0001493152-18-007140.txt : 20180515 0001493152-18-007140.hdr.sgml : 20180515 20180515165952 ACCESSION NUMBER: 0001493152-18-007140 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180515 DATE AS OF CHANGE: 20180515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Wellness Center USA, Inc. CENTRAL INDEX KEY: 0001516887 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 272980395 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-173216 FILM NUMBER: 18837519 BUSINESS ADDRESS: STREET 1: 2500 WEST HIGGINS ROAD, STE. 780 CITY: HOFFMAN ESTATES STATE: IL ZIP: 60169 BUSINESS PHONE: (847) 925-1885 MAIL ADDRESS: STREET 1: 2500 WEST HIGGINS ROAD, STE. 780 CITY: HOFFMAN ESTATES STATE: IL ZIP: 60169 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2018

 

OR

 

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

 

For the transition period from ____________ to _____________

 

Commission file number: 001-37960

 

WELLNESS CENTER USA, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Nevada   27-2980395
(State or other jurisdiction   (I.R.S. Employer
of incorporation or organization)   Identification Number)

 

2500 West Higgins Road, Ste. 780, Hoffman Estates, IL   60169
 (Address of principal executive offices)   (Zip Code)

 

(847) 925-1885

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

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 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

  Large Accelerated Filer [  ] Accelerated Filer[  ]

Non-Accelerated Filer

(do not check if Smaller Reporting Company) [  ]

       
  Smaller Reporting Company [X] Emerging Growth Company [  ]  

 

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

 

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

 

The number of shares outstanding of the Registrant’s common stock, $0.0001 par value, as of March 31, 2018 was 92,879,384.

 

 

 

   
 

 

FORM 10-Q

WELLNESS CENTER USA, INC.

MARCH 31, 2018

TABLE OF CONTENTS

 

PART I— FINANCIAL INFORMATION  
     
Item 1. Condensed Consolidated Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
Item 3 Quantitative and Qualitative Disclosures About Market Risk 23
Item 4. Control and Procedures 23
     
PART II— OTHER INFORMATION  
     
Item 1 Legal Proceedings 26
Item 1A Risk Factors 27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Mine Safety Disclosures. 27
Item 5. Other Information 27
Item 6. Exhibits 27
     
SIGNATURE 28

 

 2 
 

 

PART I— FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements

 

Wellness Center USA, Inc.

Condensed Consolidated Balance Sheets

 

   March 31, 2018   September 30, 2017 
    (Unaudited)      
ASSETS          
Current Assets          
Cash  $40,413   $29,369 
Accounts receivable   -    24,999 
Inventories   12,057    12,335 
Prepaid expenses and other current assets   2,213    1,751 
Total Current Assets   54,683    68,454 
           
Property and equipment, net   3,148    5,126 
Other assets   16,760    16,760 
Total Other Assets   19,908    21,886 
           
TOTAL ASSETS  $74,591   $90,340 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIT          
Current Liabilities          
Accounts payable and accrued expenses  $376,641   $203,367 
Accrued payroll - officers   51,381    13,440 
Deferred revenue   49,598    55,098 
Convertible notes payable   130,721    49,884 
Loans payable from officers and shareholders   227,500    59,000 
Total Current Liabilities   835,841    380,789 
           
Shareholders’ Deficit          
Common stock, par value $0.001, 185,000,000 shares authorized; 92,879,384 and 90,284,916 shares issued and outstanding, respectively   93,066    90,285 
Additional paid-in capital   19,841,209    19,069,211 
Accumulated deficit   (20,310,695)   (19,132,557)
Total Wellness Center USA shareholders’ equity (deficit)   (376,420)   26,939 
           
Non-controlling interest   (384,830)   (317,388)
Total Shareholder’s deficit   (761,250)   (290,449)
           
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT  $74,591   $90,340 

 

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

 

 3 
 

 

Wellness Center USA, Inc.

Condensed Consolidated Statements of Operations

 

   Three Months Ended   Six Months Ended 
   March 31,   March 31, 
   2018   2017   2018   2017 
   (Unaudited)   (Unaudited) 
Sales:                    
Trade  $20,500   $120,100   $36,000   $209,100 
Consulting services   20,750    14,125    31,750    28,250 
Total Sales   41,250    134,225    67,750    237,350 
                     
Cost of goods sold   17,666    53,407    34,658    113,907 
                     
Gross profit   23,584    80,818    33,092    123,443 
                     
Operating expenses   561,317    609,624    895,480    1,026,187 
                     
Loss from operations   (537,733)   (528,806)   (862,388)   (902,744)
                     
Other income (expenses)                    
Amortization of debt discount   (65,790)   -    (135,837)   - 
Gain on extinguishment of debt   -    288,777    -    288,777 
Loss on modification of conversion price on convertible note payable   (158,400)   -    (158,400)   - 
Loss on modification of exercise price on warrants in connection with convertible note payable   (5,445)   -    (5,445)   - 
Financing costs   (70,422)   -    (70,422)   - 
Interest expense   (9,788)   -    (13,088)   - 
Total other income (expenses)   (309,845)   288,777    (383,192)   288,777 
                     
LOSS FROM CONTINUING OPERATIONS   (847,578)   (240,029)   (1,245,580)   (613,967)
                     
DISCONTINUED OPERATIONS                    
Loss from discontinued operations   -    (29,361)   -    (70,923)
                     
NET LOSS   (847,578)   (269,390)   (1,245,580)   (684,890)
                     
Net loss (gain) attributable to non-controlling interest   21,473    (5,430)   67,442    1,098 
                     
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC.  $(826,105)  $(274,820)  $(1,178,138)  $(683,792)
                     
BASIC AND DILUTED LOSS PER SHARE  $(0.01)  $(0.00)  $(0.01)  $(0.01)
                     
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED   91,551,485    84,644,460    91,414,889    82,814,207 

 

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

 

 4 
 

 

Wellness Center USA, Inc.

Condensed Consolidated Statement of Shareholders' Deficit (Unaudited)

 

   Common Stock  

Additional

 Paid-in

   Accumulated   Total WCUI   Non-controlling     
   Shares   Amount   Capital   Deficit   Deficit   Interest   Total 
                             
Balance, September 30, 2017   90,284,916   $90,285   $19,069,211   $(19,132,557)  $26,939   $(317,388)  $(290,449)
                                    
Exercise of stock warrants   1,407,619    1,407    169,507    -    170,914    -    170,914 
                                    
Fair value of common stock issued for services   150,000    150    26,550    -    26,700    -    26,700 
                                    
Shares issued upon conversions of note payable   550,000    737    54,263    -    55,000    -    55,000 
                                    
Fair value of vested stock options   -    -    137,898    -    137,898    -    137,898 
                                    
Fair value of common stock issued in connection with convertible note payable   486,849    487    69,935    -    70,422    -    70,422 
                                    
Discount on convertible note payable due to beneficial conversion and warrants   -    -    150,000    -    150,000    -    150,000 
                                    
Loss on modification of conversion price on convertible note payable   -    -    158,400    -    158,400    -    158,400 
                                    
Loss on modification of exercise price on warrants in connection with convertible note payable   -    -    5,445    -    5,445    -    5,445 
                                    
Net loss for the six months ended March 31, 2018   -    -    -    (1,178,138)   (1,178,138)   (67,442)   (1,245,580)
                                    
Balance, March 31, 2018 (Unaudited)   92,879,384   $93,066   $19,841,209   $(20,310,695)  $(376,420)  $(384,830)  $(761,250)

  

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

 

 5 
 

 

Wellness Center USA, Inc.

Condensed Consolidated Statements of Cash Flows

 

   Six Months Ended 
   March 31, 
   2018   2017 
   (Unaudited) 
Cash Flows from Operating Activities          
Net loss  $(1,245,580)  $(684,890)
           
Adjustments to reconcile net loss to net cash used in operating activities          
Loss from discontinued operations   -    70,923 
Depreciation expense   1,978    5,402 
Amortization of debt discount   135,837    - 
Gain on extinguishment of debt   -    (288,777)
Fair value of common shares issued for services   26,700    26,000 
Fair value of stock options issued for services   137,898    178,068 
Loss on modification of conversion price on convertible note payble   158,400    - 
Loss on modification of exercise price on warrants in connection with convertible note payble   5,445    - 
Fair value of common stock issued in connection with convertible note payable   70,422    - 
Changes in Assets and Liabilities          
(Increase) Decrease in:          
 Accounts receivable   24,999    (70,000)
 Inventories   278    66,787 
 Prepaid expenses and other current assets   (462)   24,613 
(Decrease) Increase in:          
 Accounts payable and accrued expenses   173,274    (25,500)
 Accrued payroll taxes   -    20,506 
 Accrued payroll - officers   37,941    25,371 
 Deferred revenue   (5,500)   (24,826)
Net cash used in operating activities from continuing operations   (478,370)   (676,323)
Net cash used in operating activities from discontinued operations   -    (6,489)
Net cash used in operating activities   (478,370)   (682,812)
           
Cash Flows from Investing Activities          
Purchases of property and equipment   -    (546)
Net cash used in investing activities from continuing operations   -    (546)
Net cash used in investing activities from discontinued operations   -    (1,704)
Net cash used in investing activities   -    (2,250)
           
Cash Flows from Financing Activities          
Proceeds from loans payable from officers and shareholders   179,000    30,000 
Repayment of loans payable from officers and shareholders   (10,500)   - 
Proceeds from convertible note payable   150,000    - 
Repayment of advances from related party   -    (2,000)
Proceeds from the sale of common stock and warrants   -    424,600 
Exercise of stock warrants   170,914    428,015 
Net cash provided by financing activities   489,414    880,615 
           
Net increase in cash   11,044    195,553 
           
Cash beginning of period   29,369    81,749 
Cash end of period  $40,413   $277,302 
           
Supplemental cash flows disclosures:          
Interest paid  $-   $- 
Taxes paid  $-   $- 
           
Supplemental non-cash financing disclosures:          
Debt discount on convertible note payable  $150,000   $- 
Conversion of convertible note payable into common shares  $55,000   $- 
Non-controlling interest’s share in losses of a subsidiary  $67,442   $1,098 

 

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

 

 6 
 

 

WELLNESS CENTER USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE SIX MONTHS ENDED MARCH 31, 2018 and 2017

 

NOTE 1 – ORGANIZATION AND 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. 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 condensed consolidated statement of operations for the three months ended March 31, 2017. See Note 3 for details relating to the sale.

 

The Company currently operates in the following business segments: (i) distribution of targeted Ultra Violet (“UV”) phototherapy devices for dermatology; and (ii) authentication and encryption products and services. The segments are operated, respectively, through PSI and SCI.

 

Basis of Presentation of Unaudited Financial Information

 

The accompanying unaudited condensed consolidated financial statements of Wellness Center USA, Inc. and Subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending September 30, 2018.

 

Going Concern

 

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 six months ended March 31, 2018, the Company incurred a net loss from continuing operations of $1,245,580 and used cash in operations from continuing operations of $478,370 and had a shareholders’ deficit of $761,250 as of March 31, 2018. 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.

 

In addition, the Company’s independent registered public accounting firm, in its report on the Company’s September 30, 2017 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At March 31, 2018, the Company had cash on hand in the amount of $40,413. 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 six months ended March 31, 2018, the Company received $489,414 through debt financing 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.

 

 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%
StealthCo, Inc. (“StealthCo”)   The State of Illinois   March 18, 2014   100%
Psoria Development Company LLC. (“PDC”)   The State of Illinois   January 15, 2015   50%

 

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 the valuation of accounts receivable and allowance for uncollectible amounts, inventory and obsolescence reserves, accruals for potential liabilities, valuations of stock-based compensation, realization of deferred tax assets, 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 stockholders 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 stockholders 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 six months ended March 31, 2018 and 2017, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At March 31, 2018 and 2017, the dilutive impact of outstanding stock options for 8,847,500 and 6,147,500 shares, respectively, and outstanding warrants for 59,096,084 and 63,741,253 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

 

 8 
 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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.

 

(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 March 31, 2018 and 2017 was $49,598 and $55,098, respectively.

 

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.

 

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, estimated forfeitures 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.

 

 9 
 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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. During the year ended September 30, 2017, the Company recorded a $252,508 gain relating to this transaction.

 

Components of the statement of operations relating to NPC for the three and six months ended March 31, 2017, were as follows:

 

   Three Months Ended   Six Months Ended 
   March 31, 2017   March 31, 2017 
         
Total Sales  $40,000   $77,402 
           
Operating expenses   69,361    148,325 
           
Loss from discontinued operations  $(29,361)  $(70,923)

 

 10 
 

 

NOTE 4 – LOANS PAYABLE FROM OFFICERS AND SHAREHOLDERS

 

At September 30, 2017, loans payable from officers and shareholders of $59,000 consisted of two unsecured note agreements issued in 2014 totaling to $9,000, and two short-term unsecured loans issued in fiscal 2017 totaling to $50,000. The loans issued in 2014 have no stated interest rate and are due on demand. The loans issued in 2017 have an interest rate of eight percent per annum and are due one year from the date of issuance. During the six months ended March 31, 2018, the Company borrowed $179,000 under nine short-term unsecured loans. The loans have an interest rate of eight percent and are due one year from the date of issuance. During the six months ended March 31, 2018, the Company repaid $10,500 of the loans payable. As of March 31, 2018, loans payable from officers and shareholders of $227,500 were outstanding.

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE AGREEMENTS

 

   March 31, 2018   September 30, 2017 
         
Convertible note payable (a)  $110,000   $165,000 
Convertible note payable (b)   165,000    - 
Debt discount – unamortized balance   (144,279)   (115,116)
Convertible notes payable, net  $130,721   $49,884 

 

(a) 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 90th 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 comprised $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 affected Black-Scholes Merton option pricing model with a stock price of $0.31, volatility of 139.98% and risk-free rate of 1.28%. The unamortized balance of the debt discount at September 30, 2017 was $115,116. During the six months ended March 31, 2018, the Company amortized the remaining $115,116 of debt discount, leaving no unamortized balance at March 31, 2018.

 

The agreement also included a clause that allowed for the individual to receive additional shares if the price of the stock declined as of February 28, 2018 (the maturity date). The price of the stock on that date was $0.12 per share, causing the Company to issue the individual an additional 186,849 shares of its common stock. The Company recorded an expense of $22,422 relating to the issuance of these shares.

 

On March 5, 2018, the Company modified the conversion price on the note payable from $0.25 per share to $0.10 per share. On that date, the reduction in the conversion price allowed for the individual to convert an additional 990,000 shares with a fair value of $0.16 per share. The total amount of expense the Company recognized relating to the modification was $158,400. Also on March 5, 2018, the Company modified the exercise price on the attached warrants from $0.50 per share to $0.20 per share. The total amount of expense the Company recognized relating to the modification was $5,445. The maturity date of the note was also extended until April 30, 2018.

 

During the six months ended March 31, 2018, the individual converted $55,000 of the convertible note payable into 550,000 shares of the Company’s common stock.

 

 11 
 

 

NOTE 5 – CONVERTIBLE NOTE AGREEMENTS (CONTINUED)

 

(b) On March 5, 2018, the Company entered into another Convertible Note Payable Agreement with the same individual under which the Company borrowed an additional $165,000. Net proceeds received by the Company under the agreement after payment of a $15,000 fee to the lender was $150,000. In connection with the agreement, the Company issued the individual 300,000 restricted shares of its common stock and warrants to purchase 660,000 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 $0.20 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.10 per share. The note matures in October 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.

 

The Company calculated the related fair value of the warrants issued to the noteholder to be $55,032 using a Black Scholes Merton option pricing model and performing a relative value calculation. The Company then made a calculation to determine if a beneficial conversion feature (BCF) existed. The beneficial conversion was based upon the effective conversion price based on the proceeds received that were allocated to the convertible instrument. Based upon the Company’s calculation, it was determined that a beneficial conversion feature existed amounting to $94,968 and was recorded as a debt discount. As such the Company recognized a debt discount at the date of issuance in the aggregate amount of $165,000 relating to the $15,000 fees paid to the lender, and the aggregate amount of $150,000 relating to the relative value of the warrants and the BCF. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the Convertible note (a valuation debt discount). During the three and six months ended March 31, 2018, the Company amortized $20,721 of debt discount, leaving an unamortized balance of $144,279 at March 31, 2018.

 

In addition, the Company recorded an additional finance cost of $48,000 related to the fair value of the 300,000 shares of common stock granted at the date issuance.

 

NOTE 6 – SHAREHOLDERS’ DEFICIT

 

Common shares issued for Services

 

During the six months ended March 31, 2018, the Company issued 150,000 shares of its common stock valued at $26,700 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.

 

Common shares issued in connection with Convertible Notes Payable

 

During the six months ended March 31, 2018, the Company issued 486,849 shares of its common stock in connection with the issuance of convertible notes payable and also issued 550,000 shares upon the conversion of the notes payable (see Note 5).

 

Stock Options

 

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. Effective January 1, 2018, the Board of Directors approved to increase the number of authorized shares of the Company’s common stock that may be subject to, or issued pursuant to, the terms of the plan from 7,500,000 to 30,000,000 (see Note 9).

 

On January 1, 2018, the Company entered into employment agreements with three employees of SCI. Under the agreements, the Company issued options to purchase a combined total of 1,775,000 shares of its common stock with a fair value of $289,890. The options are exercisable over a term of five years, with an exercise price of $0.19. The Company valued the options using a Black-Scholes option pricing model. A combined total of 675,000 shares vested 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. During the three and six months ended March 31, 2018, the Company recorded $110,498 of stock compensation for the value of the options and as of March 31, 2018, unvested compensation of $179,392 remained that will be amortized over the remaining vesting period.

 

 12 
 

 

NOTE 6 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

Stock Options (continued)

 

Further, 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. The options are exercisable over a five year period, are issuable on the last day of each quarter ending and vest immediately on the date of grant. All options accelerate and become fully vested upon the sale or change of control of the Company. During the six months ended March 31, 2018, the Company issued options to purchase 250,000 shares of its common stock to the employees with an exercise price of $0.13 per share. During the six months ended March 31, 2018, the Company valued the options using a Black-Scholes option pricing model and recorded $27,400 of stock compensation for the value of the options vested.

 

The assumptions used for options granted during the six months ended March 31, 2018 are as follows:

 

Exercise price  $0.13 - 0.19 
Expected dividends   - 
Expected volatility   123.8% - 130.2%
Risk free interest rate   2.01% - 2.18%
Expected life of options   2.5 

 

The table below summarizes the Company’s stock option activities for the three months ended March 31, 2018:

 

  

Number of

Option Shares

   Exercise Price Range Per Share   Weighted Average Exercise Price  

Fair Value

at Date of Grant

 
                 
Balance, September 30, 2017   6,822,500   $ 0.10 - 2.00   $0.51   $1,865,628 
Granted   2,025,000    0.13 - 0.19    0.18    317,971 
Cancelled   -    -    -    - 
Exercised   -    -    -    - 
Expired   -    -    -    - 
Balance, March 31, 2018   8,847,500   $ 0.10 – 2.00   $0.43   $2,183,599 
Vested and exercisable, March 31, 2018   7,747,500   $0.10 – 2.00   $0.43   $2,003,527 
                     
Unvested, March 31, 2018   1,100,000   $0.19   $0.19   $180,072 

 

The aggregate intrinsic value for option shares outstanding at March 31, 2018 was $13,438.

 

The following table summarizes information concerning outstanding and exercisable options as of March 31, 2018:

 

      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  
                                       
$ 0.10 - 0.39       5,325,000       3.72     $ 0.18       4,225,000       3.72     $ 0.18  
  0.40 - 0.99       2,122,500       1.05       0.40       2,122,500       1.05       0.40  
  1.00 - 1.99       750,000       2.75       1.00       750,000       2.75       1.00  
  2.00       650,000       2.75       2.00       650,000       2.75       2.00  
$ 0.01 - 2.00       8,847,500       2.93     $ 0.43       7,747,500       2.93     $ 0.43  

 

As of March 31, 2018, there were 21,152,500 shares of stock options remaining available for issuance under the 2010 Plan.

 

 13 
 

 

NOTE 6 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

Stock Warrants

 

During the six months ended March, 31, 2018, the Company issued warrants to purchase 660,000 shares with an exercise price of $0.20 per share in connection with the issuance of a convertible note payable (see Note 5). The warrants expire five years from the date of grant.

 

During the six months ended March, 31, 2018, warrants to purchase 1,407,619 shares of the Company’s common stock were exercised for $170,914.

 

The table below summarizes the Company’s warrants activities for the three months ended March 31, 2018:

 

   Number of Warrant Shares   Exercise Price Range Per Share   Weighted Average Exercise Price   Fair Value at Date of Issuance 
Balance, September 30, 2017   64,161,304   $0.12 - 1.00   $0.24   $2,151,219 
Granted   660,000    0.20    0.20    132,000 
Cancelled   -    -    -    - 
Exercised   (1,407,619)   0.12 – 0.15    0.12    - 
Expired   (4,317,602)   0.30 – 0.45    0.43    - 
Balance, March 31, 2018   59,096,084   $0.12 - 1.00   $0.22   $2,283,219 
Vested and exercisable, March 31, 2018   59,096,084   $0.12 - 1.00   $0.22   $2,283,219 
                     
Unvested, March 31, 2018   -   $-   $-   $- 

 

The aggregate intrinsic value for warrant shares outstanding March 31, 2018 was $95,733.

 

The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2018:

 

    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    43,183,441    2.61   $0.15    43,183,441    2.61   $0.15 
  0.21 – 0.49    11,412,905    2.13    0.32    11,412,905    2.13    0.32 
  0.50 – 1.00    4,499,738    0.38    0.75    4,499,738    0.38    0.75 
                                 
$0.12 – 1.00    59,096,084    2.35   $0.22    59,096,084    2.35   $0.22 

 

NOTE 7 – 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).

 

 14 
 

 

NOTE 7 – SEGMENT REPORTING (CONTINUED)

 

The Company operates in the 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.

 

The detailed segment information of the Company is as follows:

 

Wellness Center USA, Inc.

Assets By Segments

 

   March 31, 2018 
   Corporate   Medical Devices   Authentication and Encryption   Total 
ASSETS                
Current Assets                    
Cash  $24,884   $1,003   $14,526   $40,413 
Accounts receivable   -    -    -    - 
Inventories   -    -    12,057    12,057 
Prepaid expenses and other current assets   -    -    2,213    2,213 
                     
Total current assets   24,884    1,003    28,796    54,683 
                     
Property and equipment, net   -    -    3,148    3,148 
Other assets   15,000    1,760    -    16,760 
                     
Total other assets   15,000    1,760    3,148    19,908 
                     
TOTAL ASSETS  $39,884   $2,763   $31,944   $74,591 

 

Wellness Center USA, Inc.

Operations by Segments

 

   For the Six Months Ended 
   March 31, 2018 
   Corporate   Medical Devices   Authentication and Encryption   Total 
Sales:                
Trade  $-    -   $36,000   $36,000 
Consulting services   -    -    31,750    31,750 
Total Sales   -    -    67,750    67,750 
                     
Cost of goods sold   -    -    34,658    34,658 
                     
Gross profit   -    -    33,092    33,092 
                     
Operating expenses   397,108    135,934    362,438    895,480 
                     
Loss from operations  $(397,108)  $(135,934)  $(329,346)  $(862,388)

 

Wellness Center USA, Inc.

Operations by Segments

 

   For the Six Months Ended 
   March 31, 2017 
   Corporate   Medical Devices   Authentication and Encryption   Total 
Sales:                
Trade  $-   $196,000   $13,100   $209,100 
Consulting services   -    -    28,250    28,250 
Total Sales   -    196,000    41,350    237,350 
                     
Cost of goods sold   -    75,117    38,790    113,907 
                     
Gross profit   -    120,883    2,560    123,443 
                     
Operating expenses   568,610    157,039    300,538    1,026,187 
                     
Loss from operations  $(568,610)  $(36,156)  $(297,978)  $(902,744)

 

NOTE 8 – LEGAL MATTERS

 

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 May, 2017, the Staff issued a Wells Notice stating its preliminary determination to recommend an enforcement action against the Company and our CEO, Mr. Kandalepas, 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 (“Settlement”) through an administrative cease and desist action on November 17, 2017, which was accepted by the SEC on April 12, 2018.  Pursuant to the Settlement, we neither admit nor deny any of the proposed allegations, but are enjoined from violating the above-referenced Sections and Rule. The Settlement imposes no financial penalties or sanctions against the Company. On April 13, 2018, the SEC filed a separate complaint against our CEO in the U.S. District Court for the Northern District of Illinois. It asserts the allegations noted above, as well as allegations that he manipulated the price of company shares through undisclosed trading, realizing more than $130,000 from such trading. The SEC seeks a permanent injunction, disgorgement including prejudgment interest, a civil penalty, an officer-and-director bar, and a penny stock bar.

 

Mr. Kandalepas intends to contest the allegations against him. He has voluntarily resigned as an officer and director. He has agreed to provide transition services to Calvin R. O’Harrow and Roy M. Harsch, who have been appointed to serve as CEO and Chairman, respectively. Mr. Kandalepas will remain with the Company to serve as Executive Director of Corporate Business Development.

 

 15 
 

 

NOTE 9 – SUBSEQUENT EVENTS

 

Subsequent to March 31, 2018, the Company borrowed $80,000 from Directors, an officer and a shareholder. Of these loans, $60,000, along with loans payable of $188,500 outstanding at March 31, 2018, were converted into 1,962,498 shares of common stock. In connection with the conversion of the loans payable, the Company issued warrants to purchase 3,925,002 shares of common stock. The warrants expire five years from the date of grant and have exercise prices of $0.14 and $0.18 per share.

 

An aggregate total of $70,000 of a convertible note payable was converted into 700,000 shares of the Company’s common stock.

 

The Company granted 500,000 shares of its common stock to consultants for services provided. The fair value of the shares on the dates of grant was $70,000.

 

In April 2018, the Board of Directors approved to increase the number of authorized shares of the Company’s common stock that may be subject to, or issued pursuant to, the terms of the 2010 Option Plan from 7,500,000 to 30,000,000, effective January 1, 2018 (see Note 6). 

 

In April 2018, the Company granted options to purchase 11,980,000 shares of its common stock to its officers and directors with a fair value of approximately $1,400,000. The options have an exercise price of $0.14 per share and expire five years from the date of grant. A total of 1,230,000 shares vested upon grant and 10,750,000 shares will vest ratably on a monthly basis over 36 months.

 

In May 2018, the Company received $50,000 from the sale of 333,333 shares of its common stock. In connection with the sale, the Company issued warrants to the shareholders to purchase 666,667 shares of the Company’s common stock. The warrants expire five years from the date of grant and have an exercise price of $0.18 per share.

 

In May 2018, the Board approved the permanent appointment of Roy M. Harsch as Chairman of the Board of Directors and Calvin O’Harrow as Chief Executive Officer.

 

 16 
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward Looking Statements

 

Except for historical information, the following discussion 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 “Description of Business,” and “Analysis of Financial Condition and Results of Operations”, 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” in our Annual Report on Form 10-K and in other Reports we have filed with the Securities and Exchange Commission, as well as 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.

 

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. 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.

 

Description of 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. 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. 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 condensed consolidated financial statements for the three months ended December 31, 2016. See Note 3 for details relating to the sale.

 

The Company currently operates in the following business segments: (i) distribution of targeted Ultra Violet (“UV”) phototherapy devices for dermatology; and (ii) authentication and encryption products and services. The segments are operated, respectively, through PSI and SCI.

 

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.

 

 17 
 

 

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.

 

 18 
 

 

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 (ActiveDutyTM).

 

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.

 

In April 2018, the Company’s subsidiary, SCI, concluded licensing of a patent for technology that is the next generation of Stealth Mark. Working with researchers at the Oak Ridge National Labs, the patent signifies development of a new technology that will generate an invisible marking system with attributes currently unavailable in the anti-counterfeit marketplace today. The formula and techniques have been shown through extensive testing to be resilient to manufacturing processes and can be used on a wide range of materials from woven and non-woven fabrics, cardboard, metal, concrete, plastics, leather, wood, and paper. In addition, the complexity of the information that can be encoded with the system makes counterfeiting difficult.

 

ActiveDutyTM

 

SCI’s ActiveDutyTM 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. ActiveDutyTM 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 ActiveDutyTM creates the first systemic reporting mechanism to deliver strategic and tactical results supported by an intense worldwide analysis of patterns of human behavior. The ActiveDutyTM 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.

 

Analysis of Financial Condition and Results of Operations

 

Results of Operations for the three months ended March 31, 2018 compared to the three months ended March 31, 2017.

 

Revenue and Cost of Goods Sold

 

Revenue for the three months ended March 31, 2018 and 2017 was $41,250 and $134,225, respectively. The decrease of $92,795 was due to the decrease in revenues at PSI, as they had no revenue during the three months ended March 31, 2018, but had $112,000 of revenue during the three months ended March 31, 2017. Cost of sales for the three months ended March 31, 2018 and 2017, was $17,666 and $53,407, respectively. Gross profit for the three months ended March 31, 2018 and 2017, was $23,584 and $80,818, respectively. The gross profit decrease of $57,234 was due to the decrease in revenues of PSI during the three months ended March 31, 2018.

 

 19 
 

 

In June 2017, PSI entered into a pilot program agreement with a Chicago government healthcare organization under which the customer purchased one Psoria Light (PL 1000) to conduct therapy and evaluate the device’s efficacy and functionality for a period of 60 days. Under the agreement, at the end of the pilot program, if the customer was satisfied with the first unit, PSI would receive a purchase order for an additional 15 units. PSI shipped the first unit to the customer in early August 2017, it passed their electrical safety inspection and they were ready to commence training. The pilot study lasted longer than expected but in favor of expand​in​g the utilization of the PL 1000 to additional facilities affiliated with the hospital system. Units will be supplied to individual clinics on a scheduled basis predicated upon in-service and educational program coordination. The objective is to have all selected hospital system clinics equipped with the PL 1000 as medical staff become properly trained to treat ​​previously identified skin conditions. The first shipment for the expanded program was completed in April 2018.​

 

Operating Expenses

 

Operating expenses for the three months ended March 31, 2018 and 2017 were $561,317 and $609,624, respectively. The decrease in operating expenses of $48,307 was due primarily to the reduction of consulting and professional fees during the three months ended March 31, 2018.

 

Other Income (Expenses)

 

Other expenses during the three months ended March 31, 2018 consisted of $65,790 of amortization of debt discount, $158,400 relating to a loss on the modification of the conversion price on a convertible note payable, $5,445 relating to a loss on the modification of the exercise price on warrants in connection with the convertible note payable, $70,422 relating to financing costs and $9,788 of interest expense. There was no other income during the three months ended March 31, 2018. Other income during the three months ended March 31, 2017 consisted of $288,777 relating to a gain on the extinguishment of debt. There was no other expenses during the three months ended March 31, 2017.

 

Net Loss from Continuing Operations

 

Our net loss from continuing operations for the three months ended March 31, 2018 was $847,578, compared to a net loss from continuing operations of $240,029 for the three months ended March 31, 2017. The increase in the net loss of $607,549 was primarily due to the total of other expenses of $309,845 incurred in fiscal 2018, as compared to the total of other income of $288,777 in fiscal 2017, a total loss difference of $598,622. The increase in the net loss was also due to the decrease in revenues and gross profit in 2018, offset by the decrease in operating expenses in 2018.

 

Results of Operations for the six months ended March 31, 2018 compared to the six months ended March 31, 2017.

 

Revenue and Cost of Goods Sold

 

Revenue for the six months ended March 31, 2018 and 2017 was $67,750 and $237,350, respectively. The decrease of $103,125 was due to the decrease in revenues at PSI, as they had no revenue during the six months ended March 31, 2018, but had $196,000 of revenue during the six months ended March 31, 2017. Cost of sales for the six months ended March 31, 2018 and 2017, was $34,658 and $113,907, respectively. Gross profit for the six months ended March 31, 2018 and 2017, was $33,902 and $123,443, respectively. The gross profit decrease of $90,351 was primarily due to the decrease in revenues of PSI during the six months ended March 31, 2018.

 

In June 2017, PSI entered into a pilot program agreement with a Chicago government healthcare organization under which the customer purchased one Psoria Light (PL 1000) to conduct therapy and evaluate the device’s efficacy and functionality for a period of 60 days. Under the agreement, at the end of the pilot program, if the customer was satisfied with the first unit, PSI would receive a purchase order for an additional 15 units. PSI shipped the first unit to the customer in early August 2017, it passed their electrical safety inspection and they were ready to commence training. The pilot study lasted longer than expected but in favor of expand​in​g the utilization of the PL 1000 to additional facilities affiliated with the hospital system. Units will be supplied to individual clinics on a scheduled basis predicated upon in-service and educational program coordination. The objective is to have all selected hospital system clinics equipped with the PL 1000 as medical staff become properly trained to treat ​​previously identified skin conditions. The first shipment for the expanded program was completed in April 2018.​

 

 20 
 

 

Operating Expenses

 

Operating expenses for the six months ended March 31, 2018 and 2017 were $895,480 and $1,026,187, respectively. The decrease in operating expenses of $130,707 was due primarily to the reduction of consulting and professional fees, and the reduction of costs relating to the development of the ActiveDutyTM product, during the six months ended March 31, 2018.

 

Other Income (Expenses)

 

Other expenses during the six months ended March 31, 2018 consisted of $135,837 of amortization of debt discount, $158,400 relating to a loss on the modification of the conversion price on a convertible note payable, $5,445 relating to a loss on the modification of the exercise price on warrants in connection with the convertible note payable, $70,422 relating to financing costs and $13,088 of interest expense. There was no other income during the six months ended March 31, 2018. Other income during the six months ended March 31, 2017 consisted of $288,777 relating to a gain on the extinguishment of debt. There was no other expenses during the six months ended March 31, 2017.

 

Net Loss from Continuing Operations

 

Our net loss from continuing operations for the six months ended March 31, 2018 was $1,245,580, compared to a net loss from continuing operations of $613,967 for the six months ended March 31, 2017. The increase in the net loss of $631,613 in 2018 was primarily due to the total of other expenses of $383,192 incurred in 2018, as compared to the total of other income of $288,777 in 2017, a total loss difference of $671,969. The increase in the net loss was also due to the decrease in revenues and gross profit in 2018, offset by the decrease in operating expenses in 2018.

 

Results of Operations by Segment

 

The Company currently maintains two business segments:

 

  (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 Six Months Ended 
   March 31, 2018 
   Corporate   Medical Devices   Authentication and Encryption   Total 
Sales:                    
Trade  $-    -   $36,000   $36,000 
Consulting services   -    -    31,750    31,750 
Total Sales   -    -    67,750    67,750 
                     
Cost of goods sold   -    -    34,658    34,658 
                     
Gross profit   -    -    33,092    33,092 
                     
Operating expenses   397,108    135,934    362,438    895,480 
                     
Loss from operations  $(397,108)  $(135,934)  $(329,346)  $(862,388)

 

Revenue for the Medical Devices segment for the six months ended March 31, 2017 was $196,000. The Medical Devices segment had no revenue, cost of sales or gross profit for the six months ended March 31, 2018. Cost of goods sold for the six months ended March 31, 2017 was $75,117. Gross profit for the six months ended March 31, 2017 was $120,883. Operating expenses for the six months ended March 31, 2018 and 2017 was $135,934 and $157,039, respectively. The decrease in operating expenses of $21,105 in 2017 was due primarily to the decrease in consulting fees. The loss from operations for the six months ended March 31, 2018 and 2017 was $135,934 and $36,156, respectively.

 

Revenue for the Authentication and Encryption segment for the six months ended March 31, 2018 and 2017 was $67,750 and $41,350, respectively. The increase of $26,400 was primarily due to the increase in trade sales during fiscal 2018. Cost of goods sold for the six months ended March 31, 2018 and 2017 was $34,658 and $38,790, respectively, and the gross profit was $33,092 and $2,560, respectively. The gross profit increase in fiscal 2018 was primarily due to the increase in sales in fiscal 2018. Operating expenses for the six months ended March 31, 2018 and 2017 was $362,438 and $300,538, respectively. The increase in operating expenses of $61,900 in fiscal 2018 was due primarily to the increase in consulting costs. The loss from operations for the six months ended March 31, 2018 and 2017 was $329,346 and $297,978, respectively.

 

The Corporate segment primarily provides executive management services for the Company. Operating expenses for the six months ended March 31, 2018 and 2017 was $397,108 and $568,610, respectively. The decrease in operating expenses of $171,502 in fiscal 2018 was due primarily to the decrease in professional and consulting fees. The loss from operations for the six months ended March 31, 2018 and 2017 was $397,108 and $568,610, respectively.

 

 21 
 

 

Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate adequate amounts of cash to meet its cash needs.

 

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 six months ended March 31, 2018, the Company incurred a net loss of $1,245,580 and used cash in operations of $478,370, and had a shareholders’ deficit of $761,250 as of March 31, 2018. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. 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.

 

As of March 31, 2018, our cash balance was $40,413. Our current cash on hand is not sufficient to maintain our daily operations for the next 12 months unless the Company is able to generate positive cash flows from operating activities. If needed, management intends to raise additional capital through debt and equity financing to fund our daily operations through next 12 months. During the six months ended March 31, 2018, the Company received $489,414 through debt financing and the exercise of stock warrants. However no assurance can be given that we will be successful in raising sufficient capital through debt or equity financing, or that we will be able to raise the required working capital on terms favorable, or that such working capital will be available on any terms when needed during next 12 months. Any failure to secure sufficient debt or equity financing may force the Company to modify its business plan. In addition, we have incurred recurring losses from inception and such losses are expected to continue for the foreseeable future and until such time, if ever, as the Company is able to attain sales levels sufficient to support its operations.

 

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.

 

The Company’s independent registered public accounting firm, in their report on the Company’s consolidated financial statements for the year ended September 30, 2017, has expressed substantial doubt about the Company’s ability to continue as a going concern.

 

Comparison of six months for the years ended March 31, 2018 and 2017

 

As of March 31, 2018, we had $40,413 in cash, negative working capital of $781,158 and an accumulated deficit of $20,310,695.

 

As of March 31, 2017, we had $29,369 in cash, negative working capital of $312,335 and an accumulated deficit of $19,132,557.

 

Cash flows used in operating activities

 

During the six months ended March 31, 2018, the Company used cash flows in operating activities of $478,370 compared to $682,812 used in the six months ended March 31, 2017. During the six months ended March 31, 2018, the Company incurred a net loss of $1,245,580 with $536,680 of non-cash expenses compared to a net loss of $684,890 and $79,307 of negative non-cash expenses during the six months ended March 31, 2017.

 

Cash flows used in investing activities

 

During the six months ended March 31, 2017, we had purchases of property and equipment of $2,250. During the six months ended March 31, 2018, we had no cash flows from investing activities.

 

 22 
 

 

Cash flows provided by financing activities

 

During the six months ended March 31, 2018, we had proceeds from loans payable from officers and shareholders of $179,000, from a convertible note payable of $150,000 and from the exercise of stock warrants of $170,914. We used cash to repay loans payable from officers and shareholders of $10,500. During the six months ended March 31, 2017, we had proceeds loans payable from officers and shareholders of $30,000, from the sale of common stock and warrants of $424,600 and from the exercise of stock warrants of $428,015. We used cash to repay advances from a related party of $2,000.

 

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.

 

Summary of Critical Accounting Policies.

 

The Company has identified critical accounting policies that, as a result of the judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operations involved could result in material changes to its financial condition or results of operations under different conditions or using different assumptions. The Company’s most critical accounting policies include, but are not limited to, those related to fair value of financial instruments, revenue recognition, stock based compensation for obtaining employee services, and equity instruments issued to parties other than employees for acquiring goods or services. Details regarding the Company’s use of these policies and the related estimates are described in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, filed with the Securities and Exchange Commission on February 20, 2018. There have been no material changes to the Company’s critical accounting policies that impact the Company’s financial condition, results of operations or cash flows for the six months ended March 31, 2018.

 

Recently Issued Accounting Pronouncements

 

See Management’s discussion of recent accounting policies included in footnote 2 to the condensed consolidated financial statements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not required for smaller reporting Companies.

 

Item 4. 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.

 

 23 
 

 

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 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.
     
  3. The Company does not have sufficient segregation of duties so that one person can initiate, authorize and execute transactions.
     
  4. Lack of Board of Director approval of debt and equity instruments before issuance.
     
  5. Weaknesses in the controls over press releases before being disseminated.
     

 

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. On April 17, 2018, Mr. Kandalepas voluntarily resigned as an officer and Director and agreed to provide transition services to Calvin R. O’Harrow and Roy M. Harsch, who have been appointed to serve as CEO and Chairman, respectively, from the date of Mr. Kandalepas’ resignation and until appointment of permanent successors.

 

 24 
 

 

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.

 

 25 
 

 

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 control over financial reporting.

 

There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

The Company is periodically engaged in legal proceedings arising from and relating to its business operations. We are currently 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 companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

In May, 2017, the Staff issued a Wells Notice stating its preliminary determination to recommend an enforcement action against the Company and our CEO, Mr. Kandalepas, 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 (“Settlement”) through an administrative cease and desist action on November 17, 2017, which was accepted by the SEC on April 12, 2018.  Pursuant to the Settlement, we neither admit nor deny any of the proposed allegations, but are enjoined from violating the above-referenced Sections and Rule. The Settlement imposes no financial penalties or sanctions against the Company. On April 13, 2018, the SEC filed a separate complaint against our CEO in the U.S. District Court for the Northern District of Illinois. It asserts the allegations noted above, as well as allegations that he manipulated the price of company shares through undisclosed trading, realizing more than $130,000 from such trading. The SEC seeks a permanent injunction, disgorgement including prejudgment interest, a civil penalty, an officer-and-director bar, and a penny stock bar.

 

Mr. Kandalepas intends to contest the allegations against him. He has voluntarily resigned as an officer and director. He has agreed to provide transition services to Calvin R. O’Harrow and Roy M. Harsch, who have been appointed to serve as CEO and Chairman, respectively. Mr. Kandalepas will remain with the Company to serve as Executive Director of Corporate Business Development.

 

 26 
 

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

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

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibit No.   Description
31.1   Certification of Principal Executive Officer Pursuant to Rule 13a-14*
32.1   CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act*
101.INS   XBRL Instance Document**
101.SCH   XBRL Taxonomy Extension Schema**
101.CAL   XBRL Taxonomy Extension Calculation Linkbase**
101.DEF   XBRL Taxonomy Extension Definition Linkbase**
101.LAB   XBRL Taxonomy Extension Label Linkbase**
101.PRE   XBRL Taxonomy Extension Presentation Linkbase**

 

 

* Filed herewith.

**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.

 

 27 
 

 

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: May 15, 2018 By: /s/ Paul D. Jones
   

Paul D. Jones

    President
    (Duly Authorized Principal Executive Officer)

 

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: May 15, 2018 By: /s/ Douglas W. Samuelson
   

Douglas W. Samuelson

    Chief Financial Officer and Chief 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/ Calvin R. O’Harrow   Chief Executive Officer, Chief Operating Officer, Director   May 15, 2018
         
/s/ Douglas W. Samuelson   Chief Financial Officer, Chief Accounting Officer   May 15, 2018

Douglas W. Samuelson 

       
         
/s/ Roy M. Harsch   Chairman   May 15, 2018

Roy M. Harsch

       
         
/s/ Paul D. Jones   Director, President   May 15, 2018
Paul D. Jones        
         
/s/ Thomas E. Scott   Director, Secretary   May 15, 2018
Thomas E. Scott        
         
/s/ William E. Kingsford   Director   May 15, 2018
William E. Kingsford        

 

 28 
 

 

 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Calvin R. O’Harrow, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Wellness Center USA, Inc. for the quarterly period ended March 31, 2018;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such internal control over financial reporting to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, if any, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period cover by this report based on such evaluation; and

 

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;

 

Date: May 15, 2018  
     
  /s/ Calvin R. O’Harrow  
Name: Calvin R. O’Harrow  
Title: Chief Executive Officer, Chief Operating Officer and Director  

 

   
 

EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Douglas W. Samuelson, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Wellness Center USA, Inc. for the quarterly period ended March 31, 2018;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such internal control over financial reporting to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, if any, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period cover by this report based on such evaluation; and

 

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;

 

Date: May 15, 2018  
     
  /s/ Douglas W. Samuelson  
Name: Douglas W. Samuelson  
Title: Chief Financial Officer and Chief Accounting Officer  

 

   
 

 

EX-32.1 4 ex32-1.htm

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 of Wellness Center USA, Inc., a Nevada corporation (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Calvin R. O’Harrow, Chief Executive Officer, Chief Operating Officer and Director of the Company certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) or15(d) of the Securities and Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

Date: May 15, 2018  
   
  /s/ Calvin R. O’Harrow  
Name: Calvin R. O’Harrow  
Title: Chief Executive Officer, Chief Operating Officer and Director  

 

   
 

 

EX-32.2 5 ex32-2.htm

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 of Wellness Center USA, Inc., a Nevada corporation (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas W. Samuelson, Chief Financial Officer and Chief Accounting Officer of the Company certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) or15(d) of the Securities and Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

Date: May 15, 2018  
     
  /s/ Douglas W. Samuelson  
Name: Douglas W. Samuelson  
Title: Chief Financial Officer and Chief Accounting Officer  

 

   
 

EX-101.INS 6 wcui-20180331.xml XBRL INSTANCE FILE 0001516887 2017-10-01 2018-03-31 0001516887 2018-03-31 0001516887 2017-09-30 0001516887 2016-10-01 2017-03-31 0001516887 us-gaap:CommonStockMember 2017-10-01 2018-03-31 0001516887 us-gaap:CommonStockMember 2017-09-30 0001516887 us-gaap:CommonStockMember 2018-03-31 0001516887 us-gaap:AdditionalPaidInCapitalMember 2017-10-01 2018-03-31 0001516887 us-gaap:AdditionalPaidInCapitalMember 2017-09-30 0001516887 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001516887 us-gaap:RetainedEarningsMember 2017-10-01 2018-03-31 0001516887 us-gaap:RetainedEarningsMember 2017-09-30 0001516887 us-gaap:RetainedEarningsMember 2018-03-31 0001516887 WCUI:TotalWCUIDeficitMember 2017-10-01 2018-03-31 0001516887 WCUI:TotalWCUIDeficitMember 2017-09-30 0001516887 WCUI:TotalWCUIDeficitMember 2018-03-31 0001516887 us-gaap:NoncontrollingInterestMember 2017-10-01 2018-03-31 0001516887 us-gaap:NoncontrollingInterestMember 2017-09-30 0001516887 us-gaap:NoncontrollingInterestMember 2018-03-31 0001516887 2016-09-30 0001516887 2017-03-31 0001516887 WCUI:StockOptionsMember 2017-10-01 2018-03-31 0001516887 WCUI:StockOptionsMember 2016-10-01 2017-03-31 0001516887 WCUI:WarrantsMember 2017-10-01 2018-03-31 0001516887 WCUI:WarrantsMember 2016-10-01 2017-03-31 0001516887 WCUI:PsoriaShieldIncMember 2017-10-01 2018-03-31 0001516887 WCUI:PsoriaShieldIncMember 2018-03-31 0001516887 WCUI:StealthCoIncMember 2017-10-01 2018-03-31 0001516887 WCUI:StealthCoIncMember 2018-03-31 0001516887 WCUI:PsoriaDevelopmentCompanyLLCMember 2017-10-01 2018-03-31 0001516887 WCUI:PsoriaDevelopmentCompanyLLCMember 2018-03-31 0001516887 WCUI:NPCIncMember WCUI:DrJayJoshiMember 2017-08-11 0001516887 WCUI:NPCIncMember 2017-08-11 0001516887 WCUI:TwoUnsecuredNoteAgreementsMember 2014-09-30 0001516887 WCUI:TwoShorttermUnsecuredLoansMember 2017-09-30 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember 2017-07-31 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember 2017-07-01 2017-07-31 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember 2017-10-01 2018-03-31 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:WarrantMember 2018-03-31 0001516887 WCUI:PSIConsultantsMember 2017-10-01 2018-03-31 0001516887 WCUI:TwoThousandTenNonQualifiedStockOptionPlanMember 2018-03-31 0001516887 us-gaap:CorporateMember 2018-03-31 0001516887 WCUI:MedicalDevicesMember 2018-03-31 0001516887 WCUI:AuthenticationandEncryptionMember 2018-03-31 0001516887 us-gaap:CorporateMember 2017-10-01 2018-03-31 0001516887 WCUI:MedicalDevicesMember 2017-10-01 2018-03-31 0001516887 WCUI:AuthenticationandEncryptionMember 2017-10-01 2018-03-31 0001516887 us-gaap:CorporateMember 2016-10-01 2017-03-31 0001516887 WCUI:MedicalDevicesMember 2016-10-01 2017-03-31 0001516887 WCUI:AuthenticationandEncryptionMember 2016-10-01 2017-03-31 0001516887 WCUI:CEOMember 2017-10-01 2018-03-31 0001516887 us-gaap:SubsequentEventMember 2018-03-31 0001516887 us-gaap:MinimumMember 2017-10-01 2018-03-31 0001516887 us-gaap:MinimumMember 2017-09-30 0001516887 us-gaap:MinimumMember 2018-03-31 0001516887 us-gaap:MaximumMember 2017-10-01 2018-03-31 0001516887 us-gaap:MaximumMember 2017-09-30 0001516887 us-gaap:MaximumMember 2018-03-31 0001516887 WCUI:ExercisePriceRangeOneMember 2017-10-01 2018-03-31 0001516887 WCUI:ExercisePriceRangeOneMember 2018-03-31 0001516887 WCUI:ExercisePriceRangeTwoMember 2017-10-01 2018-03-31 0001516887 WCUI:ExercisePriceRangeTwoMember 2018-03-31 0001516887 WCUI:ExercisePriceRangeThreeMember 2017-10-01 2018-03-31 0001516887 WCUI:ExercisePriceRangeThreeMember 2018-03-31 0001516887 WCUI:ExercisePriceRangeFourMember 2018-03-31 0001516887 WCUI:ExercisePriceRangeFourMember 2017-10-01 2018-03-31 0001516887 us-gaap:WarrantMember 2017-09-30 0001516887 us-gaap:WarrantMember us-gaap:MinimumMember 2017-10-01 2018-03-31 0001516887 us-gaap:WarrantMember us-gaap:MinimumMember 2017-09-30 0001516887 us-gaap:WarrantMember us-gaap:MinimumMember 2018-03-31 0001516887 us-gaap:WarrantMember us-gaap:MaximumMember 2017-10-01 2018-03-31 0001516887 us-gaap:WarrantMember us-gaap:MaximumMember 2017-09-30 0001516887 us-gaap:WarrantMember us-gaap:MaximumMember 2018-03-31 0001516887 us-gaap:WarrantMember WCUI:ExercisePriceRangeOneMember 2017-10-01 2018-03-31 0001516887 us-gaap:WarrantMember WCUI:ExercisePriceRangeOneMember 2018-03-31 0001516887 us-gaap:WarrantMember WCUI:ExercisePriceRangeTwoMember 2017-10-01 2018-03-31 0001516887 us-gaap:WarrantMember WCUI:ExercisePriceRangeTwoMember 2018-03-31 0001516887 us-gaap:WarrantMember WCUI:ExercisePriceRangeThreeMember 2017-10-01 2018-03-31 0001516887 us-gaap:WarrantMember WCUI:ExercisePriceRangeThreeMember 2018-03-31 0001516887 2018-01-01 2018-03-31 0001516887 2017-01-01 2017-03-31 0001516887 WCUI:NPCIncMember WCUI:DrJayJoshiMember 2016-10-01 2017-09-30 0001516887 WCUI:TwoUnsecuredNoteAgreementsMember 2013-10-01 2014-09-30 0001516887 WCUI:TwoShorttermUnsecuredLoansMember 2016-10-01 2017-09-30 0001516887 WCUI:NineShortTermUnsecuredLoansMember 2017-10-01 2018-03-31 0001516887 WCUI:NineShortTermUnsecuredLoansMember 2018-03-31 0001516887 WCUI:ConvertibleNotePayableOneMember 2018-03-31 0001516887 WCUI:ConvertibleNotePayableTwoMember 2018-03-31 0001516887 WCUI:ConvertibleNotePayableOneMember 2017-09-30 0001516887 WCUI:ConvertibleNotePayableTwoMember 2017-09-30 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember 2017-09-30 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember 2018-03-31 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember 2018-02-27 2018-02-28 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember 2018-02-28 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember 2018-03-05 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember 2018-03-04 2018-03-05 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember us-gaap:MaximumMember 2018-03-05 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember us-gaap:MinimumMember 2018-03-05 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember us-gaap:WarrantMember us-gaap:MaximumMember 2018-03-05 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember us-gaap:WarrantMember us-gaap:MinimumMember 2018-03-05 0001516887 WCUI:ConvertibleNotePayableAgreementOneMember us-gaap:IndividualMember us-gaap:WarrantMember 2018-03-04 2018-03-05 0001516887 WCUI:ConvertibleNotePayableAgreementTwoMember us-gaap:IndividualMember 2018-03-05 0001516887 WCUI:ConvertibleNotePayableAgreementTwoMember us-gaap:IndividualMember 2018-03-04 2018-03-05 0001516887 WCUI:ConvertibleNotePayableAgreementTwoMember us-gaap:IndividualMember 2017-10-01 2018-03-31 0001516887 WCUI:ConvertibleNotePayableAgreementTwoMember us-gaap:IndividualMember 2018-03-31 0001516887 us-gaap:ConvertibleNotesPayableMember 2017-10-01 2018-03-31 0001516887 WCUI:TwoThousandTenNonQualifiedStockOptionPlanMember us-gaap:MinimumMember 2018-03-31 0001516887 WCUI:TwoThousandTenNonQualifiedStockOptionPlanMember us-gaap:MaximumMember 2018-03-31 0001516887 WCUI:EmploymentAgreementWithThreeEmployeesMember WCUI:JanuaryOneTwoThousandEighteenMember 2017-10-01 2018-03-31 0001516887 WCUI:EmploymentAgreementWithThreeEmployeesMember WCUI:JanuaryOneTwoThousandEighteenMember 2018-03-31 0001516887 WCUI:JanuaryOneTwoThousandEighteenMember 2017-10-01 2018-03-31 0001516887 WCUI:EmploymentAgreementWithThreeEmployeesMember 2017-10-01 2018-03-31 0001516887 WCUI:EmploymentAgreementWithThreeEmployeesMember 2018-01-01 2018-03-31 0001516887 us-gaap:MaximumMember 2017-12-29 2018-01-02 0001516887 2018-01-02 0001516887 WCUI:StockWarrantsMember 2018-03-31 0001516887 WCUI:StockWarrantsMember 2017-10-01 2018-03-31 0001516887 us-gaap:WarrantMember 2017-10-01 2018-03-31 0001516887 us-gaap:WarrantMember 2018-03-31 0001516887 WCUI:CEOMember us-gaap:MaximumMember 2017-10-01 2018-03-31 0001516887 us-gaap:SubsequentEventMember 2017-10-01 2018-03-31 0001516887 us-gaap:SubsequentEventMember us-gaap:MinimumMember 2018-03-31 0001516887 us-gaap:SubsequentEventMember us-gaap:MaximumMember 2018-03-31 0001516887 us-gaap:SubsequentEventMember us-gaap:MaximumMember WCUI:TwoThousandTenOptionPlanMember 2018-04-30 0001516887 us-gaap:SubsequentEventMember us-gaap:MinimumMember WCUI:TwoThousandTenOptionPlanMember 2018-04-30 0001516887 us-gaap:SubsequentEventMember 2018-04-01 2018-04-30 0001516887 us-gaap:SubsequentEventMember WCUI:ThirtySixMonthsMember 2018-04-01 2018-04-30 0001516887 us-gaap:SubsequentEventMember WCUI:MayTwoThousandEighteenMember 2018-01-01 2018-03-31 0001516887 us-gaap:SubsequentEventMember WCUI:MayTwoThousandEighteenMember 2018-05-30 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure Wellness Center USA, Inc. 0001516887 10-Q 2018-03-31 false --09-30 Smaller Reporting Company Q2 2018 92879384 40413 29369 81749 277302 24884 1003 14526 24999 12057 12335 12057 2213 1751 2213 54683 68454 24884 1003 28796 3148 5126 3148 19908 21886 15000 1760 3148 74591 90340 39884 2763 31944 376641 203367 51381 13440 227500 59000 9000 50000 835841 380789 93066 90285 -20310695 -19132557 -376420 26939 -384830 -317388 -761250 -290449 90285 93066 19069211 19841209 -19132557 -20310695 26939 -376420 -317388 -384830 74591 90340 16760 16760 15000 1760 130721 49884 0.001 0.001 185000000 185000000 7500000 7500000 30000000 30000000 7500000 92879384 90284916 92879384 90284916 36000 209100 36000 196000 13100 20500 120100 36000 31750 28250 31750 28250 20750 14125 31750 67750 237350 67750 196000 41350 41250 134225 67750 34658 113907 34658 75117 38790 17666 53407 34658 33092 123443 33092 120883 2560 23584 80818 33092 895480 1026187 397108 135934 362438 568610 157039 300538 561317 609624 895480 -862388 -902744 -397108 -135934 -329346 -568610 -36156 -297978 -537733 -528806 -862388 13088 9788 -383192 288777 -309845 288777 -1245580 -613967 -847578 -240029 -70923 -29361 -1245580 -684890 -1178138 -1178138 -67442 -847578 -269390 -67442 -1098 -21473 5430 -1178138 -683792 -826105 -274820 -0.01 -0.01 -0.01 -0.00 91414889 82814207 91551485 84644460 90284916 92879384 26700 150 26550 26700 26700 70000 150000 150000 500000 1978 5402 26700 26000 -24999 70000 -278 -66787 462 -24613 173274 -25500 20506 37941 25371 -5500 -24826 -6489 -478370 -682812 546 -546 -1704 -2250 170914 428015 424600 489414 880615 11044 195553 67442 1098 <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 1 &#8211; ORGANIZATION AND BASIS OF PRESENTATION</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Organization and Operations</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Wellness Center USA, Inc. (&#8220;WCUI&#8221; or the &#8220;Company&#8221;) 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. (&#8220;PSI&#8221;), National Pain Centers, Inc. (&#8220;NPC&#8221;), and StealthCo Inc. (&#8220;SCI&#8221;), d/b/a Stealth Mark, Inc. 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 condensed consolidated statement of operations for the three months ended March 31, 2017. See Note 3 for details relating to the sale.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company currently operates in the following business segments: (i) distribution of targeted Ultra Violet (&#8220;UV&#8221;) phototherapy devices for dermatology; and (ii) authentication and encryption products and services. The segments are operated, respectively, through PSI and SCI.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of Presentation of Unaudited Financial Information</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying unaudited condensed consolidated financial statements of Wellness Center USA, Inc. and Subsidiaries (the &#8220;Company&#8221;) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending September 30, 2018.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Going Concern</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 six months ended March 31, 2018, the Company incurred a net loss from continuing operations of $1,245,580 and used cash in operations from continuing operations of $478,370 and had a shareholders&#8217; deficit of $761,250 as of March 31, 2018. These factors raise substantial doubt about the Company&#8217;s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company&#8217;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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, the Company&#8217;s independent registered public accounting firm, in its report on the Company&#8217;s September 30, 2017 financial statements, has raised substantial doubt about the Company&#8217;s ability to continue as a going concern.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At March 31, 2018, the Company had cash on hand in the amount of $40,413. 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 six months ended March 31, 2018, the Company received $489,414 through debt financing and the exercise of stock warrants.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="background-color: white"><b>NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of Consolidation</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s consolidated subsidiaries and/or entities are as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="width: 24%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Name of consolidated subsidiary or entity</b></font></td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 26%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>State or other jurisdiction of incorporation or organization</b></font></td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 32%; border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Date of incorporation or formation</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>(date of acquisition/disposition, if applicable)</b></p></td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 15%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Attributable interest</b></font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font-size: 10pt">Psoria-Shield Inc. (&#8220;PSI&#8221;)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">The State of Florida</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">June 17, 2009 (August 24, 2012)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">100%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font-size: 10pt">StealthCo, Inc. (&#8220;StealthCo&#8221;)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">The State of Illinois</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">March 18, 2014</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">100%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font-size: 10pt">Psoria Development Company LLC. (&#8220;PDC&#8221;)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">The State of Illinois</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">January 15, 2015</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">50%</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 the valuation of accounts receivable and allowance for uncollectible amounts, inventory and obsolescence reserves, accruals for potential liabilities, valuations of stock-based compensation, realization of deferred tax assets, among others. Actual results could differ from these estimates.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income (Loss) per Share </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic loss per share is computed by dividing net loss applicable to common stockholders 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 stockholders 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 six months ended March 31, 2018 and 2017, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At March 31, 2018 and 2017, the dilutive impact of outstanding stock options for 8,847,500 and 6,147,500 shares, respectively, and outstanding warrants for 59,096,084 and 63,741,253 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Revenue Recognition</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px">&#160;</td> <td style="width: 24px"><font style="font-size: 10pt">(i)</font></td> <td style="text-align: justify"><font style="font-size: 10pt"><b><i>Sale of products</i></b><i>:</i> 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 (&#8220;FOB&#8221;) 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.</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><b><i>&#160;</i></b></p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px">&#160;</td> <td style="width: 24px"><font style="font-size: 10pt">(ii)</font></td> <td style="text-align: justify"><font style="font-size: 10pt"><b><i>Consulting services:</i></b> 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.</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Payments received before the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue. Deferred revenue at March 31, 2018 and 2017 was $49,598 and $55,098, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Non-controlling Interest</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Non-controlling interest represents the non-controlling interest holder&#8217;s proportionate share of the equity of the Company&#8217;s majority-owned subsidiary, PDC. Non-controlling interest is adjusted for the non-controlling interest holder&#8217;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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The fair value of the Company&#8217;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, estimated forfeitures 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Issued Accounting Pronouncements</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; color: #222222">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&#8217;s financial statements and disclosures.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&#8217;s financial statements and disclosures.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&#8217;s present or future consolidated financial statements.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 3 &#8211; DISCONTINUED OPERATIONS </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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. (&#8220;NPC&#8221;) 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&#8217;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.&#8217;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&#8217;s board of directors until February 5, 2018. During the year ended September 30, 2017, the Company recorded a $252,508 gain relating to this transaction.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Components of the statement of operations relating to NPC for the three and six months ended March 31, 2017, were as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Three Months Ended</b></font></td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Six Months Ended</b></font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 58%"><font style="font-size: 10pt">Total Sales</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 18%; text-align: right"><font style="font-size: 10pt">40,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 18%; text-align: right"><font style="font-size: 10pt">77,402</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Operating expenses</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">69,361</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">148,325</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Loss from discontinued operations</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(29,361</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(70,923</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b></b></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 4 &#8211; LOANS PAYABLE FROM OFFICERS AND SHAREHOLDERS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At September 30, 2017, loans payable from officers and shareholders of $59,000 consisted of two unsecured note agreements issued in 2014 totaling to $9,000, and two short-term unsecured loans issued in fiscal 2017 totaling to $50,000. The loans issued in 2014 have no stated interest rate and are due on demand. The loans issued in 2017 have an interest rate of eight percent per annum and are due one year from the date of issuance. During the six months ended March 31, 2018, the Company borrowed $179,000 under nine short-term unsecured loans. The loans have an interest rate of eight percent and are due one year from the date of issuance. During the six months ended March 31, 2018, the Company repaid $10,500 of the loans payable. As of March 31, 2018, loans payable from officers and shareholders of $227,500 were outstanding.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 5 &#8211; CONVERTIBLE NOTES PAYABLE AGREEMENTS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">September 30, 2017</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 62%"><font style="font-size: 10pt">Convertible note payable (a)</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 16%; text-align: right"><font style="font-size: 10pt">110,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 16%; text-align: right"><font style="font-size: 10pt">165,000</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Convertible note payable (b)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">165,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Debt discount &#8211; unamortized balance</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(144,279</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(115,116</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Convertible notes payable, net</b></font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">130,721</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">49,884</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(a) 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<sup>th </sup>day from the issue date into the Company&#8217;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&#8217; prior written notice.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 comprised $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 affected Black-Scholes Merton option pricing model with a stock price of $0.31, volatility of 139.98% and risk-free rate of 1.28%. The unamortized balance of the debt discount at September 30, 2017 was $115,116. During the six months ended March 31, 2018, the Company amortized the remaining $115,116 of debt discount, leaving no unamortized balance at March 31, 2018.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The agreement also included a clause that allowed for the individual to receive additional shares if the price of the stock declined as of February 28, 2018 (the maturity date). The price of the stock on that date was $0.12 per share, causing the Company to issue the individual an additional 186,849 shares of its common stock. The Company recorded an expense of $22,422 relating to the issuance of these shares.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 5, 2018, the Company modified the conversion price on the note payable from $0.25 per share to $0.10 per share. On that date, the reduction in the conversion price allowed for the individual to convert an additional 990,000 shares with a fair value of $0.16 per share. The total amount of expense the Company recognized relating to the modification was $158,400. Also on March 5, 2018, the Company modified the exercise price on the attached warrants from $0.50 per share to $0.20 per share. The total amount of expense the Company recognized relating to the modification was $5,445. The maturity date of the note was also extended until April 30, 2018.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the six months ended March 31, 2018, the individual converted $55,000 of the convertible note payable into 550,000 shares of the Company&#8217;s common stock.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b>&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(b) On March 5, 2018, the Company entered into another Convertible Note Payable Agreement with the same individual under which the Company borrowed an additional $165,000. Net proceeds received by the Company under the agreement after payment of a $15,000 fee to the lender was $150,000. In connection with the agreement, the Company issued the individual 300,000 restricted shares of its common stock and warrants to purchase 660,000 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 $0.20 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90<sup>th</sup> day from the issue date into the Company&#8217;s common stock at the fixed conversion price of $0.10 per share. The note matures in October 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&#8217; prior written notice.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company calculated the related fair value of the warrants issued to the noteholder to be $55,032 using a Black Scholes Merton option pricing model and performing a relative value calculation. The Company then made a calculation to determine if a beneficial conversion feature (BCF) existed. The beneficial conversion was based upon the effective conversion price based on the proceeds received that were allocated to the convertible instrument. Based upon the Company&#8217;s calculation, it was determined that a beneficial conversion feature existed amounting to $94,968 and was recorded as a debt discount. As such the Company recognized a debt discount at the date of issuance in the aggregate amount of $165,000 relating to the $15,000 fees paid to the lender, and the aggregate amount of $150,000 relating to the relative value of the warrants and the BCF. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the Convertible note (a valuation debt discount). During the three and six months ended March 31, 2018, the Company amortized $20,721 of debt discount, leaving an unamortized balance of $144,279 at March 31, 2018.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, the Company recorded an additional finance cost of $48,000 related to the fair value of the 300,000 shares of common stock granted at the date issuance.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 6 &#8211; SHAREHOLDERS&#8217; DEFICIT</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Common shares issued for Services</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the six months ended March 31, 2018, the Company issued 150,000 shares of its common stock valued at $26,700 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Common shares issued in connection with Convertible Notes Payable</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>&#160;</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the six months ended March 31, 2018, the Company issued 486,849 shares of its common stock in connection with the issuance of convertible notes payable and also issued 550,000 shares upon the conversion of the notes payable (see Note 5).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stock Options</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>&#160;</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 22, 2010, effective retroactively as of June 30, 2010, the Company&#8217;s Board of Directors approved the adoption of the &#8220;2010 Non-Qualified Stock Option Plan&#8221; (&#8220;2010 Option Plan&#8221;) 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&#8217;s common stock may be subject to, or issued pursuant to, the terms of the plan. Effective January 1, 2018, the Board of Directors approved to increase the number of authorized shares of the Company&#8217;s common stock that may be subject to, or issued pursuant to, the terms of the plan from 7,500,000 to 30,000,000 (see Note 9).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 1, 2018, the Company entered into employment agreements with three employees of SCI. Under the agreements, the Company issued options to purchase a combined total of 1,775,000 shares of its common stock with a fair value of $289,890. The options are exercisable over a term of five years, with an exercise price of $0.19. The Company valued the options using a Black-Scholes option pricing model. A combined total of 675,000 shares vested 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. During the three and six months ended March 31, 2018, the Company recorded $110,498 of stock compensation for the value of the options and as of March 31, 2018, unvested compensation of $179,392 remained that will be amortized over the remaining vesting period.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Further, 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&#8217;s common stock each quarter. The options are exercisable over a five year period, are issuable on the last day of each quarter ending and vest immediately on the date of grant. All options accelerate and become fully vested upon the sale or change of control of the Company. During the six months ended March 31, 2018, the Company issued options to purchase 250,000 shares of its common stock to the employees with an exercise price of $0.13 per share. During the six months ended March 31, 2018, the Company valued the options using a Black-Scholes option pricing model and recorded $27,400 of stock compensation for the value of the options vested.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The assumptions used for options granted during the six months ended March 31, 2018 are as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Exercise price</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">0.13 - 0.19</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Expected dividends</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Expected volatility</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">123.8% - 130.2</font></td> <td><font style="font-size: 10pt">%</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Risk free interest rate</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.01% - 2.18</font></td> <td><font style="font-size: 10pt">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 71%; text-align: justify"><font style="font-size: 10pt">Expected life of options</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 26%; text-align: right"><font style="font-size: 10pt">2.5</font></td> <td style="width: 1%">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below summarizes the Company&#8217;s stock option activities for the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number of</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Option Shares</b></p></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Exercise Price Range Per Share</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Fair Value</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>at Date of Grant</b></p></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 40%"><font style="font-size: 10pt">Balance, September 30, 2017</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">6,822,500</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">0.10 - 2.00</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">0.51</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">1,865,628</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Granted</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2,025,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.13 - 0.19</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.18</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">317,971</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Cancelled</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Exercised</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Expired</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">8,847,500</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.10 &#8211; 2.00</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,183,599</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Vested and exercisable, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,747,500</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.10 &#8211; 2.00</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,003,527</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Unvested, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,100,000</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.19</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.19</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">180,072</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate intrinsic value for option shares outstanding at March 31, 2018 was $13,438.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes information concerning outstanding and exercisable options as of March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td colspan="2">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Options Outstanding</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Options Exercisable</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Range of Exercise Prices</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number Outstanding</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Average Remaining Contractual Life (in years)</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number Exercisable</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Average Remaining Contractual Life (in years)</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 17%; text-align: right"><font style="font-size: 10pt">0.10 - 0.39</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">5,325,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">3.72</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">0.18</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">4,225,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">3.72</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">0.18</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.40 - 0.99</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2,122,500</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.05</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.40</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2,122,500</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.05</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.40</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.00 - 1.99</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">750,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.75</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.00</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">750,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.75</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.00</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">650,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.75</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">650,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.75</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.01 - 2.00</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">8,847,500</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.93</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,747,500</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.93</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 31, 2018, there were 21,152,500 shares of stock options remaining available for issuance under the 2010 Plan.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stock Warrants</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the six months ended March, 31, 2018, the Company issued warrants to purchase 660,000 shares with an exercise price of $0.20 per share in connection with the issuance of a convertible note payable (see Note 5). The warrants expire five years from the date of grant.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the six months ended March, 31, 2018, warrants to purchase 1,407,619 shares of the Company&#8217;s common stock were exercised for $170,914.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below summarizes the Company&#8217;s warrants activities for the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number of Warrant Shares</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Exercise Price Range Per Share</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Fair Value at Date of Issuance</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 40%"><font style="font-size: 10pt">Balance, September 30, 2017</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">64,161,304</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">0.12 - 1.00</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">0.24</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">2,151,219</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Granted</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">660,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.20</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.20</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">132,000</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Cancelled</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Exercised</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">(1,407,619</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.12 &#8211; 0.15</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.12</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Expired</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4,317,602</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.30 &#8211; 0.45</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Balance, March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">59,096,084</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.12 - 1.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.22</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,283,219</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Vested and exercisable, March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">59,096,084</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.12 - 1.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.22</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,283,219</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Unvested, March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The aggregate intrinsic value for warrant shares outstanding March 31, 2018 was $95,733.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td colspan="2">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Warrants Outstanding</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Warrants Exercisable</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Range of Exercise Prices</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number Outstanding</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Average Remaining Contractual Life (in years)</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number Exercisable</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Average Remaining Contractual Life (in years)</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 17%; text-align: right"><font style="font-size: 10pt">0.12 &#8211; 0.20</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">43,183,441</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">2.61</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">0.15</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">43,183,441</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.61</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">0.15</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">&#160;0.21 &#8211; 0.49</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">11,412,905</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.13</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.32</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">11,412,905</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.13</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.32</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">&#160;0.50 &#8211; 1.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,499,738</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.38</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.75</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,499,738</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.38</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.75</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.12 &#8211; 1.00</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">59,096,084</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.35</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.22</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">59,096,084</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.35</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.22</font></td> <td style="padding-bottom: 2.5pt"></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b></b></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 7 &#8211; SEGMENT REPORTING</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&#8217;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).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company operates in the following business segments:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>(i) Medical Devices:</i> 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 (&#8220;UV&#8221;) phototherapy devices for the treatment of skin diseases.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>(ii) Authentication and Encryption Products and Services:</i> 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The detailed segment information of the Company is as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Wellness Center USA, Inc. </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Assets By Segments </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="14" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Corporate</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Medical Devices</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Authentication and Encryption</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Total</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt"><b>ASSETS</b></font></td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt"><b>Current Assets</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 40%"><font style="font-size: 10pt">Cash</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">24,884</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">1,003</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">14,526</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">40,413</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Accounts receivable</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Inventories</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">12,057</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">12,057</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Prepaid expenses and other current assets</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,213</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,213</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt"><b>Total current assets</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">24,884</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1,003</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">28,796</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">54,683</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Property and equipment, net</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">3,148</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">3,148</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Other assets</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,760</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">16,760</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt"><b>Total other assets</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,760</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">3,148</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">19,908</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>TOTAL ASSETS</b></font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">39,884</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,763</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">31,944</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">74,591</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Wellness Center USA, Inc. </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Operations by Segments </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="14" style="text-align: center"><font style="font-size: 10pt"><b>For the Six Months Ended</b></font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="14" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Corporate</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Medical Devices</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Authentication and Encryption</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Total</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Sales:</font></td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 40%; padding-left: 10pt"><font style="font-size: 10pt">Trade</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">36,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">36,000</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Consulting services</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">31,750</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">31,750</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Total Sales</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">67,750</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">67,750</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Cost of goods sold</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">34,658</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">34,658</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Gross profit</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">33,092</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">33,092</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Operating expenses</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">397,108</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">135,934</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">362,438</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">895,480</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Loss from operations</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(397,108</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(135,934</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(329,346</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(862,388</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Wellness Center USA, Inc. </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Operations by Segments </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="14" style="text-align: center"><font style="font-size: 10pt"><b>For the Six Months Ended</b></font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="14" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Corporate</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Medical Devices</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Authentication and Encryption</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Total</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Sales:</font></td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 40%; padding-left: 10pt"><font style="font-size: 10pt">Trade</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">196,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">13,100</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">209,100</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Consulting services</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">28,250</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">28,250</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Total Sales</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">196,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">41,350</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">237,350</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Cost of goods sold</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">75,117</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">38,790</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">113,907</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Gross profit</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">120,883</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2,560</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">123,443</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Operating expenses</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">568,610</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">157,039</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">300,538</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,026,187</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Loss from operations</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(568,610</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(36,156</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(297,978</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(902,744</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 8 &#8211; LEGAL MATTERS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&#8217;s or our subsidiaries&#8217; 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May, 2017, the Staff issued a Wells Notice stating its preliminary determination to recommend an enforcement action against the Company and our CEO, Mr. Kandalepas, 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 &#8220;salary&#8221;, &#8220;prepayments&#8221; or &#8220;loans,&#8221; 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Subsequent discussions resulted in our submission of an Offer of Settlement (&#8220;Settlement&#8221;) through an administrative cease and desist action on November 17, 2017, which was accepted by the SEC on April 12, 2018. &#160;Pursuant to the Settlement, we neither admit nor deny any of the proposed allegations, but are enjoined from violating the above-referenced Sections and Rule. The Settlement imposes no financial penalties or sanctions against the Company. On April 13, 2018, the SEC filed a separate complaint against our CEO in the U.S. District Court for the Northern District of Illinois. It asserts the allegations noted above, as well as allegations that he manipulated the price of company shares through undisclosed trading, realizing more than $130,000 from such trading. The SEC seeks a permanent injunction, disgorgement including prejudgment interest, a civil penalty, an officer-and-director bar, and a penny stock bar.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mr. Kandalepas intends to contest the allegations against him. He has voluntarily resigned as an officer and director. He has agreed to provide transition services to Calvin R. O&#8217;Harrow and Roy M. Harsch, who have been appointed to serve as CEO and Chairman, respectively. Mr. Kandalepas will remain with the Company to serve as Executive Director of Corporate Business Development.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 9 &#8211; SUBSEQUENT EVENTS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Subsequent to March 31, 2018, the Company borrowed $80,000 from Directors, an officer and a shareholder. Of these loans, $60,000, along with loans payable of $188,500 outstanding at March 31, 2018, were converted into 1,962,498 shares of common stock. In connection with the conversion of the loans payable, the Company issued warrants to purchase 3,925,002 shares of common stock. The warrants expire five years from the date of grant and have exercise prices of $0.14 and $0.18 per share.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">An aggregate total of $70,000 of a convertible note payable was converted into 700,000 shares of the Company&#8217;s common stock.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company granted 500,000 shares of its common stock to consultants for services provided. The fair value of the shares on the dates of grant was $70,000.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2018, the Board of Directors approved to increase the number of authorized shares of the Company&#8217;s common stock that may be subject to, or issued pursuant to, the terms of the 2010 Option Plan from 7,500,000 to 30,000,000, effective January 1, 2018 (see Note 6).&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In April 2018, the Company granted options to purchase 11,980,000 shares of its common stock to its officers and directors with a fair value of approximately $1,400,000. The options have an exercise price of $0.14 per share and expire five years from the date of grant. A total of 1,230,000 shares vested upon grant and 10,750,000 shares will vest ratably on a monthly basis over 36 months.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2018, the Company received $50,000 from the sale of 333,333 shares of its common stock. In connection with the sale, the Company issued warrants to the shareholders to purchase 666,667 shares of the Company&#8217;s common stock. The warrants expire five years from the date of grant and have an exercise price of $0.18 per share.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2018, the Board approved the permanent appointment of Roy M. Harsch as Chairman of the Board of Directors and Calvin O&#8217;Harrow as Chief Executive Officer.</p> Nevada The State of Florida The State of Illinois The State of Illinois -478370 -676323 8847500 6147500 59096084 63741253 49598 55098 55098 Psoria-Shield Inc. (“PSI”) StealthCo, Inc. (“StealthCo”) Psoria Development Company LLC. (“PDC”) 2009-06-17 2014-03-18 2015-01-15 2012-08-24 1.00 1.00 0.50 77402 40000 148325 69361 1.00 1.00 due on demand due one year from the date of issuance. due one year from the date of issuance. 0.00 0.08 0.08 0.08 0.08 144279 115116 150000 115116 94968 144279 165000 165000 150000 150000 150000 165000 300000 1407619 330000 3925002 660000 660000 666667 P5Y P5Y 0.50 0.20 0.20 0.14 0.18 0.25 0.25 0.10 0.50 0.20 0.10 February 2018 October 2018 94704 55296 87582 55032 0.31 0.12 1.3998 0.0128 unsecured unsecured convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.25 per share. convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.10 per share. <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of Consolidation</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s consolidated subsidiaries and/or entities are as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="width: 24%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Name of consolidated subsidiary or entity</b></font></td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 26%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>State or other jurisdiction of incorporation or organization</b></font></td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 32%; border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Date of incorporation or formation</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>(date of acquisition/disposition, if applicable)</b></p></td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 15%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Attributable interest</b></font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font-size: 10pt">Psoria-Shield Inc. (&#8220;PSI&#8221;)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">The State of Florida</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">June 17, 2009 (August 24, 2012)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">100%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font-size: 10pt">StealthCo, Inc. (&#8220;StealthCo&#8221;)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">The State of Illinois</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">March 18, 2014</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">100%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font-size: 10pt">Psoria Development Company LLC. (&#8220;PDC&#8221;)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">The State of Illinois</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">January 15, 2015</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">50%</font></td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 the valuation of accounts receivable and allowance for uncollectible amounts, inventory and obsolescence reserves, accruals for potential liabilities, valuations of stock-based compensation, realization of deferred tax assets, among others. Actual results could differ from these estimates.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income (Loss) per Share </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic loss per share is computed by dividing net loss applicable to common stockholders 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 stockholders 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 six months ended March 31, 2018 and 2017, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At March 31, 2018 and 2017, the dilutive impact of outstanding stock options for 8,847,500 and 6,147,500 shares, respectively, and outstanding warrants for 59,096,084 and 63,741,253 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Revenue Recognition</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px">&#160;</td> <td style="width: 24px; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt">(i)</font></td> <td style="font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 10pt"><b><i>Sale of products</i></b><i>:</i> 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 (&#8220;FOB&#8221;) 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.</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><b><i>&#160;</i></b></p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px">&#160;</td> <td style="width: 24px; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt">(ii)</font></td> <td style="font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 10pt"><b><i>Consulting services:</i></b> 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.</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Payments received before the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue. Deferred revenue at March 31, 2018 and 2017 was $49,598 and $55,098, respectively.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The fair value of the Company&#8217;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, estimated forfeitures 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.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Recently Issued Accounting Pronouncements</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; color: #222222">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&#8217;s financial statements and disclosures.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&#8217;s financial statements and disclosures.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&#8217;s present or future consolidated financial statements.</p> 2018-04-30 288777 288777 158400 158400 158400 158400 158400 5445 5445 5445 5445 5445 550000 55000 737 54263 55000 1400000 150000 150000 150000 70422 487 69935 70422 486849 137898 178068 55000 150000 115116 20721 2000 <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Components of the statement of operations relating to NPC for the three and six months ended March 31, 2017, were as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Three Months Ended</b></font></td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Six Months Ended</b></font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 58%"><font style="font-size: 10pt">Total Sales</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 18%; text-align: right"><font style="font-size: 10pt">40,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 18%; text-align: right"><font style="font-size: 10pt">77,402</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Operating expenses</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">69,361</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">148,325</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Loss from discontinued operations</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(29,361</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(70,923</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">September 30, 2017</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 62%"><font style="font-size: 10pt">Convertible note payable (a)</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 16%; text-align: right"><font style="font-size: 10pt">110,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 16%; text-align: right"><font style="font-size: 10pt">165,000</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Convertible note payable (b)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">165,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Debt discount &#8211; unamortized balance</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(144,279</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(115,116</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>Convertible notes payable, net</b></font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">130,721</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">49,884</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(a) 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<sup>th </sup>day from the issue date into the Company&#8217;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&#8217; prior written notice.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 comprised $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 affected Black-Scholes Merton option pricing model with a stock price of $0.31, volatility of 139.98% and risk-free rate of 1.28%. The unamortized balance of the debt discount at September 30, 2017 was $115,116. During the six months ended March 31, 2018, the Company amortized the remaining $115,116 of debt discount, leaving no unamortized balance at March 31, 2018.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The agreement also included a clause that allowed for the individual to receive additional shares if the price of the stock declined as of February 28, 2018 (the maturity date). The price of the stock on that date was $0.12 per share, causing the Company to issue the individual an additional 186,849 shares of its common stock. The Company recorded an expense of $22,422 relating to the issuance of these shares.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 5, 2018, the Company modified the conversion price on the note payable from $0.25 per share to $0.10 per share. On that date, the reduction in the conversion price allowed for the individual to convert an additional 990,000 shares with a fair value of $0.16 per share. The total amount of expense the Company recognized relating to the modification was $158,400. Also on March 5, 2018, the Company modified the exercise price on the attached warrants from $0.50 per share to $0.20 per share. The total amount of expense the Company recognized relating to the modification was $5,445. The maturity date of the note was also extended until April 30, 2018.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the six months ended March 31, 2018, the individual converted $55,000 of the convertible note payable into 550,000 shares of the Company&#8217;s common stock.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b>&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(b) On March 5, 2018, the Company entered into another Convertible Note Payable Agreement with the same individual under which the Company borrowed an additional $165,000. Net proceeds received by the Company under the agreement after payment of a $15,000 fee to the lender was $150,000. In connection with the agreement, the Company issued the individual 300,000 restricted shares of its common stock and warrants to purchase 660,000 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 $0.20 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90<sup>th</sup> day from the issue date into the Company&#8217;s common stock at the fixed conversion price of $0.10 per share. The note matures in October 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&#8217; prior written notice.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company calculated the related fair value of the warrants issued to the noteholder to be $55,032 using a Black Scholes Merton option pricing model and performing a relative value calculation. The Company then made a calculation to determine if a beneficial conversion feature (BCF) existed. The beneficial conversion was based upon the effective conversion price based on the proceeds received that were allocated to the convertible instrument. Based upon the Company&#8217;s calculation, it was determined that a beneficial conversion feature existed amounting to $94,968 and was recorded as a debt discount. As such the Company recognized a debt discount at the date of issuance in the aggregate amount of $165,000 relating to the $15,000 fees paid to the lender, and the aggregate amount of $150,000 relating to the relative value of the warrants and the BCF. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the Convertible note (a valuation debt discount). During the three and six months ended March 31, 2018, the Company amortized $20,721 of debt discount, leaving an unamortized balance of $144,279 at March 31, 2018.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, the Company recorded an additional finance cost of $48,000 related to the fair value of the 300,000 shares of common stock granted at the date issuance.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The assumptions used for options granted during the six months ended March 31, 2018 are as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Exercise price</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">0.13 - 0.19</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Expected dividends</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Expected volatility</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">123.8% - 130.2</font></td> <td><font style="font-size: 10pt">%</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Risk free interest rate</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.01% - 2.18</font></td> <td><font style="font-size: 10pt">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 71%; text-align: justify"><font style="font-size: 10pt">Expected life of options</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 26%; text-align: right"><font style="font-size: 10pt">2.5</font></td> <td style="width: 1%"></td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below summarizes the Company&#8217;s warrants activities for the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number of Warrant Shares</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Exercise Price Range Per Share</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Fair Value at Date of Issuance</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 40%"><font style="font-size: 10pt">Balance, September 30, 2017</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">64,161,304</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">0.12 - 1.00</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">0.24</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">2,151,219</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Granted</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">660,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.20</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.20</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">132,000</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Cancelled</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Exercised</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">(1,407,619</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.12 &#8211; 0.15</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.12</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Expired</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4,317,602</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.30 &#8211; 0.45</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Balance, March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">59,096,084</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.12 - 1.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.22</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,283,219</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Vested and exercisable, March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">59,096,084</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.12 - 1.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.22</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,283,219</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Unvested, March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt"></td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td colspan="2">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Warrants Outstanding</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Warrants Exercisable</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Range of Exercise Prices</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number Outstanding</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Average Remaining Contractual Life (in years)</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number Exercisable</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Average Remaining Contractual Life (in years)</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 17%; text-align: right"><font style="font-size: 10pt">0.12 &#8211; 0.20</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">43,183,441</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">2.61</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">0.15</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">43,183,441</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">2.61</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">0.15</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">&#160;0.21 &#8211; 0.49</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">11,412,905</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.13</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.32</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">11,412,905</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.13</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.32</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">&#160;0.50 &#8211; 1.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,499,738</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.38</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.75</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,499,738</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.38</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">0.75</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.12 &#8211; 1.00</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">59,096,084</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.35</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.22</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">59,096,084</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.35</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.22</font></td> <td style="padding-bottom: 2.5pt"></td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The detailed segment information of the Company is as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Wellness Center USA, Inc. </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Assets By Segments </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="14" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Corporate</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Medical Devices</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Authentication and Encryption</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Total</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt"><b>ASSETS</b></font></td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt"><b>Current Assets</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 40%"><font style="font-size: 10pt">Cash</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">24,884</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">1,003</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">14,526</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">40,413</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Accounts receivable</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Inventories</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">12,057</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">12,057</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Prepaid expenses and other current assets</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,213</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,213</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt"><b>Total current assets</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">24,884</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1,003</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">28,796</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">54,683</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Property and equipment, net</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">3,148</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">3,148</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Other assets</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,760</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">16,760</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt"><b>Total other assets</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,760</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">3,148</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">19,908</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt"><b>TOTAL ASSETS</b></font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">39,884</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,763</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">31,944</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">74,591</font></td> <td style="padding-bottom: 2.5pt"></td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Wellness Center USA, Inc. </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Operations by Segments </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="14" style="text-align: center"><font style="font-size: 10pt"><b>For the Six Months Ended</b></font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="14" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Corporate</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Medical Devices</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Authentication and Encryption</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Total</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Sales:</font></td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 40%; padding-left: 10pt"><font style="font-size: 10pt">Trade</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">36,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">36,000</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Consulting services</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">31,750</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">31,750</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Total Sales</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">67,750</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">67,750</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Cost of goods sold</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">34,658</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">34,658</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Gross profit</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">33,092</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">33,092</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Operating expenses</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">397,108</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">135,934</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">362,438</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">895,480</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Loss from operations</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(397,108</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(135,934</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(329,346</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(862,388</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Wellness Center USA, Inc. </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Operations by Segments </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="14" style="text-align: center"><font style="font-size: 10pt"><b>For the Six Months Ended</b></font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="14" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Corporate</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Medical Devices</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Authentication and Encryption</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Total</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Sales:</font></td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 40%; padding-left: 10pt"><font style="font-size: 10pt">Trade</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">196,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">13,100</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">209,100</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-size: 10pt">Consulting services</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">28,250</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">28,250</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Total Sales</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">196,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">41,350</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">237,350</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Cost of goods sold</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">75,117</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">38,790</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">113,907</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Gross profit</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">120,883</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2,560</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">123,443</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Operating expenses</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">568,610</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">157,039</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">300,538</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,026,187</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Loss from operations</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(568,610</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(36,156</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(297,978</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(902,744</font></td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">)</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p> 365459 500000 0.25 179000 30000 179000 10500 110000 165000 165000 0.31 186849 300000 486849 22422 48000 990000 0.16 15000 2025000 1775000 675000 250000 250000 289890 P2Y11M4D P3Y8M19D P1Y0M18D P2Y9M0D P2Y9M0D P5Y 0.19 0.13 A combined total of 675,000 shares vested 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 27400 110498 110498 179392 13438 21152500 P5Y 170914 95733 0.13 0.19 0.00 1.238 1.302 0.0201 0.0218 P2Y6M0D 8847500 6822500 5325000 2122500 750000 650000 1407619 7747500 4225000 2122500 750000 650000 1100000 0.43 0.51 0.10 0.10 2.00 2.00 0.18 0.40 1.00 2.00 0.18 0.13 0.19 0.14 0.18 0.43 0.18 0.40 1.00 2.00 0.19 0.01 0.10 0.40 1.00 0.12 0.21 0.50 0.12 2.00 0.39 0.99 1.99 2.00 0.20 0.49 1.00 1.00 P2Y11M4D P3Y8M19D P1Y0M18D P2Y9M0D P2Y9M0D 64161304 43183441 11412905 4499738 59096084 660000 -1407619 -4317602 43183441 11412905 4499738 59096084 0.24 0.12 0.12 1.00 1.00 0.15 0.32 0.75 0.22 0.20 0.12 0.15 0.12 0.12 1.00 0.15 0.32 0.75 0.22 P2Y7M10D P2Y1M16D P0Y4M17D P2Y4M6D P2Y7M10D P2Y1M16D P0Y4M17D P2Y4M6D 450000 130000 60000 55000 188500 550000 550000 1962498 P5Y 11980000 P5Y 1230000 10750000 50000 333333 19841209 19069211 -135837 -65790 -70422 -70422 170914 1407 169507 170914 137898 137898 137898 135837 <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Non-controlling Interest</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Non-controlling interest represents the non-controlling interest holder&#8217;s proportionate share of the equity of the Company&#8217;s majority-owned subsidiary, PDC. Non-controlling interest is adjusted for the non-controlling interest holder&#8217;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.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s consolidated subsidiaries and/or entities are as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="width: 24%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Name of consolidated subsidiary or entity</b></font></td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 26%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>State or other jurisdiction of incorporation or organization</b></font></td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 32%; border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Date of incorporation or formation</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>(date of acquisition/disposition, if applicable)</b></p></td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 15%; border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Attributable interest</b></font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font-size: 10pt">Psoria-Shield Inc. (&#8220;PSI&#8221;)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">The State of Florida</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">June 17, 2009 (August 24, 2012)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">100%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font-size: 10pt">StealthCo, Inc. (&#8220;StealthCo&#8221;)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">The State of Illinois</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">March 18, 2014</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">100%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font-size: 10pt">Psoria Development Company LLC. (&#8220;PDC&#8221;)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">The State of Illinois</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">January 15, 2015</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">50%</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below summarizes the Company&#8217;s stock option activities for the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number of</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Option Shares</b></p></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Exercise Price Range Per Share</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Fair Value</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>at Date of Grant</b></p></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 40%"><font style="font-size: 10pt">Balance, September 30, 2017</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">6,822,500</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">0.10 - 2.00</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">0.51</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">1,865,628</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Granted</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2,025,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.13 - 0.19</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.18</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">317,971</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Cancelled</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Exercised</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Expired</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Balance, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">8,847,500</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.10 &#8211; 2.00</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,183,599</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Vested and exercisable, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,747,500</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.10 &#8211; 2.00</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,003,527</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Unvested, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,100,000</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.19</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.19</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">180,072</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes information concerning outstanding and exercisable options as of March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td colspan="2">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Options Outstanding</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Options Exercisable</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt"><b>Range of Exercise Prices</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number Outstanding</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Average Remaining Contractual Life (in years)</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Number Exercisable</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Average Remaining Contractual Life (in years)</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Weighted Average Exercise Price</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 17%; text-align: right"><font style="font-size: 10pt">0.10 - 0.39</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">5,325,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">3.72</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">0.18</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">4,225,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">3.72</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">0.18</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.40 - 0.99</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2,122,500</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.05</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.40</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2,122,500</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.05</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0.40</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.00 - 1.99</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">750,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.75</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.00</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">750,000</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.75</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.00</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">650,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.75</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">650,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.75</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.01 - 2.00</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">8,847,500</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.93</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,747,500</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2.93</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">0.43</font></td> <td style="padding-bottom: 2.5pt"></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b></b></p> 252508 7747500 0.43 0.10 2.00 2183599 1865628 317971 2003527 180072 2151219 2283219 132000 2283219 80000 0.30 0.45 0.43 WCUI 150000 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 90th 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 comprised $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 affected Black-Scholes Merton option pricing model with a stock price of $0.31, volatility of 139.98% and risk-free rate of 1.28%. The unamortized balance of the debt discount at September 30, 2017 was $115,116. During the six months ended March 31, 2018, the Company amortized the remaining $115,116 of debt discount, leaving no unamortized balance at March 31, 2018. The agreement also included a clause that allowed for the individual to receive additional shares if the price of the stock declined as of February 28, 2018 (the maturity date). The price of the stock on that date was $0.12 per share, causing the Company to issue the individual an additional 186,849 shares of its common stock. The Company recorded an expense of $22,422 relating to the issuance of these shares. On March 5, 2018, the Company modified the conversion price on the note payable from $0.25 per share to $0.10 per share. On that date, the reduction in the conversion price allowed for the individual to convert an additional 990,000 shares with a fair value of $0.16 per share. The total amount of expense the Company recognized relating to the modification was $158,400. Also on March 5, 2018, the Company modified the exercise price on the attached warrants from $0.50 per share to $0.20 per share. The total amount of expense the Company recognized relating to the modification was $5,445. The maturity date of the note was also extended until April 30, 2018. During the six months ended March 31, 2018, the individual converted $55,000 of the convertible note payable into 550,000 shares of the Company’s common stock. On March 5, 2018, the Company entered into another Convertible Note Payable Agreement with the same individual under which the Company borrowed an additional $165,000. Net proceeds received by the Company under the agreement after payment of a $15,000 fee to the lender was $150,000. In connection with the agreement, the Company issued the individual 300,000 restricted shares of its common stock and warrants to purchase 660,000 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 $0.20 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.10 per share. The note matures in October 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. The Company calculated the related fair value of the warrants issued to the noteholder to be $55,032 using a Black Scholes Merton option pricing model and performing a relative value calculation. The Company then made a calculation to determine if a beneficial conversion feature (BCF) existed. The beneficial conversion was based upon the effective conversion price based on the proceeds received that were allocated to the convertible instrument. Based upon the Company’s calculation, it was determined that a beneficial conversion feature existed amounting to $94,968 and was recorded as a debt discount. As such the Company recognized a debt discount at the date of issuance in the aggregate amount of $165,000 relating to the $15,000 fees paid to the lender, the relative value of the warrants and the BCF. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the Convertible note (a valuation debt discount). During the three and six months ended March 31, 2018, the Company amortized $20,721 of debt discount, leaving an unamortized balance of $144,279 at March 31, 2018. In addition, the Company recorded an additional finance cost of $48,000 related to the fair value of the 330,000 shares of common stock granted at the date issuance. EX-101.SCH 7 wcui-20180331.xsd XBRL SCHEMA FILE 00000001 - Document - Document and Entity Information link:presentationLink link:calculationLink link:definitionLink 00000002 - Statement - Condensed Consolidated Balance Sheets link:presentationLink link:calculationLink link:definitionLink 00000003 - Statement - Condensed Consolidated Balance Sheets (Parenthetical) link:presentationLink link:calculationLink link:definitionLink 00000004 - Statement - Condensed Consolidated Statements of Operations (Unaudited) link:presentationLink link:calculationLink link:definitionLink 00000005 - Statement - Condensed Consolidated Statement of Shareholders' Deficit (Unaudited) link:presentationLink link:calculationLink link:definitionLink 00000006 - Statement - Condensed Consolidated Statements of Cash Flows (Unaudited) link:presentationLink link:calculationLink link:definitionLink 00000007 - Disclosure - Organization and Basis of Presentation link:presentationLink link:calculationLink link:definitionLink 00000008 - Disclosure - Summary of Significant Accounting Policies link:presentationLink link:calculationLink link:definitionLink 00000009 - Disclosure - Discontinued Operations link:presentationLink link:calculationLink link:definitionLink 00000010 - Disclosure - Loans Payable from Officers and Shareholders link:presentationLink link:calculationLink link:definitionLink 00000011 - Disclosure - Convertible Notes Payable Agreements link:presentationLink link:calculationLink link:definitionLink 00000012 - Disclosure - Shareholders' Deficit link:presentationLink link:calculationLink link:definitionLink 00000013 - Disclosure - Segment Reporting link:presentationLink link:calculationLink link:definitionLink 00000014 - Disclosure - Legal Matters link:presentationLink link:calculationLink link:definitionLink 00000015 - Disclosure - Subsequent Events link:presentationLink link:calculationLink link:definitionLink 00000016 - Disclosure - Summary of Significant Accounting Policies (Policies) link:presentationLink link:calculationLink link:definitionLink 00000017 - Disclosure - Summary of Significant Accounting Policies (Tables) link:presentationLink link:calculationLink link:definitionLink 00000018 - Disclosure - Discontinued Operations (Tables) link:presentationLink link:calculationLink link:definitionLink 00000019 - Disclosure - Convertible Notes Payable Agreements (Tables) link:presentationLink link:calculationLink link:definitionLink 00000020 - Disclosure - Shareholders' Deficit (Tables) link:presentationLink link:calculationLink link:definitionLink 00000021 - Disclosure - Segment Reporting (Tables) link:presentationLink link:calculationLink link:definitionLink 00000022 - Disclosure - Organization and Basis of Presentation (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000023 - Disclosure - Summary of Significant Accounting Policies (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000024 - Disclosure - Summary of Significant Accounting Policies - Schedule of Company's Consolidated Subsidiaries (Details) link:presentationLink link:calculationLink link:definitionLink 00000025 - Disclosure - Discontinued Operations (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000026 - Disclosure - Discontinued Operations - Statement of Operations of Discontinued Operations (Details) link:presentationLink link:calculationLink link:definitionLink 00000027 - Disclosure - Loans Payable from Officers and Shareholders (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000028 - Disclosure - Convertible Notes Payable Agreements - Schedule of Convertible Notes Payable (Details) link:presentationLink link:calculationLink link:definitionLink 00000029 - Disclosure - Convertible Notes Payable Agreements - Schedule of Convertible Notes Payable (Details) (Parenthetical) link:presentationLink link:calculationLink link:definitionLink 00000030 - Disclosure - Shareholders' Equity (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000031 - Disclosure - Shareholders' Equity - Schedule of Assumptions Used for Options Granted (Details) link:presentationLink link:calculationLink link:definitionLink 00000032 - Disclosure - Shareholders' Equity - Schedule of Stock Option Activity (Details) link:presentationLink link:calculationLink link:definitionLink 00000033 - Disclosure - Shareholders' Equity - Schedule of Outstanding and Exercisable Options by Exercise Price Range (Details) link:presentationLink link:calculationLink link:definitionLink 00000034 - Disclosure - Shareholders' Equity - Schedule of Warrant Activity (Details) link:presentationLink link:calculationLink link:definitionLink 00000035 - Disclosure - Shareholders' Equity - Schedule of Outstanding and Exercisable Warrants by Exercise Price Range (Details) link:presentationLink link:calculationLink link:definitionLink 00000036 - Disclosure - Segment Reporting - Schedule of Assets of Reportable Segments (Details) link:presentationLink link:calculationLink link:definitionLink 00000037 - Disclosure - Segment Reporting - Schedule of Operations of Reportable Segments (Details) link:presentationLink link:calculationLink link:definitionLink 00000038 - Disclosure - Legal Matters (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000039 - Disclosure - Subsequent Events (Details Narrative) link:presentationLink link:calculationLink link:definitionLink EX-101.CAL 8 wcui-20180331_cal.xml XBRL CALCULATION FILE EX-101.DEF 9 wcui-20180331_def.xml XBRL DEFINITION FILE EX-101.LAB 10 wcui-20180331_lab.xml XBRL LABEL FILE Equity Components [Axis] Common Stock [Member] Additional Paid-in Capital [Member] Accumulated Deficit [Member] Total WCUI Deficit [Member] Non-controlling Interest [Member] Antidilutive Securities [Axis] Stock Options [Member] Warrants [Member] Legal Entity [Axis] Psoria-Shield Inc. [Member] StealthCo, Inc. [Member] Psoria Development Company LLC. [Member] NPC Inc. [Member] Title of Individual [Axis] Dr. Jay Joshi [Member] Type of Arrangement and Non-arrangement Transactions [Axis] Two Unsecured Note Agreements [Member] Debt Instrument [Axis] Two Short-term Unsecured Loans [Member] Convertible Note Payable Agreement One [Member] Individual [member] Warrant [Member] PSI Consultants [Member] Plan Name [Axis] 2010 Non-Qualified Stock Option Plan [Member] Segments [Axis] Corporate [Member] Medical Devices [Member] Authentication and Encryption [Member] CEO [Member] Subsequent Event Type [Axis] Subsequent Event [Member] Range [Axis] Minimum [Member] Maximum [Member] Exercise Price Range [Axis] Exercise Price Range One [Member] Exercise Price Range Two [Member] Exercise Price Range Three [Member] Exercise Price Range Four [Member] Nine Short-Term Unsecured Loans [Member] Convertible Note Payable One [Member] Convertible Note Payable Two [Member] Convertible Note Payable Agreement Two [Member] Short-term Debt, Type [Axis] Convertible Notes Payable [Member] Employment Agreement with Three Employees [Member] Report Date [Axis] January 1, 2018 [Member] Stock Warrants [Member] 2010 Option Plan [Member] Award Type [Axis] 36 Months [Member] May 2018 [Member] Document And Entity Information Entity Registrant Name Entity Central Index Key Document Type Document Period End Date Amendment Flag Current Fiscal Year End Date Entity Filer Category Entity Common Stock, Shares Outstanding Trading Symbol Document Fiscal Period Focus Document Fiscal Year Focus Statement of Financial Position [Abstract] ASSETS Current Assets Cash Accounts receivable Inventories Prepaid expenses and other current assets Total Current Assets Property and equipment, net Other assets Total Other Assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' DEFICIT Current Liabilities Accounts payable and accrued expenses Accrued payroll - officers Deferred revenue Convertible notes payable Loans payable from officers and shareholders Total Current Liabilities Shareholders' Deficit Common stock, par value $0.001, 185,000,000 shares authorized; 92,879,384 and 90,284,916 shares issued and outstanding, respectively Additional paid-in capital Accumulated deficit Total Wellness Center USA shareholders' equity (deficit) Non-controlling interest Total Shareholder's deficit TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT Common stock, par value Common stock, shares authorized Common stock, shares, issued Common stock, shares, outstanding Income Statement [Abstract] Sales: Trade Consulting services Total Sales Cost of goods sold Gross profit Operating expenses Loss from operations Other income (expenses) Amortization of debt discount Gain on extinguishment of debt Loss on modification of conversion price on convertible note payable Loss on modification of exercise price on warrants in connection with convertible note payable Financing costs Interest expense Total other income (expenses) LOSS FROM CONTINUING OPERATIONS DISCONTINUED OPERATIONS Loss from discontinued operations NET LOSS Net loss (gain) attributable to non-controlling interest NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC. BASIC AND DILUTED LOSS PER SHARE WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED Statement [Table] Statement [Line Items] Balance Balance, shares Exercise of stock warrants Exercise of stock warrants, shares Fair value of common stock issued for services Fair value of common stock issued for services, shares Shares issued upon conversions of note payable Shares issued upon conversions of note payable, shares Fair value of vested stock options Fair value of common stock issued in connection with convertible note payable Fair value of common stock issued in connection with convertible note payable, shares Discount on convertible note payable due to beneficial conversion and warrants Discount on convertible note payable due to beneficial conversion and warrants, shares Loss on modification of conversion price on convertible note payable Loss on modification of exercise price on warrants in connection with convertible note payable Net loss Balance Balance, shares Statement of Cash Flows [Abstract] Cash Flows from Operating Activities Adjustments to reconcile net loss to net cash used in operating activities Loss from discontinued operations Depreciation expense Amortization of debt discount Gain on extinguishment of debt Fair value of common shares issued for services Fair value of stock options issued for services Changes in Assets and Liabilities (Increase) Decrease in: Accounts receivable Inventories Prepaid expenses and other current assets (Decrease) Increase in: Accounts payable and accrued expenses Accrued payroll taxes Accrued payroll - officers Deferred revenue Net cash used in operating activities from continuing operations Net cash used in operating activities from discontinued operations Net cash used in operating activities Cash Flows from Investing Activities Purchases of property and equipment Net cash used in investing activities from continuing operations Net cash used in investing activities from discontinued operations Net cash used in investing activities Cash Flows from Financing Activities Proceeds from loans payable from officers and shareholders Repayment of loans payable from officers and shareholders Proceeds from convertible note payable Repayment of advances from related party Proceeds from the sale of common stock and warrants Exercise of stock warrants Net cash provided by financing activities Net increase in cash Cash beginning of period Cash end of period Supplemental cash flows disclosures: Interest paid Taxes paid Supplemental non-cash financing disclosures: Debt discount on convertible note payable Conversion of convertible note payable into common shares Non-controlling interest's share in losses of a subsidiary Organization, Consolidation and Presentation of Financial Statements [Abstract] Organization and Basis of Presentation Accounting Policies [Abstract] Summary of Significant Accounting Policies Discontinued Operations and Disposal Groups [Abstract] Discontinued Operations Debt Disclosure [Abstract] Loans Payable from Officers and Shareholders Convertible Notes Payable Agreements Equity [Abstract] Shareholders' Deficit Segment Reporting [Abstract] Segment Reporting Commitments and Contingencies Disclosure [Abstract] Legal Matters Subsequent Events [Abstract] Subsequent Events Basis of Consolidation Use of Estimates Income (Loss) Per Share Revenue Recognition Non-controlling Interest Stock-Based Compensation Recently Issued Accounting Pronouncements Schedule of Company's Consolidated Subsidiaries Statement of Operations of Discontinued Operations Schedule of Convertible Notes Payable Schedule of Assumptions Used for Options Granted Schedule of Stock Option Activity Schedule of Outstanding and Exercisable Options by Exercise Price Range Schedule of Warrant Activity Schedule of Outstanding and Exercisable Warrants by Exercise Price Range Schedule of Assets of Reportable Segments Schedule of Operations of Reportable Segments Ownership interest, percentage Entity incorporation, state country name Net loss from continuing operations Net cash used in operating activities from continuing operations Shareholders' deficit Cash on hand Proceeds from debt financing and exercise of stock warrants Antidilutive securities excluded from computation of earnings per share Name of consolidated subsidiary or entity State or other jurisdiction of incorporation or organization Date of incorporation or formation Date of acquisition/disposition Attributable interest Accrued compensation Number of stock options issued to purchase common stock Common stock exercise price Gain relating to transaction Total Sales Operating expenses Loss from discontinued operations Debt instrument, interest rate, stated percentage Debt instrument, payment terms Proceeds from short term debt Repayments of short term debt Convertible note payable Debt discount - unamortized balance Convertible note payable, net Debt instrument, face amount Proceeds from convertible notes payable Number of restricted shares issued Number of common stock and warrants issued to purchase common shares Warrant term Warrant exercise price Debt instrument interest rate Debt instrument, collateral Debt instrument, convertible, terms of conversion feature Debt instrument conversion price Debt instrument maturity date description Closing price of the common stock Debt instrument, unamortized discount Intrinsic value of beneficial conversion features Fair value of warrants Stock price Volatility rate Risk-free rate Amortization of debt discount Common stock issued, shares Stock issuance cost Conversion of stock, shares converted Stock conversion price Debt maturity date Conversion of debt into common stock Conversion of debt into common stock, shares Lender fee Fair value of warrants and beneficial conversion features Number of stock issued for service Number of stock issued for service, amount Numbers of shares issued Number of stock converted into shares Number options to purchase of common stock Fair value of stock options Options exercisable term Stock option exercise price per share Options Vesting description Stock based compensation Unvested compensation Aggregate intrinsic value for option shares outstanding Shares of stock options remaining available for issuance Number of warrants issued to purchase common shares Warrant expiration period Warrants to purchase shares of common stock, value Aggregate intrinsic value for warrant shares outstanding Exercise price Expected dividends Expected volatility, minimum Expected volatility, maximum Risk free interest rate, minimum Risk free interest rate, maximum Expected life of options Number of Option Shares Outstanding, Number, Beginning Balance Number of Option Shares Outstanding, Granted Number of Option Shares Outstanding, Cancelled Number of Option Shares Outstanding, Exercised Number of Option Shares Outstanding, Expired Number of Option Shares Outstanding, Number, Ending Balance Number of Option Shares Outstanding, Vested and exercisable, Ending Balance Number of Option Shares Outstanding, Unvested, Ending Balance Weighted Average Exercise Price, Number, Beginning Balance Weighted Average Exercise Price, Granted Weighted Average Exercise Price, Cancelled Weighted Average Exercise Price, Exercised Weighted Average Exercise Price, Expired Weighted Average Exercise Price, Number, Ending Balance Weighted Average Exercise Price, Vested and exercisable, Ending Balance Weighted Average Exercise Price, Unvested, Ending Balance Fair Value at Date of Grant, Number, Beginning Balance Fair Value at Date of Grant, Granted Fair Value at Date of Grant, Cancelled Fair Value at Date of Grant, Exercised Fair Value at Date of Grant, Expired Fair Value at Date of Grant, Number, Ending Balance Fair Value at Date of Grant, Vested and exercisable, Ending Balance Fair Value at Date of Grant, Unvested, Ending Balance Range of Exercise Prices, Lower Limit Range of Exercise Prices, Upper Limit Number of Options, Outstanding, Number Number of Options, Outstanding, Weighted Average Remaining Contractual Term Number of Options, Outstanding, Weighted Average Exercise Price Number of Options, Exercisable, Number Number of Options, Exercisable, Weighted Average Remaining Contractual Term Number of Options, Exercisable, Weighted Average Exercise Price Number of Warrant Shares Outstanding, Number, Beginning Balance Number of Warrant Shares Outstanding, Granted Number of Warrant Shares Outstanding, Cancelled Number of Warrant Shares Outstanding, Exercised Number of Warrant Shares Outstanding, Expired Number of Warrant Shares Outstanding, Number, Ending Balance Number of Warrant Shares Outstanding, Vested and exercisable, Ending Balance Number of Warrant Shares Outstanding, Unvested, Ending Balance Weighted Average Exercise Price, Number, Beginning Balance Weighted Average Exercise Price, Granted Weighted Average Exercise Price, Cancelled Weighted Average Exercise Price, Exercised Weighted Average Exercise Price, Expired Weighted Average Exercise Price, Number, Ending Balance Weighted Average Exercise Price, Vested and exercisable, Ending Balance Weighted Average Exercise Price, Unvested, Ending Balance Fair Value at Date of Issuance, Number, Beginning Balance Fair Value at Date of Issuance, Granted Fair Value at Date of Issuance, Cancelled Fair Value at Date of Issuance, Exercised Fair Value at Date of Issuance, Expired Fair Value at Date of Issuance, Number, Ending Balance Fair Value at Date of Issuance, Vested and exercisable, Ending Balance Fair Value at Date of Issuance, Unvested, Ending Balance Number of Warrants, Outstanding, Number Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term Number of Warrants, Outstanding, Weighted Average Exercise Price Number of Warrants, Exercisable, Number Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term Number of Warrants, Exercisable, Weighted Average Exercise Price Total current assets Total other assets TOTAL ASSETS Total Sales Gross profit Loss from operations Total payments to employee Trading, realized amount Due from directors, officer and shareholder Loans payable Debt instrument, amount converted Debt conversion into shares Warrants to purchase shares Warrants term Warrants exercise price Stock issued during services Value of stock Options granted to purchase shares Fair value of options granted Exercise price of options Options term Shares vested upon grants Amount received on sale of stock Sale of shares of common stock Total WCUI Deficit [Member] Represents the monetary amount of Non-controlling interest's share in losses of a subsidiary, during the indicated time period. Stock Options [Member] Warrants [Member] Psoria-Shield Inc. [Member] StealthCo, Inc. [Member] Psoria Development Company LLC. [Member] NPC Inc. [Member] Dr. Jay Joshi [Member] Two Unsecured Note Agreements [Member] Two Short-term Unsecured Loans [Member] Three Short-term Unsecured Loans [Member] Warrant term. Number of stock options issued to purchase common stock. Common stock exercise price. PSI Consultants [Member] 2010 Non-Qualified Stock Option Plan [Member] Medical Devices [Member] Authentication and Encryption [Member] CEO [Member] Exercise Price Range One [Member] Exercise Price Range Two [Member] Exercise Price Range Three [Member] Exercise Price Range Four [Member] Loss on modification of conversion price on convertible note payable. Loss on modification of exercise price on warrants in connection with convertible note payable. Represents the monetary amount of Discount on convertible note payable due to beneficial conversion and warrants, during the indicated time period. Represents the monetary amount of Fair value of common stock issued in connection with convertible note payable, during the indicated time period. Represents the Fair value of common stock issued in connection with convertible note payable, Shares (number of shares), during the indicated time period. Conversion of convertible note payable into common shares. Represents the textual narrative disclosure of Schedule of Warrant Activity, during the indicated time period. Represents the textual narrative disclosure of Schedule of Outstanding and Exercisable Warrants, during the indicated time period. Nine Short-Term Unsecured Loans [Member] Convertible note payable, gross. Convertible Note Payable One [Member] Convertible Note Payable Two [Member] Convertible Note Payable Agreement One [Member] Stock conversion price. Convertible Note Payable Agreement Two [Member] Employment Agreement with Three Employees [Member] January 1, 2018 [Member] Stock Warrants [Member] Fair value of stock options. Represents the monetary amount of Aggregate intrinsic value for option shares outstanding, as of the indicated date. Represents the Shares of stock options remaining available for issuance (number of shares), as of the indicated date. Warrant expiration period. Warrants to purchase shares of common stock, value. Represents the monetary amount of Aggregate intrinsic value for warrant shares outstanding, as of the indicated date. Share based compensation arrangement by share based payment award options unvested intrinsic value. Share based compensation arrangement by share based payment award equity instruments other than options expired in period. Share based compensation arrangement by share based payment award equity instruments other than options exercisable number. Share based compensation arrangement by share based payment award equity instruments other than options unvested number. Share based compensation arrangement by share based payment award equity instruments other than options nonvested weighted average grant date fair value exercisable. Share based compensation arrangement by share based payment award equity instruments other than options nonvested weighted average grant date fair value unvested. Share based compensation arrangement by share based payment award equity instruments other than options exercisable weighted average remaining contractual terms. 36 Months [Member] Warrants term. Represents the Discount on convertible note payable due to beneficial conversion and warrants, Shares (number of shares), during the indicated time period. Represents the textual narrative disclosure of Schedule of the Company's Consolidated Subsidiaries, during the indicated time period. Gain relating to transaction. Fair Value at Date of Grant, Granted. Fair Value at Date of Grant, Cancelled. Fair Value at Date of Grant, Expired. Fair Value at Date of Issuance, Granted. Fair Value at Date of Issuance, Cancelled. Fair Value at Date of Issuance, Expired. Fair Value at Date of Issuance, Vested and exercisable. 2010 Option Plan [Member] May 2018 [Member] Weighted Average Exercise Price, Expired. Fair value of warrants and beneficial conversion features. Liabilities, Current Stockholders' Equity Attributable to Parent Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest Liabilities and Equity Revenue, Net Interest Expense Nonoperating Income (Expense) Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest Net Income (Loss) Attributable to Noncontrolling Interest Net Income (Loss) Attributable to Parent Shares, Outstanding Amortization Increase (Decrease) in Accounts Receivable Increase (Decrease) in Inventories Increase (Decrease) in Prepaid Expense and Other Assets Increase (Decrease) in Accounts Payable and Accrued Liabilities Increase (Decrease) in Accrued Salaries Increase (Decrease) in Deferred Revenue Net Cash Provided by (Used in) Operating Activities, Continuing Operations Net Cash Provided by (Used in) Operating Activities Payments to Acquire Property, Plant, and Equipment Net Cash Provided by (Used in) Investing Activities, Continuing Operations Net Cash Provided by (Used in) Investing Activities Repayments of Related Party Debt Proceeds from Warrant Exercises Cash and Cash Equivalents, Period Increase (Decrease) Stockholders' Equity Note Disclosure [Text Block] Disposal Group, Including Discontinued Operation, Operating Expense Amortization of Debt Discount (Premium) Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantedIntrinsicValue ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsCancelledIntrinsicValue ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExpiredIntrinsicValue Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsUnvestedIntrinsicValue ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsUnvestedNumber Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsVestedInPeriodWeightedAverageGrantDateFairValueExpired ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsWeightedAverageGrantDateFairValueUnvested Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding SharebasedCompensationArrangementBySharebasedPaymentAwardEquityInstrumentsOtherThanOptionsAggregateIntrinsicValueGranted SharebasedCompensationArrangementBySharebasedPaymentAwardEquityInstrumentsOtherThanOptionsAggregateIntrinsicValueCancelled SharebasedCompensationArrangementBySharebasedPaymentAwardEquityInstrumentsOtherThanOptionsAggregateIntrinsicValueExpired SharebasedCompensationArrangementBySharebasedPaymentAwardEquityInstrumentsOtherThanOptionsAggregateIntrinsicValueVestedAndExercisable Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Nonvested EX-101.PRE 11 wcui-20180331_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.8.0.1
Document and Entity Information
6 Months Ended
Mar. 31, 2018
shares
Document And Entity Information  
Entity Registrant Name Wellness Center USA, Inc.
Entity Central Index Key 0001516887
Document Type 10-Q
Document Period End Date Mar. 31, 2018
Amendment Flag false
Current Fiscal Year End Date --09-30
Entity Filer Category Smaller Reporting Company
Entity Common Stock, Shares Outstanding 92,879,384
Trading Symbol WCUI
Document Fiscal Period Focus Q2
Document Fiscal Year Focus 2018
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2018
Sep. 30, 2017
Current Assets    
Cash $ 40,413 $ 29,369
Accounts receivable 24,999
Inventories 12,057 12,335
Prepaid expenses and other current assets 2,213 1,751
Total Current Assets 54,683 68,454
Property and equipment, net 3,148 5,126
Other assets 16,760 16,760
Total Other Assets 19,908 21,886
TOTAL ASSETS 74,591 90,340
Current Liabilities    
Accounts payable and accrued expenses 376,641 203,367
Accrued payroll - officers 51,381 13,440
Deferred revenue 49,598 55,098
Convertible notes payable 130,721 49,884
Loans payable from officers and shareholders 227,500 59,000
Total Current Liabilities 835,841 380,789
Shareholders' Deficit    
Common stock, par value $0.001, 185,000,000 shares authorized; 92,879,384 and 90,284,916 shares issued and outstanding, respectively 93,066 90,285
Additional paid-in capital 19,841,209 19,069,211
Accumulated deficit (20,310,695) (19,132,557)
Total Wellness Center USA shareholders' equity (deficit) (376,420) 26,939
Non-controlling interest (384,830) (317,388)
Total Shareholder's deficit (761,250) (290,449)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 74,591 $ 90,340
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2018
Sep. 30, 2017
Statement of Financial Position [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 185,000,000 185,000,000
Common stock, shares, issued 92,879,384 90,284,916
Common stock, shares, outstanding 92,879,384 90,284,916
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Sales:        
Trade $ 20,500 $ 120,100 $ 36,000 $ 209,100
Consulting services 20,750 14,125 31,750 28,250
Total Sales 41,250 134,225 67,750 237,350
Cost of goods sold 17,666 53,407 34,658 113,907
Gross profit 23,584 80,818 33,092 123,443
Operating expenses 561,317 609,624 895,480 1,026,187
Loss from operations (537,733) (528,806) (862,388) (902,744)
Other income (expenses)        
Amortization of debt discount (65,790) (135,837)
Gain on extinguishment of debt 288,777 288,777
Loss on modification of conversion price on convertible note payable (158,400) (158,400)
Loss on modification of exercise price on warrants in connection with convertible note payable (5,445) (5,445)
Financing costs (70,422) (70,422)
Interest expense (9,788) (13,088)
Total other income (expenses) (309,845) 288,777 (383,192) 288,777
LOSS FROM CONTINUING OPERATIONS (847,578) (240,029) (1,245,580) (613,967)
DISCONTINUED OPERATIONS        
Loss from discontinued operations (29,361) (70,923)
NET LOSS (847,578) (269,390) (1,245,580) (684,890)
Net loss (gain) attributable to non-controlling interest 21,473 (5,430) 67,442 1,098
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC. $ (826,105) $ (274,820) $ (1,178,138) $ (683,792)
BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.00) $ (0.01) $ (0.01)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED 91,551,485 84,644,460 91,414,889 82,814,207
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Statement of Shareholders' Deficit (Unaudited) - 6 months ended Mar. 31, 2018 - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Total WCUI Deficit [Member]
Non-controlling Interest [Member]
Total
Balance at Sep. 30, 2017 $ 90,285 $ 19,069,211 $ (19,132,557) $ 26,939 $ (317,388) $ (290,449)
Balance, shares at Sep. 30, 2017 90,284,916          
Exercise of stock warrants $ 1,407 169,507 170,914 $ 170,914
Exercise of stock warrants, shares 1,407,619        
Fair value of common stock issued for services $ 150 26,550 26,700 $ 26,700
Fair value of common stock issued for services, shares 150,000          
Shares issued upon conversions of note payable $ 737 54,263 55,000 55,000
Shares issued upon conversions of note payable, shares 550,000          
Fair value of vested stock options 137,898 137,898 137,898
Fair value of common stock issued in connection with convertible note payable $ 487 69,935 70,422 70,422
Fair value of common stock issued in connection with convertible note payable, shares 486,849          
Discount on convertible note payable due to beneficial conversion and warrants 150,000 150,000 150,000
Discount on convertible note payable due to beneficial conversion and warrants, shares          
Loss on modification of conversion price on convertible note payable 158,400 158,400 158,400
Loss on modification of exercise price on warrants in connection with convertible note payable 5,445 5,445 5,445
Net loss (1,178,138) (1,178,138) (67,442) (1,245,580)
Balance at Mar. 31, 2018 $ 93,066 $ 19,841,209 $ (20,310,695) $ (376,420) $ (384,830) $ (761,250)
Balance, shares at Mar. 31, 2018 92,879,384          
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cash Flows from Operating Activities    
Net loss $ (1,245,580) $ (684,890)
Adjustments to reconcile net loss to net cash used in operating activities    
Loss from discontinued operations 70,923
Depreciation expense 1,978 5,402
Amortization of debt discount 135,837
Gain on extinguishment of debt (288,777)
Fair value of common shares issued for services 26,700 26,000
Fair value of stock options issued for services 137,898 178,068
Loss on modification of conversion price on convertible note payable 158,400
Loss on modification of exercise price on warrants in connection with convertible note payable 5,445
Fair value of common stock issued in connection with convertible note payable 70,422
(Increase) Decrease in:    
Accounts receivable 24,999 (70,000)
Inventories 278 66,787
Prepaid expenses and other current assets (462) 24,613
(Decrease) Increase in:    
Accounts payable and accrued expenses 173,274 (25,500)
Accrued payroll taxes 20,506
Accrued payroll - officers 37,941 25,371
Deferred revenue (5,500) (24,826)
Net cash used in operating activities from continuing operations (478,370) (676,323)
Net cash used in operating activities from discontinued operations (6,489)
Net cash used in operating activities (478,370) (682,812)
Cash Flows from Investing Activities    
Purchases of property and equipment (546)
Net cash used in investing activities from continuing operations (546)
Net cash used in investing activities from discontinued operations (1,704)
Net cash used in investing activities (2,250)
Cash Flows from Financing Activities    
Proceeds from loans payable from officers and shareholders 179,000 30,000
Repayment of loans payable from officers and shareholders (10,500)
Proceeds from convertible note payable 150,000
Repayment of advances from related party (2,000)
Proceeds from the sale of common stock and warrants 424,600
Exercise of stock warrants 170,914 428,015
Net cash provided by financing activities 489,414 880,615
Net increase in cash 11,044 195,553
Cash beginning of period 29,369 81,749
Cash end of period 40,413 277,302
Supplemental cash flows disclosures:    
Interest paid
Taxes paid
Supplemental non-cash financing disclosures:    
Debt discount on convertible note payable 150,000
Conversion of convertible note payable into common shares 55,000
Non-controlling interest's share in losses of a subsidiary $ 67,442 $ 1,098
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.8.0.1
Organization and Basis of Presentation
6 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Basis of Presentation

NOTE 1 – ORGANIZATION AND 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. 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 condensed consolidated statement of operations for the three months ended March 31, 2017. See Note 3 for details relating to the sale.

 

The Company currently operates in the following business segments: (i) distribution of targeted Ultra Violet (“UV”) phototherapy devices for dermatology; and (ii) authentication and encryption products and services. The segments are operated, respectively, through PSI and SCI.

 

Basis of Presentation of Unaudited Financial Information

 

The accompanying unaudited condensed consolidated financial statements of Wellness Center USA, Inc. and Subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending September 30, 2018.

 

Going Concern

 

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 six months ended March 31, 2018, the Company incurred a net loss from continuing operations of $1,245,580 and used cash in operations from continuing operations of $478,370 and had a shareholders’ deficit of $761,250 as of March 31, 2018. 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.

 

In addition, the Company’s independent registered public accounting firm, in its report on the Company’s September 30, 2017 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At March 31, 2018, the Company had cash on hand in the amount of $40,413. 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 six months ended March 31, 2018, the Company received $489,414 through debt financing 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.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies
6 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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%
StealthCo, Inc. (“StealthCo”)   The State of Illinois   March 18, 2014   100%
Psoria Development Company LLC. (“PDC”)   The State of Illinois   January 15, 2015   50%

 

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 the valuation of accounts receivable and allowance for uncollectible amounts, inventory and obsolescence reserves, accruals for potential liabilities, valuations of stock-based compensation, realization of deferred tax assets, 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 stockholders 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 stockholders 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 six months ended March 31, 2018 and 2017, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At March 31, 2018 and 2017, the dilutive impact of outstanding stock options for 8,847,500 and 6,147,500 shares, respectively, and outstanding warrants for 59,096,084 and 63,741,253 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.

 

  (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 March 31, 2018 and 2017 was $49,598 and $55,098, respectively.

 

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.

 

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, estimated forfeitures 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.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
Discontinued Operations
6 Months Ended
Mar. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

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. During the year ended September 30, 2017, the Company recorded a $252,508 gain relating to this transaction.

 

Components of the statement of operations relating to NPC for the three and six months ended March 31, 2017, were as follows:

 

    Three Months Ended     Six Months Ended  
    March 31, 2017     March 31, 2017  
             
Total Sales   $ 40,000     $ 77,402  
                 
Operating expenses     69,361       148,325  
                 
Loss from discontinued operations   $ (29,361 )   $ (70,923 )

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
Loans Payable from Officers and Shareholders
6 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Loans Payable from Officers and Shareholders

NOTE 4 – LOANS PAYABLE FROM OFFICERS AND SHAREHOLDERS

 

At September 30, 2017, loans payable from officers and shareholders of $59,000 consisted of two unsecured note agreements issued in 2014 totaling to $9,000, and two short-term unsecured loans issued in fiscal 2017 totaling to $50,000. The loans issued in 2014 have no stated interest rate and are due on demand. The loans issued in 2017 have an interest rate of eight percent per annum and are due one year from the date of issuance. During the six months ended March 31, 2018, the Company borrowed $179,000 under nine short-term unsecured loans. The loans have an interest rate of eight percent and are due one year from the date of issuance. During the six months ended March 31, 2018, the Company repaid $10,500 of the loans payable. As of March 31, 2018, loans payable from officers and shareholders of $227,500 were outstanding.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Notes Payable Agreements
6 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Convertible Notes Payable Agreements

NOTE 5 – CONVERTIBLE NOTES PAYABLE AGREEMENTS

 

    March 31, 2018     September 30, 2017  
             
Convertible note payable (a)   $ 110,000     $ 165,000  
Convertible note payable (b)     165,000       -  
Debt discount – unamortized balance     (144,279 )     (115,116 )
Convertible notes payable, net   $ 130,721     $ 49,884  

 

(a) 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 90th 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 comprised $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 affected Black-Scholes Merton option pricing model with a stock price of $0.31, volatility of 139.98% and risk-free rate of 1.28%. The unamortized balance of the debt discount at September 30, 2017 was $115,116. During the six months ended March 31, 2018, the Company amortized the remaining $115,116 of debt discount, leaving no unamortized balance at March 31, 2018.

 

The agreement also included a clause that allowed for the individual to receive additional shares if the price of the stock declined as of February 28, 2018 (the maturity date). The price of the stock on that date was $0.12 per share, causing the Company to issue the individual an additional 186,849 shares of its common stock. The Company recorded an expense of $22,422 relating to the issuance of these shares.

 

On March 5, 2018, the Company modified the conversion price on the note payable from $0.25 per share to $0.10 per share. On that date, the reduction in the conversion price allowed for the individual to convert an additional 990,000 shares with a fair value of $0.16 per share. The total amount of expense the Company recognized relating to the modification was $158,400. Also on March 5, 2018, the Company modified the exercise price on the attached warrants from $0.50 per share to $0.20 per share. The total amount of expense the Company recognized relating to the modification was $5,445. The maturity date of the note was also extended until April 30, 2018.

 

During the six months ended March 31, 2018, the individual converted $55,000 of the convertible note payable into 550,000 shares of the Company’s common stock.

  

(b) On March 5, 2018, the Company entered into another Convertible Note Payable Agreement with the same individual under which the Company borrowed an additional $165,000. Net proceeds received by the Company under the agreement after payment of a $15,000 fee to the lender was $150,000. In connection with the agreement, the Company issued the individual 300,000 restricted shares of its common stock and warrants to purchase 660,000 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 $0.20 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.10 per share. The note matures in October 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.

 

The Company calculated the related fair value of the warrants issued to the noteholder to be $55,032 using a Black Scholes Merton option pricing model and performing a relative value calculation. The Company then made a calculation to determine if a beneficial conversion feature (BCF) existed. The beneficial conversion was based upon the effective conversion price based on the proceeds received that were allocated to the convertible instrument. Based upon the Company’s calculation, it was determined that a beneficial conversion feature existed amounting to $94,968 and was recorded as a debt discount. As such the Company recognized a debt discount at the date of issuance in the aggregate amount of $165,000 relating to the $15,000 fees paid to the lender, and the aggregate amount of $150,000 relating to the relative value of the warrants and the BCF. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the Convertible note (a valuation debt discount). During the three and six months ended March 31, 2018, the Company amortized $20,721 of debt discount, leaving an unamortized balance of $144,279 at March 31, 2018.

 

In addition, the Company recorded an additional finance cost of $48,000 related to the fair value of the 300,000 shares of common stock granted at the date issuance.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Deficit
6 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Shareholders' Deficit

NOTE 6 – SHAREHOLDERS’ DEFICIT

 

Common shares issued for Services

 

During the six months ended March 31, 2018, the Company issued 150,000 shares of its common stock valued at $26,700 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.

 

Common shares issued in connection with Convertible Notes Payable

 

During the six months ended March 31, 2018, the Company issued 486,849 shares of its common stock in connection with the issuance of convertible notes payable and also issued 550,000 shares upon the conversion of the notes payable (see Note 5).

 

Stock Options

 

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. Effective January 1, 2018, the Board of Directors approved to increase the number of authorized shares of the Company’s common stock that may be subject to, or issued pursuant to, the terms of the plan from 7,500,000 to 30,000,000 (see Note 9).

 

On January 1, 2018, the Company entered into employment agreements with three employees of SCI. Under the agreements, the Company issued options to purchase a combined total of 1,775,000 shares of its common stock with a fair value of $289,890. The options are exercisable over a term of five years, with an exercise price of $0.19. The Company valued the options using a Black-Scholes option pricing model. A combined total of 675,000 shares vested 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. During the three and six months ended March 31, 2018, the Company recorded $110,498 of stock compensation for the value of the options and as of March 31, 2018, unvested compensation of $179,392 remained that will be amortized over the remaining vesting period.

 

Further, 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. The options are exercisable over a five year period, are issuable on the last day of each quarter ending and vest immediately on the date of grant. All options accelerate and become fully vested upon the sale or change of control of the Company. During the six months ended March 31, 2018, the Company issued options to purchase 250,000 shares of its common stock to the employees with an exercise price of $0.13 per share. During the six months ended March 31, 2018, the Company valued the options using a Black-Scholes option pricing model and recorded $27,400 of stock compensation for the value of the options vested.

 

The assumptions used for options granted during the six months ended March 31, 2018 are as follows:

 

Exercise price   $ 0.13 - 0.19  
Expected dividends     -  
Expected volatility     123.8% - 130.2 %
Risk free interest rate     2.01% - 2.18 %
Expected life of options     2.5  

 

The table below summarizes the Company’s stock option activities for the three months ended March 31, 2018:

 

   

Number of

Option Shares

    Exercise Price Range Per Share     Weighted Average Exercise Price    

Fair Value

at Date of Grant

 
                         
Balance, September 30, 2017     6,822,500     $ 0.10 - 2.00     $ 0.51     $ 1,865,628  
Granted     2,025,000       0.13 - 0.19       0.18       317,971  
Cancelled     -       -       -       -  
Exercised     -       -       -       -  
Expired     -       -       -       -  
Balance, March 31, 2018     8,847,500     $ 0.10 – 2.00     $ 0.43     $ 2,183,599  
Vested and exercisable, March 31, 2018     7,747,500     $ 0.10 – 2.00     $ 0.43     $ 2,003,527  
                                 
Unvested, March 31, 2018     1,100,000     $ 0.19     $ 0.19     $ 180,072  

 

The aggregate intrinsic value for option shares outstanding at March 31, 2018 was $13,438.

 

The following table summarizes information concerning outstanding and exercisable options as of March 31, 2018:

 

      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  
                                       
$ 0.10 - 0.39       5,325,000       3.72     $ 0.18       4,225,000       3.72     $ 0.18  
  0.40 - 0.99       2,122,500       1.05       0.40       2,122,500       1.05       0.40  
  1.00 - 1.99       750,000       2.75       1.00       750,000       2.75       1.00  
  2.00       650,000       2.75       2.00       650,000       2.75       2.00  
$ 0.01 - 2.00       8,847,500       2.93     $ 0.43       7,747,500       2.93     $ 0.43  

 

As of March 31, 2018, there were 21,152,500 shares of stock options remaining available for issuance under the 2010 Plan.

 

Stock Warrants

 

During the six months ended March, 31, 2018, the Company issued warrants to purchase 660,000 shares with an exercise price of $0.20 per share in connection with the issuance of a convertible note payable (see Note 5). The warrants expire five years from the date of grant.

 

During the six months ended March, 31, 2018, warrants to purchase 1,407,619 shares of the Company’s common stock were exercised for $170,914.

 

The table below summarizes the Company’s warrants activities for the three months ended March 31, 2018:

 

    Number of Warrant Shares     Exercise Price Range Per Share     Weighted Average Exercise Price     Fair Value at Date of Issuance  
Balance, September 30, 2017     64,161,304     $ 0.12 - 1.00     $ 0.24     $ 2,151,219  
Granted     660,000       0.20       0.20       132,000  
Cancelled     -       -       -       -  
Exercised     (1,407,619 )     0.12 – 0.15       0.12       -  
Expired     (4,317,602 )     0.30 – 0.45       0.43       -  
Balance, March 31, 2018     59,096,084     $ 0.12 - 1.00     $ 0.22     $ 2,283,219  
Vested and exercisable, March 31, 2018     59,096,084     $ 0.12 - 1.00     $ 0.22     $ 2,283,219  
                                 
Unvested, March 31, 2018     -     $ -     $ -     $ -  

 

The aggregate intrinsic value for warrant shares outstanding March 31, 2018 was $95,733.

 

The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2018:

 

      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       43,183,441       2.61     $ 0.15       43,183,441       2.61     $ 0.15  
   0.21 – 0.49       11,412,905       2.13       0.32       11,412,905       2.13       0.32  
   0.50 – 1.00       4,499,738       0.38       0.75       4,499,738       0.38       0.75  
                                                     
$ 0.12 – 1.00       59,096,084       2.35     $ 0.22       59,096,084       2.35     $ 0.22

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Reporting
6 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
Segment Reporting

NOTE 7 – 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 the 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.

 

The detailed segment information of the Company is as follows:

 

Wellness Center USA, Inc.

Assets By Segments

 

    March 31, 2018  
    Corporate     Medical Devices     Authentication and Encryption     Total  
ASSETS                        
Current Assets                                
Cash   $ 24,884     $ 1,003     $ 14,526     $ 40,413  
Accounts receivable     -       -       -       -  
Inventories     -       -       12,057       12,057  
Prepaid expenses and other current assets     -       -       2,213       2,213  
                                 
Total current assets     24,884       1,003       28,796       54,683  
                                 
Property and equipment, net     -       -       3,148       3,148  
Other assets     15,000       1,760       -       16,760  
                                 
Total other assets     15,000       1,760       3,148       19,908  
                                 
TOTAL ASSETS   $ 39,884     $ 2,763     $ 31,944     $ 74,591  

 

Wellness Center USA, Inc.

Operations by Segments

 

    For the Six Months Ended  
    March 31, 2018  
    Corporate     Medical Devices     Authentication and Encryption     Total  
Sales:                        
Trade   $ -       -     $ 36,000     $ 36,000  
Consulting services     -       -       31,750       31,750  
Total Sales     -       -       67,750       67,750  
                                 
Cost of goods sold     -       -       34,658       34,658  
                                 
Gross profit     -       -       33,092       33,092  
                                 
Operating expenses     397,108       135,934       362,438       895,480  
                                 
Loss from operations   $ (397,108 )   $ (135,934 )   $ (329,346 )   $ (862,388 )

 

Wellness Center USA, Inc.

Operations by Segments

 

    For the Six Months Ended  
    March 31, 2017  
    Corporate     Medical Devices     Authentication and Encryption     Total  
Sales:                        
Trade   $ -     $ 196,000     $ 13,100     $ 209,100  
Consulting services     -       -       28,250       28,250  
Total Sales     -       196,000       41,350       237,350  
                                 
Cost of goods sold     -       75,117       38,790       113,907  
                                 
Gross profit     -       120,883       2,560       123,443  
                                 
Operating expenses     568,610       157,039       300,538       1,026,187  
                                 
Loss from operations   $ (568,610 )   $ (36,156 )   $ (297,978 )   $ (902,744 )

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
Legal Matters
6 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Legal Matters

NOTE 8 – LEGAL MATTERS

 

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 May, 2017, the Staff issued a Wells Notice stating its preliminary determination to recommend an enforcement action against the Company and our CEO, Mr. Kandalepas, 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 (“Settlement”) through an administrative cease and desist action on November 17, 2017, which was accepted by the SEC on April 12, 2018.  Pursuant to the Settlement, we neither admit nor deny any of the proposed allegations, but are enjoined from violating the above-referenced Sections and Rule. The Settlement imposes no financial penalties or sanctions against the Company. On April 13, 2018, the SEC filed a separate complaint against our CEO in the U.S. District Court for the Northern District of Illinois. It asserts the allegations noted above, as well as allegations that he manipulated the price of company shares through undisclosed trading, realizing more than $130,000 from such trading. The SEC seeks a permanent injunction, disgorgement including prejudgment interest, a civil penalty, an officer-and-director bar, and a penny stock bar.

 

Mr. Kandalepas intends to contest the allegations against him. He has voluntarily resigned as an officer and director. He has agreed to provide transition services to Calvin R. O’Harrow and Roy M. Harsch, who have been appointed to serve as CEO and Chairman, respectively. Mr. Kandalepas will remain with the Company to serve as Executive Director of Corporate Business Development.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events
6 Months Ended
Mar. 31, 2018
Subsequent Events [Abstract]  
Subsequent Events

NOTE 9 – SUBSEQUENT EVENTS

 

Subsequent to March 31, 2018, the Company borrowed $80,000 from Directors, an officer and a shareholder. Of these loans, $60,000, along with loans payable of $188,500 outstanding at March 31, 2018, were converted into 1,962,498 shares of common stock. In connection with the conversion of the loans payable, the Company issued warrants to purchase 3,925,002 shares of common stock. The warrants expire five years from the date of grant and have exercise prices of $0.14 and $0.18 per share.

 

An aggregate total of $70,000 of a convertible note payable was converted into 700,000 shares of the Company’s common stock.

 

The Company granted 500,000 shares of its common stock to consultants for services provided. The fair value of the shares on the dates of grant was $70,000.

 

In April 2018, the Board of Directors approved to increase the number of authorized shares of the Company’s common stock that may be subject to, or issued pursuant to, the terms of the 2010 Option Plan from 7,500,000 to 30,000,000, effective January 1, 2018 (see Note 6). 

 

In April 2018, the Company granted options to purchase 11,980,000 shares of its common stock to its officers and directors with a fair value of approximately $1,400,000. The options have an exercise price of $0.14 per share and expire five years from the date of grant. A total of 1,230,000 shares vested upon grant and 10,750,000 shares will vest ratably on a monthly basis over 36 months.

 

In May 2018, the Company received $50,000 from the sale of 333,333 shares of its common stock. In connection with the sale, the Company issued warrants to the shareholders to purchase 666,667 shares of the Company’s common stock. The warrants expire five years from the date of grant and have an exercise price of $0.18 per share.

 

In May 2018, the Board approved the permanent appointment of Roy M. Harsch as Chairman of the Board of Directors and Calvin O’Harrow as Chief Executive Officer.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Basis of Consolidation

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%
StealthCo, Inc. (“StealthCo”)   The State of Illinois   March 18, 2014   100%
Psoria Development Company LLC. (“PDC”)   The State of Illinois   January 15, 2015   50%

Use of Estimates

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 the valuation of accounts receivable and allowance for uncollectible amounts, inventory and obsolescence reserves, accruals for potential liabilities, valuations of stock-based compensation, realization of deferred tax assets, among others. Actual results could differ from these estimates.

Income (Loss) Per Share

Income (Loss) per Share

 

Basic loss per share is computed by dividing net loss applicable to common stockholders 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 stockholders 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 six months ended March 31, 2018 and 2017, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At March 31, 2018 and 2017, the dilutive impact of outstanding stock options for 8,847,500 and 6,147,500 shares, respectively, and outstanding warrants for 59,096,084 and 63,741,253 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

Revenue Recognition

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.

 

  (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 March 31, 2018 and 2017 was $49,598 and $55,098, respectively.

Non-controlling Interest

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.

Stock-Based Compensation

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, estimated forfeitures 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

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.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Schedule of Company's Consolidated Subsidiaries

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%
StealthCo, Inc. (“StealthCo”)   The State of Illinois   March 18, 2014   100%
Psoria Development Company LLC. (“PDC”)   The State of Illinois   January 15, 2015   50%

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
Discontinued Operations (Tables)
6 Months Ended
Mar. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Statement of Operations of Discontinued Operations

Components of the statement of operations relating to NPC for the three and six months ended March 31, 2017, were as follows:

 

    Three Months Ended     Six Months Ended  
    March 31, 2017     March 31, 2017  
             
Total Sales   $ 40,000     $ 77,402  
                 
Operating expenses     69,361       148,325  
                 
Loss from discontinued operations   $ (29,361 )   $ (70,923 )

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Notes Payable Agreements (Tables)
6 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Schedule of Convertible Notes Payable

    March 31, 2018     September 30, 2017  
             
Convertible note payable (a)   $ 110,000     $ 165,000  
Convertible note payable (b)     165,000       -  
Debt discount – unamortized balance     (144,279 )     (115,116 )
Convertible notes payable, net   $ 130,721     $ 49,884  

 

(a) 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 90th 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 comprised $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 affected Black-Scholes Merton option pricing model with a stock price of $0.31, volatility of 139.98% and risk-free rate of 1.28%. The unamortized balance of the debt discount at September 30, 2017 was $115,116. During the six months ended March 31, 2018, the Company amortized the remaining $115,116 of debt discount, leaving no unamortized balance at March 31, 2018.

 

The agreement also included a clause that allowed for the individual to receive additional shares if the price of the stock declined as of February 28, 2018 (the maturity date). The price of the stock on that date was $0.12 per share, causing the Company to issue the individual an additional 186,849 shares of its common stock. The Company recorded an expense of $22,422 relating to the issuance of these shares.

 

On March 5, 2018, the Company modified the conversion price on the note payable from $0.25 per share to $0.10 per share. On that date, the reduction in the conversion price allowed for the individual to convert an additional 990,000 shares with a fair value of $0.16 per share. The total amount of expense the Company recognized relating to the modification was $158,400. Also on March 5, 2018, the Company modified the exercise price on the attached warrants from $0.50 per share to $0.20 per share. The total amount of expense the Company recognized relating to the modification was $5,445. The maturity date of the note was also extended until April 30, 2018.

 

During the six months ended March 31, 2018, the individual converted $55,000 of the convertible note payable into 550,000 shares of the Company’s common stock.

  

(b) On March 5, 2018, the Company entered into another Convertible Note Payable Agreement with the same individual under which the Company borrowed an additional $165,000. Net proceeds received by the Company under the agreement after payment of a $15,000 fee to the lender was $150,000. In connection with the agreement, the Company issued the individual 300,000 restricted shares of its common stock and warrants to purchase 660,000 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 $0.20 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.10 per share. The note matures in October 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.

 

The Company calculated the related fair value of the warrants issued to the noteholder to be $55,032 using a Black Scholes Merton option pricing model and performing a relative value calculation. The Company then made a calculation to determine if a beneficial conversion feature (BCF) existed. The beneficial conversion was based upon the effective conversion price based on the proceeds received that were allocated to the convertible instrument. Based upon the Company’s calculation, it was determined that a beneficial conversion feature existed amounting to $94,968 and was recorded as a debt discount. As such the Company recognized a debt discount at the date of issuance in the aggregate amount of $165,000 relating to the $15,000 fees paid to the lender, and the aggregate amount of $150,000 relating to the relative value of the warrants and the BCF. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the Convertible note (a valuation debt discount). During the three and six months ended March 31, 2018, the Company amortized $20,721 of debt discount, leaving an unamortized balance of $144,279 at March 31, 2018.

 

In addition, the Company recorded an additional finance cost of $48,000 related to the fair value of the 300,000 shares of common stock granted at the date issuance.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Deficit (Tables)
6 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Schedule of Assumptions Used for Options Granted

The assumptions used for options granted during the six months ended March 31, 2018 are as follows:

 

Exercise price   $ 0.13 - 0.19  
Expected dividends     -  
Expected volatility     123.8% - 130.2 %
Risk free interest rate     2.01% - 2.18 %
Expected life of options     2.5

Schedule of Stock Option Activity

The table below summarizes the Company’s stock option activities for the three months ended March 31, 2018:

 

   

Number of

Option Shares

    Exercise Price Range Per Share     Weighted Average Exercise Price    

Fair Value

at Date of Grant

 
                         
Balance, September 30, 2017     6,822,500     $ 0.10 - 2.00     $ 0.51     $ 1,865,628  
Granted     2,025,000       0.13 - 0.19       0.18       317,971  
Cancelled     -       -       -       -  
Exercised     -       -       -       -  
Expired     -       -       -       -  
Balance, March 31, 2018     8,847,500     $ 0.10 – 2.00     $ 0.43     $ 2,183,599  
Vested and exercisable, March 31, 2018     7,747,500     $ 0.10 – 2.00     $ 0.43     $ 2,003,527  
                                 
Unvested, March 31, 2018     1,100,000     $ 0.19     $ 0.19     $ 180,072  

Schedule of Outstanding and Exercisable Options by Exercise Price Range

The following table summarizes information concerning outstanding and exercisable options as of March 31, 2018:

 

      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  
                                       
$ 0.10 - 0.39       5,325,000       3.72     $ 0.18       4,225,000       3.72     $ 0.18  
  0.40 - 0.99       2,122,500       1.05       0.40       2,122,500       1.05       0.40  
  1.00 - 1.99       750,000       2.75       1.00       750,000       2.75       1.00  
  2.00       650,000       2.75       2.00       650,000       2.75       2.00  
$ 0.01 - 2.00       8,847,500       2.93     $ 0.43       7,747,500       2.93     $ 0.43

Schedule of Warrant Activity

The table below summarizes the Company’s warrants activities for the three months ended March 31, 2018:

 

    Number of Warrant Shares     Exercise Price Range Per Share     Weighted Average Exercise Price     Fair Value at Date of Issuance  
Balance, September 30, 2017     64,161,304     $ 0.12 - 1.00     $ 0.24     $ 2,151,219  
Granted     660,000       0.20       0.20       132,000  
Cancelled     -       -       -       -  
Exercised     (1,407,619 )     0.12 – 0.15       0.12       -  
Expired     (4,317,602 )     0.30 – 0.45       0.43       -  
Balance, March 31, 2018     59,096,084     $ 0.12 - 1.00     $ 0.22     $ 2,283,219  
Vested and exercisable, March 31, 2018     59,096,084     $ 0.12 - 1.00     $ 0.22     $ 2,283,219  
                                 
Unvested, March 31, 2018     -     $ -     $ -     $ -

Schedule of Outstanding and Exercisable Warrants by Exercise Price Range

The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2018:

 

      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       43,183,441       2.61     $ 0.15       43,183,441       2.61     $ 0.15  
   0.21 – 0.49       11,412,905       2.13       0.32       11,412,905       2.13       0.32  
   0.50 – 1.00       4,499,738       0.38       0.75       4,499,738       0.38       0.75  
                                                     
$ 0.12 – 1.00       59,096,084       2.35     $ 0.22       59,096,084       2.35     $ 0.22

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Reporting (Tables)
6 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
Schedule of Assets of Reportable Segments

The detailed segment information of the Company is as follows:

 

Wellness Center USA, Inc.

Assets By Segments

 

    March 31, 2018  
    Corporate     Medical Devices     Authentication and Encryption     Total  
ASSETS                        
Current Assets                                
Cash   $ 24,884     $ 1,003     $ 14,526     $ 40,413  
Accounts receivable     -       -       -       -  
Inventories     -       -       12,057       12,057  
Prepaid expenses and other current assets     -       -       2,213       2,213  
                                 
Total current assets     24,884       1,003       28,796       54,683  
                                 
Property and equipment, net     -       -       3,148       3,148  
Other assets     15,000       1,760       -       16,760  
                                 
Total other assets     15,000       1,760       3,148       19,908  
                                 
TOTAL ASSETS   $ 39,884     $ 2,763     $ 31,944     $ 74,591

Schedule of Operations of Reportable Segments

Wellness Center USA, Inc.

Operations by Segments

 

    For the Six Months Ended  
    March 31, 2018  
    Corporate     Medical Devices     Authentication and Encryption     Total  
Sales:                        
Trade   $ -       -     $ 36,000     $ 36,000  
Consulting services     -       -       31,750       31,750  
Total Sales     -       -       67,750       67,750  
                                 
Cost of goods sold     -       -       34,658       34,658  
                                 
Gross profit     -       -       33,092       33,092  
                                 
Operating expenses     397,108       135,934       362,438       895,480  
                                 
Loss from operations   $ (397,108 )   $ (135,934 )   $ (329,346 )   $ (862,388 )

 

Wellness Center USA, Inc.

Operations by Segments

 

    For the Six Months Ended  
    March 31, 2017  
    Corporate     Medical Devices     Authentication and Encryption     Total  
Sales:                        
Trade   $ -     $ 196,000     $ 13,100     $ 209,100  
Consulting services     -       -       28,250       28,250  
Total Sales     -       196,000       41,350       237,350  
                                 
Cost of goods sold     -       75,117       38,790       113,907  
                                 
Gross profit     -       120,883       2,560       123,443  
                                 
Operating expenses     568,610       157,039       300,538       1,026,187  
                                 
Loss from operations   $ (568,610 )   $ (36,156 )   $ (297,978 )   $ (902,744 )

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
Organization and Basis of Presentation (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Sep. 30, 2017
Aug. 11, 2017
Sep. 30, 2016
Entity incorporation, state country name     Nevada        
Net loss from continuing operations $ 847,578 $ 269,390 $ 1,245,580 $ 684,890      
Net cash used in operating activities from continuing operations     478,370 676,323      
Shareholders' deficit 761,250   761,250   $ 290,449    
Cash on hand $ 40,413 $ 277,302 40,413 277,302 $ 29,369   $ 81,749
Proceeds from debt financing and exercise of stock warrants     $ 489,414 $ 880,615      
NPC Inc. [Member]              
Ownership interest, percentage           100.00%  
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Sep. 30, 2017
Deferred revenue $ 49,598 $ 55,098 $ 55,098
Stock Options [Member]      
Antidilutive securities excluded from computation of earnings per share 8,847,500 6,147,500  
Warrants [Member]      
Antidilutive securities excluded from computation of earnings per share 59,096,084 63,741,253  
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies - Schedule of Company's Consolidated Subsidiaries (Details)
6 Months Ended
Mar. 31, 2018
State or other jurisdiction of incorporation or organization Nevada
Psoria-Shield Inc. [Member]  
Name of consolidated subsidiary or entity Psoria-Shield Inc. (“PSI”)
State or other jurisdiction of incorporation or organization The State of Florida
Date of incorporation or formation Jun. 17, 2009
Date of acquisition/disposition Aug. 24, 2012
Attributable interest 100.00%
StealthCo, Inc. [Member]  
Name of consolidated subsidiary or entity StealthCo, Inc. (“StealthCo”)
State or other jurisdiction of incorporation or organization The State of Illinois
Date of incorporation or formation Mar. 18, 2014
Attributable interest 100.00%
Psoria Development Company LLC. [Member]  
Name of consolidated subsidiary or entity Psoria Development Company LLC. (“PDC”)
State or other jurisdiction of incorporation or organization The State of Illinois
Date of incorporation or formation Jan. 15, 2015
Attributable interest 50.00%
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
Discontinued Operations (Details Narrative) - NPC Inc. [Member] - USD ($)
12 Months Ended
Sep. 30, 2017
Aug. 11, 2017
Ownership interest, percentage   100.00%
Dr. Jay Joshi [Member]    
Ownership interest, percentage   100.00%
Accrued compensation   $ 365,459
Number of stock options issued to purchase common stock   500,000
Common stock exercise price   $ 0.25
Gain relating to transaction $ 252,508  
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
Discontinued Operations - Statement of Operations of Discontinued Operations (Details) - USD ($)
3 Months Ended 6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Discontinued Operations and Disposal Groups [Abstract]        
Total Sales   $ 40,000   $ 77,402
Operating expenses   69,361   148,325
Loss from discontinued operations $ (29,361) $ (70,923)
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
Loans Payable from Officers and Shareholders (Details Narrative) - USD ($)
6 Months Ended 12 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Sep. 30, 2017
Sep. 30, 2014
Loans payable from officers and shareholders $ 227,500   $ 59,000  
Proceeds from short term debt 179,000 $ 30,000    
Repayments of short term debt $ 10,500    
Two Short-term Unsecured Loans [Member]        
Loans payable from officers and shareholders     $ 50,000  
Debt instrument, interest rate, stated percentage     8.00%  
Debt instrument, payment terms     due one year from the date of issuance.  
Nine Short-Term Unsecured Loans [Member]        
Debt instrument, interest rate, stated percentage 8.00%      
Debt instrument, payment terms due one year from the date of issuance.      
Proceeds from short term debt $ 179,000      
Two Unsecured Note Agreements [Member]        
Loans payable from officers and shareholders       $ 9,000
Debt instrument, interest rate, stated percentage       0.00%
Debt instrument, payment terms       due on demand
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Notes Payable Agreements - Schedule of Convertible Notes Payable (Details) - USD ($)
Mar. 31, 2018
Sep. 30, 2017
Debt discount - unamortized balance $ (144,279) $ (115,116)
Convertible note payable, net 130,721 49,884
Convertible Note Payable One [Member]    
Convertible note payable [1] 110,000 165,000
Convertible Note Payable Two [Member]    
Convertible note payable [2] $ 165,000
[1] 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 90th 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 comprised $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 affected Black-Scholes Merton option pricing model with a stock price of $0.31, volatility of 139.98% and risk-free rate of 1.28%. The unamortized balance of the debt discount at September 30, 2017 was $115,116. During the six months ended March 31, 2018, the Company amortized the remaining $115,116 of debt discount, leaving no unamortized balance at March 31, 2018. The agreement also included a clause that allowed for the individual to receive additional shares if the price of the stock declined as of February 28, 2018 (the maturity date). The price of the stock on that date was $0.12 per share, causing the Company to issue the individual an additional 186,849 shares of its common stock. The Company recorded an expense of $22,422 relating to the issuance of these shares. On March 5, 2018, the Company modified the conversion price on the note payable from $0.25 per share to $0.10 per share. On that date, the reduction in the conversion price allowed for the individual to convert an additional 990,000 shares with a fair value of $0.16 per share. The total amount of expense the Company recognized relating to the modification was $158,400. Also on March 5, 2018, the Company modified the exercise price on the attached warrants from $0.50 per share to $0.20 per share. The total amount of expense the Company recognized relating to the modification was $5,445. The maturity date of the note was also extended until April 30, 2018. During the six months ended March 31, 2018, the individual converted $55,000 of the convertible note payable into 550,000 shares of the Company’s common stock.
[2] On March 5, 2018, the Company entered into another Convertible Note Payable Agreement with the same individual under which the Company borrowed an additional $165,000. Net proceeds received by the Company under the agreement after payment of a $15,000 fee to the lender was $150,000. In connection with the agreement, the Company issued the individual 300,000 restricted shares of its common stock and warrants to purchase 660,000 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 $0.20 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.10 per share. The note matures in October 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. The Company calculated the related fair value of the warrants issued to the noteholder to be $55,032 using a Black Scholes Merton option pricing model and performing a relative value calculation. The Company then made a calculation to determine if a beneficial conversion feature (BCF) existed. The beneficial conversion was based upon the effective conversion price based on the proceeds received that were allocated to the convertible instrument. Based upon the Company’s calculation, it was determined that a beneficial conversion feature existed amounting to $94,968 and was recorded as a debt discount. As such the Company recognized a debt discount at the date of issuance in the aggregate amount of $165,000 relating to the $15,000 fees paid to the lender, the relative value of the warrants and the BCF. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the Convertible note (a valuation debt discount). During the three and six months ended March 31, 2018, the Company amortized $20,721 of debt discount, leaving an unamortized balance of $144,279 at March 31, 2018. In addition, the Company recorded an additional finance cost of $48,000 related to the fair value of the 330,000 shares of common stock granted at the date issuance.
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Notes Payable Agreements - Schedule of Convertible Notes Payable (Details) (Parenthetical) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Mar. 05, 2018
Feb. 28, 2018
Jul. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Sep. 30, 2017
Proceeds from convertible notes payable           $ 150,000  
Number of common stock and warrants issued to purchase common shares       1,407,619   1,407,619    
Debt instrument, unamortized discount       $ 144,279   $ 144,279   $ 115,116
Loss on modification of conversion price on convertible note payable       158,400 158,400  
Loss on modification of exercise price on warrants in connection with convertible note payable       5,445 5,445  
Convertible Note Payable Agreement One [Member]                
Debt instrument, unamortized discount           $ 115,116
Fair value of warrants           $ 87,582    
Volatility rate           139.98%    
Risk-free rate           1.28%    
Amortization of debt discount           $ 115,116    
Conversion of debt into common stock           $ 55,000    
Conversion of debt into common stock, shares           550,000    
Convertible Note Payable Agreement One [Member] | Warrant [Member]                
Stock price       $ 0.31   $ 0.31    
Convertible Note Payable Agreement One [Member] | Individual [member]                
Debt instrument, face amount     $ 165,000          
Proceeds from convertible notes payable     $ 150,000          
Number of restricted shares issued     165,000          
Number of common stock and warrants issued to purchase common shares     330,000          
Warrant term     5 years          
Warrant exercise price     $ 0.50          
Debt instrument interest rate     8.00%          
Debt instrument, collateral     unsecured          
Debt instrument, convertible, terms of conversion feature     convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.25 per share.          
Debt instrument conversion price     $ 0.25          
Debt instrument maturity date description     February 2018          
Closing price of the common stock     $ 0.31          
Debt instrument, unamortized discount     $ 150,000          
Intrinsic value of beneficial conversion features     94,704          
Fair value of warrants     $ 55,296          
Stock price   $ 0.12            
Common stock issued, shares   186,849            
Stock issuance cost   $ 22,422            
Conversion of stock, shares converted 990,000              
Stock conversion price $ 0.16              
Loss on modification of conversion price on convertible note payable $ 158,400              
Debt maturity date Apr. 30, 2018              
Convertible Note Payable Agreement One [Member] | Individual [member] | Maximum [Member]                
Debt instrument conversion price $ 0.25              
Convertible Note Payable Agreement One [Member] | Individual [member] | Minimum [Member]                
Debt instrument conversion price $ 0.10              
Convertible Note Payable Agreement One [Member] | Individual [member] | Warrant [Member]                
Loss on modification of exercise price on warrants in connection with convertible note payable $ 5,445              
Convertible Note Payable Agreement One [Member] | Individual [member] | Warrant [Member] | Maximum [Member]                
Debt instrument conversion price $ 0.50              
Convertible Note Payable Agreement One [Member] | Individual [member] | Warrant [Member] | Minimum [Member]                
Debt instrument conversion price $ 0.20              
Convertible Note Payable Agreement Two [Member] | Individual [member]                
Debt instrument, face amount $ 165,000              
Proceeds from convertible notes payable $ 150,000              
Number of restricted shares issued 300,000              
Number of common stock and warrants issued to purchase common shares 660,000              
Warrant term 5 years              
Warrant exercise price $ 0.20              
Debt instrument interest rate 8.00%              
Debt instrument, collateral unsecured              
Debt instrument, convertible, terms of conversion feature convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.10 per share.              
Debt instrument conversion price $ 0.10              
Debt instrument maturity date description October 2018              
Debt instrument, unamortized discount $ 94,968     $ 144,279   $ 144,279    
Fair value of warrants 55,032              
Amortization of debt discount           $ 20,721    
Common stock issued, shares           300,000    
Stock issuance cost           $ 48,000    
Lender fee 15,000              
Fair value of warrants and beneficial conversion features $ 150,000              
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Equity (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jan. 02, 2018
Mar. 31, 2018
Mar. 31, 2018
Sep. 30, 2017
Number of stock issued for service, amount     $ 26,700  
Common stock, shares authorized   185,000,000 185,000,000 185,000,000
Number options to purchase of common stock     2,025,000  
Options exercisable term     2 years 11 months 4 days  
Stock option exercise price per share $ 0.13      
Stock based compensation     $ 27,400  
Unvested compensation   $ 179,392 179,392  
Aggregate intrinsic value for option shares outstanding   $ 13,438 $ 13,438  
Shares of stock options remaining available for issuance   21,152,500 21,152,500  
Number of warrants issued to purchase common shares   1,407,619 1,407,619  
Warrants to purchase shares of common stock, value   $ 170,914 $ 170,914  
Aggregate intrinsic value for warrant shares outstanding   $ 95,733 $ 95,733  
Stock Warrants [Member]        
Number of warrants issued to purchase common shares   660,000 660,000  
Warrant exercise price   $ 0.20 $ 0.20  
Warrant expiration period     5 years  
January 1, 2018 [Member]        
Number options to purchase of common stock     675,000  
Options Vesting description     A combined total of 675,000 shares vested 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  
Employment Agreement with Three Employees [Member]        
Number options to purchase of common stock     250,000  
Stock based compensation   $ 110,498 $ 110,498  
Employment Agreement with Three Employees [Member] | January 1, 2018 [Member]        
Number options to purchase of common stock     1,775,000  
Fair value of stock options     $ 289,890  
Options exercisable term     5 years  
Stock option exercise price per share   $ 0.19 $ 0.19  
Maximum [Member]        
Number options to purchase of common stock 250,000      
2010 Non-Qualified Stock Option Plan [Member]        
Common stock, shares authorized   7,500,000 7,500,000  
2010 Non-Qualified Stock Option Plan [Member] | Minimum [Member]        
Common stock, shares authorized   7,500,000 7,500,000  
2010 Non-Qualified Stock Option Plan [Member] | Maximum [Member]        
Common stock, shares authorized   30,000,000 30,000,000  
Convertible Notes Payable [Member]        
Numbers of shares issued     486,849  
Number of stock converted into shares     550,000  
PSI Consultants [Member]        
Number of stock issued for service     150,000  
Number of stock issued for service, amount     $ 26,700  
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Equity - Schedule of Assumptions Used for Options Granted (Details)
6 Months Ended
Mar. 31, 2018
$ / shares
Expected dividends 0.00%
Expected volatility, minimum 123.80%
Expected volatility, maximum 130.20%
Risk free interest rate, minimum 2.01%
Risk free interest rate, maximum 2.18%
Expected life of options 2 years 6 months
Minimum [Member]  
Exercise price $ 0.13
Maximum [Member]  
Exercise price $ 0.19
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Equity - Schedule of Stock Option Activity (Details) - USD ($)
6 Months Ended
Jan. 02, 2018
Mar. 31, 2018
Number of Option Shares Outstanding, Number, Beginning Balance   6,822,500
Number of Option Shares Outstanding, Granted   2,025,000
Number of Option Shares Outstanding, Cancelled  
Number of Option Shares Outstanding, Exercised  
Number of Option Shares Outstanding, Expired  
Number of Option Shares Outstanding, Number, Ending Balance   8,847,500
Number of Option Shares Outstanding, Vested and exercisable, Ending Balance   7,747,500
Number of Option Shares Outstanding, Unvested, Ending Balance   1,100,000
Weighted Average Exercise Price, Number, Beginning Balance   $ 0.51
Weighted Average Exercise Price, Granted   0.18
Weighted Average Exercise Price, Cancelled  
Weighted Average Exercise Price, Exercised  
Weighted Average Exercise Price, Expired  
Weighted Average Exercise Price, Number, Ending Balance   0.43
Weighted Average Exercise Price, Vested and exercisable, Ending Balance   0.43
Weighted Average Exercise Price, Unvested, Ending Balance   $ 0.19
Fair Value at Date of Grant, Number, Beginning Balance   $ 1,865,628
Fair Value at Date of Grant, Granted   317,971
Fair Value at Date of Grant, Cancelled  
Fair Value at Date of Grant, Exercised  
Fair Value at Date of Grant, Expired  
Fair Value at Date of Grant, Number, Ending Balance   2,183,599
Fair Value at Date of Grant, Vested and exercisable, Ending Balance   2,003,527
Fair Value at Date of Grant, Unvested, Ending Balance   $ 180,072
Minimum [Member]    
Weighted Average Exercise Price, Number, Beginning Balance   $ 0.10
Weighted Average Exercise Price, Granted   0.13
Weighted Average Exercise Price, Number, Ending Balance   0.10
Weighted Average Exercise Price, Vested and exercisable, Ending Balance   0.10
Maximum [Member]    
Number of Option Shares Outstanding, Granted 250,000  
Weighted Average Exercise Price, Number, Beginning Balance   2.00
Weighted Average Exercise Price, Granted   0.19
Weighted Average Exercise Price, Number, Ending Balance   2.00
Weighted Average Exercise Price, Vested and exercisable, Ending Balance   $ 2.00
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Equity - Schedule of Outstanding and Exercisable Options by Exercise Price Range (Details) - $ / shares
6 Months Ended
Mar. 31, 2018
Sep. 30, 2017
Range of Exercise Prices, Lower Limit $ 0.01  
Range of Exercise Prices, Upper Limit $ 2.00  
Number of Options, Outstanding, Number 8,847,500 6,822,500
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 2 years 11 months 4 days  
Number of Options, Outstanding, Weighted Average Exercise Price $ 0.43 $ 0.51
Number of Options, Exercisable, Number 7,747,500  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 2 years 11 months 4 days  
Number of Options, Exercisable, Weighted Average Exercise Price $ 0.43  
Exercise Price Range One [Member]    
Range of Exercise Prices, Lower Limit 0.10  
Range of Exercise Prices, Upper Limit $ 0.39  
Number of Options, Outstanding, Number 5,325,000  
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 3 years 8 months 19 days  
Number of Options, Outstanding, Weighted Average Exercise Price $ 0.18  
Number of Options, Exercisable, Number 4,225,000  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 3 years 8 months 19 days  
Number of Options, Exercisable, Weighted Average Exercise Price $ 0.18  
Exercise Price Range Two [Member]    
Range of Exercise Prices, Lower Limit 0.40  
Range of Exercise Prices, Upper Limit $ 0.99  
Number of Options, Outstanding, Number 2,122,500  
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 1 year 18 days  
Number of Options, Outstanding, Weighted Average Exercise Price $ 0.40  
Number of Options, Exercisable, Number 2,122,500  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 1 year 18 days  
Number of Options, Exercisable, Weighted Average Exercise Price $ 0.40  
Exercise Price Range Three [Member]    
Range of Exercise Prices, Lower Limit 1.00  
Range of Exercise Prices, Upper Limit $ 1.99  
Number of Options, Outstanding, Number 750,000  
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 2 years 9 months  
Number of Options, Outstanding, Weighted Average Exercise Price $ 1.00  
Number of Options, Exercisable, Number 750,000  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 2 years 9 months  
Number of Options, Exercisable, Weighted Average Exercise Price $ 1.00  
Exercise Price Range Four [Member]    
Range of Exercise Prices, Upper Limit $ 2.00  
Number of Options, Outstanding, Number 650,000  
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 2 years 9 months  
Number of Options, Outstanding, Weighted Average Exercise Price $ 2.00  
Number of Options, Exercisable, Number 650,000  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 2 years 9 months  
Number of Options, Exercisable, Weighted Average Exercise Price $ 2.00  
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Equity - Schedule of Warrant Activity (Details) - Warrant [Member]
6 Months Ended
Mar. 31, 2018
USD ($)
$ / shares
shares
Number of Warrant Shares Outstanding, Number, Beginning Balance | shares 64,161,304
Number of Warrant Shares Outstanding, Granted | shares 660,000
Number of Warrant Shares Outstanding, Cancelled | shares
Number of Warrant Shares Outstanding, Exercised | shares (1,407,619)
Number of Warrant Shares Outstanding, Expired | shares (4,317,602)
Number of Warrant Shares Outstanding, Number, Ending Balance | shares 59,096,084
Number of Warrant Shares Outstanding, Vested and exercisable, Ending Balance | shares 59,096,084
Number of Warrant Shares Outstanding, Unvested, Ending Balance | shares
Weighted Average Exercise Price, Number, Beginning Balance $ 0.24
Weighted Average Exercise Price, Granted 0.20
Weighted Average Exercise Price, Cancelled
Weighted Average Exercise Price, Exercised 0.12
Weighted Average Exercise Price, Expired 0.43
Weighted Average Exercise Price, Number, Ending Balance 0.22
Weighted Average Exercise Price, Vested and exercisable, Ending Balance 0.22
Weighted Average Exercise Price, Unvested, Ending Balance
Fair Value at Date of Issuance, Number, Beginning Balance | $ $ 2,151,219
Fair Value at Date of Issuance, Granted | $ 132,000
Fair Value at Date of Issuance, Cancelled | $
Fair Value at Date of Issuance, Exercised | $
Fair Value at Date of Issuance, Expired | $
Fair Value at Date of Issuance, Number, Ending Balance | $ 2,283,219
Fair Value at Date of Issuance, Vested and exercisable, Ending Balance | $ 2,283,219
Fair Value at Date of Issuance, Unvested, Ending Balance | $
Minimum [Member]  
Weighted Average Exercise Price, Number, Beginning Balance $ 0.12
Weighted Average Exercise Price, Exercised 0.12
Weighted Average Exercise Price, Expired 0.30
Weighted Average Exercise Price, Number, Ending Balance 0.12
Weighted Average Exercise Price, Vested and exercisable, Ending Balance 0.12
Maximum [Member]  
Weighted Average Exercise Price, Number, Beginning Balance 1.00
Weighted Average Exercise Price, Exercised 0.15
Weighted Average Exercise Price, Expired 0.45
Weighted Average Exercise Price, Number, Ending Balance 1.00
Weighted Average Exercise Price, Vested and exercisable, Ending Balance $ 1.00
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Equity - Schedule of Outstanding and Exercisable Warrants by Exercise Price Range (Details) - $ / shares
6 Months Ended
Mar. 31, 2018
Sep. 30, 2017
Range of Exercise Prices, Lower Limit $ 0.01  
Range of Exercise Prices, Upper Limit 2.00  
Exercise Price Range One [Member]    
Range of Exercise Prices, Lower Limit 0.10  
Range of Exercise Prices, Upper Limit 0.39  
Exercise Price Range Two [Member]    
Range of Exercise Prices, Lower Limit 0.40  
Range of Exercise Prices, Upper Limit 0.99  
Exercise Price Range Three [Member]    
Range of Exercise Prices, Lower Limit 1.00  
Range of Exercise Prices, Upper Limit 1.99  
Warrant [Member]    
Range of Exercise Prices, Lower Limit 0.12  
Range of Exercise Prices, Upper Limit $ 1.00  
Number of Warrants, Outstanding, Number 59,096,084 64,161,304
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 2 years 4 months 6 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.22 $ 0.24
Number of Warrants, Exercisable, Number 59,096,084  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 2 years 4 months 6 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.22  
Warrant [Member] | Exercise Price Range One [Member]    
Range of Exercise Prices, Lower Limit 0.12  
Range of Exercise Prices, Upper Limit $ 0.20  
Number of Warrants, Outstanding, Number 43,183,441  
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 2 years 7 months 10 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.15  
Number of Warrants, Exercisable, Number 43,183,441  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 2 years 7 months 10 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.15  
Warrant [Member] | Exercise Price Range Two [Member]    
Range of Exercise Prices, Lower Limit 0.21  
Range of Exercise Prices, Upper Limit $ 0.49  
Number of Warrants, Outstanding, Number 11,412,905  
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 2 years 1 month 16 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.32  
Number of Warrants, Exercisable, Number 11,412,905  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 2 years 1 month 16 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.32  
Warrant [Member] | Exercise Price Range Three [Member]    
Range of Exercise Prices, Lower Limit 0.50  
Range of Exercise Prices, Upper Limit $ 1.00  
Number of Warrants, Outstanding, Number 4,499,738  
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 4 months 17 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.75  
Number of Warrants, Exercisable, Number 4,499,738  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 4 months 17 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.75  
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Reporting - Schedule of Assets of Reportable Segments (Details) - USD ($)
Mar. 31, 2018
Sep. 30, 2017
Mar. 31, 2017
Sep. 30, 2016
Cash $ 40,413 $ 29,369 $ 277,302 $ 81,749
Accounts receivable 24,999    
Inventories 12,057 12,335    
Prepaid expenses and other current assets 2,213 1,751    
Total current assets 54,683 68,454    
Property and equipment, net 3,148 5,126    
Other assets 16,760 16,760    
Total other assets 19,908 21,886    
TOTAL ASSETS 74,591 $ 90,340    
Corporate [Member]        
Cash 24,884      
Accounts receivable      
Inventories      
Prepaid expenses and other current assets      
Total current assets 24,884      
Property and equipment, net      
Other assets 15,000      
Total other assets 15,000      
TOTAL ASSETS 39,884      
Medical Devices [Member]        
Cash 1,003      
Accounts receivable      
Inventories      
Prepaid expenses and other current assets      
Total current assets 1,003      
Property and equipment, net      
Other assets 1,760      
Total other assets 1,760      
TOTAL ASSETS 2,763      
Authentication and Encryption [Member]        
Cash 14,526      
Accounts receivable      
Inventories 12,057      
Prepaid expenses and other current assets 2,213      
Total current assets 28,796      
Property and equipment, net 3,148      
Other assets      
Total other assets 3,148      
TOTAL ASSETS $ 31,944      
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Reporting - Schedule of Operations of Reportable Segments (Details) - USD ($)
3 Months Ended 6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Trade $ 20,500 $ 120,100 $ 36,000 $ 209,100
Consulting services 20,750 14,125 31,750 28,250
Total Sales 41,250 134,225 67,750 237,350
Cost of goods sold 17,666 53,407 34,658 113,907
Gross profit 23,584 80,818 33,092 123,443
Operating expenses 561,317 609,624 895,480 1,026,187
Loss from operations $ (537,733) $ (528,806) (862,388) (902,744)
Employment Agreement with Three Employees [Member]        
Trade     36,000  
Consulting services     31,750  
Total Sales     67,750  
Cost of goods sold     34,658  
Gross profit     33,092  
Operating expenses     895,480  
Loss from operations     (862,388)  
Corporate [Member]        
Trade    
Consulting services    
Total Sales    
Cost of goods sold    
Gross profit    
Operating expenses     397,108 568,610
Loss from operations     (397,108) (568,610)
Medical Devices [Member]        
Trade     196,000
Consulting services    
Total Sales     196,000
Cost of goods sold     75,117
Gross profit     120,883
Operating expenses     135,934 157,039
Loss from operations     (135,934) (36,156)
Authentication and Encryption [Member]        
Trade     36,000 13,100
Consulting services     31,750 28,250
Total Sales     67,750 41,350
Cost of goods sold     34,658 38,790
Gross profit     33,092 2,560
Operating expenses     362,438 300,538
Loss from operations     $ (329,346) $ (297,978)
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
Legal Matters (Details Narrative) - CEO [Member]
6 Months Ended
Mar. 31, 2018
USD ($)
Total payments to employee $ 450,000
Maximum [Member]  
Trading, realized amount $ 130,000
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Apr. 30, 2018
Mar. 31, 2018
Mar. 31, 2018
May 30, 2018
Sep. 30, 2017
Warrants to purchase shares   1,407,619 1,407,619    
Value of stock     $ 26,700    
Common stock, shares authorized   185,000,000 185,000,000   185,000,000
Exercise price of options     $ 0.18    
Minimum [Member]          
Exercise price of options     0.13    
Maximum [Member]          
Exercise price of options     $ 0.19    
Subsequent Event [Member]          
Due from directors, officer and shareholder   $ 80,000 $ 80,000    
Loans payable   $ 60,000 60,000    
Debt instrument, amount converted     $ 188,500    
Debt conversion into shares     1,962,498    
Warrants to purchase shares   3,925,002 3,925,002    
Warrants term     5 years    
Stock issued during services     500,000    
Value of stock     $ 70,000    
Options granted to purchase shares 11,980,000        
Fair value of options granted $ 1,400,000        
Exercise price of options $ 0.14        
Options term 5 years        
Shares vested upon grants 1,230,000        
Subsequent Event [Member] | May 2018 [Member]          
Warrants to purchase shares       666,667  
Exercise price of options   $ 0.18      
Amount received on sale of stock   $ 50,000      
Sale of shares of common stock   333,333      
Subsequent Event [Member] | 36 Months [Member]          
Shares vested upon grants 10,750,000        
Subsequent Event [Member] | Minimum [Member]          
Warrants exercise price   $ 0.14 $ 0.14    
Subsequent Event [Member] | Minimum [Member] | 2010 Option Plan [Member]          
Common stock, shares authorized 7,500,000        
Subsequent Event [Member] | Maximum [Member]          
Warrants exercise price   $ 0.18 $ 0.18    
Subsequent Event [Member] | Maximum [Member] | 2010 Option Plan [Member]          
Common stock, shares authorized 30,000,000        
EXCEL 51 Financial_Report.xlsx IDEA: XBRL DOCUMENT begin 644 Financial_Report.xlsx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�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