

Date: February 20, 2018	By: /s/ Douglas W. Samuelson
	Douglas W. Samuelson Chief Financial Officer and Principal Accounting Officer (Duly Authorized Principal Accounting Officer)

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints severally Paul D. Jones, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE

/s/ Andrew J. Kandalepas	Chairman, Chief Executive Officer	February 20, 2018
Andrew J. Kandalepas

/s/ Douglas W. Samuelson	Chief Financial Officer and Principal Accounting Officer	February 20, 2018
Douglas W. Samuelson

/s/ Paul D. Jones	Director, President	February 20, 2018
Paul D. Jones

/s/ Thomas E. Scott	Director, Secretary	February 20, 2018
Thomas E. Scott

/s/ William E. Kingsford	Director	February 20, 2018
William E. Kingsford

/s/ Roy M. Harsch	Director	February 20, 2018
Roy M. Harsch

/s/ Calvin R. O’Harrow	Director, Chief Operating Officer	February 20, 2018
Calvin R. O’Harrow

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Wellness Center USA, Inc.

September 30, 2017 and 2016

Index to the Consolidated Financial Statements

Page

Report of Independent Registered Public Accounting FirmF-2

Consolidated Balance Sheets at September 30, 2017 and 2016F-3

Consolidated Statements of Operations for the Years Ended September 30, 2017 and 2016F-4

Consolidated Statements of Shareholders’ Deficit for the Years Ended September 30, 2017 and 2016F-5

Consolidated Statements of Cash Flows for the Years Ended September 30, 2017 and 2016F-6

Notes to the Consolidated Financial StatementsF-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Wellness Center USA, Inc. and Subsidiaries

We have audited the consolidated balance sheets of Wellness Center USA, Inc. (the “Company”) and Subsidiaries as of September 30, 2017 and 2016, and the related consolidated statements of operations, shareholders’ deficit and cash flows for the years ended September 30, 2017 and 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2017 and 2016, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company had a shareholders’ deficit at September 30, 2017 and incurred a net loss and utilized cash used in operating activities for the year ended September 30, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Weinberg & Company, P.A.

Weinberg & Company, P.A

Los Angeles, California

February 20, 2018

F-2

Wellness Center USA, Inc.
Consolidated Balance Sheets

		September 30,
		2017		2016
ASSETS
Current Assets
Cash	$	29,369	$	81,479
Accounts receivable		24,999		-
Inventories		12,335		79,169
Prepaid expenses and other current assets		1,751		26,634
Other current assets under discontinued operations		-		10,470
Total Current Assets		68,454		197,752

Property and equipment, net		5,126		14,307
Other assets		16,760		16,760
Other assets under discontinued operations		-		1,514
Total Other Assets		21,886		32,581

TOTAL ASSETS	$	90,340	$	230,333

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	203,367	$	595,103
Accrued payroll taxes		-		37,436
Accrued payroll - officers		13,440		21,891
Deferred revenue		55,098		77,375
Advances from related parties		-		13,041
Convertible note payable, net		49,884		-
Loans payable		59,000		9,000
Other current liabilities under discontinued operations		-		231,187
Total Current Liabilities		380,789		985,033

Shareholders' Deficit
Common stock, par value $0.001, 185,000,000 shares authorized; 90,284,916 and 74,968,352 shares issued and outstanding, respectively
		90,285		74,969
Additional paid-in capital		19,069,211		16,464,896
Common stock issuable, none and 5,048,650 shares, respectively		-		442,400
Accumulated deficit		(19,132,557)		(17,541,827)
Total Wellness Center USA shareholders' equity (deficit)		26,939		(559,562)

Non-controlling interest		(317,388)		(195,138)
Total Shareholder's deficit		(290,449)		(754,700)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	90,340	$	230,333


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

F-3

Wellness Center USA, Inc.
Consolidated Statements of Operations

		Year Ended
		September 30,
		2017		2016
Sales:
Trade	$	209,599	$	208,862
Related party		-		54,117
Consulting services		63,125		36,625
Total Sales		272,724		299,604

Cost of goods sold		146,944		189,591

Gross profit		125,780		110,013

Operating expenses
Selling, general and administrative expenses		2,129,184		1,917,046
Impairment of goodwill and intangible assets		-		349,639
Total operating expenses		2,129,184		2,266,685

Loss from operations		(2,003,404)		(2,156,672)

Other income (expenses)
Loss on conversion of loans payable to equity		-		(254,723)
Gain on extinguishment of debt		288,777		-
Other loss		-		(5,000)
Amortization of debt discount		(49,884)		-
Financing costs		(51,150)		(18,900)
Interest expense		(2,351)		-
Interest income - related party		-		2,913
Total other income (expenses)		185,392		(275,710)

LOSS FROM CONTINUING OPERATIONS		(1,818,012)		(2,432,382)

DISCONTINUED OPERATIONS
Loss from discontinued operations		(147,476)		(38,930)
Gain from sale of discontinued operations		252,508		-
Income (loss) from discontinued operations		105,032		(38,930)

NET LOSS		(1,712,980)		(2,471,312)

Net loss attributable to non-controlling interest		122,250		120,037

NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC.	$	(1,590,730)	$	(2,351,275)

BASIC AND DILUTED LOSS PER SHARE
Loss per share from continuing operations	$	(0.02)	$	(0.03)
Income (loss) per share from discontinued operations	$	0.00	$	(0.00)
Net loss per share	$	(0.02)	$	(0.03)

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED		86,002,821		72,887,494

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

F-4

Wellness Center USA, Inc.
Consolidated Statement of Shareholders' Deficit

	Common Stock			Shares to be Issued
	Shares	Amount	Additional Paid-in Capital	Shares	Amount	Accumulated Deficit	Total WCUI Deficit	Non- controlling Interest	Total

Balance, September 30, 2015 (Restated)	64,539,684	$ 64,540	$ 15,188,621	-	$ -	$ (15,190,552)	$ 62,609	$ (75,101)	$ (12,492)

Common stock issued for cash	6,918,668	6,919	707,281	-		-	714,200	-	714,200

Issuance of common shares upon exercise of stock options and warrants
	500,000	500	4,500	-		-	5,000	-	5,000

Fair value of vested stock options	-	-	23,181	-		-	23,181	-	23,181

Fair value of common stock issued for services	1,312,000	1,312	118,488	-	-	-	119,800	-	119,800

Issuance of common shares upon conversion of debt
Issuance of common shares upon conversion of debt	1,000,000	1,000	99,000	-	-	-	100,000	-	100,000

Issuance of common shares and warrants upon settlement of loans payable
	698,000	698	323,825	1,322,221	117,500	-	442,023	-	442,023

Common stock issuable	-	-	-	3,591,429	306,000	-	306,000	-	306,000

Common stock to be issued as financing costs	-	-	-	135,000	18,900	-	18,900	-	18,900

Net loss for the year ended September 30, 2016	-	-	-	-	-	(2,351,275)	(2,351,275)	(120,037)	(2,471,312)

Balance, September 30, 2016	74,968,352	74,969	16,464,896	5,048,650	442,400	(17,541,827)	(559,562)	(195,138)	(754,700)

Issuance of common stock issuable	5,048,650	5,048	437,352	(5,048,650)	(442,400)	-	-	-	-

Common stock issued for cash	5,837,500	5,837	878,763	-	-	-	884,600	-	884,600

Exercise of stock warrants	4,065,414	4,066	622,556	-	-	-	626,622	-	626,622

Retirement of common stock in legal settlement	(250,000)	(250)	250	-	-	-	-	-	-

Fair value of vested stock options	-	-	326,359	-	-	-	326,359	-	326,359

Fair value of common stock issued for services	450,000	450	138,050	-	-	-	138,500	-	138,500

Fair value of common stock issued in connection with convertible note payable
	165,000	165	50,985	-	-	-	51,150	-	51,150

Discount on convertible note payable due to beneficial conversion and warrants
	-	-	150,000	-	-	-	150,000	-	150,000

Net loss for the year ended September 30, 2017	-	-	-	-	-	(1,590,730)	(1,590,730)	(122,250)	(1,712,980)

Balance, September 30, 2017	90,284,916	$ 90,285	$ 19,069,211	-	$ -	$ (19,132,557)	$ 26,939	$ (317,388)	$ (290,449)


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

F-5

Wellness Center USA, Inc.
Consolidated Statements of Cash Flows

		Year Ended
		September 30,
		2017		2016
Cash Flows from Operating Activities
Net loss	$	(1,712,980)	$	(2,471,312)

Adjustments to reconcile net loss to net cash used in operating activities of continuing operations

Gain from sale of discontinued operations		(252,508)		-
Loss from discontinued operations		147,476		38,930
Depreciation expense		11,125		16,051
Amortization of debt discount		49,884		-
Amortization expense		-		67,266
Impairment of goodwill		-		55,316
Impairment of intangible assets		-		294,323
Loss on shares issued for repayment of accounts payable		-		40,000
Loss on conversion of loans payable		-		254,723
Gain on extinguishment of debt		(288,777)		-
Fair value of common shares issued for services		138,500		119,800
Fair value of common stock issued in connection with convertible note payable		51,150		-
Fair value of stock options and warrants issued for services		326,359		23,181
Fair value of common shares issued for financing costs		-		18,900
Note receivable from officer written-off as compensation		-		197,028
Changes in Assets and Liabilities
(Increase) Decrease in:
Accounts receivable		(24,999)		-
Inventories		66,834		134,332
Prepaid expenses and other current assets		24,883		(63)
Other assets		-		(15,000)
(Decrease) Increase in:
Accounts payable and accrued expenses		(102,959)		62,965
Accrued payroll taxes		(37,436)		37,436
Accrued payroll - officers		(8,451)		21,891
Deferred revenue		(22,277)		39,875
Net cash used in operating activities from continuing operations		(1,634,176)		(1,064,358)
Net cash used in operating activities from discontinued operations		(112,466)		4,514
Net cash used in operating activities		(1,746,642)		(1,059,844)

Cash Flows from Investing Activities
Purchases of property and equipment		(3,649)		(2,248)
Patent application costs		-		(5,246)
Net cash used in investing activities		(3,649)		(7,494)

Cash Flows from Financing Activities
Proceeds from loans payable		50,000		82,300
Proceeds from convertible note payable		150,000		-
Advances from related party		-		13,041
Repayment of advances from related party		(13,041)		-
Common stock issued for cash		884,600		714,200
Exercise of stock options and warrants		626,622		5,000
Proceeds from common stock issuable		-		306,000
Net cash provided by financing activities		1,698,181		1,120,541

Net increase (decrease) in cash		(52,110)		53,203

Cash beginning of year		81,479		28,276
Cash end of year	$	29,369	$	81,479

Supplemental cash flows disclosures:
Interest paid	$	-	$	-
Taxes paid	$	-	$	-

Supplemental non-cash financing disclosures:
Debt discount on convertible note payable	$	150,000	$	-
Issuance of common shares upon conversion of notes payable	$	-	$	187,300
Issuance of common stock for repayment of accounts payable of $60,000	$	-	$	100,000
Non-controlling interest's share in losses of a subsidiary	$	122,250	$	120,037

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

F-6

WELLNESS CENTER USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2017 and 2016

NOTE 1 – BASIS OF PRESENTATION

Organization and Operations

Wellness Center USA, Inc. ("WCUI" or the “Company”) was incorporated in June 2010 under the laws of the State of Nevada. The Company initially engaged in online sports and nutrition supplements marketing and distribution. The Company subsequently expanded into additional businesses within the healthcare and medical sectors through acquisitions, including Psoria-Shield Inc. (“PSI”), National Pain Centers, Inc. (“NPC”), and StealthCo Inc. (“SCI”), d/b/a Stealth Mark, Inc. During the period covered by this Annual Report, the Company operated in the following business segments: (i) distribution of targeted Ultra Violet ("UV") phototherapy devices for dermatology; (ii) management of top tier medical practices in the interventional and multimodal pain management sector; and (iii) authentication and encryption products and services. The segments are operated, respectively, through PSI, NPC and SCI.

Going Concern

At September 30, 2017, the Company had cash on hand in the amount of $29,369. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital soon to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, we have funded our operations primarily through equity and debt financings and we expect to continue to rely on these sources of capital in the future. During the year ended September 30, 2017, the Company received $1,511,222 through the sale of its common stock and the exercise of stock warrants.

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our shareholders, in case of equity financing.

F-7

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The Company's consolidated subsidiaries and/or entities are as follows:

Name of consolidated subsidiary or entity	State or other jurisdiction of incorporation or organization	Date of incorporation or formation (date of acquisition/disposition, if applicable)	Attributable interest

Psoria-Shield Inc. (“PSI”)	The State of Florida	June 17, 2009 (August 24, 2012)	100%

National Pain Centers, Inc. (“NPC”)	The State of Nevada	January 24, 2014 (February 28, 2014/August 11, 2017)	100%
StealthCo, Inc. (“StealthCo”)	The State of Illinois	March 18, 2014	100%
Psoria Development Company LLC. (“PDC”)	The State of Illinois	January 15, 2015	50%

As of August 11, 2017, NPC was no longer a subsidiary of the Company (see Note 3). Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in valuing our intangible assets and goodwill for impairment, valuation of inventory and obsolescence and valuations of stock-based compensation calculations, among others. Actual results could differ from these estimates.

Income (Loss) Per Share

Basic loss per share is computed by dividing net loss applicable to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share is computed by dividing the net loss applicable to common shareholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. For the years ended September 30, 2017 and 2016, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At September 30, 2017 and 2016, the dilutive impact of outstanding stock options for 6,822,500 and 5,227,500 shares, respectively, and outstanding warrants for 64,161,304 and 54,938,158 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. In addition to the aforementioned general policy, the following are the specific revenue recognition policies for each major category of revenue:

(i)Sale of products: The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the vessel or rail company and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

F-8

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (continued)

(ii)Consulting services: Revenue is recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured.

Payments received before the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue. Deferred revenue at September 30, 2017 and 2016 was $55,098 and $77,375, respectively.

Accounts Receivable

The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s historical losses and an overall assessment of past due trade accounts receivable outstanding.

The allowance for doubtful accounts and returns is established through a provision reducing the carrying value of receivables. At September 30, 2017 and 2016, no allowance for doubtful accounts and returns was recorded.

Inventories

Inventories are stated at the lower of cost or market. Cost is computed on a first-in, first-out basis. At September 30, 2017 and 2016, inventories totaling $12,335 and $79,169, respectively, consisted of finished goods. The Company provides inventory reserves based on excess and obsolete inventories determined primarily by future demand forecasts. The write down amount is measured as the difference between the cost of the inventory and market based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. During the year ended September 30, 2016, the Company provided a reserve of $80,770 that is included in cost of goods sold to account for its estimate of slow moving and obsolete inventory. During the year ended September 30, 2017, the reserve was removed as the related inventories were sold.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The Company has determined the estimated useful lives of its property and equipment, as follows:

Computer equipment	5 years
Medical equipment	5 years
Furniture and fixtures	7 years
Vehicles	3 years
Software	3 years

Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the related accounts and the resulting gain or loss is reflected in the statements of operations.

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

Income Taxes

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The Company recorded a 100% valuation allowance against its deferred tax assets as of September 30, 2017 and 2016.

F-9

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes (continued)

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

Fair Value measurements

The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of financial instruments such as cash, accounts receivable, inventories, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments.

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of the net assets at the date of acquisition. Goodwill recorded as part of a business combination is not amortized; rather, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired. At September 30, 2016, the Company recorded impairment charges of $55,316 on its recorded goodwill based on impairment tests performed on that date and recorded such charges in the accompanying consolidated statement of operations for the year ended September 30, 2016. There was no remaining goodwill as of September 30, 2016.

Intangible Assets Other Than Goodwill

The Company amortizes the acquisition costs of intangible assets other than goodwill on a straight-line basis over the estimated useful lives of the respective assets. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. The Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. At September 30, 2016, the Company recorded impairment charges of $294,323 on its recorded intangible assets based on impairment tests performed on that date, and recorded such charges in the accompanying consolidated statement of operations for the year ended September 30, 2016. Amortization expense for the year ended September 30, 2016 was $67,266. There were no remaining intangible assets as of September 30, 2016.

Non-controlling Interest

Non-controlling interest represents the non-controlling interest holder’s proportionate share of the equity of the Company’s majority-owned subsidiary, PDC. Non-controlling interest is adjusted for the non-controlling interest holder’s proportionate share of the earnings or losses and other comprehensive income (loss), if any, and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

F-10

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock-Based Compensation

The Company periodically grants stock options and warrants to employees and non-employees in non-capital raising transactions as compensation for services rendered. The Company accounts for stock option and stock warrant grants to employees based on the authoritative guidance provided by the Financial Accounting Standards Board where the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and stock warrant grants to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board where the value of the stock compensation is determined based upon the measurement date at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option or warrant grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

The fair value of the Company’s common stock option and warrant grants are estimated using a Black-Scholes Merton option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes Merton option pricing model could materially affect compensation expense recorded in future periods.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.

In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

NOTE 3 – DISCONTINUED OPERATIONS

On August 11, 2017, the Company entered into an agreement with Dr. Jay Joshi to sell 100% of the issued and outstanding shares of NPC Inc. (“NPC”) to Dr. Joshi. As part of the agreement, Dr. Joshi and NPC released the Company from any and all liabilities, claims and obligations of the Company in favor of Dr. Joshi or NPC and arising from or relating to the operation of the NPC business. Also as part of the agreement, Dr. Joshi’s employment agreement with NPC was terminated and all assets and liabilities of NPC were transferred to Dr. Joshi as of the date of the agreement, including $365,459 of accrued compensation and shareholder advances owed to Dr. Joshi by NPC. The Company agreed to sell NPC to Dr. Joshi so that it could focus on its other business segments, PSI and Stealth Mark, which are technology companies, while NPC was a service business. Further, the elimination of the underlined NPC liabilities to Dr. Joshi will significantly improve Wellness Center Inc.’s financial position. As part of the agreement, the Company agreed to issue Dr. Joshi stock options to purchase 500,000 shares of its common stock with an exercise price of $0.25 per share. Dr. Joshi continued to serve on the Company’s board of directors until February 5, 2018. The Company recorded a $252,508 gain relating to this transaction.

F-11

Components of the balance sheet of NPC at December 31, 2016 were as follows and are reflected as assets and liabilities of discontinued operations on the accompanying balance sheet.

Current Assets
Cash	$	7,770
Prepaid expenses and other current assets		2,700
Total Current Assets		10,470

Property and equipment, net		1,514

TOTAL ASSETS	$	11,984

Current Liabilities
Accounts payable and accrued expenses	$	15,478
Accrued payroll - officers		178,205
Advances from related party		37,504
Total Current Liabilities	$	231,187

Components of the statement of operations relating to NPC was as follows:

		Year Ended
		September 30,
		2017		2016
Total Sales	$	83,826	$	181,680

Operating expenses		231,302		220,610

Loss from discontinued operations	$	(147,476)	$	(38,930)

Other income
Gain from sale of discontinued operations		252,508		-

F-12

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30, 2017 and 2016:

		September 30,		September 30,
		2017		2016

Vehicles	$	15,000	$	15,000
Computer equipment		10,456		9,058
Furniture and fixtures		23,998		23,452
Medical equipment		18,889		18,889
Software		23,207		23,207
Leasehold improvements		15,170		15,170
		106,720		104,776
Less: accumulated depreciation and amortization		(101,594)		(90,469)
Property and equipment, net	$	5,126	$	14,307

Depreciation expense for the years ended September 30, 2017 and 2016 was $11,125 and $16,051, respectively.

NOTE 5 – LOANS PAYABLE

As of September 30, 2015, the Company had outstanding notes payable of $114,000. During the year ended September 30, 2016, unsecured convertible loans of $82,300 with interest at a rate of 10% per annum were issued for cash. The notes also contained a conversion feature that allowed the note holder to convert the notes at a rate of $.09 per share, the trading value of the shares on the date of the issuance of the notes. As the conversion price embedded in the note agreements was equal to the trading price of the common stock on the date of issuance, no beneficial conversion feature was recognized at the date of issuance. In addition, upon issuance of certain of these notes, the Company granted 135,000 shares of common stock with a fair value of $18,900 to the holders, which was been recorded as a finance cost on the consolidated statement of operations.

During the year ended September 30, 2016, notes with a face value of $187,300 were converted into 2,020,221 shares of common stock and 2,369,221 warrants with an aggregate fair value of $442,023 as follows:

Notes payable of $117,500 issued during the year ended September 30, 2016 were converted into 1,322,221 shares of common at $0.09 per share in accordance with their original conversion terms. In accordance with the note agreements, the company also issued to the holders of the notes warrants to acquire 1,322,221 shares of common stock valued at $108,422 upon their election to convert. The fair value of the warrants granted of $108,422 was recorded as a cost of conversion.

Notes payable of $69,800 issued during the year ended September 30, 2015 were converted into 698,000 shares of common stock with a fair value of $125,640 based on the trading price of the common shares on the date of conversion. The Company also agreed to issue to the note holders warrants to acquire 1,047,000 shares of common stock with a fair value of $90,461.

The aggregate fair value of the common shares and warrants to acquire commons shares issued of $442,023 in excess of the face amount of the notes of $187,300 was recognized as a cost of $254,723 upon conversion of the notes. The fair value of the warrants was determined with the use of a Black-Scholes Merton option pricing model with stock prices ranging from $0.09 to $0.10, volatility of 140.9% - 151.3% and risk-free rate of 0.86% - 1.44%.

As of September 30, 2016, loans payable of $9,000 were outstanding.

During the year ended September 30, 2017, the Company borrowed $20,000 and $30,000 from two separate shareholders. The short-term loans are unsecured, have no stated interest rate and are due on demand.

As of September 30, 2017, loans payable of $59,000 were outstanding.

F-13

NOTE 6 – CONVERTIBLE NOTE AGREEMENT

		September 30,		September 30,
		2017		2016

Convertible note payable	$	165,000	$	-
Debt discount – unamortized balance		(115,116)		-
Convertible note payable, net	$	49,884	$	-

In July 2017, the Company entered into a Convertible Note Payable Agreement with an individual under which the Company borrowed $165,000. Net proceeds received by the Company under the agreement were $150,000. In connection with the agreement, the Company issued the individual 165,000 restricted shares of its common stock and warrants to purchase 330,000 shares of its common stock, which vested upon grant. The warrants expire five years from the date of grant and have an exercise price of $0.50 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90^th day from the issue date into the Company’s common stock at the fixed conversion price of $0.25 per share. The note matures in February 2018, but may be extended at the option of the individual. The Company may prepay the note at any time immediately following the issue date upon seven days’ prior written notice.

On the date of the agreement, the closing price of the common stock was $0.31 per share. As the conversion price embedded in the note agreement was below the trading price of the common stock on the date of issuance, a beneficial conversion feature (BCF) was recognized at the date of issuance. The Company recognized a debt discount at the date of issuance in the aggregate amount of $150,000 related to the relative fair value of the warrants and beneficial conversion features, which was comprised of $94,704 related to the intrinsic value of beneficial conversion features and $55,296 related to the relative fair value of the warrants. The aggregate fair value of the warrants of $87,582 was based on a probability effected Black-Scholes option pricing model with a stock price of $0.31, volatility of 139.98% and risk-free rate of 1.28%.During the year ended September 30, 2017 the Company amortized $49,884 of valuation discount leaving an unamortized balance of $115,116 at September 30, 2017.

NOTE 7 – SHAREHOLDERS’ EQUITY

Authorized shares

Common shares issued for services

During the year ended September 30, 2016, the Company issued 1,312,000 shares of its common stock for services valued at $119,800. The shares were valued at the trading price of the common stock at the date of issuance.

During the year ended September 30, 2017, the Company issued 450,000 shares of its common stock for services valued at $138,500. The shares were valued at the trading price of the common stock at the date of issuance.

F-14

NOTE 7 – SHAREHOLDERS’ EQUITY (CONTINUED)

Common shares issued for repayment of accounts payable

During the year ended September 30, 2016, the Company issued 1,000,000 shares of its common stock valued at $100,000 for repayment of consulting fees due of $60,000. The shares were valued at the trading price of the common stock at the date of issuance. The Company recorded an additional $40,000 cost in the September 30, 2016 statement of operations relating to the settlement of the payable.

Common shares issued for cash

During the year ended September 30, 2016, the Company received $714,200 from the sale of 6,918,668 shares of its common stock. In connection with the sale, the Company issued warrants to the shareholders to purchase 9,687,168 shares of the Company’s common stock. The warrants expire five years from the date of grant and have exercise prices ranging from $0.15 per share to $0.18 per share.

During the year ended September 30, 2016, the Company received $306,000 from several investors to purchase 3,591,429 shares of the Company’s common stock. In connection with the sale, the Company issued warrants to the shareholders to purchase 7,982,857 shares of the Company’s common stock. The warrants expire five years from the date of grant and have an exercise prices ranging from $0.12 to $0.15 per share. As of September 30, 2016, the shares had not been issued to the investors, such shares were issued during fiscal 2017.

During the year ended September 30, 2017, the Company received $884,600 from the sale of 5,837,500 shares of its common stock. In connection with the sale, the Company issued warrants to the shareholders to purchase 13,715,000 shares of the Company’s common stock. The warrants expire five years from the date of grant and have exercise prices ranging from $0.12 per share to $0.40 per share.

Common shares issued in connection with convertible note payable

In July 2017, the Company entered into a Convertible Note Payable Agreement with an individual under which the Company borrowed $165,000 (see Note 6). In connection with the agreement, the Company issued the individual 165,000 restricted shares of its common stock, along with 330,000 stock warrants. The total value of the stock on the date of grant was $51,150, which is included as a finance cost in other expenses on the consolidated statement of operations for the year ended September 30, 2017. Under the agreement, a beneficial conversion feature (BCF) was recognized at the date of issuance. The discount on the Convertible Note Payable due to the BCF and warrants was recorded to Additional paid-in Capital in the amount of $150,000 during the year ended September 30, 2017.

Stock Options

The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. Additionally, the Company’s policy is to issue new shares of common stock to satisfy stock option exercises. The Company applied fair value accounting for all share based payments awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.

During the year ended September 30, 2016, the Company issued options to purchase 250,000 shares of its common stock to an officer of the Company with exercise prices ranging from $0.10 to $0.15 per share. The options vested immediately and expire five years from the date of grant. During the year ended September 30, 2016, the Company valued the options using a Black-Scholes option pricing model and recorded $22,631 of stock compensation for the value of the options.

F-15

NOTE 7 – SHAREHOLDERS’ EQUITY (CONTINUED)

During the year ended September 30, 2016, the Company issued options to purchase 5,000 shares of its common stock to a consultant with an exercise price of $0.09 per share. The options vested on August 31, 2016 and expire five years from the date of grant. During the year ended September 30, 2016, the Company valued the options using a Black-Scholes option pricing model and recorded $550 of stock compensation for the value of the options.

The assumptions used for options granted during the year ended September 30, 2016 are as follows:

Exercise price	$	0.09 – 0.15
Expected dividends		-
Expected volatility		139.0% - 152.2%
Risk free interest rate		0.65% - 1.19%
Expected life of options		2.5

During the year ended September 30, 2016, stock options were exercised to purchase 200,000 shares of the Company’s common stock for $2,000.

During the year ended September 30, 2017, the Company issued options to purchase 250,000 shares of its common stock to an officer of the Company with exercise prices ranging from $0.19 to $0.40 per share. The options vested immediately and expire five years from the date of grant. During the year ended September 30, 2017, the Company valued the options using a Black-Scholes option pricing model and recorded $61,001 of stock compensation for the value of the options.

During the year ended September 30, 2017, the Company issued options to purchase 320,000 shares of its common stock to a consultant providing services to the Company with an exercise price of $0.26 per share. The options vested immediately and expire five years from the date of grant. During the year ended September 30, 2017, the Company valued the options using a Black-Scholes option pricing model and recorded $82,237 of stock compensation for the value of the options.

During the year ended September 30, 2017, the Company issued options to purchase 30,000 shares of its common stock to a consultant providing services to the Company with an exercise price of $0.30 per share. The options vested immediately and expire five years from the date of grant. During the year ended September 30, 2017, the Company valued the options using a Black-Scholes option pricing model and recorded $7,131 of stock compensation for the value of the options.

During the year ended September 30, 2017, the Company issued options to purchase 500,000 shares of its common stock to a consulting firm providing services to StealthCo with an exercise price of $0.12 per share. All of the options vested on January 30, 2017. During the year ended September 30, 2017, the Company valued the options using a Black-Scholes option pricing model and recorded $54,600 of stock compensation for the value of the options.

During the year ended September 30, 2017, the Company issued options to purchase 50,000 shares of its common stock to a consulting firm providing services to PSI with an exercise price of $0.16 per share. The options vested immediately and expire five years from the date of grant. During the year ended September 30, 2017, the Company valued the options using a Black-Scholes option pricing model and recorded $15,040 of stock compensation for the value of the options.

During the year ended September 30, 2017, the Company issued options to purchase 500,000 shares of its common stock to a Director, Dr. Jay Joshi, relating to the sale of NPC Inc. shares (see Note 3). The options had an exercise price of $0.24 per share, vested immediately and expire five years from the date of grant. During the year ended September 30, 2017, the Company valued the options using a Black-Scholes option-pricing model and recorded $106,350 for the value of the options, which was recorded as a cost to the Company in computing the total gain on the transaction (see Note 3).

The assumptions used for options granted during the year ended September 30, 2017 are as follows:

Exercise price	$	0.12 - 0.40
Expected dividends		-
Expected volatility		138.2% - 152.3%
Risk free interest rate		0.96% - 1.39%
Expected life of options		2.5

F-16

NOTE 7 – SHAREHOLDERS’ EQUITY (CONTINUED)

Stock Options (Continued)

The table below summarizes the Company’s stock option activities for the years ended September 30, 2017 and 2016:

	Number of Option Shares		Exercise Price Range Per Share		Weighted Average Exercise Price		Fair Value at Date of Grant

Balance, September 30, 2015	5,172,500	$	0.01 – 2.00	$	0.60	$	1,516,088
Granted	255,000		0.09 – 0.15		0.12		23,181
Cancelled	-		-		-		-
Exercised	(200,000)		0.01		0.01		-
Expired	-		-		-		-
Balance, September 30, 2016	5,227,500	$	0.01 - 2.00	$	0.60	$	1,539,269
Granted	1,650,000		0.12 - 0.40		0.21		326,359
Cancelled	(5,000)		0.09		0.09		-
Exercised	-		-		-		-
Expired	(50,000)		1.00		1.00		-
Balance, September 30, 2017	6,822,500	$	0.10 – 2.00	$	0.51	$	1,865,628
Vested and exercisable, September 30, 2017	6,822,500	$	0.10 - 2.00	$	0.51	$	1,865,628

Unvested, September 30, 2017	-	$	-	$	-	$	-

The aggregate intrinsic value for option shares outstanding at September 30, 2017 was $184,938.

The following table summarizes information concerning outstanding and exercisable options as of September 30, 2017:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable	Average Remaining Contractual Life (in years)		Weighted Average Exercise Price

$0.01 - 0.39	3,300,000	3.56	$	0.17		3,300,000	3.56	$	0.17
0.40 - 0.99	2,122,500	1.55		0.40		2,122,500	1.55		0.40
1.00 - 1.99	750,000	3.25		1.00		750,000	3.25		1.00
2.00	650,000	3.25		2.00		650,000	3.25		2.00
$0.01 - 2.00	6,822,500	2.87	$	0.51		6,822,500	2.87	$	0.51

As of September 30, 2017, there were 677,500 shares of stock options remaining available for issuance under the 2010 Plan.

Stock Warrants

During the year ended September 30, 2016:

The Company issued warrants to purchase 17,670,025 shares with exercise prices of $0.12 and $0.18 per share as part of the sale of equity units. The warrants expire five years from the date of grant.

The Company issued warrants to purchase 2,369,221 shares with an exercise price of $0.15 per share as part of the conversion of loans payable to equity (see Note 5). The warrants expire five years from the date of grant.

Warrants were exercised to purchase 300,000 shares of the Company’s common stock for $3,000.

F-17

NOTE 7 – SHAREHOLDERS’ EQUITY (CONTINUED)

Stock Warrants (continued)

During the year ended September 30, 2017:

The Company issued warrants to purchase 13,715,000 shares with exercise prices of $0.12 and $0.40 per share as part of the sale of equity units. The warrants expire five years from the date of grant.

The Company issued warrants to purchase 330,000 shares with an exercise price of $0.31 per share in connection with the issuance of a convertible note payable (see Note 6). The warrants expire five years from the date of grant.

Warrants were exercised to purchase 4,065,414 shares of the Company’s common stock for $3,000.

The table below summarizes the Company’s warrants activities for the years ended September 30, 2017 and 2016:

	Number of Warrant Shares		Exercise Price Range Per Share		Weighted Average Exercise Price			Fair Value at Date of Issuance

Balance, September 30, 2015	36,371,578	$	0.01 - 2.31	$		0.32	$		1,840,934
Granted	20,039,246		0.12 - 0.18			0.14			222,703
Canceled	-		-			-			-
Exercised	(300,000)		0.01			0.01			-
Expired	(1,384,334)		1.00			1.00			-
Balance, September 30, 2016	54,938,158	$	0.01 - 2.31	$		0.25	$		2,063,637
Granted	14,045,000		0.12 - 0.40			0.19			87,582
Cancelled	-		-			-			-
Exercised	(4,065,414)		0.12 - 0.25			0.15			-
Expired	(756,440)		0.45 - 2.31			0.86			-
Balance, September 30, 2017	64,161,304	$	0.12 - 1.00	$		0.24	$		2,151,219
Vested and exercisable, September 30, 2017	64,161,304	$	0.12 - 1.00	$		0.24	$		2,151,219

Unvested, September 30, 2017	-	$	-	$		-	$		-

The aggregate intrinsic value for warrant shares outstanding at September 30, 2017 was $3,168,053.

The following table summarizes information concerning outstanding and exercisable warrants as of September 30, 2017:

	Warrants Outstanding				Warrants Exercisable
Range of Exercise Prices	Number Outstanding	Average Remaining Contractual Life (in years)		Weighted Average Exercise Price	Number Exercisable	Average Remaining Contractual Life (in years)		Weighted Average Exercise Price

$0.12 – 0.20	43,931,059	3.03	$	0.15	43,931,059	3.03	$	0.15
0.21 – 0.49	15,730,507	1.35		0.35	15,730,507	1.35		0.35
0.50 – 1.00	4,499,738	0.89		0.75	4,499,738	0.89		0.75

$0.12 – 1.00	64,161,304	2.47	$	0.24	64,161,304	2.47	$	0.24

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NOTE 8 – RELATED PARTY TRANSACTIONS

Advances from Shareholders

From time to time, shareholders of the Company advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand. At September 30, 2016, advances from shareholders were $13,041. There were no advances from shareholders outstanding as of September 30, 2017.

Related Party Sales

Note Receivable – Chairman, President and CEO

NOTE 9 – SETTLEMENT OF ACCRUED LIABILITIES ACQUIRED WITH PSI ACQUISITION

Edwin Longo was a principal in Psoria-Shield, Inc. (PSI), a company that was purchased by Wellness Center in 2012..Prior to the acquisition of PSI, Mr. Longo made advances of $224,444 to PSI that were outstanding at the time Wellness acquired that company. Mr. Longo had filed a claim against Wellness and PSI for payment of those advances. In February 2017, through the Circuit Court of the 13^th Judicial Circuit in and for Hillsborough County, Florida, a Final Settlement Agreement (“Settlement Agreement”) was executed between the Company, Longo and certain other parties. The Settlement Agreement provided for, among other matters, the transfer of all right, title and interest of 250,000 common shares of Wellness held by certain parties to the Settlement Agreement back to Wellness, and the release of Wellness from any and all claims against the Company by Longo, including but not limited to the advances owed to him of $224,444.

In accounting for the Settlement Agreement on the Company’s statement of operations for the year ended September 30, 2017, the balance of the amount owed to Longo of $224,444, plus another $64,333 of long outstanding or improperly recorded accounts payable, was canceled and accounted for as gain on settlement in an aggregate amount of $288,777.

NOTE 10 – SEGMENT REPORTING

Reportable segments are components of an enterprise about which separate financial information is available and that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. During the year ended September 30, 2017, the Company discontinued operations of its NPC segment (see Note 3).

The Company operates in following business segments:

(i)Medical Devices: which it stems from PSI, its wholly-owned subsidiary it acquired on August 24, 2012, a developer, manufacturer, marketer and distributer of targeted Ultra Violet ("UV") phototherapy devices for the treatment of skin diseases.

(ii)Authentication and Encryption Products and Services: which it stems from StealthCo, its wholly-owned subsidiary formed on March 18, 2014. StealthCo engages in the business of selling, licensing or otherwise providing certain authentication and encryption products and services upon acquisition of certain assets from SMI.

F-19

NOTE 10 – SEGMENT REPORTING (continued)

The detailed segment information of the Company is as follows:

Wellness Center USA, Inc.
Assets By Segments

		September 30, 2017
		Corporate		Medical Devices		Authentication and Encryption		Total
ASSETS
Current Assets
Cash	$	1,358	$	389	$	27,622	$	29,369
Accounts receivable		-		24,999		-		24,999
Inventories		-		-		12,335		12,335
Prepaid expenses and other current assets		-		-		1,751		1,751

Total current assets		1,358		25,388		41,708		68,454

Property and equipment, net		1,450		-		3,676		5,126
Other assets		15,000		1,760		-		16,760

Total other assets		16,450		1,760		3,676		21,886

TOTAL ASSETS	$	17,808	$	27,148	$	45,384	$	90,340

Wellness Center USA, Inc.
Operations by Segments

		For the Year Ended
		September 30, 2017
		Corporate		Medical Devices		Authentication and Encryption		Total
Sales:
Trade	$	-	$	180,999	$	28,600	$	209,599
Consulting services		-		-		63,125		63,125

Total Sales		-		180,999		91,725		272,724

Cost of goods sold		-		71,827		75,117		146,944

Gross profit		-		109,172		16,608		125,780

Operating expenses		1,066,227		436,557		626,400		2,129,184

Loss from operations	$	(1,066,227)	$	(327,385)	$	(609,792)	$	(2,003,404)

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NOTE 10 – SEGMENT REPORTING (continued)

Wellness Center USA, Inc.
Operations by Segments

		For the Year Ended
		September 30, 2016
		Corporate		Medical Devices		Authentication and Encryption		Total
Sales:
Trade	$	-	$	100,519	$	108,343	$	208,862
Trade - related party		-		54,117		-		54,117
Consulting services		-		-		36,625		36,625
Total Sales		-		154,636		144,968		299,604

Cost of goods sold		-		176,381		13,210		189,591

Gross profit (loss)		-		(21,745)		131,758		110,013

Operating expenses
Selling, general and administrative expenses		1,164,377		403,768		348,901		1,917,046
Impairment of goodwill and intangible assets		-		94,214		255,425		349,639
Total operating expenses		1,164,377		497,982		604,326		2,266,685

Loss from operations	$	(1,164,377)	$	(519,727)	$	(472,568)	$	(2,156,672)

NOTE 11 – COMMITMENTS

Operating Leases

The Company leases its corporate office facilities under a non-cancellable lease agreement. The lease was initiated in July 2016 and expires February 28, 2024. The lease contains escalating rent payments and free rent periods. The Company accounts for the rent expense on a straight-line basis. At September 30, 2017 and 2016, the Company recorded a deferred rent obligation of $85,294 and $22,149 relating to the lease.

Commencing on October 1, 2016, the Company’s wholly-owned subsidiary, StealthCo, entered into a non-cancellable lease agreement to lease its office facilities in Oak Ridge, Tennessee. The term of the lease is five years and expires September 30, 2021.

Minimum annual rental commitments under non-cancelable leases at September 30, 2017 are as follows:

Years ending September 30,		Amount
2018	$	128,179
2019		145,812
2020		164,614
2021		184,583
2022		152,709
Thereafter		226,398
TOTAL	$	1,002,295

Rent expense was $183,685 and $120,036 for the years ended September 30, 2017 and 2016, respectively.

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NOTE 11 – COMMITMENTS (continued)

Legal Matters

Employment Contracts

Synopsis of Employment Agreement – Rick Howard

F-22

NOTE 12 – INCOME TAXES

At September 30, 2017, the Company had net operating loss (“NOL”) carryforwards for federal income tax purposes of approximately $15 million that may be offset against future taxable income through 2037. No tax benefit has been reported with respect to these net operating loss carryforwards because the Company believes that the realization of the Company’s net deferred tax assets of approximately $5,000,000 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carryforwards are offset by a full valuation allowance.

Deferred tax assets consist primarily of the tax effect of NOL carryforwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding the probability of its realization.

The Company’s effective income tax rate differs from the amount computed by applying the federal statutory income tax rate to loss before income taxes as follows:

	September 30,	September 30,
	2017	2016

Income tax benefit at federal statutory rate	(34.00%)	(34.00%)
State income tax benefit, net of federal benefit	(6.00%)	(6.00%)
Change in valuation allowance	40.00%	40.00%
Income taxes at effective income tax rate	-%	-%

The components of deferred taxes consist of the following at September 30, 2017 and 2016:

		September 30,		September 30,
		2017		2016

Net operating loss carryforwards	$	5,535,673	$	4,919,273
Impairment of goodwill and intangible assets		-		139,856
Less: Valuation allowance		(5,535,673)		(5,059,129)

Net deferred tax assets	$	-	$	-

NOTE 13 – SUBSEQUENT EVENTS

Effective November 17, 2017, the Board of Directors filled then existing vacancies in the Board by appointing each of the following persons as a member of the Board: William E. Kingsford; Thomas E. Scott, CPA; Paul D. Jones; and Roy M. Harsch, each to serve until the next annual meeting of the shareholders, or until his successor has been duly qualified and appointed.

On December 1, 2017, the Board of Directors consisting of Andrew J. Kandalepas, Jay Joshi, M.D., Messrs. Kingsford, Scott, Jones, and Harsch, accepted the voluntary resignation of Mr. Kandalepas, as President, and appointed Mr. Jones as President. Mr. Kandalepas’ resignation, and Mr. Jones’ appointment, were effective immediately.

On December 1, 2017, the Board of Directors also accepted the voluntary resignation of Dr. Joshi, M.D., as Secretary, effective immediately, and appointed Mr. Scott as Secretary, to serve until the next annual meeting of the shareholders or until his successor is qualified and appointed.

The Board of Directors appointed a Compensation Committee consisting of Messrs. Jones, Scott and Kingsford.

On February 5, 2018, the Board of Directors appointed Calvin R. O’Harrow as Chief Operating Officer and a member of the Board. It accepted the resignation of Andrew J. Kandalepas as Chief Financial Officer (CFO) and Principal Accounting Officer (PAO) and appointed Douglas W. Samuelson, C.P.A., as CFO and PAO. It also removed Jay Joshi, M.D., as a Director.

F-23

NOTE 13 – SUBSEQUENT EVENTS (CONTINUED)

On January 1, 2018, the Company entered into employment agreements with three employees of SCI, under which their employment shall continue in effect for a period of three years. Each agreement allows for a base salary that can increase each year based on certain profitability goals of SCI or SCI products. Under the agreements, the Company will issue options to purchase a combined total of 1,775,000 shares of its common stock. The options are exercisable over a term of five years, with an exercise price equal to the fair market value of the common stock on the date of grant. A combined total of 675,000 shares will vest in equal amounts over a three-month period, starting on January 1, 2018, with the remainder vesting in equal amounts over the following one year and two months.

Further, provided the employees remain employed by the Company, beginning on January 1, 2018, they will be granted additional stock options to purchase up to an aggregate total of 250,000 shares of the Company’s common stock each quarter, exercisable over a five year period, and issuable on the last day of each quarter ending, with an exercise price to be set at the then fair market value and based on the closing trading price on the last day of each quarter end. All Options shall accelerate and become fully vested upon the sale or change of control of the Company.

Subsequent to September 30, 2017, the Company issued 150,000 shares of its common stock for services provided by accounting and PSI consultants. The shares were valued at the trading price of the common stock at the date of issuance.

Subsequent to September 30, 2017, warrants were exercised to purchase 1,407,619 shares of the Company’s common stock for $170,914.

In January 2018, the Company entered into a promissory note payable agreement with one of its investors. Under the agreement, the Company borrowed $50,000. The note accrued interest at 8% per annum, is unsecured and is due in January 2019.

In February 2018, the Company entered into a promissory note payable agreement with one of its investors. Under the agreement, the Company borrowed $37,500. The note accrued interest at 8% per annum, is unsecured and is due in February 2019.

F-24