UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Mark One
For the quarterly period ended
For the transition period from ______ to _______
COMMISSION FILE NO.
(Exact name of registrant as specified in its charter)
| 3669 | ||
| (State or Other Jurisdiction of | (IRS Employer | (Primary Standard Industrial |
| Incorporation or Organization) | Identification Number) | Classification Code Number) |
(Address of principal executive offices)
Phone:
(Registrant’s telephone number)
Indicate by checkmark whether the issuer: (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
| ☒ | |
Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
| Class | Outstanding as of February 20, 2024 | |
| Common Stock, $0.0001 |
WEARABLE HEALTH SOLUTIONS, INC.
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Wearable Healthcare Solutions, Inc.
Consolidated Balance Sheets
As at December 31, 2023 and June 30, 2023
| December 31, | June 30, | |||||||
| 2023 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid inventory | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Short-term lease liability | ||||||||
| Related party debt, net | ||||||||
| Deferred revenue | ||||||||
| Line of credit | ||||||||
| Notes payable | ||||||||
| Notes payable - other | ||||||||
| Notes payable - related party | ||||||||
| Convertible notes - Leonite | ||||||||
| Convertible notes - other | ||||||||
| Stock subscription liability | ||||||||
| Total Current Liabilities | ||||||||
| Long-term lease liability | ||||||||
| Total Liabilities | ||||||||
| SHAREHOLDERS' DEFICIT | ||||||||
| Series A Convertible Preferred Stock: $ par value; shares authorized, shares issued and outstanding as of both December 31, 2023 and June 30, 2023 | ||||||||
| Series B Convertible Preferred Stock: $ par value; shares authorized, shares issued and outstanding as of both December 31, 2023 and June 30, 2023 | ||||||||
| Series C Preferred Stock: $ par value; shares authorized, and shares issued and outstanding as of December 31, 2023 and June 30, 2023 , respectively | ||||||||
| Series D Preferred Stock: $ par value; shares authorized, shares issued and outstanding as of both December 31, 2023 and June 30, 2023 | ||||||||
| Series E Preferred Stock: $ par value; shares authorized, shares issued and outstanding as of December 31, 2023 and June 30, 2023 , respectively | ||||||||
| Common stock: $ par value; shares authorized, and shares issued and outstanding as of December 31, 2023 and June 30, 2023, respectively | ||||||||
| Common stock to be issued | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders' Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders' Deficit | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
| 3 |
Wearable Healthcare Solutions, Inc.
Consolidated Statements of Operations
For the Three and Six Months Ended December 31, 2023 and 2022 (unaudited)
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling expense | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Research and development expense | ||||||||||||||||
| Consulting and professional fees | ||||||||||||||||
| Insurance | ||||||||||||||||
| Rent | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income / (expense), net | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Gain on debt extinguishment | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Net income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Income taxes | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Preferred stock extinguishment | ||||||||||||||||
| Net income (loss) attributable to common holders | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) per common share - Basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) per common share - Diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average common shares outstanding - Basic | ||||||||||||||||
| Weighted average common shares outstanding - Diluted | ||||||||||||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
| 4 |
Wearable Healthcare Solutions, Inc.
Consolidated Statements of Changes in Shareholders’ Deficit
For the Three and Six Months Ended December 31, 2023 and 2022 (unaudited)
| Series A | Series B | Series C | Series D | Series E | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Loss for the period | – | – | – | – | – | |||||||||||||||||||||
| Common stock for compensation | – | – | – | – | – | |||||||||||||||||||||
| Common stock to be issued for compensation | – | – | – | – | – | |||||||||||||||||||||
| Common stock for officer compensation | – | – | – | – | – | |||||||||||||||||||||
| Common stock to be issued for officer compensation | – | – | – | – | – | |||||||||||||||||||||
| Shares issued for services | – | – | – | – | – | |||||||||||||||||||||
| Shares sold for cash - prior quarter | – | – | – | – | – | |||||||||||||||||||||
| Shares sold for cash - current quarter | – | – | – | – | – | |||||||||||||||||||||
| Payment of subscription receivable | – | – | – | – | – | |||||||||||||||||||||
| Balance at September 30, 2022 | ||||||||||||||||||||||||||
| Income for the period | – | – | – | – | – | |||||||||||||||||||||
| Common stock to be issued for compensation | – | – | – | – | – | |||||||||||||||||||||
| Common stock for officer compensation | – | – | – | – | – | |||||||||||||||||||||
| Common stock to be issued for officer compensation | – | – | – | – | – | |||||||||||||||||||||
| Shares issued for services | – | – | – | – | – | |||||||||||||||||||||
| Commitment shares - Leonite convertible notes | – | – | – | – | – | |||||||||||||||||||||
| Shares sold for cash - prior quarter | – | – | – | – | – | |||||||||||||||||||||
| Shares sold for cash - current quarter | – | – | – | – | – | |||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Income for the period | – | – | – | – | – | |||||||||||||||||||||
| Common stock for officer compensation | – | – | – | – | – | |||||||||||||||||||||
| Shares sold for cash - prior quarter | – | – | – | – | – | |||||||||||||||||||||
| Shares sold for cash - current quarter | – | – | – | – | – | |||||||||||||||||||||
| Balance at September 30, 2023 | ||||||||||||||||||||||||||
| Income for the period | – | – | – | – | – | |||||||||||||||||||||
| Common stock for officer compensation | – | – | – | – | – | |||||||||||||||||||||
| Reversal of common stock issued for former officer compensation | – | – | – | – | – | |||||||||||||||||||||
| Cancellation of Preferred C shares | – | – | ( | ) | ( | ) | – | – | ||||||||||||||||||
| Preferred stock extinguishment | – | – | – | – | – | |||||||||||||||||||||
| Shares sold for cash - prior quarter | – | – | – | – | – | |||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
| 5 |
Wearable Healthcare Solutions, Inc.
Consolidated Statements of Shareholders’ Deficit
For the Three and Six Months Ended December 31, 2023 and 2022 (unaudited)
(continued)
| Common Stock | Common Stock to be issued | Additional Paid in Capital | Accumulated | Total Shareholders' | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Amount | Deficit | Deficit | ||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock for compensation | ( | ) | ( | ) | ||||||||||||||||||||||
| Common stock to be issued for compensation | – | |||||||||||||||||||||||||
| Common stock for officer compensation | ( | ) | ( | ) | ||||||||||||||||||||||
| Common stock to be issued for officer compensation | – | |||||||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||
| Shares sold for cash - prior quarter | ( | ) | ( | ) | ||||||||||||||||||||||
| Shares sold for cash - current quarter | – | |||||||||||||||||||||||||
| Payment of subscription receivable | – | – | ||||||||||||||||||||||||
| Balance at September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||
| Income for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock to be issued for compensation | – | |||||||||||||||||||||||||
| Common stock for officer compensation | – | – | ||||||||||||||||||||||||
| Common stock to be issued for officer compensation | – | |||||||||||||||||||||||||
| Shares issued for services | – | – | ||||||||||||||||||||||||
| Commitment shares - Leonite convertible notes | – | |||||||||||||||||||||||||
| Shares sold for cash - prior quarter | – | – | ||||||||||||||||||||||||
| Shares sold for cash - current quarter | – | |||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | ) | ( | ) | ||||||||||||||||||
| Income for the period | – | – | ||||||||||||||||||||||||
| Common stock for officer compensation | – | |||||||||||||||||||||||||
| Shares sold for cash - prior quarter | ( | ) | ( | ) | ||||||||||||||||||||||
| Shares sold for cash - current quarter | ||||||||||||||||||||||||||
| Balance at September 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||
| Income for the period | – | – | ||||||||||||||||||||||||
| Common stock for officer compensation | – | |||||||||||||||||||||||||
| Reversal of common stock issued for former officer compensation | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Cancellation of Preferred C shares | – | – | ( | ) | ( | ) | ||||||||||||||||||||
| Preferred stock extinguishment | – | – | ||||||||||||||||||||||||
| Shares sold for cash - prior quarter | – | |||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
| 6 |
Wearable Healthcare Solutions, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2023 and 2022 (unaudited)
| Six Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flow from operating activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustment for non-cash charges and other items: | ||||||||
| Depreciation | ||||||||
| Amortization of deferred debt issuance costs | ||||||||
| Amortization of debt discount | ||||||||
| Stock based compensation expense | ||||||||
| Gain on debt extinguishment | ( | ) | ||||||
| Total adjustments | ( | ) | ( | ) | ||||
| Changes in working capital | ||||||||
| Decrease / (increase) in accounts receivable | ( | ) | ( | ) | ||||
| Decrease / (increase) in inventory | ( | ) | ||||||
| Decrease / (increase) in prepaid inventory | ||||||||
| Decrease / (increase) in prepaid expenses | ( | ) | ||||||
| (Decrease) / increase in accounts payable | ( | ) | ||||||
| (Decrease) / increase in accrued expenses | ||||||||
| (Decrease) / increase in accrued expenses - related party | ||||||||
| (Decrease) / increase in deferred revenue | ( | ) | ||||||
| Total changes in working capital | ||||||||
| Cash flow used in operating activities | ( | ) | ( | ) | ||||
| Cash flow used in investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Cash flow used in investing activities | ( | ) | ||||||
| Cash flow provided by financing activities | ||||||||
| Proceeds received from related parties | ||||||||
| Proceeds from issuance of convertible notes | ||||||||
| Repayments of note payable | ( | ) | ( | ) | ||||
| Proceeds from issuance of stock (net of subscriptions receivable) and stock subscription liability | ||||||||
| Cash flow from financing activities | ||||||||
| Decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of the period | ||||||||
| Cash and cash equivalents at end of the period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid during the periods for: | ||||||||
| Interest | $ | $ | ||||||
| Taxes | $ | $ | ||||||
| Supplemental Disclosures of Non-Cash Financing Activities | ||||||||
| Note payable issued to related party as reclassification of amounts due | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
| 7 |
WEARABLE HEALTHCARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023 (unaudited) and June 30, 2023
Note 1 – Nature and Continuance of Operations
Wearable Healthcare Solutions Inc. (the Company) was incorporated as Medical Alarm Concepts Holding, Inc. on June 4, 2008, under the laws of the State of Nevada. The Company was formed for the sole purpose of acquiring all of the membership units of Medical Alarm Concepts LLC, a Pennsylvania limited liability company (“Medical LLC”). On May 26, 2016, the Company filed an Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada to change its name from “Medical Alarm Concepts, Inc.” to “Wearable Health Solutions, Inc.”
The Company provides mobile health (mHealth) products and services to be used by customers in case of an emergency. As a provider of personal emergency devices, the Company provides innovative wearable healthcare products, tracking services, and turn-key solutions that enable our users to be proactive with their health, as well as safe and protected.
The Company’s flagship products are the iHelp devices, the 3G and the next generation iHelp MAX™ – personal emergency alarm that are used to summon help in the event of an emergency at home.
Basis of presentation
The accompanying interim consolidated financial statements are unaudited, but in the opinion of management of Wearable Healthcare Solutions, Inc. (the Company), contain all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position at December 31, 2023, and the results of operations and changes in shareholders’ deficit for the three and six months ended December 31, 2023 and cash flows for the six months ended December 31, 2023. The balance sheet as of June 30, 2023, is derived from the Company’s audited financial statements. These unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America, or GAAP. These unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended June 30, 2023 and 2022, which are included in the Company’s June 30, 2023 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on October 20, 2023.
Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on this Form 10-K for the fiscal year ended June 30, 2023.
The results of operations for the three and six months ended December 31, 2023, are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 2024.
| 8 |
Note 2 – Summary of Significant Accounting Policies
Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiary: Medical Alarm Concepts, LLC. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of management’s estimates requires the exercise of judgment. The Company’s management evaluates these significant estimates and assumptions including those related to the fair value of acquired assets and liabilities, stock-based compensation, income taxes, allowance for doubtful accounts, long-lived assets, and inventories, and other matters that affect the consolidated financial statements and disclosures. Actual results could differ from those estimates.
Cash and Cash Equivalents – For purposes of the Statement of Cash Flows, the Company considers highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable – The Company estimates
credit loss reserves for accounts receivable on an individual receivable basis. A specific impairment allowance reserve is established
based on expected future cash flows and the financial condition of the debtor. The Company charges off customer balances in part or in
full when it is more likely than not that we will not collect that amount of the balance due. The Company considers any balance unpaid
after the contract payment period to be past due. There are $
Software Development for internal use - The Company accounts for software development costs in accordance with applicable guidelines. Software development costs include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development. Software development costs also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Such costs related to software development are included in software development expense until the point that technological feasibility is reached. Once technological feasibility is reached, such costs are capitalized and depreciated over the useful estimated lives of the software. For software modifications or developments, the Company expenses the costs.
Concentration of Credit Risk - Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.
Recognition of Revenues – Recognition of Revenues – In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from outside contracts with customers and supersedes most of the existing revenue recognition guidance and notes that lease contracts with customers are a scope exception. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. On August 12, 2015, the FASB issued ASU 2015-14 to defer the effective date of ASU 2014-09. Public business entities may elect to adopt the amendments as of the original effective date; however, adoption is required for annual reporting periods beginning after December 15, 2017. The Company has adopted this pronouncement.
| 9 |
The Company’s revenues are derived principally from utilizing new technology in the medical alarm industry to provide 24-hour personal response monitoring services and related products to subscribers with medical or age-related conditions. The Company recognizes revenue when it is realized or realizable and earned. For hardware sales, the Company recognizes revenues at a point in time when the product is shipped. Customers are billed on Net 30 terms. For service revenue, the Company recognizes revenues over the term of the service contract and when the services are rendered. For customers who pay several months at a time, the Company records revenues for the month’s services and the balance of funds to deferred revenues and records the balance of revenues as they become current.
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| Revenue | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Hardware revenue | $ | $ | $ | |||||||||||||
| Service Revenue | ||||||||||||||||
| Total Revenue | $ | $ | ||||||||||||||
Deferred revenues at December 31, 2023 and June 30,
2023 were $
Deferred Taxes – The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
ASC 740, Income Taxes, requires a company to first determine whether it is more likely than not (which is defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.
The Federal and state income tax returns of the Company for 2023, 2022, and 2021 are subject to examination by the Internal Revenue Service and state taxing authorities for three (3) years from the date filed.
Fair value of financial instruments. The Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASB Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation techniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable market prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
| 10 |
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.
From time to time, our financial instruments include cash, accounts payable and accrued expenses, convertible notes, lines of credit, and credit cards.
Research
and Development - Research and development costs are charged to operations as they are incurred. Legal fees and other
direct costs incurred in obtaining and protecting patents are also expensed as incurred, due to the uncertainty with respect to
future cash flows resulting from the patents. For the three and six months ended December 31, 2023 and 2022, the Company recorded
$-
| Three months ended | Six months ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Series A convertible preferred stock | ||||||||||||||||
| Series B convertible preferred stock | ||||||||||||||||
| Series C convertible preferred stock | ||||||||||||||||
| Series D convertible preferred stock | ||||||||||||||||
| Series E convertible preferred stock | ||||||||||||||||
| Common stock to be Issued | ||||||||||||||||
| Leonite Convertible notes | ||||||||||||||||
| Stock subscription liability | ||||||||||||||||
| Others | ||||||||||||||||
| Total potentially dilutive shares | ||||||||||||||||
| 11 |
| Three months ended December 31, | Six months ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) attributable to common holders | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average common shares outstanding - basic | ||||||||||||||||
| Weighted average common shares outstanding - diluted | ||||||||||||||||
| Net income (loss) per share - basic | ( | ) | ( | ) | ||||||||||||
| Net income (loss) per share - diluted | ( | ) | ( | ) | ||||||||||||
The Company has recognized income for this quarter, as a result, the basic and diluted share bases will not be presented as the same. For the three and six month periods ended December 31, 2023 and 2022, the Company recognized income of $0.00 and $0.00 and incurred losses of ($0.00) and ($0.00) per basic share, respectively. For the three and six month periods ended December 31, 2023 and 2022, the Company recognized income of $0.00 and $0.00 and incurred losses ($0.00) and ($0.00) per diluted share, respectively.
Recent Accounting Pronouncements
The Company reviewed all recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC, and they did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
Note 3 – Going Concern
The accompanying consolidated
financial statements for the three and six months ended December 31, 2023 and 2022 have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As at December
31, 2023 and June 30, 2023, the Company has shown losses for the last two years and has an accumulated deficit of ($
During the six months
ended December 31, 2023, the Company has net cash used in operating activities of $
Management believes that the Company’s capital requirements will depend on many factors including the success of the Company’s development efforts and its efforts to raise capital. Management also believes the Company needs to raise additional capital for working capital purposes. There can be no assurance that the Company will be able to obtain the additional capital resources necessary to implement its business plan or that any assumptions relating to its business plan will prove accurate.
These factors raise substantial doubt about our ability to continue as a going concern for a period of 12 months from the issue date of this report. The consolidated financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
| 12 |
Note 4 – Inventory, Prepaid Inventory, and Prepaid Expenses
The Company maintains some inventory in its warehouse and purchases some of its inventory overseas. Inventories, except for stock in transit, are stated at lower of cost and net realizable value. Stock in transit is valued at cost comprising invoice value plus other charges thereon. Net realizable value is the estimated selling price in ordinary course of business less estimated costs of completion and selling expenses. The quantity of inventory may vary from time to time depending on the delivery schedule of overseas shipments.
As of December 31, 2023
and June 30, 2023, the Company had $
Note 5 – Property and Equipment
The Company has $20,000 in furnishings, $19,689 in
office computers and equipment, and capitalized software development costs of $45,900 which are fully depreciated. On August 30, 2021,
the Company purchased its dealer portal for $50,000 for internal use, amortized over 60 months. On September 26, 2022, the Company purchased
used furniture for $
As of December
31, 2023 and June 30, 2023, the Company recorded $
| December 31, | June 30, | |||||||
| 2023 | 2023 | |||||||
| Furniture | $ | $ | ||||||
| Office computers, equipment, software | ||||||||
| Software development costs | ||||||||
| Dealer portal | ||||||||
| Furniture | ||||||||
| Property, plant, and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Net property, plant, and equipment | $ | $ | ||||||
Note 6 – Accounts payable and accrued expenses and liabilities
The Company recorded accounts payable of $
Accrued expenses and other current liabilities are
expenses that have been incurred but not yet paid, and mainly include legal fees, audit fees and other professional fees as well as accrued
interest in connection with the credit line and notes payable. The Company recorded $
| 13 |
Note 7 – Notes Payable and Note payable-other
Notes payable consists of notes payable from our subsidiary, notes payable-other, convertible notes payable, notes payable for stock purchases under Reg A, short term notes payable, and notes payable-BOAPIN portal, as follows:
| December 31 | June 30, | |||||||
| 2023 | 2023 | |||||||
| Notes from subsidiary | $ | $ | ||||||
| Notes payable - Reg A deposits | ||||||||
| Short term bridge loan | ||||||||
| Total notes payable | $ | $ | ||||||
Notes Payable - subsidiary
The Company has various loans and credit lines outstanding.
The credit line carries an interest rate of
| December 31 | June 30, | |||||||
| 2023 | 2023 | |||||||
| Wells Fargo Loan | $ | $ | ||||||
| On Deck Loan | ||||||||
| Prosper Loans | ||||||||
| $ | $ | |||||||
Short term bridge loan - COHEN
On July 31, 2020, the Company secured a $
On August 19, 2021, the Company repaid $
At December 31, 2023 and June 30, 2023, the Company
recorded a short term note payable of $
Note payable – stock purchases under Reg A
At December 31, 2023 and June 30, 2023, the Company
has recorded $
| 14 |
Note Payable – Other
In November, 2016, the Company secured a $
During the three and six months ended December
31, 2023, the Company recorded interest expense of $
Convertible note payable – BENZA, D2CF
On March 1, 2016 and
March 3, 2016, the Company closed a private placement of debt and received an aggregate of $
On July 21, 2023, the Company
entered into settlement agreements with the principals of the company. In the Nevada Lawsuit (see Note 10), the Company agreed to settle
for $345,000, with $145,000 paid upon signing and $200,000 due within 6 months. The Settlement Agreement allows for an increased payment
of $600,000 if the Second Nevada Settlement Payment isn’t made within six months. In the New York Lawsuit (see Note 10), the Company
will pay $80,000, with $10,000 due upon execution of the Settlement. Payments received by the Company will be applied first to the Second
New York Payment. On July 26, 2023 the company paid $
As of December 31, 2023
and June 30, 2023, the Company reported $
Convertible Note – Leonite Capital, LLC
On
December 5, 2022, the Company received $
The
Company will begin making nine equal amortization payments of $
| 15 |
Credit line – MediPendant New York Inc.
On September 30, 2014, the subsidiary received a
line of credit with Medi Pendant New York, Inc. (“MNY). Under the original terms of the line of credit agreement, the Company
was able to borrow up to $
As of December 31, 2023 and June 30, 2023, the
balance due on the line of credit was $
Debt settlement – On Deck, Susquehanna, MCA Cure
In 2019, our subsidiary engaged MCA CURE to
negotiate settlements with two creditors: On Deck and Susquehanna Salt, noted in the table above. The Company ceased paying the loan
payments and paid to MCA Cure $43,875 in 2019 and $47,000 in 2020, at which point the Company was contacted and MCA Cure
assured they had enough funds to negotiate with the creditors. In 2020, the Company discovered MCA Cure had not performed when bank
accounts were levied for $33,705 by the creditors. $18,705 was subsequently refunded by the collection firm. On September 30, 2020,
the bank accounts were again levied for additional funds. Currently the Company has a settlement agreement in place with Susquehanna
Salt Loan, and has booked a reserve against the $90,875 funds paid to MCA Cure. The Company has hired an attorney and is making
every effort to recover funds and damages from MCA Cure. To date, there has been no resolution to the situation. As of December 31,
2023 and June 30, 2023, the Company recorded $
Note 10 – Shareholders’ Deficit
Preferred Stock:
The Company is currently authorized to issue shares of preferred stock, par value of $.
Series A Convertible Preferred Stock: The Company is currently authorized to issue up to 100,000 shares of Series A Convertible Preferred Stock, par value $ per share, convertible at a ratio of 1 share of Series A Convertible Preferred Stock for 2 shares of common stock. These shares have no voting rights. As of December 31, 2023 and June 30, 2023, 688 shares of Series A Convertible Preferred Stock were issued and outstanding, respectively.
Series B Convertible Preferred Stock: The Company is currently authorized to issue up to 62,500 shares of Series B Convertible Preferred Stock, par value $ per share, convertible at a ratio of 1 share of Series B Convertible Preferred Stock for 2 shares of common stock. These shares have voting rights and vote on an “as converted” basis in actions required to have Series B Preferred Stockholder approval. As of December 31, 2023 and June 30, 2023, 9,938 shares of Series B Convertible Preferred Stock were issued and outstanding, respectively.
Series C Convertible Preferred Stock: The Company is currently authorized to issue up to 6,944,445 shares of Series C Convertible Preferred Stock, par value $ per share, convertible at a ratio of 1 share of Series C Convertible Preferred Stock for 10 shares common stock. These shares have voting rights and vote on an “as converted” basis on all matters submitted to our Stockholders for approval.
| 16 |
The Company issued shares for the BOAPIN asset purchase; these shares were issued on September 1, 2020.
On November 28, 2023, shares of Series C
Convertible Preferred Stock were forfeited by the investor, Hypersoft Ventures. Pursuant to ASC 260-10-S99, the transaction was accounted
for as a preferred stock extinguishment. As such, the Company recorded the difference between the fair value of consideration transferred
to the preferred stock holder ($0) and the carrying amount of the preferred stock ($
As of December 31, 2023 and June 30, 2023, and shares of Series C Convertible Preferred Stock were issued and outstanding, respectively.
Series D Convertible Preferred Stock: The Company is currently authorized to issue up to 500,000 shares of Series D Convertible Preferred Stock, par value $ per share, convertible at a ratio of 1 share of Series D Convertible Preferred stock for 10 shares of common stock. These shares have voting rights and vote on an “as converted” basis in actions required to have Series D Preferred Stockholder approval. As of December 31, 2023 and June 30, 2023, shares of Series D Convertible Preferred Stock were issued and outstanding, respectively.
Series E Convertible Preferred Stock: The Company is currently authorized to issue up to 4,000,000 shares of Series E Convertible Preferred Stock, par value $ per share, convertible at a ratio of 1 share of Series E Convertible Preferred Stock for 100 shares of common stock. Each of these shares carries a voting right equivalent to 10,000 shares of common stock. The Company may not issue any other shares with extended voting rights.
As of December 31, 2023 and June 30, 2023, shares of Series E Convertible Preferred Stock were issued and outstanding, respectively.
Common Stock:
The Company is currently authorized to issue shares of common stock, par value of $ per share.
During the six months ended December 31, 2023,
| · | the Company has issued common shares pursuant to its Regulation A offering for net proceeds of $ | |
| · | the Company issued common shares pursuant to subscriptions received prior to June 30, 2023. |
During the six months ended December 31, 2023, the Company also recorded shares to be issued of to its officers as compensation, valued at $ or $0.001 per share. All shares were recorded at the stock price of the date of agreement or grant.
During the six months ended December 31, 2023, the Company received proceeds totaling $114,000 in connection with the issuance of 115,000,000 shares of common stock. Of the total proceeds received, $99,000 in proceeds was received from the issuance of 100,000,000 common shares that were issued under the terms of subscription agreements at the contract price of $0.0001. Proceeds of $15,000 were received from the issuance of 15,000,000 common shares that were issued under the terms of subscription agreements at the contract price of $0.0001 per share. Of these issuances, only 15,000,000 shares are yet to be issued as of December 31, 2023.
As of December 31, 2023 and June 30, 2023, the Company has and shares of common stock issued and outstanding, respectively.
| 17 |
Note 11 – Related Party Transactions
Note payable – BOAPIN purchase
In August 2020, and effective as of June 30, 2020,
the Company purchased the BOAPIN portal, including all software, licensing, and ownership rights from Hypersoft Ventures, Inc., a related
party through common ownership, for $
On November 28, 2023, Hypersoft Venture forgave any
and all outstanding debt owed by the Company, including $
As of December 31, 2023
and June 30, 2023, the Company has recorded a note payable of $
Note payable – Chief Executive Officer
On November
3, 2023, the Company entered into a Promissory Note Agreement (the “Promissory Note”) with its Chief Executive Officer Peter
Pizzino (“Noteholder”), pursuant to which the Company issued to the Noteholder a Secured Note in an aggregate principal amount
of $
The Note accrues interest at the rate of
As of December 31, 2023
and June 30, 2023, the Company has recorded a note payable of $
Related party debt, net
From time to time, the Company received funds from related parties for day-to-day operations. These are short-term loans which bear no interest, and the Company expects to repay these loans by the end of the fiscal year following the year in which the short-term loan was made. The following table reflects the composition of the related party debt, net balance at December 31, 2023 and June 30, 2023.
| December 31, | June 30, | |||||||
| 2023 | 2023 | |||||||
| Related parties – subsidiary | $ | $ | ||||||
| Accrued salaries, bonus, fees | ||||||||
| Total loans from related parties, net | $ | $ | ||||||
| 18 |
Note 12 – Commitments and contingencies
Legal Matters
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
| 1) | Legal Proceedings Involving Aqualaro Corp |
On October 24, 2022, Aqualaro Corp. filed a lawsuit against the Company and its transfer agent in the Supreme Court of the State of New York, County of New York. Aqualaro sought monetary damages and an injunction to transfer 56 million shares of common stock to an individual. An amended complaint was filed on October 26, 2022. On December 5, 2022, the Company moved to dismiss the amended complaint. On April 13, 2023, the Court granted the Company’s motion but allowed the plaintiff to refile. On April 26, 2023, a second amended complaint was filed against the Company, adding Mr. Pizzino as a defendant. On May 8, 2023, Acqualaro filed a notice of appeal regarding the decision to dismiss the first amended complaint. On August 3, 2023, Aqualaro filed a third amended complaint. On August 14, 2023, the Company moved to dismiss the Third Amended Complaint.
| 2) | Settlement Agreements on July 21, 2023 |
The Company entered into a Settlement Agreement related to two litigations:
| – | Benza Pharma, LLC, et al. v. Wearable Health Solutions, Inc., et al. in Clark County Nevada. | |
| – | GRQ Consultants, Inc. v. Wearable Health Solutions Inc. in the Supreme Court of the State of New York. |
In the Nevada Lawsuit, the Company agreed
to settle for $
In the New York Lawsuit, the Company will
pay $
On February 6, 2024, the Company entered into an amendment to Settlement Agreement related to above two litigations where Within two days of the signing of this Amendment WHSI shall make total payments in the amount of twenty thousand dollars ($20,000) and a ten thousand payment ($10,000) made on or before April 5th, 2024, to “GRQ” pursuant to the payment instructions provided by Mr. Honig. This $20,000 payment shall be credited to the Second Nevada Settlement Payment for the Benza Pharma LLC note as that term is defined in the Settlement Agreement. All outstanding principal and accrued interest shall be due on April 15th, 2024 (the "Extended Due Date").
| 3) | Medical Alarm Concepts LLC v. MCA Cure, LLC |
The Company sought the return of payments for non-performance, attorney fees, and court costs. An initial settlement was reached where MCA Cure would pay $10,000 upfront and $6,500 monthly until the debt was paid off in 2023.
The defendants breached the settlement agreement,
leading to a reopened case. A judgment of $
| 4) | On October 4, 2023, Mr. Miceli filed a breach of contact complaint in the state of Connecticut against the Company. |
Other than the aforementioned, we are not presently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
| 19 |
Commitments and Contingencies. The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Note 13 – Office/Warehouse lease
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the current accounting for leases and while retaining two distinct types of leases, finance and operating, (1) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting,
(2) eliminates most real estate specific lease provisions, and (3) aligns many of the underlying lessor model principles with those in the new revenue standard. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. For public companies, the new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018. For all other entities, including emerging growth companies, this standard is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 2020.
The Company maintains its corporate office at 2901 W. Coast Highway, Suite 200, Newport Beach, CA 92663. The Company currently pays $175 a month for its office space and the term is month-to-month . The Company entered into a new three-year lease agreement on September 9, 2022 for new warehouse space located in Mequon, Wisconsin. The monthly rent for this new warehouse space is currently $1,325 per month for the first twelve months of the lease agreement. Expenditures for the six months ending December 31, 2023 and 2022 are as follows:
| Six Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Rent Expenses | $ | $ | ||||||
The Company leased a fulfilment center in the U.S.,
which was classified as an operating lease which subsequently expired on September 30, 2022. The Company determines if an arrangement
qualifies as a lease at the lease inception. Operating lease liabilities are recorded based on the present value of the future lease payments
over the lease term, assessed as of the commencement date. The Company’s real estate leases, which are for a fulfilment center,
generally have a lease term between
| 20 |
The Company’s lease agreements generally do
not specify an implicit borrowing rate, and as such, the Company utilizes its incremental borrowing rate by lease term, in order to calculate
the present value of the future lease payments. The discount rate represents a risk-adjusted rate on a secured basis, and is the rate
at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term. The
Company entered into a new three-year lease agreement on September 9, 2022 for new warehouse space located in Mequon, Wisconsin. The monthly
rent which commenced in September 2022 is $1,325 per month and increases approximately 3% annually thereafter. The discount
rate used was determined based on the available data as of the lease commencement date. The Right-of-use (“ROU”) asset value
added as a result of this new lease agreement was $
Certain of the Company’s lease agreements, primarily related to real estate, include options for the Company to either renew (extend) or early terminate the lease. Leases with renewal options allow the Company to extend the lease term typically between 1 and 3 years. Renewal options are reviewed at lease commencement to determine if such options are reasonably certain of being exercised, which could impact the lease term. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, or specific characteristics unique to the particular lease that would make it reasonably certain that the Company would exercise such option. In most cases, the Company has concluded that renewal and early termination options are not reasonably certain of being exercised by the Company (and thus not included in the Company’s ROU asset and lease liability) unless there is an economic, financial or business reason to do so.
The following summarizes (i) the future minimum undiscounted lease payments under non-cancellable lease for each of the next four years and thereafter, incorporating the practical expedient to account for lease and non-lease components as a single lease component for our existing real estate leases, (ii) a reconciliation of the undiscounted lease payments to the present value of the lease liabilities recognized, and (iii) the lease-related account balances on the Company’s consolidated balance sheet, as of December 31, 2023:
| Fiscal Year Ending June 30, | ||||
| 2024 | $ | |||
| 2025 | ||||
| July & August 2025 | ||||
| Total future minimum lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total present value of future minimum lease payments | $ | |||
| As of December 31, 2023 | ||||
| Operating lease right-of-use assets | $ | |||
| Accrued lease liability | ||||
| Long-term lease liability | ||||
| $ |
| As of December 31, 2023 | ||||
| Weighted Average Remaining Lease Term | ||||
| Weighted Average Discount Rate |
| 21 |
Note 14 – Other income - settlement
Settlement
In 2019, the Company engaged MCA Cure to negotiate
settlements with two note holders, and paid MCA Cure a total of $97,625. In 2020, the Company discovered MCA Cure had not performed when
bank accounts were levied for $33,705 and $18,705, being subsequently refunded, and engaged an attorney to recover funds. Currently the
Company has a settlement agreement in place with Susquehanna Salt Loan and has hired an attorney to recover funds and damages from MCA
Cure. In February 2022, a settlement was reached with MCA Cure for fees and attorney costs of $
For the three
and six months ended December 31, 2023 and 2022, the Company recorded $
Note 15 – Subsequent Events
On January 16, 2024, the Company cancelled 1,250,000 shares of Series C Preferred Stock and 15,000,000 shares of common stock for no consideration.
On February 6, 2024, the Company entered into an amendment to the Benza Settlement Agreement (see Note 12). Within two days of the signing of this Amendment, the Company shall make total payments in the amount of $20,000 and a $10,000 payment made on or before April 5, 2024, to “GRQ. This $20,000 payment shall be credited to the Second Nevada Settlement Payment for the Benza Pharma LLC note as that term is defined in the Settlement Agreement. All outstanding principal and accrued interest shall be due on April 15, 2024 (the “Extended Due Date”).
The Company evaluated events that have occurred after the balance sheet date but before the financial statements are issued and determined that there are no additional material events that are required to be disclosed.
| 22 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking information includes statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other matters. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “continue” and similar expressions or the negative of these similar terms. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information.
These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In evaluating these forward-looking statements, you should consider various factors, including the following: (a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate profitable operations, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, (d) whether we are able to successfully fulfill our primary requirements for cash, which are explained below under “Liquidity and Capital Resources”. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws. Unless stated otherwise, terms such as the “Company,” “Wearable Health,” “we,” “us,” “our,” and similar terms shall refer to Wearable Health Solutions, Inc., a Nevada corporation, and its subsidiaries.
Results of Operations
Results for the Three Months Ended December 31, 2023, compared to the Three Months Ended December 31, 2022
Operating Revenues
The Company had revenues of $127,250 and $198,039 for the three months ended December 31, 2023 and 2022, respectively. Revenues decreased due to lower airtime and monitoring sales.
Cost of Revenues
The Company’s cost of revenues for the three months ended December 31, 2023 and 2022 was $83,265 and $99,418 respectively. Cost of revenues decreased for the three months ended December 31, 2023 primarily due to decreased revenues in the three months ended December 31, 2023 as compared to 2022.
Gross Profit
The Company’s gross profit for the three months ended December 31, 2023 and 2022 was $43,985, and $98,621, respectively. The decrease in the Company’s gross profit was due primarily to the decrease in revenues in 2023 as compared to 2022.
| 23 |
Operating Expenses
Operating expenses consisted primarily of consulting fees, professional fees, and legal and accounting expenses. For the three months ended December 31, 2023, operating expenses were $115,684 compared to $618,048 for the three months ended December 31, 2022. The primary expenses for the three months ended December 31, 2023 were salaries and wages totaling $27,784 and consulting & professional fees $50,750; the primary expenses for the three months ended December 31, 2022 were salaries and wages totaling $354,429 and selling expenses $80,272. Operating expenses consisted primarily of Salary & wages which was decreased due to decreased headcount amongst executives and employees.
Other (Income) Expense, net
The Company had other (income) expense, net for the three months ended December 31, 2023 and 2022 of $(196,930) and $20,364, respectively. Other income, net for the three months ended December 31, 2023, consisted of gain on debt extinguishment of $239,834 which was partially offset by interest expense of $42,904. Other income, net for the three months ended December 31, 2022 consisted of interest expense of $20,364.
Net income (loss)
The net income (loss) for the three months ended December 31, 2023, was $125,231 compared to ($539,791) for the three months ended December 31, 2022.
Results for the Six Months Ended December 31, 2023, compared to the Six Months Ended December 31, 2022
Operating Revenues
The Company had revenues of $269,662 and $414,499 for the six months ended December 31, 2023 and 2022, respectively. Revenues decreased due to lower airtime and monitoring sales.
Cost of Revenues
The Company’s cost of revenues for the six months ended December 31, 2023 and 2022 was $133,392 and $219,420 respectively. Cost of revenues decreased for the six months ended December 31, 2023 primarily due to decreased revenues in the six months ended December 31, 2023 as compared to 2022.
Gross Profit
The Company’s gross profit for the six months ended December 31, 2023 and 2022 was $136,270, and $195,079, respectively. The increase in the Company’s gross profit was due primarily to the decrease in cost of revenues in 2023 as compared to 2022.
Operating Expenses
Operating expenses consisted primarily of consulting fees, professional fees, and legal and accounting expenses. For the six months ended December 31, 2023, operating expenses were $543,700 compared to $1,474,531 for the six months ended December 31, 2022. The primary expenses for the six months ended December 31, 2023 were salaries and wages totaling $215,724 and consulting & professional fees $175,935; the primary expenses for the six months ended December 31, 2022 were salaries and wages totaling $857,285 and selling expenses $270,282. Operating expenses consisted primarily of Salary & wages which was decreased due to decreased headcount amongst executives and employees.
| 24 |
Other (Income) Expense, net
The Company had other (income) expense, net for the six months ended December 31, 2023 and 2022 of $(551,563) and $9,106, respectively. Other income, net for the six months ended December 31, 2023, consisted of gain on debt extinguishment of $637,334 which was partially offset by interest expense of $85,771. Other income, net for the six months ended December 31, 2022 consisted of $19,500 in settlement proceeds, interest income of $1,500 all of which was partially offset by interest expense of $30,106.
Net income (loss)
The net income (loss) for the six months ended December 31, 2023, was $144,133 compared to ($1,288,558) for the six months ended December 31, 2022.
Liquidity and Capital Resources
| December 31, | June 30, | |||||||
| 2023 | 2023 | |||||||
| Working Capital Deficit | ||||||||
| Cash | $ | 410 | $ | 136,151 | ||||
| Current Assets | $ | 32,215 | $ | 152,327 | ||||
| Current Liabilities | $ | 3,171,390 | $ | 3,781,817 | ||||
| Working Capital Deficit | $ | (3,139,175 | ) | $ | (3,629,490 | ) | ||
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Cash Flows | ||||||||
| Cash flow used in operating activities | $ | (184,951 | ) | $ | (1,055,780 | ) | ||
| Cash flow used in investing activities | $ | – | $ | (9,442 | ) | |||
| Cash flow provided by financing activities | $ | 49,210 | $ | 1,040,191 | ||||
| Net decrease in cash during the period | $ | (135,741 | ) | $ | (25,031 | ) | ||
The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by related parties through capital investment and borrowing of funds and through the sale of equity.
At December 31, 2023, the Company had total current assets of $32,215. Current assets consisted of accounts receivable, cash and inventory. At December 31, 2023 and June 30, 2023, the Company had total current liabilities of $3,171,390 and $3,781,817, respectively. Current liabilities consisted primarily of accounts payable, accrued liabilities and notes payable.
We had a working capital deficit of $3,139,175 as of December 31, 2023.
Cash flow from Operating Activities
During the six months ended December 31, 2023, cash used in operating activities was $(184,951) compared to $(1,055,780) for the period ended December 31, 2022. The decrease in the amount of cash used in operating activities was primarily due to the decrease in the net loss resulting from the lower salaries and wages incurred in the six months ended December 31, 2023 as compared to the six months ended December 31, 2022.
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Cash flow from Financing Activities
For the six months ended December 31, 2023, cash provided by financing activities was $49,210 compared to $1,040,191 provided during the six months ended December 31, 2022.
Quarterly Developments
On November 3, 2023, the Company entered into a Promissory Note Agreement (the “Promissory Note”) with its president Peter Pizzino (“Noteholder”), pursuant to which the Company issued to the Noteholder, on November 3, 2023, Secured Note in an aggregate principal amount of $279,940 (the “Notes”), consisting of gross proceeds of loans of $279,940, that were made in cash by Noteholder to the Company over the past year used for operations, which Note shall not be convertible into the Company’s common stock, par value $0.0001 per share.
The Note accrues interest at the rate of 3% per annum and matures on October 7, 2024. Interest on the Note is payable in cash. Upon the occurrence of an event of default, interest accrues at 15% per annum. The Note contains customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Company may only prepay the Note with the prior written consent of the respective Noteholder thereof.
Going Concern
The accompanying unaudited interim consolidated condensed financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company on a going-concern basis. The going concern basis assumes that assets are realized, and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses from operations and has an accumulated deficit of $41,667,716 as of December 31, 2023. The Company’s ability to continue as a going concern depends upon its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes raising the necessary funds to finance the Company’s development and marketing efforts.
Critical Accounting Estimates and Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 2 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.
We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired, or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.
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We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled. Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Off Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were not effective for the quarterly period ended December 31, 2023.
The following aspects of the Company were noted as potential material weaknesses:
| 1. | We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the period ended December 31, 2023; Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
| 2. | We do not as yet have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
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| 3. | We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial personnel and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness. |
| 4. | Certain control procedures were unable to be verified due to performance not being sufficiently documented. As an example, some procedures requiring review of certain reports could not be verified due to there being no written documentation of such review. Management evaluated the impact of its failure to maintain proper documentation of the review process on its assessment of its reporting controls and procedures and has concluded deficiencies represented a material weakness. |
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.
Changes in Internal Controls
Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no changes occurred in the Company’s internal controls over financial reporting during the quarter ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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PART II – OTHER INFORMATION
Item. 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
| 1) | Legal Proceedings Involving Aqualaro Corp |
On October 24, 2022, Aqualaro Corp. filed a lawsuit against the Company and its transfer agent in the Supreme Court of the State of New York, County of New York. Aqualaro sought monetary damages and an injunction to transfer 56 million shares of common stock to an individual. An amended complaint was filed on October 26, 2022. On December 5, 2022, the Company moved to dismiss the amended complaint. On April 13, 2023, the Court granted the Company’s motion but allowed the plaintiff to refile. On April 26, 2023, a second amended complaint was filed against the Company, adding Mr. Pizzino as a defendant. On May 8, 2023, Acqualaro filed a notice of appeal regarding the decision to dismiss the first amended complaint. On August 3, 2023, Aqualaro filed a third amended complaint. On August 14, 2023, the Company moved to dismiss the Third Amended Complaint.
| 2) | Settlement Agreements on July 21, 2023 |
The Company entered into a Settlement Agreement related to two litigations:
| – | Benza Pharma, LLC, et al. v. Wearable Health Solutions, Inc., et al. in Clark County Nevada. | |
| – | GRQ Consultants, Inc. v. Wearable Health Solutions Inc. in the Supreme Court of the State of New York. |
In the Nevada Lawsuit, the Company agreed to settle for $345,000, with $145,000 paid upon signing and $200,000 due within 6 months. The Settlement Agreement allows for an increased payment of $600,000 if the Second Nevada Settlement Payment isn’t made within six months.
In the New York Lawsuit, the Company will pay $80,000, with $10,000 due upon execution of the Settlement. Payments received by the Company will be applied first to the Second New York Payment.
On February 6, 2024, the Company entered into an amendment to Settlement Agreement related to above two litigations where Within two days of the signing of this Amendment WHSI shall make total payments in the amount of twenty thousand dollars ($20,000) and a ten thousand payment ($10,000) made on or before April 5th, 2024, to “GRQ” pursuant to the payment instructions provided by Mr. Honig. This $20,000 payment shall be credited to the Second Nevada Settlement Payment for the Benza Pharma LLC note as that term is defined in the Settlement Agreement. All outstanding principal and accrued interest shall be due on April 15th, 2024 (the “Extended Due Date”).
| 3) | Medical Alarm Concepts LLC v. MCA Cure, LLC |
The Company sought the return of payments for non-performance, attorney fees, and court costs. An initial settlement was reached where MCA Cure would pay $10,000 upfront and $6,500 monthly until the debt was paid off in 2023.
The defendants breached the settlement agreement, leading to a reopened case. A judgment of $148,875.00, including punitive damages for fraud, was entered against all three defendants on August 25th. Pre-judgment interest of $1,066.60 and costs were
also awarded to the plaintiffs.
| 4) | On October 4, 2023, Mr. Miceli filed a breach of contact complaint in the state of Connecticut against the Company. |
Other than the aforementioned, we are not presently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
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Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the six months ended December 31, 2023, the Company received proceeds totaling $114,000 in connection with the issuance of 115,000,000 shares of common stock. Of the total proceeds received, $99,000 in proceeds was received from the issuance of 100,000,000 common shares that were issued under the terms of subscription agreements at the contract price of $0.0001. Proceeds of $15,000 were received from the issuance of 15,000,000 common shares that were issued under the terms of subscription agreements at the contract price of $0.0001 per share. Of these issuances, only 15,000,000 shares are yet to be issued as of December 31, 2023.
The above securities were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act. These securities qualified for exemption under Section 4(a)(2) since the issuance by us did not involve a public offering. The offerings were not “public offerings” as defined in 4(a)(2) due to the insubstantial number of persons involved in the transactions, manner of the issuance and number of securities issued. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(a)(2) since they agreed to and received securities bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act for these transactions.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On November 8, 2023, Mr. Harrysen Mittler resigned from the capacity of CEO and as a Director for the Company. The resignation of Mr. Mittler was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Peter Pizzino our current President and Director will take over as the Company’s CEO.
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Item 6. Exhibits.
| Exhibit Number |
Exhibit Description | |
| 31.1 | Certification of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 | |
| 31.2 | Certification of the Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 | |
| 32.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| EX-101.INS | Inline XBRL Instance Document the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document. | |
| EX-101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| EX-101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| EX-101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| EX-101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
| EX-101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | The cover page from this Report, formatted in Inline XBRL (included in Exhibit 101) |
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WEARABLE HEALTH SOLUTIONS, INC. | ||
| /s/ Peter Pizzino | February 20, 2024 | |
| Peter Pizzino, CEO, Principal Executive Officer, Director | Date | |
| /s/ Eric Sherb | February 20, 2024 | |
| Eric Sherb, CFO, Principal Accounting Officer | Date |
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