0001493152-20-004732.txt : 20200325 0001493152-20-004732.hdr.sgml : 20200325 20200325172424 ACCESSION NUMBER: 0001493152-20-004732 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 53 CONFORMED PERIOD OF REPORT: 20191231 FILED AS OF DATE: 20200325 DATE AS OF CHANGE: 20200325 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: 20743256 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

 

 

 

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

 

For the quarterly period ended December 31, 2019

 

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

 

For the transition period from ___________ to ___________

 

WELLNESS CENTER USA, INC.

(Name of small business issuer in its charter)

 

 NEVADA   333-173216   27-2980395

(State or other jurisdiction of

incorporation or organization)

 

Commission

File Number

 

(IRS Employee

Identification No.)

 

145 E. University Boulevard, Tucson, AZ 85705

(Address of Principal Executive Offices)

 

 

 

(847) 925-1885

(Issuer Telephone number)

 

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

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

 

 

 

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

Name of each exchange on which registered:

None   None
 
Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.001

(Title of class)

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes [X] No [  ]

 

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

 

Large Accelerated Filer [  ]

Accelerated Filer [  ]

 

 

Non-Accelerated Filer [  ]

Smaller Reporting Company [X]

Emerging growth Company [  ]

 

 

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 issued and outstanding of each of the issuer’s classes of common equity as of December 31, 2019 was 107,497,077.

 

 

 

   
 

 

FORM 10-Q

WELLNESS CENTER USA, INC.

DECEMBER 31, 2019

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 24
Item 4. Control and Procedures 24
     
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 
 

 

Wellness Center USA, Inc.

Condensed Consolidated Balance Sheets

 

   December 31, 2019   September 30, 2019 
   (Unaudited)     
ASSETS          
Current Assets          
Cash  $42,363   $53,147 
Prepaid expenses and other current assets   55,500    55,000 
Total Current Assets   97,863    108,147 
           
Property and equipment, net   -    1,562 
Right of use asset   22,697    - 
Total Other Assets   22,697    1,562 
           
TOTAL ASSETS  $120,560   $109,709 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIT          
Current Liabilities          
Accounts payable and accrued expenses  $775,566   $691,619 
Payroll taxes payable   102,899    102,834 
Lease liability   22,697    - 
Loans payable from officers and shareholders   534,250    399,250 
Total Current Liabilities   1,435,412    1,193,703 
           
Shareholders’ Deficit          
Common stock, par value $0.001, 200,000,000 shares authorized; 107,497,077 shares issued and outstanding, respectively   107,497    107,497 
Additional paid-in capital   23,868,885    23,777,647 
Accumulated deficit   (25,686,754)   (25,362,287)
Total Wellness Center USA shareholders’ deficit   (1,710,372)   (1,477,143)
           
Non-controlling interest   395,520    393,149 
Total Shareholder’s deficit   (1,314,852)   (1,083,994)
           
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT  $120,560   $109,709 

 

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 
   December 31, 
   2019   2018 
    (Unaudited) 
Sales:          
Trade  $-   $7,675 
Consulting services   -    5,200 
Total Sales   -    12,875 
           
Cost of goods sold   -    7,725 
           
Gross profit   -    5,150 
           
Operating expenses   337,273    475,864 
           
Loss from operations   (337,273)   (470,714)
           
Other expenses          
Amortization of debt discount   -    (50,689)
Financing costs   -    (51,434)
Interest expense   (9,323)   (4,851)
Total other expenses   (9,323)   (106,974)
           
NET LOSS   (346,596)   (577,688)
           
Net loss attributable to non-controlling interest   22,129    3,759 
Loss from deconsolidation of non-controlling interest   -    (405,383)
           
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC.   (324,467)   (979,312)
           
BASIC AND DILUTED LOSS PER SHARE  $(0.00)  $(0.01)
           
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING          
BASIC AND DILUTED   107,497,077    100,952,569 

 

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

 

 4 
 

 

Wellness Center USA, Inc.

Condensed Consolidated Statements of Shareholders’ Deficit (Unaudited)

 

       Additional       Total   Non-     
   Common Stock   Paid-in   Accumulated   WCUI   controlling     
   Shares   Amount   Capital   Deficit   Deficit   Interest   Total 
                             
                                    
Balance, September 30, 2019   107,497,077   $107,497   $23,777,647   $(25,362,287)  $(1,477,143)  $393,149   $(1,083,994)
                                    
Fair value of vested stock options   -    -    65,738    -    65,738    -    65,738 
                                    
Contribution of capital by joint venture partner   -    -    25,500    -    25,500    24,500    50,000 
                                    
Net loss for the three months ended December 31, 2019   -    -    -    (324,467)   (324,467)   (22,129)   (346,596)
                                    
Balance, December 31, 2019 (unaudited)   107,497,077   $107,497   $23,868,885   $(25,686,754)  $(1,710,372)  $395,520   $(1,314,852)
                                    
Balance, September 30, 2018   100,952,569   $100,952   $22,450,252   $(22,974,740)  $(423,536)  $(401,624)  $(825,160)
                                    
Common shares issued for cash   142,857    143    9,857    -    10,000    -    10,000 
                                    
Shares issued upon conversions of note payable   2,482,441    2,483    171,300    -    173,783    -    173,783 
                                    
Fair value of additional shares issued upon conversions of note payable   -    -    51,434    -    51,434    -    51,434 
                                    
Fair value of vested stock options   -    -    85,951    -    85,951    -    85,951 
                                    
Fair value of common stock issued for services   120,000    120    9,480    -    9,600    -    9,600 
                                    
Termination of non-controlling interest agreement   -    -    -    (405,383)   (405,383)   405,383    - 
                                    
Contribution of capital by joint venture partner   -    -    255,000    -    255,000    120,000    375,000 
                                    
Net loss for the three months ended December 31, 2018   -    -    -    (573,929)   (573,929)   (3,759)   (577,688)
                                    
Balance, December 31, 2018 (unaudited)   103,697,867   $103,698   $23,033,274   $(23,954,052)  $(817,080)  $120,000   $(697,080)

  

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

 5 
 

 

Wellness Center USA, Inc.

Condensed Consolidated Statements of Cash Flows

 

   Three Months Ended 
   December 31, 
   2019   2018 
    (Unaudited) 
Cash Flows from Operating Activities          
Net loss  $(346,596)  $(577,688)
           
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation expense   1,562    264 
Amortization of right-of-use asset   5,144    - 
Amortization of debt discount   -    50,689 
Fair value of common shares issued for services   -    9,600 
Fair value of stock options issued for services   65,738    85,951 
Fair value of additional shares issued upon conversions of note payable   -    51,434 
Changes in Assets and Liabilities          
(Increase) Decrease in:          
Prepaid expenses and other assets   (500)   1,550 
(Decrease) Increase in:          
Accounts payable and accrued expenses   84,012    62,615 
Lease liability   (5,144)   - 
Deferred revenue   -    1,125 
Net cash used in operating activities   (195,784)   (314,460)
           
Cash Flows from Financing Activities          
Proceeds from loans payable from officers and shareholders   135,000    60,000 
Common stock and warrants issued for cash   -    10,000 
Contribution of capital by joint venture partner   50,000    375,000 
Net cash provided by financing activities   185,000    445,000 
           
Net increase (decrease) in cash   (10,784)   130,540 
           
Cash beginning of period   53,147    4,210 
Cash end of period  $42,363   $134,750 
           
Supplemental cash flows disclosures:          
Interest paid  $-   $- 
Taxes paid  $-   $- 
           
Supplemental non-cash financing disclosures:          
Initial recognition of right-of-use assets and operating lease liabilities upon adoption of ASC Topic 842  $27,841   $- 
Conversion of convertible note payable into common shares  $-   $173,783 
Conversion of accrued interest into common shares  $-   $8,783 

 

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 THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018

 

NOTE 1 – BASIS OF PRESENTATION

 

Organization and Operations

 

Wellness Center USA, Inc. (“WCUI” or the “Company”) was incorporated in June 2010 under the laws of the State of Nevada. The Company initially engaged in online sports and nutrition supplements marketing and distribution. The Company subsequently expanded into additional businesses within the healthcare and medical sectors through acquisitions, including Psoria-Shield Inc. (“PSI”) and StealthCo Inc. (“SCI”), d/b/a Stealth Mark, Inc.

 

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 three months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the year ending September 30, 2020.

 

Going Concern

 

The accompanying condensed 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 condensed consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the three months ended December 31, 2019, the Company incurred a net loss of $346,596 and used cash in operations of $195,784, and had a shareholders’ deficit of $1,314,852 as of December 31, 2019. In addition, $102,899 of payroll taxes are past due. 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, 2019 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At December 31, 2019, the Company had cash on hand in the amount of $42,363. 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 three months ended December 31, 2019, the Company received $185,000 through short-term loans and contributions of capital by a joint venture partner.

 

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/November 15, 2018   50%
            
 NEO Phototherapy LLC (“NEO”)  The State of Illinois  December 2018   51%

 

Through October 2018, PSI was operated by PDC, a joint venture between PSI and the Medical Alliance, Inc (“TMA”). On November 15, 2018, the Company and TMA entered into a Withdraw and Mutual Release Agreement to terminate their joint venture agreement. In December 2018, the Company and its wholly-owned subsidiary, Psoria-Shield, Inc. (“PSI”), entered into a Joint Venture Agreement with PSI Gen 2 Funding, Inc. (“GEN2”), an Illinois corporation, to further development, marketing, licensing and/or sale of PSI technology and products. The joint venture is conducted through NEO Phototherapy, LLC, a recently formed Illinois limited liability company (“NEO”), with principal offices and records to be maintained at WCUI’s offices. See Non-Controlling Interests in Note 2 for more details.

 

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 three months ended December 31, 2019 and 2018, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At December 31, 2019 and 2018, the dilutive impact of outstanding stock options of 15,037,738 and 17,587,738 shares, respectively, and outstanding warrants for 66,484,049 and 68,192,442 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

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The Company adopted this ASU on October 1, 2018 retrospectively, the cumulative effect of the initial application on our accumulated deficit on that date was immaterial.

 

For trade sales, the Company generates its revenue from sales contracts with customers with revenues being generated upon the shipment of merchandise, or for consulting services, revenue is recognized in the period services are rendered and earned under service arrangements with clients.

 

We sell our products through two main sales channels: 1) directly to customers who use our products (the “Direct Channel”) and 2) to distribution partners who resell our products (the “Indirect Channel”).

 

Under the Direct Channel, we sell our products to and we receive payment directly from customers who purchase our products. Under our Indirect Channel, we have entered into distribution agreements that allow the distributors to sell our products and fulfill performance obligations under the agreements.

 

We determine revenue recognition through the following steps:

 

  Identification of the contract, or contracts, with a customer

 

  Identification of the performance obligations in the contract

 

  Determination of the transaction price

 

  Allocation of the transaction price to the performance obligations in the contract

 

 

Recognition of revenue when, or as, we satisfy a performance obligation.

 

Revenue is generally recognized upon shipment or when a service has been completed, unless we have significant performance obligations for services still to be completed. We recognize revenue when a material reversal is no longer probable. Payments received before the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue. There was no deferred revenue at December 31, 2019 and 2018.

 

Non-controlling Interests

 

Through November 2018, non-controlling interest represented 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.

 

On November 15, 2018, PSI and TMA entered into a Withdraw and Mutual Release Agreement to terminate their joint venture agreement. On the date of termination, the non-controlling interest’s share of the accumulated losses of the joint venture totaled to $405,383. Upon termination, during the three months ended December 31, 2018, the Company wrote-off the non-controlling interest’s share of the accumulated losses and recorded a loss from the deconsolidation of a non-controlling interest of $405,383.

 

 9 
 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Non-controlling Interests (continued)

 

In December 2018, PSI entered into a Joint Venture Agreement with GEN2 to further development, marketing, licensing and/or sale of PSI technology and products. Pursuant to the Joint Venture Agreement, the venture will be conducted through NEO. PSI and GEN2 will be the members of NEO, owning 50.5% and 36.0%, respectively, of the Units issued in connection with the organization of NEO. An additional 13.5% of such Units will be reserved for issuance as incentives for key employees and consultants. Until such shares are distributed, the Company controls 68% of the joint venture and GEN2 the remaining 32%. PSI and GEN2 will manage NEO’s day-to-day operations. PSI will contribute PSI technology to NEO and GEN2 will contribute $700,000. As of December 31, 2019, NEO’s operations required additional funding above the $700,000 documented in the agreement, and as of September 30, 2019, GEN2 had received $925,000 of investments to contribute to NEO. During the three months ended December 30, 2019, an additional $50,000 was contributed by GEN2 to NEO. As of December 31, 2019, GEN2 had received $975,000 of investments to contribute to NEO. As of December 31, 2019, the Company controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%. The Company recorded its proportionate share of the contributions received of $497,250 to additional paid-in-capital and $477,750 to non-controlling interest as of that date. During the three months ended December 31, 2019, NEO recorded a loss of $45,162 relating to its operations.

 

Repayment of the investment by GEN2 will begin through and upon the date which NEO has realized and retained cumulative net income/distributable cash in the amount of $300,000. Distributions thereafter will be made to PSI, GEN2 and other members in proportion to their respective Unit ownership, at the times and in the manner determined from time to time by the managers, in their sole discretion. GEN2 consists of accredited investors, and investment participation of $700,000 from several WCUI officers and directors, including Calvin R. O’Harrow and Roy M. Harsch.

 

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.

 

 10 
 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Leases

 

In February 2016, the FASB issued 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 twelve 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 leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements.

 

The Company adopted ASU 2016-02 effective October 1, 2019. As a result, we recorded right-of-use assets of $27,841, and lease liabilities of the same amount, as of that date. In accordance with ASU 2016-02, the right-of-use assets are being amortized over the life of the underlying leases, and monthly lease payments are being recorded as reductions to the lease liability and imputed interest expense. See Note 4 for additional information.

 

Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for interim and annual reporting periods beginning after December 15, 2019. The adoption of ASU 2016-13 is not expected to have a material impact on the Company’s financial position, results of operations, and cash flows.

 

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 – LOANS PAYABLE FROM OFFICERS AND SHAREHOLDERS

 

As of September 30, 2019, loans payable from officers and shareholders of $399,250 were outstanding. During the three months ended December 31, 2019, the Company borrowed $135,000 from its officers and shareholders. All of the loans are unsecured, have an interest rate of eight percent and are due one year from the date of issuance. As of December 31, 2019, loans payable to officers and shareholders of $534,250 were outstanding.

 

NOTE 4 – LEASE LIABILITIES

 

In February 2019, the Company’s PSI subsidiary entered into a 24-month non-cancellable lease for its office facilities that requires monthly payments of $1,800 through January 2021. The Company adopted ASU 2016-02, Leases, effective October 1, 2019, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the lease as an operating lease and determined that the value of the lease assets and liability at the adoption date was $27,841 using a discount rate of 4.00%. During the three months ended December 31, 2019, the Company made payments of $5,144 towards the lease liability. As of December 31, 2019, lease liability amounted to $22,697.

 

ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Rent expense for the three months ended December 31, 2019 was $5,144. During the three months ended December 31, 2019, the Company reflected amortization of right of use asset of $5,144 related to this lease, resulting in a net asset balance of $22,697 as of December 31, 2019.

 

 11 
 

  

NOTE 5 – SHAREHOLDERS’ EQUITY

 

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.

 

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

 

During the three months ended December 31, 2019, the Company granted options to an employee to purchase a total of 62,500 shares of its common stock with an aggregate fair value of $2,313. The options have an exercise price of $0.04 per share and expire five years from the date of grant. The shares vested on December 31, 2019. The Company valued the options using a Black-Scholes option pricing model.

 

The assumptions used for the option granted during the three months ended December 31, 2019 are as follows:

 

Exercise price  $0.04 
Expected dividends   - 
Expected volatility   157.6%
Risk free interest rate   1.60%
Expected life of options   2.5 

 

During the three months ended December 31, 2019, the Company recorded $65,738 of stock compensation for the value of all outstanding options, and as of December 31, 2019, unvested compensation of $314,812 remained that will be amortized over the remaining vesting period.

 

The table below summarizes the Company’s stock option activities for the three months ended December 31, 2019:

  

    Number of Option Shares  

Exercise

Price Range Per Share

  

Weighted 

Average Exercise Price

  

Fair Value

at Date of Grant

 
                  
Balance, September 30, 2019    15,237,738   $0.03 - 2.00   $0.27   $3,255,121 
Granted    62,500    0.04    0.04    2,313 
Cancelled    -    -    -    - 
Exercised    -    -    -    - 
Expired    (262,500)   0.11    0.11    - 
Balance, December 31, 2019    15,037,738   $0.03 – 2.00   $0.27   $3,257,434 
Vested and exercisable, December 31, 2019    12,350,238   $0.03 – 2.00   $0.30   $2,189,047 
                      
Unvested, December 31, 2019    2,687,500   $0.14   $0.14   $1,068,387 

 

  

There was no aggregate intrinsic value for option shares outstanding at December 31, 2019. As of December 31, 2019, there were 14,962,262 shares of stock options remaining available for issuance under the 2010 Plan.

 

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NOTE 5 – SHAREHOLDERS’ EQUITY (CONTINUED)

 

Stock Options (continued)

 

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2019:

  

    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 
                                 
$0.06 - 0.39    13,575,238    2.93   $0.15    10,887,738    2.85   $0.15 
 0.40 - 0.99    62,500    2.25    0.40    62,500    2.25    0.40 
 1.00 - 1.99    750,000    1.00    1.00    750,000    1.00    1.00 
 2.00    650,000    1.00    2.00    650,000    1.00    2.00 
$0.06 - 2.00    15,037,738    2.75   $0.27    12,350,238    2.64   $0.30 

  

Stock Warrants

 

The table below summarizes the Company’s warrants activities for the three months ended December 31, 2019:

 

  

Number of

Warrant Shares

   

Exercise

Price Range

Per Share

    Weighted Average Exercise Price   Fair Value at Date of Issuance 
                   
Balance, September 30, 2019   66,484,049    $0.12 - 0.40    $0.17   $3,434,560 
Granted   -     -     -    - 
Cancelled   -     -     -    - 
Exercised   -     -     -    - 
Expired   -     -     -    - 
Balance, December 31, 2019   66,484,049    $0.12 - 0.40    $0.17   $3,434,560 
Vested and exercisable, December 31, 2019   66,484,049    $0.12 - 0.40    $0.17   $3,434,560 

 

There was no aggregate intrinsic value for warrant shares outstanding at December 31, 2019.

 

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2019:

  

     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   59,279,384    1.70   $0.15    59,279,384    1.70   $ 0.15
  0.21 – 0.40   7,204,665    0.61    0.26    7,204,665    0.61     0.26
                                
$ 0.12 – 0.67   66,484,049    1.58   $0.17    66,484,049    1.58   $ 0.17

  

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NOTE 6 – 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.

 

The Company operates in the following business segments:

 

(i) Medical Devices: which stems from 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.

 

(ii) Authentication and Encryption Products and Services: which stems from StealthCo, its wholly-owned subsidiary formed on March 18, 2014, which has engaged in the business of selling, licensing or otherwise providing certain authentication and encryption products and services since acquisition of certain assets from SMI on April 4, 2014.

 

The detailed segment information of the Company is as follows:

 

Assets By Segment

 

   December 31, 2019 
   Corporate   Medical Devices   Authentication and Encryption   Total 
ASSETS                    
Current Assets                    
Cash  $2,273   $33,330   $6,760   $42,363 
Prepaid expenses and other current assets   -    55,500    -    55,500 
Total current assets   2,273    88,830    6,760    97,863 
                     
Right-of-use asset   -    22,697    -    22,697 
Total other assets   -    22,697    -    22,697 
                     
TOTAL ASSETS  $2,273   $111,527   $6,760   $120,560 

 

Operations by Segment

 

   For the Three Months Ended 
   December 31, 2019 
   Corporate   Medical Devices   Authentication and Encryption   Total 
Sales:                     
Trade  $-   $-   $-   $- 
Consulting services   -    -    -    - 
Total Sales   -    -    -    - 
                     
Cost of goods sold   -    -    -    - 
                     
Gross profit   -    -    -    - 
                     
Operating expenses   98,462    175,286    63,525    337,273 
                     
Loss from operations  $(98,462)  $(175,286)  $(63,525)  $(337,273)

 

Operations by Segment

 

   For the Three Months Ended 
   December 31, 2018 
   Corporate   Medical Devices   Authentication and Encryption   Total 
Sales:                    
Trade  $-   $-   $7,675   $7,675 
Consulting services   -    -    5,200    5,200 
Total Sales   -    -    12,875    12,875 
                     
Cost of goods sold   -    -    7,725    7,725 
                     
Gross profit   -    -    5,150    5,150 
                     
Operating expenses   254,429    119,720    101,715    475,864 
                     
Loss from operations  $(254,429)  $(119,720)  $(96,565)  $(470,714)

 

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NOTE 7 – 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. However, we recently decided to attempt to preserve revenue and reduce operating expenses through actions including, but not limited to, facilities consolidation and staff reductions, which we hope to implement through negotiated transactions with lessors, employees and other third parties. Such actions may result in disputes with and claims by such parties which, if not resolved through negotiations, may impact negatively the Company’s ability to continue as a going concern. To date, we have negotiated settlement of all but $89,302 in ex-employee wage and benefits claims, with agreement to pay such remaining amount, together with interest at the rate of 4% per annum on the principal amount from time to time outstanding, when and as cash flow permits. One of the employees claims additional amounts due for certain statutory damages under the Illinois Wage Payment and Collection which currently could exceed $21,600 and would increase at the rate of 2% of the wages due per month plus attorneys’ fees if the employee elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim.

 

NOTE 8 – COMMITMENTS

 

Operating Leases

 

The Company leased its corporate office facility in Hoffman Estates, Illinois pursuant to a non-cancellable lease initiated in July 2016 and expiring February 28, 2024. The lease terms require a monthly payment of approximately $11,000. The Company vacated the facility in April 2019, in favor of its present facilities in Tucson AZ, which are provided by a shareholder on a rent-free basis. The Company is in negotiations with the owners regarding the settlement of its lease obligations and expects that the property will be subleased or a settlement with the landlord will be reached at an amount significantly less than the remaining payment obligations. At the date of abandonment, the Company had a remaining lease obligation of $631,587. During the year ended September 30, 2019, the Company recorded an accrual for the estimated potential settlement and wrote-off its $15,000 security deposit relating to the lease. During the three months ended December 31, 2019, the Company recorded an additional expense of $37,815 relating to the lease obligation.

 

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NOTE 9 – PROPOSED SALE OF STEALTHCO, INC.

 

On September 3, 2019, the Company’s Board of Directors unanimously approved, subject to stockholder approval: (1) execution and delivery of a proposed Share Exchange Agreement with DTI Holdings, Inc. (“DTI”) relating to the share exchange and transfer of certain assets of StealthCo, Inc. (“SCI”) pursuant to the terms and conditions of a Memorandum of Agreement in substantially the form of the copy presented to the Board (“Agreement”). As of September 18, 2019, holders of a majority of the outstanding shares of voting capital stock have executed written stockholder consents approving this action.

 

The Agreement provides, among other things, that: (1) DTI will pay the Company $500,000 upon the execution of a definitive share exchange agreement (“Share Exchange Agreement”) which the parties will endeavor to negotiate and execute as quickly as possible, and not later than October 15, 2019; (2) DTI will pay the Company an additional $500,000 within seven days following the completion date of the transfer of all assets and/or full ownership of SCI to DTI, with such date to occur within 120 days following execution of the Share Exchange Agreement; (3) DTI will issue to the Company 3,112,000 shares of DTI common stock and will guaranty that the value of the 3,112,000 shares of DTI common stock will have a value of at least $4.50 per share ($14,004,000, in the aggregate), as of December 31, 2021; (4) To the extent that the value of the DTI common shares, as of December 31, 2021, is less than $4.50 per share ($14,004,000, in the aggregate), DTI will issue additional shares of DTI common stock, at the then current fair market value, in an amount sufficient to cause the resulting aggregate value of all shares of DTI common stock issued to the Company to be $14,004,000, in the aggregate; (5) DTI will assign the assets transferred by SCI, including trademarks, intellectual properties, and patents, to its subsidiary, Femtobitz, Inc., a Delaware corporation, and will pay to the Company 1% of annual gross revenue arising from or relating to operation of Femtobitz, Inc.; and (6) Upon closing of the share exchange, the Company’s Chairman will be appointed an advisory board member of DTI and a board member of Femtobitz, Inc.

 

As of September 18, 2019, stockholders holding a majority of our outstanding common stock approved the share exchange and the Company began discussions and negotiations with DTI, which are currently on-going as of the date of this filing. There can be no assurance that the proposed transaction will be concluded successfully on the terms described or any alternate terms that may be proposed hereafter.

 

NOTE 10 – SUBSEQUENT EVENTS

 

Subsequent to December 31, 2019, the Company borrowed $235,000 from its officers and shareholders. All of the loans are unsecured, have an interest rate of eight percent and are due one year from the date of issuance.

 

Commencing on October 1, 2016, the Company’s wholly-owned subsidiary, StealthCo, entered into a non-cancellable lease agreement to lease its office facilities in Oak Ridge, Tennessee. The term of the lease is five years and expires September 30, 2021. On January 6, 2020, the Company entered into an agreement with the owners to terminate the agreement effective January 1, 2020. Under the agreement, the Company agreed to pay $11,000 and abandon certain Company property as documented in the agreement.

 

Effective January 1, 2020, the Company’s Board of Directors approved the extension of the Company’s unexpired stock warrants as of December 31, 2019, by an additional one year period. This change would affect approximately 66 million warrant shares and approximately 20 million warrant shares that were set to expire by the year ending September 30, 2020. The 20 million warrant shares that were set to expire by September 30, 2020, had exercise prices ranging from $0.15 per share to $0.25 per share. The 66 million warrant shares had exercise prices ranging from $0.12 per share to $0.40 per share. The incremental fair value of the warrants resulting from modification is approximately $700,000 that will be recognized as an expense beginning with the period ending March 31, 2020, as the options vest.

 

 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. We initially engaged in online sports and nutrition supplements marketing and distribution. We subsequently expanded into additional businesses within the healthcare and medical sectors through acquisitions, including Psoria-Shield Inc. (“PSI”) and StealthCo Inc. (“SCI”), d/b/a Stealth Mark, Inc.

 

The Company currently operates in two business segments: (i) distribution of targeted Ultra Violet (“UV”) phototherapy devices for dermatology; and (ii) authentication and encryption products and services. The segments are conducted through our wholly-owned subsidiaries, PSI and SCI.

 

PSI

 

PSI was incorporated under the laws of the state of Florida on June 17, 2009. We acquired all of the issued and outstanding shares of stock in PSI on August 24, 2012.

 

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Joint Ventures

 

We conducted PSI operations through Psoria Development Company LLC, an Illinois limited liability company (“PDC”), from January 15, 2015 through October, 2018. PDC was a joint venture between WCUI/PSI and The Medical Alliance, Inc., a Florida corporation (“TMA”). On November 15, 2018, PSI and TMA terminated the PDC joint venture. On the termination date, the non-controlling interest’s share of the accumulated losses of the joint venture totaled $405,383. During the year ended September 30, 2019, the Company wrote-off the non-controlling interest’s share of the accumulated losses and recorded a loss from deconsolidation of non-controlling interest of $405,383.

 

In December 2018, the Company and PSI entered into a Joint Venture Agreement with PSI GEN2 Funding, Inc., an Illinois corporation (“GEN2”), to further develop, market, license and/or sell PSI technology and products. The Joint Venture Agreement provides for the venture to be conducted through NEO Phototherapy, LLC, an Illinois limited liability company (“NEO”), with PSI and GEN2 to hold membership Units representing 50.5% and 36.0% ownership, respectively. It provides for an additional 13.5% of such Units to be reserved for issuance as incentive awards to key employees and consultants. PSI and GEN2 are to jointly manage NEO’s day-to-day operations.

 

According to the Joint Venture Agreement, PSI would contribute PSI technology to NEO in consideration for its Units and GEN2 would contribute $700,000 for its Units. Once NEO has realized and retained cumulative net income/distributable cash in the amount of $300,000, the next $700,000 of realized and retained cumulative net income/distributable cash would be distributed to GEN2. Distributions thereafter would be made to PSI, GEN2 and other members, if any, in proportion to their respective Unit ownership, at the times and in the manner determined from time to time by the managers, in their sole discretion.

 

As of December 31, 2019, NEO’s operations required funding in excess of the $700,000 initially anticipated by the joint venture. As of that date, GEN2 had contributed $975,000 to NEO, for which GEN2 received Units representing a cumulative total of 39.0% ownership of NEO. Additional Units representing a 10% ownership interest in NEO were awarded to one individual as a key staff incentive from the reserve initially established for such awards, with no further awards currently anticipated. As a result, once NEO has realized and retained cumulative net income/distributable cash in the amount of $300,000, the next $975,000 of realized and retained cumulative net income/distributable cash would be distributed to GEN2. Distributions thereafter would be made to PSI, GEN2 and the other member, in proportion to their respective Unit ownership, at the times and in the manner determined from time to time by the managers, in their sole discretion.

 

GEN2 contributions to NEO were derived from its shareholders, which consist of accredited investors, and which include several WCUI officers and directors, including Calvin R. O’Harrow, Roy M. Harsch, William E. Kingsford, Douglas Samuelson, Paul D. Jones and Thomas E. Scott. GEN2 shareholders, including said officers and directors of WCUI, will share any realized and retained cumulative net income/distributable cash that may be distributed to GEN2.

 

As of September 30, 2019, the Company interest was adjusted to 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%. As of December 31, 2019, the Company recorded its proportionate share of $497,250 to additional paid-in-capital and $477,750 to non-controlling interest as of that date. During the three months ended December 31, 2019, NEO recorded a loss of $45,162 relating to its operations.

 

Psoria-Light

 

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

 

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

 

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

 

 18 
 

 

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.

 

 19 
 

 

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 provider of: a) Stealth Mark encryption and authentication solutions offering advanced technologies within the security and supply chain management vertical sectors (Intelligent Microparticles), and b) advanced data intelligence services offering proprietary, unprecedented, and actionable technology for industries, companies, and agencies on a global scale (ActiveDuty™).

 

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.

 

ActiveDuty™

 

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

 

The proprietary algorithmic architecture of ActiveDuty™ creates the first systemic reporting mechanism to deliver strategic and tactical results supported by an intense worldwide analysis of patterns of human behavior. The ActiveDuty™ 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 was managed initially by Ricky Howard, who brought 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 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. In November 2018, Mr. Howard passed away suddenly and Mr. O’Harrow took over operations of SCI’s business on an interim basis.

 

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Proposed Share Exchange

 

On September 3, 2019, our Board unanimously approved, subject to stockholder approval, the execution and delivery of a proposed Share Exchange Agreement relating to the share exchange and transfer of certain assets of SCI to DTI Holdings, Inc. (“DTI”) pursuant to the terms and conditions of a Memorandum of Agreement providing, among other things, as follows:

 

● DTI will pay the Company $500,000 upon execution of a definitive share exchange agreement (“Share Exchange Agreement”) which the parties will endeavor to negotiate and execute as quickly as possible, and not later than October 15, 2019.

● DTI will pay the Company an additional $500,000 within seven days following the completion date of the transfer of all assets and/or full ownership of SCI to DTI, with such date to occur within 120 days following execution of the Share Exchange Agreement.

● DTI will issue to the Company 3,112,000 shares of DTI common stock and will guaranty that the value of the 3,112,000 shares of DTI common stock will have a value of at least $4.50 per share ($14,004,000, in the aggregate), as of December 31, 2021.

● To the extent that the value of the DTI common shares, as of December 31, 2021, is less than $4.50 per share ($14,004,000, in the aggregate), DTI will issue additional shares of DTI common stock, at the then current fair market value, in an amount sufficient to cause the resulting aggregate value of all shares of DTI common stock issued to the Company to be $14,004,000, in the aggregate.

● DTI will assign the assets transferred by SCI, including trademarks, intellectual properties, and patents, to its subsidiary, Femtobitz, Inc., a Delaware corporation, and will pay to the Company 1% of annual gross revenue arising from or relating to operation of Femtobitz, Inc.

● Upon closing of the share exchange, the Company’s Chairman will be appointed an advisory board member of DTI and a board member of Femtobitz, Inc.

 

The 3,112,000 shares of DTI common stock to be issued to us in exchange for all of our shares of SCI common stock will represent a minority of the issued and outstanding shares of DTI common stock as of the date of issuance. The DTI shares will be issued in reliance upon the exemption from registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereof and Regulation D thereunder. As such, such shares may not be offered or sold by us unless they are registered under the Securities Act or qualify for an exemption from the registration requirements under the Securities Act.

 

As of September 18, 2019, stockholders holding a majority of our outstanding common stock approved the share exchange and the Company began discussions and negotiations with DTI, which are currently on-going as of the date of this filing. There can be no assurance that the proposed transaction will be concluded successfully on the terms described or any alternate terms that may be proposed hereafter.

 

Analysis of Financial Condition and Results of Operations

 

Results of Operations for the three months ended December 31, 2019 compared to the three months ended December 31, 2018.

 

Revenue and Cost of Goods Sold

 

Revenue for the three months ended December 31, 2018 was $12,875. There was no revenue, cost of sales or gross profit for the three months ended December 31, 2019. The decrease in 2019 was due to the decrease in revenues at SCI, as there was no revenue at PSI for each period. Cost of sales for the three months ended December 31, 2018 was $7,725. Gross profit for the three months ended December 31, 2018 was $5,150.

 

Operating Expenses

 

Operating expenses for the three months ended December 31, 2019 and 2018 were $337,273 and $475,864, respectively. The decrease in operating expenses of $138,591 was due primarily to the decrease in consulting fees and stock compensation during the three months ended December 31, 2019.

 

Other Expenses

 

Other expenses during the three months ended December 31, 2019 consisted of $9,323 of interest expense. Other expenses during the three months ended December 31, 2018 consisted of $50,689 of amortization of debt discount, $51,434 of financing costs and $4,851 of interest expense, totaling to $106,974.

 

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Net Loss

 

Our net loss for the three months ended December 31, 2019 was $346,596, compared to a net loss of $577,688 for the three months ended December 31, 2018. The decrease in the net loss of $231,091 was primarily due to the decrease in operating and other expenses.

 

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:

 

Operations by Segment

 

   For the Three Months Ended 
   December 31, 2019 
   Corporate   Medical Devices   Authentication and Encryption   Total 
Sales:                
Trade  $ -   $ -   $ -   $ - 
Consulting services   -    -    -    - 
Total Sales   -    -    -    - 
                     
Cost of goods sold   -    -    -    - 
                     
Gross profit   -    -    -    - 
                     
Operating expenses   98,462    175,286    63,525    337,273 
                     
Loss from operations  $(98,462)  $(175,286)  $(63,525)  $(337,273)

 

Operations by Segment

 

   For the Three Months Ended 
   December 31, 2018 
   Corporate   Medical Devices   Authentication and Encryption   Total 
Sales:                
Trade  $-   $-   $7,675   $7,675 
Consulting services   -    -    5,200    5,200 
Total Sales   -    -    12,875    12,875 
                     
Cost of goods sold   -    -    7,725    7,725 
                     
Gross profit   -    -    5,150    5,150 
                     
Operating expenses   254,429    119,720    101,715    475,864 
                     
Loss from operations  $(254,429)  $(119,720)  $(96,565)  $(470,714)

 

 

There was no revenue or cost of goods sold for the Medical Devices segment for the three months ended December 31, 2019 and 2018. Operating expenses for the three months ended December 31, 2019 and 2018 was $175,286 and $119,720, respectively. The increase in operating expenses of $55,566 in 2019 was due primarily to the increase in contract labor. The loss from operations for the three months ended December 31, 2019 and 2018 was $175,286 and $119,720, respectively.

 

Revenue for the Authentication and Encryption segment for the three months ended December 31, 2018 was $12,875. There was no revenue or cost of sales for the Authentication and Encryption segment for the three months ended December 31, 2019. The decrease in 2019 was due to the decrease in trade sales and consulting services. Cost of goods sold for the three months ended December 31, 2018 was $7,725 and the gross profit was $5,150. The gross profit decrease in 2019 was primarily due to the decrease in sales. Operating expenses for the three months ended December 31, 2019 and 2018 was $63,525 and $101,715, respectively. The decrease in operating expenses of $38,190 in 2019 was due primarily to the decrease in stock compensation costs and salaries and wages. The loss from operations for the three months ended December 31, 2019 and 2018 was $63,525 and $96,565, respectively.

 

The Corporate segment primarily provides executive management services for the Company. Operating expenses for the three months ended December 31, 2019 and 2018 was $60,647 and $254,429, respectively. The decrease in operating expenses of $193,782 in 2019 was due primarily to the decrease in professional fees and stock compensation. The loss from operations for the three months ended December 31, 2019 and 2018 was $60,647 and $254,429, respectively.

 

Liquidity and Capital Resources

 

The accompanying condensed 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 condensed consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the three months ended December 31, 2019, the Company incurred a net loss of $346,596 and used cash in operations of $195,784, and had a shareholders’ deficit of $1,314,852 as of December 31, 2019. 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, 2019 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

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At December 31, 2019, the Company had cash on hand in the amount of $42,363. 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 three months ended December 31, 2019, the Company received $185,000 through short-term loans and contributions of capital by a joint venture partner. As of December 31, 2019, loans payable to officers and shareholders of $534,250 were outstanding. All of the loans are unsecured, have an interest rate of eight percent and are due one year from the date of issuance.

 

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.

 

Comparison of three months ended December 31, 2019 and 2018

 

As of December 31, 2019, we had $42,363 in cash, negative working capital of $1,337,549 and an accumulated deficit of $25,686,754.

 

As of December 31, 2018, we had $134,750 in cash, negative working capital of $716,195 and an accumulated deficit of $23,954,052.

 

Cash flows used in operating activities

 

During the three months ended December 31, 2019, the Company used cash flows in operating activities of $195,784, compared to $314,460 used in the three months ended December 31, 2018. During the three months ended December 31, 2019, the Company incurred a net loss of $346,596 and $67,300 of non-cash expenses, compared to a net loss of $577,688 and $197,938 of non-cash expenses during the three months ended December 31, 2018.

 

Cash flows used in investing activities

 

During the three months ended December 31, 2019 and 2018, the Company had no cash flows from investing activities.

 

Cash flows provided by financing activities

 

During the three months ended December 31, 2019, the Company had proceeds from loans payable from officers and shareholders of $135,000 and proceeds of $50,000 from contributions of capital by its joint venture partner. During the three months ended December 31, 2018, the Company had proceeds from loans payable from officers and shareholders of $60,000, from the sale of common stock of $10,000 and from contributions of capital by its joint venture partner of $375,000.

 

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, 2019, filed with the Securities and Exchange Commission on January 28, 2020. 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 three months ended December 31, 2019.

 

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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.

 

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 December 31, 2019, 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 lack of an independent audit committee and the lack of internal personnel necessary to provide accurate and timely regulatory filings.

 

2. 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.

 

3. The Company does not have sufficient segregation of duties within its accounting functions, which is a basic internal control. Due to its size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of its failure to have segregation of duties on its assessment of its disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

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

 

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.

 

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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.

 

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, 2019, 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; and (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. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of December 31, 2019.

 

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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 response to the above identified weaknesses in our internal control over financial reporting, we plan to work on documenting in writing our internal control policies and procedures and implement sufficient segregation of duties within our accounting functions, so that one person cannot initiate, authorize and execute transactions, and so that one person cannot record transactions in the accounting records without sufficient review by a separate person. We do not have a specific timeline within which we expect to conclude these remediation initiatives but do expect it to be an on-going process for the foreseeable future. We continue to evaluate testing of our internal control policies and procedures, including assessing internal and external resources that may be available to complete these tasks, but do not know when these tasks will be completed.

 

Our CEO and CFO, along with other Board members, are and will be active participants in these remediation processes. We believe the steps taken to date have improved the effectiveness of our internal control over financial reporting.

 

Changes in internal control over financial reporting.

 

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during the fourth quarter of our fiscal year 2019 that have materially affected, or are 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 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. However, we recently decided to attempt to preserve revenue and reduce operating expenses through actions including, but not limited to, facilities consolidation and staff reductions, which we hope to implement through negotiated transactions with lessors, employees and other third parties. Such actions may result in disputes with and claims by such parties which, if not resolved through negotiations, may impact negatively the Company’s ability to continue as a going concern. To date, we have negotiated settlement of all but $89,301.87 in ex-employee wage and benefits claims, with agreement to pay such remaining amount, together with interest at the rate of 4% per annum on the principal amount from time to time outstanding, when and as cash flow permits. One of the employees claims additional amounts due for certain statutory damages under the Illinois Wage Payment and Collection which currently could exceed $21,600.00 and would increase at the rate of 2% of the wages due per month plus attorneys’ fees if the employee elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim.

 

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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*
31.2   Certification of Principal Financial Officer Pursuant to Rule 13a-14*
32.1   CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act*
32.2   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.

 

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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: March 25, 2020 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: March 25, 2020 By: /s/ Douglas W. Samuelson
   

Douglas W. Samuelson

Chief Financial Officer and Principal Accounting Officer

(Duly Authorized Principal Accounting Officer)

 

POWER OF ATTORNEY

 

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

 

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

 

SIGNATURE   TITLE   DATE
         
/s/ Calvin O’Harrow   Chief Executive Officer, Director   March 25, 2020
Calvin O’Harrow        
         
/s/ Douglas W. Samuelson   Chief Financial Officer and Principal Accounting Officer   March 25, 2020

Douglas W. Samuelson

       
         
/s/ Paul D. Jones   Director, President   March 25, 2020
Paul D. Jones        

 

/s/ Thomas E. Scott   Director, Secretary   March 25, 2020
Thomas E. Scott        

         
/s/ William E. Kingsford   Director  

March 25, 2020

William E. Kingsford        

 

/s/ Roy M. Harsch

  Director, Chairman   March 25, 2020
Roy M. Harsch        

 

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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 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 December 31, 2019;

 

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: March 25, 2020
 
/s/ Calvin O’Harrow  
Name: Calvin O’Harrow  
Title: Chief Executive 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 December 31, 2019;

 

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: March 25, 2020
   
/s/ Douglas W. Samuelson  
Name: Douglas W. Samuelson  
Title: Chief Accounting Officer and Chief Financial 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 December 31, 2019 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 O’Harrow, Chief Executive 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: March 25, 2020
   
/s/ Calvin O’Harrow  
Name: Calvin O’Harrow  
Title: Chief Executive 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 December 31, 2019 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 Accounting Officer and Chief Financial 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: March 25, 2020
   
/s/ Douglas W. Samuelson  
Name: Douglas W. Samuelson  
Title: Chief Accounting Officer and Chief Financial Officer  

 

 

 

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Due from related party in addition Common stock new issues Common stock value per share Common stock new issue value Agreement description Annual gross revenue Loans payable to officers and shareholders Debt instrument, payment terms Lease term Non-cancellable lease payment Unexpired stock warrants, extension period Number of securities called by warrants Exercise price of warrants Incremental fair value of warrants Additional funding. Additional units reserved for issuance. Represents the monetary amount of Aggregate intrinsic value for warrant shares outstanding, as of the indicated date. Amount of amortization expense attributable to right of use asset from leases. Andrew J. Kandalepas [Member] Authentication and Encryption [Member] Board of Directors [Member] CEO [Member] Consulting Services [Member] Contribution of capital by joint venture partner. Contribution of capital by joint venture partner. Conversion of accrued interest into common shares. Conversion of convertible note payable and accrued interest into common shares. 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Loan Holders [Member] Medical Devices [Member] Medical Equipment [Member] NEO [Member] NPC Inc. [Member] Neo Phototherapy LLC [Member] Nine Short-Term Unsecured Loans [Member] Non Cancellable Lease Agreement [Member] Non-cancellable lease payment. Non-Controlling Interests [Policy Text Block] Non-controlling interest's share of accumulated losses of joint venture. November 2018 [Member] Officer and Consultants [Member] Officer and Corporate Employee [Member] Officers, Directors and Corporate Employees [Member] Officers [Member] Officers and Directors [Member] Officers and Shareholders [Member] Lease expiration date. Lease rent expense. Ownership Agreement [Member] PSI Consultants [Member] Proceeds from short-term loans and contributions of capital by joint venture partner. Proposed Sale. Psoria Development Company LLC. [Member] Psoria-Shield Inc. [Member] Psoria Shield [Member] Sale of Equity Units [Member] Represents the textual narrative disclosure of Schedule of Outstanding and Exercisable Warrants, during the indicated time period. Represents the textual narrative disclosure of Schedule of the Company's Consolidated Subsidiaries, during the indicated time period. September 30, 2020 [Member] Settlement Agreement [Member] Share based compensation arrangement by share based payment award equity instruments non- options nonvested weighted average grant date fair value exercisable. Share based compensation arrangement by share based payment award equity instruments non options Vested and exercisable number. Fair Value at Date of Grant, Cancelled. Fair Value at Date of Grant, Expired. Fair Value at Date of Grant, Granted. Share based compensation arrangement by share based paymet award non-option canceled in period weighted average exercise price. Share based compensation arrangement by share based paymet award non option exercised in period weighted average exercise price. Share based compensation arrangement by share based paymet award non option forfeited or expired in period weighted average exercise price. Share based compensation arrangement by share based payment award non-option granted in period weighted average exercise price. Share based compensation arrangement by share based paymet award non option outstanding weighted average number of share. Share Exchange Agreement [Member]. 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, vested and exercisable. Fair value at date of issuance. Fair value at date of issuance, granted. Fair Value at Date of Grant, Unvested, Ending Balance. Shareholder [Member] Shareholder One [Member] Shareholder Two [Member] Shares to be Issued [Member] StealthCo, Inc. [Member] StealthCo [Member] Stock Options [Member] Stock Warrants [Member] Subscription Agreement [Member] Three Short-term Unsecured Loans [Member] Total WCUI Deficit [Member] Trade [Member] 21 Short-Term Unsecured Loans [Member] 22 Short-Term Unsecured Loans [Member] Two Short-term Unsecured Loans [Member] 2010 Non-Qualified Stock Option Plan [Member] 2010 Plan [Member] Two Unsecured Note Agreements [Member] Unexpired stock warrants, extension period. Unsecured Loans [Member] Wages increase rate. Warrant One [Member] Warrant Two [Member] Warrants [Member] TwoThousandTenPlanMember Equity Option [Member] Liabilities, Current Stockholders' Equity Attributable to Parent Liabilities and Equity Interest Expense Nonoperating Income (Expense) Net Income (Loss) Attributable to Noncontrolling Interest Net Income (Loss) Attributable to Parent Shares, Outstanding Increase (Decrease) in Prepaid Expense and Other Assets Increase (Decrease) in Accounts Payable and Accrued Liabilities IncreaseDecreaseInLeaseLiability ContributionOfCapitalByJointVenturesPartner Net Cash Provided by (Used in) Financing Activities Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Including Exchange Rate Effect Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Including Disposal Group and Discontinued Operations Contract with Customer, Liability, Current Due from Officers or Stockholders Operating Lease, Liability Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period 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, Option, Nonvested, Weighted Average Exercise Price ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantedIntrinsicValue 10. Stock Options and Warrants Aggregate intrinsic value for warrant shares outstanding [Default Label] Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsNonvestedIntrinsicValue Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number ShareBasedCompensationArrangementByShareBasedPaymentAwardNonOptionEquityInstrumentsVestedandExercisable ShareBasedCompensationArrangementByShareBasedPaymetAwardNonOptionOutstandingWeightedAverageNumberOfShare ShareBasedCompensationArrangementByShareBasedPaymetAwardNonOptionGrantedInPeriodWeightedAverageExercisePrice ShareBasedCompensationArrangementByShareBasedPaymetAwardNonOptionCancelledInPeriodWeightedAverageExercisePrice ShareBasedCompensationArrangementByShareBasedPaymetAwardNonOptionExercisedInPeriodWeightedAverageExercisePrice 10. 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Shareholders' Equity - Schedule of Outstanding and Exercisable Options by Exercise Price Range (Details) - $ / shares
3 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Range of Exercise Prices, Lower Limit $ 0.06  
Range of Exercise Prices, Upper Limit $ 2.00  
Number of Options, Outstanding, Number 15,037,738 15,237,738
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 2 years 9 months  
Number of Options, Outstanding, Weighted Average Exercise Price $ 0.27 $ 0.27
Number of Options, Exercisable, Number 12,350,238  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 2 years 7 months 21 days  
Number of Options, Exercisable, Weighted Average Exercise Price $ 0.30  
Exercise Price Range One [Member]    
Range of Exercise Prices, Lower Limit 0.06  
Range of Exercise Prices, Upper Limit $ 0.39  
Number of Options, Outstanding, Number 13,575,238  
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 2 years 11 months 4 days  
Number of Options, Outstanding, Weighted Average Exercise Price $ 0.15  
Number of Options, Exercisable, Number 10,887,738  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 2 years 10 months 6 days  
Number of Options, Exercisable, Weighted Average Exercise Price $ 0.15  
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 62,500  
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 2 years 2 months 30 days  
Number of Options, Outstanding, Weighted Average Exercise Price $ 0.40  
Number of Options, Exercisable, Number 62,500  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 2 years 2 months 30 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 1 year  
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 1 year  
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 1 year  
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 1 year  
Number of Options, Exercisable, Weighted Average Exercise Price $ 2.00  
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Lease Liabilities (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Feb. 28, 2019
Dec. 31, 2019
Dec. 31, 2018
Leases [Abstract]      
Lease term 24 months    
Payment for lease liability $ 1,800 $ 5,144  
Lease expiration date 2021-01    
Right of use assets $ 27,841 $ 22,697  
Lease, discount rate   4.00%  
Lease liability $ 42,467 $ 22,697  
Lease rent expense   5,144  
Amortization of right of use asset   $ 5,144
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Basis of Presentation (Details Narrative) - USD ($)
3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Sep. 30, 2019
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]        
Entity incorporation, state country name Nevada      
Net loss $ (346,596) $ (577,688)    
Cash used in operations (195,784) (314,460)    
Shareholders' deficit (1,314,852) $ (697,080) $ (1,083,994) $ (825,160)
Payroll taxes due 102,899   102,834  
Cash on hand 42,363   $ 53,147  
Proceeds from short-term loans and contributions of capital by joint venture partner $ 185,000      
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Shareholders' Equity - Schedule of Warrant Activity (Details) - Warrant [Member]
3 Months Ended
Dec. 31, 2019
USD ($)
$ / shares
shares
Number of Warrant Shares Outstanding, Number, Beginning Balance | shares 66,484,049
Number of Warrant Shares Outstanding, Granted | shares
Number of Warrant Shares Outstanding, Cancelled | shares
Number of Warrant Shares Outstanding, Exercised | shares
Number of Warrant Shares Outstanding, Expired | shares
Number of Warrant Shares Outstanding, Number, Ending Balance | shares 66,484,049
Number of Warrant Shares Outstanding, Vested and exercisable, Ending Balance | shares 66,484,049
Weighted Average Exercise Price, Number, Beginning Balance $ 0.17
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 0.17
Weighted Average Exercise Price, Vested and exercisable, Ending Balance $ 0.17
Fair Value at Date of Issuance, Beginning Balance | $ $ 3,434,560
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 | $ 3,434,560
Fair Value at Date of Issuance, Vested and exercisable, Ending Balance | $ $ 3,434,560
Minimum [Member]  
Weighted Average Exercise Price, Number, Beginning Balance $ 0.12
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 0.40
Weighted Average Exercise Price, Number, Ending Balance 0.40
Weighted Average Exercise Price, Vested and exercisable, Ending Balance $ 0.40
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Legal Matters (Details Narrative)
3 Months Ended
Dec. 31, 2019
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
Payment to negotiated settlement $ 89,302
Interest rate of negotiated settlement 4.00%
Wages $ 21,600
Wages increase rate 2.00%
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.20.1
Basis of Presentation
3 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

NOTE 1 – BASIS OF PRESENTATION

 

Organization and Operations

 

Wellness Center USA, Inc. (“WCUI” or the “Company”) was incorporated in June 2010 under the laws of the State of Nevada. The Company initially engaged in online sports and nutrition supplements marketing and distribution. The Company subsequently expanded into additional businesses within the healthcare and medical sectors through acquisitions, including Psoria-Shield Inc. (“PSI”) and StealthCo Inc. (“SCI”), d/b/a Stealth Mark, Inc.

 

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 three months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the year ending September 30, 2020.

 

Going Concern

 

The accompanying condensed 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 condensed consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the three months ended December 31, 2019, the Company incurred a net loss of $346,596 and used cash in operations of $195,784, and had a shareholders’ deficit of $1,314,852 as of December 31, 2019. In addition, $102,899 of payroll taxes are past due. 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, 2019 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At December 31, 2019, the Company had cash on hand in the amount of $42,363. 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 three months ended December 31, 2019, the Company received $185,000 through short-term loans and contributions of capital by a joint venture partner.

 

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 18 R3.htm IDEA: XBRL DOCUMENT v3.20.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2019
Sep. 30, 2019
Statement of Financial Position [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares, issued 107,497,077 107,497,077
Common stock, shares, outstanding 107,497,077 107,497,077
XML 19 R17.htm IDEA: XBRL DOCUMENT v3.20.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Dec. 31, 2019
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/November 15, 2018     50 %
                 
 NEO Phototherapy LLC (“NEO”)   The State of Illinois   December 2018     51 %

 

Through October 2018, PSI was operated by PDC, a joint venture between PSI and the Medical Alliance, Inc (“TMA”). On November 15, 2018, the Company and TMA entered into a Withdraw and Mutual Release Agreement to terminate their joint venture agreement. In December 2018, the Company and its wholly-owned subsidiary, Psoria-Shield, Inc. (“PSI”), entered into a Joint Venture Agreement with PSI Gen 2 Funding, Inc. (“GEN2”), an Illinois corporation, to further development, marketing, licensing and/or sale of PSI technology and products. The joint venture is conducted through NEO Phototherapy, LLC, a recently formed Illinois limited liability company (“NEO”), with principal offices and records to be maintained at WCUI’s offices. See Non-Controlling Interests in Note 2 for more details.

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 three months ended December 31, 2019 and 2018, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At December 31, 2019 and 2018, the dilutive impact of outstanding stock options of 15,037,738 and 17,587,738 shares, respectively, and outstanding warrants for 66,484,049 and 68,192,442 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

Revenue Recognition

Revenue Recognition

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The Company adopted this ASU on October 1, 2018 retrospectively, the cumulative effect of the initial application on our accumulated deficit on that date was immaterial.

 

For trade sales, the Company generates its revenue from sales contracts with customers with revenues being generated upon the shipment of merchandise, or for consulting services, revenue is recognized in the period services are rendered and earned under service arrangements with clients.

 

We sell our products through two main sales channels: 1) directly to customers who use our products (the “Direct Channel”) and 2) to distribution partners who resell our products (the “Indirect Channel”).

 

Under the Direct Channel, we sell our products to and we receive payment directly from customers who purchase our products. Under our Indirect Channel, we have entered into distribution agreements that allow the distributors to sell our products and fulfill performance obligations under the agreements.

 

We determine revenue recognition through the following steps:

 

  Identification of the contract, or contracts, with a customer

 

  Identification of the performance obligations in the contract

 

  Determination of the transaction price

 

  Allocation of the transaction price to the performance obligations in the contract

 

  Recognition of revenue when, or as, we satisfy a performance obligation.

 

Revenue is generally recognized upon shipment or when a service has been completed, unless we have significant performance obligations for services still to be completed. We recognize revenue when a material reversal is no longer probable. Payments received before the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue. There was no deferred revenue at December 31, 2019 and 2018.

Non-controlling Interests

Non-controlling Interests

 

Through November 2018, non-controlling interest represented 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.

 

On November 15, 2018, PSI and TMA entered into a Withdraw and Mutual Release Agreement to terminate their joint venture agreement. On the date of termination, the non-controlling interest’s share of the accumulated losses of the joint venture totaled to $405,383. Upon termination, during the three months ended December 31, 2018, the Company wrote-off the non-controlling interest’s share of the accumulated losses and recorded a loss from the deconsolidation of a non-controlling interest of $405,383.

 

In December 2018, PSI entered into a Joint Venture Agreement with GEN2 to further development, marketing, licensing and/or sale of PSI technology and products. Pursuant to the Joint Venture Agreement, the venture will be conducted through NEO. PSI and GEN2 will be the members of NEO, owning 50.5% and 36.0%, respectively, of the Units issued in connection with the organization of NEO. An additional 13.5% of such Units will be reserved for issuance as incentives for key employees and consultants. Until such shares are distributed, the Company controls 68% of the joint venture and GEN2 the remaining 32%. PSI and GEN2 will manage NEO’s day-to-day operations. PSI will contribute PSI technology to NEO and GEN2 will contribute $700,000. As of December 31, 2019, NEO’s operations required additional funding above the $700,000 documented in the agreement, and as of September 30, 2019, GEN2 had received $925,000 of investments to contribute to NEO. During the three months ended December 30, 2019, an additional $50,000 was contributed by GEN2 to NEO. As of December 31, 2019, GEN2 had received $975,000 of investments to contribute to NEO. As of December 31, 2019, the Company controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%. The Company recorded its proportionate share of the contributions received of $497,250 to additional paid-in-capital and $477,750 to non-controlling interest as of that date. During the three months ended December 31, 2019, NEO recorded a loss of $45,162 relating to its operations.

 

Repayment of the investment by GEN2 will begin through and upon the date which NEO has realized and retained cumulative net income/distributable cash in the amount of $300,000. Distributions thereafter will be made to PSI, GEN2 and other members in proportion to their respective Unit ownership, at the times and in the manner determined from time to time by the managers, in their sole discretion. GEN2 consists of accredited investors, and investment participation of $700,000 from several WCUI officers and directors, including Calvin R. O’Harrow and Roy M. Harsch.

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.

Leases

Leases

 

In February 2016, the FASB issued 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 twelve 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 leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements.

 

The Company adopted ASU 2016-02 effective October 1, 2019. As a result, we recorded right-of-use assets of $27,841, and lease liabilities of the same amount, as of that date. In accordance with ASU 2016-02, the right-of-use assets are being amortized over the life of the underlying leases, and monthly lease payments are being recorded as reductions to the lease liability and imputed interest expense. See Note 4 for additional information.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for interim and annual reporting periods beginning after December 15, 2019. The adoption of ASU 2016-13 is not expected to have a material impact on the Company’s financial position, results of operations, and cash flows.

 

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 R13.htm IDEA: XBRL DOCUMENT v3.20.1
Legal Matters
3 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Legal Matters

NOTE 7 – 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. However, we recently decided to attempt to preserve revenue and reduce operating expenses through actions including, but not limited to, facilities consolidation and staff reductions, which we hope to implement through negotiated transactions with lessors, employees and other third parties. Such actions may result in disputes with and claims by such parties which, if not resolved through negotiations, may impact negatively the Company’s ability to continue as a going concern. To date, we have negotiated settlement of all but $89,302 in ex-employee wage and benefits claims, with agreement to pay such remaining amount, together with interest at the rate of 4% per annum on the principal amount from time to time outstanding, when and as cash flow permits. One of the employees claims additional amounts due for certain statutory damages under the Illinois Wage Payment and Collection which currently could exceed $21,600 and would increase at the rate of 2% of the wages due per month plus attorneys’ fees if the employee elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim.

XML 21 R6.htm IDEA: XBRL DOCUMENT v3.20.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Cash Flows from Operating Activities    
Net loss $ (346,596) $ (577,688)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation expense 1,562 264
Amortization of right-of-use asset 5,144
Amortization of debt discount 50,689
Fair value of common shares issued for services 9,600
Fair value of stock options issued for services 65,738 85,951
Fair value of additional shares issued upon conversions of note payable 51,434
(Increase) Decrease in:    
Prepaid expenses and other assets (500) 1,550
(Decrease) Increase in:    
Accounts payable and accrued expenses 84,012 62,615
Lease liability (5,144)
Deferred revenue 1,125
Net cash used in operating activities (195,784) (314,460)
Cash Flows from Financing Activities    
Proceeds from loans payable from officers and shareholders 135,000 60,000
Common stock and warrants issued for cash 10,000
Contribution of capital by joint venture partner 50,000 375,000
Net cash provided by financing activities 185,000 445,000
Net increase (decrease) in cash (10,784) 130,540
Cash beginning of period 53,147 4,210
Cash end of period 42,363 134,750
Supplemental cash flows disclosures:    
Interest paid
Taxes paid
Supplemental non-cash financing disclosures:    
Initial recognition of right-of-use assets and operating lease liabilities upon adoption of ASC Topic 842 27,841
Conversion of convertible note payable into common shares 173,783
Conversion of accrued interest into common shares $ 8,783
XML 22 R2.htm IDEA: XBRL DOCUMENT v3.20.1
Condensed Consolidated Balance Sheets - USD ($)
Dec. 31, 2019
Sep. 30, 2019
Current Assets    
Cash $ 42,363 $ 53,147
Prepaid expenses and other current assets 55,500 55,000
Total Current Assets 97,863 108,147
Property and equipment, net 1,562
Right of use asset 22,697
Total Other Assets 22,697 1,562
TOTAL ASSETS 120,560 109,709
Current Liabilities    
Accounts payable and accrued expenses 775,566 691,619
Payroll taxes payable 102,899 102,834
Lease liability 22,697
Loans payable from officers and shareholders 534,250 399,250
Total Current Liabilities 1,435,412 1,193,703
Shareholders' Deficit    
Common stock, par value $0.001, 200,000,000 shares authorized; 107,497,077 shares issued and outstanding, respectively 107,497 107,497
Additional paid-in capital 23,868,885 23,777,647
Accumulated deficit (25,686,754) (25,362,287)
Total Wellness Center USA shareholders' deficit (1,710,372) (1,477,143)
Non-controlling interest 395,520 393,149
Total Shareholder's deficit (1,314,852) (1,083,994)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 120,560 $ 109,709
XML 23 R31.htm IDEA: XBRL DOCUMENT v3.20.1
Shareholders' Equity - Schedule of Outstanding and Exercisable Warrants by Exercise Price Range (Details) - $ / shares
3 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Range of Exercise Prices, Lower Limit $ 0.06  
Range of Exercise Prices, Upper Limit $ 2.00  
Number of Warrants, Outstanding, Number 15,037,738 15,237,738
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 2 years 9 months  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.27 $ 0.27
Number of Warrants, Exercisable, Number 12,350,238  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 2 years 7 months 21 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.30  
Exercise Price Range One [Member]    
Range of Exercise Prices, Lower Limit 0.06  
Range of Exercise Prices, Upper Limit $ 0.39  
Number of Warrants, Outstanding, Number 13,575,238  
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 2 years 11 months 4 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.15  
Number of Warrants, Exercisable, Number 10,887,738  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 2 years 10 months 6 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.15  
Exercise Price Range Two [Member]    
Range of Exercise Prices, Lower Limit 0.40  
Range of Exercise Prices, Upper Limit $ 0.99  
Number of Warrants, Outstanding, Number 62,500  
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 2 years 2 months 30 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.40  
Number of Warrants, Exercisable, Number 62,500  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 2 years 2 months 30 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.40  
Warrant [Member]    
Range of Exercise Prices, Lower Limit 0.12  
Range of Exercise Prices, Upper Limit $ 0.67  
Number of Warrants, Outstanding, Number 66,484,049  
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 1 year 6 months 29 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.17  
Number of Warrants, Exercisable, Number 66,484,049  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 1 year 6 months 29 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.17  
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 59,279,384  
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 1 year 8 months 12 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.15  
Number of Warrants, Exercisable, Number 59,279,384  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 1 year 8 months 12 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 $ 0.40  
Number of Warrants, Outstanding, Number 7,204,665  
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 7 months 10 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.26  
Number of Warrants, Exercisable, Number 7,204,665  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 7 months 10 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.26  
XML 24 R35.htm IDEA: XBRL DOCUMENT v3.20.1
Commitments (Details Narrative) - USD ($)
3 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]    
Lease expiration date Feb. 28, 2024  
Monthly lease payment $ 11,000  
Lease obligation remaining 631,587  
Security deposit relating to the lease $ 37,815 $ 15,000
XML 25 R16.htm IDEA: XBRL DOCUMENT v3.20.1
Subsequent Events
3 Months Ended
Dec. 31, 2019
Subsequent Events [Abstract]  
Subsequent Events

NOTE 10 – SUBSEQUENT EVENTS

 

Subsequent to December 31, 2019, the Company borrowed $235,000 from its officers and shareholders. All of the loans are unsecured, have an interest rate of eight percent and are due one year from the date of issuance.

 

Commencing on October 1, 2016, the Company’s wholly-owned subsidiary, StealthCo, entered into a non-cancellable lease agreement to lease its office facilities in Oak Ridge, Tennessee. The term of the lease is five years and expires September 30, 2021. On January 6, 2020, the Company entered into an agreement with the owners to terminate the agreement effective January 1, 2020. Under the agreement, the Company agreed to pay $11,000 and abandon certain Company property as documented in the agreement.

 

Effective January 1, 2020, the Company’s Board of Directors approved the extension of the Company’s unexpired stock warrants as of December 31, 2019, by an additional one year period. This change would affect approximately 66 million warrant shares and approximately 20 million warrant shares that were set to expire by the year ending September 30, 2020. The 20 million warrant shares that were set to expire by September 30, 2020, had exercise prices ranging from $0.15 per share to $0.25 per share. The 66 million warrant shares had exercise prices ranging from $0.12 per share to $0.40 per share. The incremental fair value of the warrants resulting from modification is approximately $700,000 that will be recognized as an expense beginning with the period ending March 31, 2020, as the options vest.

XML 26 R12.htm IDEA: XBRL DOCUMENT v3.20.1
Segment Reporting
3 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Segment Reporting

NOTE 6 – 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.

 

The Company operates in the following business segments:

 

(i) Medical Devices: which stems from 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.

 

(ii) Authentication and Encryption Products and Services: which stems from StealthCo, its wholly-owned subsidiary formed on March 18, 2014, which has engaged in the business of selling, licensing or otherwise providing certain authentication and encryption products and services since acquisition of certain assets from SMI on April 4, 2014.

 

The detailed segment information of the Company is as follows:

 

Assets By Segment

 

    December 31, 2019  
    Corporate     Medical Devices     Authentication and Encryption     Total  
ASSETS                                
Current Assets                                
Cash   $ 2,273     $ 33,330     $ 6,760     $ 42,363  
Prepaid expenses and other current assets     -       55,500       -       55,500  
Total current assets     2,273       88,830       6,760       97,863  
                                 
Right-of-use asset     -       22,697       -       22,697  
Total other assets     -       22,697       -       22,697  
                                 
TOTAL ASSETS   $ 2,273     $ 111,527     $ 6,760     $ 120,560  

 

Operations by Segment

 

    For the Three Months Ended  
    December 31, 2019  
    Corporate     Medical Devices     Authentication and Encryption     Total  
Sales:                                 
Trade   $ -     $ -     $ -     $ -  
Consulting services     -       -       -       -  
Total Sales     -       -       -       -  
                                 
Cost of goods sold     -       -       -       -  
                                 
Gross profit     -       -       -       -  
                                 
Operating expenses     98,462       175,286       63,525       337,273  
                                 
Loss from operations   $ (98,462 )   $ (175,286 )   $ (63,525 )   $ (337,273 )

 

Operations by Segment

 

    For the Three Months Ended  
    December 31, 2018  
    Corporate     Medical Devices     Authentication and Encryption     Total  
Sales:                                
Trade   $ -     $ -     $ 7,675     $ 7,675  
Consulting services     -       -       5,200       5,200  
Total Sales     -       -       12,875       12,875  
                                 
Cost of goods sold     -       -       7,725       7,725  
                                 
Gross profit     -       -       5,150       5,150  
                                 
Operating expenses     254,429       119,720       101,715       475,864  
                                 
Loss from operations   $ (254,429 )   $ (119,720 )   $ (96,565 )   $ (470,714 )

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htm IDEA: XBRL DOCUMENT v3.20.1
Loans Payable from Officers and Shareholders (Details Narrative) - USD ($)
Dec. 31, 2019
Sep. 30, 2019
Loans payable from officers and shareholders $ 534,250 $ 399,250
Due to officers and shareholders $ 135,000  
22 Short-Term Unsecured Loans [Member]    
Debt instrument, interest rate, stated percentage   8.00%
Officers and Shareholders [Member]    
Loans payable to related parties   $ 534,250

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.20.1
Segment Reporting (Tables)
3 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Schedule of Assets of Reportable Segments

The detailed segment information of the Company is as follows:

 

Assets By Segment

 

    December 31, 2019  
    Corporate     Medical Devices     Authentication and Encryption     Total  
ASSETS                                
Current Assets                                
Cash   $ 2,273     $ 33,330     $ 6,760     $ 42,363  
Prepaid expenses and other current assets     -       55,500       -       55,500  
Total current assets     2,273       88,830       6,760       97,863  
                                 
Right-of-use asset     -       22,697       -       22,697  
Total other assets     -       22,697       -       22,697  
                                 
TOTAL ASSETS   $ 2,273     $ 111,527     $ 6,760     $ 120,560  

Schedule of Operations of Reportable Segments

Operations by Segment

 

    For the Three Months Ended  
    December 31, 2019  
    Corporate     Medical Devices     Authentication and Encryption     Total  
Sales:                                 
Trade   $ -     $ -     $ -     $ -  
Consulting services     -       -       -       -  
Total Sales     -       -       -       -  
                                 
Cost of goods sold     -       -       -       -  
                                 
Gross profit     -       -       -       -  
                                 
Operating expenses     98,462       175,286       63,525       337,273  
                                 
Loss from operations   $ (98,462 )   $ (175,286 )   $ (63,525 )   $ (337,273 )

 

Operations by Segment

 

    For the Three Months Ended  
    December 31, 2018  
    Corporate     Medical Devices     Authentication and Encryption     Total  
Sales:                                
Trade   $ -     $ -     $ 7,675     $ 7,675  
Consulting services     -       -       5,200       5,200  
Total Sales     -       -       12,875       12,875  
                                 
Cost of goods sold     -       -       7,725       7,725  
                                 
Gross profit     -       -       5,150       5,150  
                                 
Operating expenses     254,429       119,720       101,715       475,864  
                                 
Loss from operations   $ (254,429 )   $ (119,720 )   $ (96,565 )   $ (470,714 )

XML 31 R28.htm IDEA: XBRL DOCUMENT v3.20.1
Shareholders' Equity - Schedule of Stock Option Activity (Details)
3 Months Ended
Dec. 31, 2019
USD ($)
$ / shares
shares
Number of Option Shares Outstanding, Number, Beginning Balance | shares 15,237,738
Number of Option Shares Outstanding, Granted | shares 62,500
Number of Option Shares Outstanding, Cancelled | shares
Number of Option Shares Outstanding, Exercised | shares
Number of Option Shares Outstanding, Expired | shares (262,500)
Number of Option Shares Outstanding, Number, Ending Balance | shares 15,037,738
Number of Option Shares Outstanding, Vested and exercisable, Ending Balance | shares 12,350,238
Number of Option Shares Outstanding, Unvested, Ending Balance | shares 2,687,500
Weighted Average Exercise Price, Number, Beginning Balance $ 0.27
Weighted Average Exercise Price, Granted 0.04
Weighted Average Exercise Price, Cancelled
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Expired 0.11
Weighted Average Exercise Price, Number, Ending Balance 0.27
Weighted Average Exercise Price, Vested and exercisable, Ending Balance 0.30
Weighted Average Exercise Price, Unvested, Ending Balance $ 0.14
Fair Value at Date of Grant, Number, Beginning Balance | $ $ 3,255,121
Fair Value at Date of Grant, Granted | $ 2,313
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 | $ 3,257,434
Fair Value at Date of Grant, Vested and exercisable, Ending Balance | $ 2,189,047
Fair Value at Date of Grant, Unvested, Ending Balance | $ $ 1,068,387
Minimum [Member]  
Weighted Average Exercise Price, Number, Beginning Balance $ 0.03
Weighted Average Exercise Price, Granted
Weighted Average Exercise Price, Number, Ending Balance 0.03
Maximum [Member]  
Weighted Average Exercise Price, Number, Beginning Balance 2.00
Weighted Average Exercise Price, Granted
Weighted Average Exercise Price, Number, Ending Balance $ 2.00
XML 33 R18.htm IDEA: XBRL DOCUMENT v3.20.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Dec. 31, 2019
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/November 15, 2018     50 %
                 
 NEO Phototherapy LLC (“NEO”)   The State of Illinois   December 2018     51 %

XML 34 R14.htm IDEA: XBRL DOCUMENT v3.20.1
Commitments
3 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments

NOTE 8 – COMMITMENTS

 

Operating Leases

 

The Company leased its corporate office facility in Hoffman Estates, Illinois pursuant to a non-cancellable lease initiated in July 2016 and expiring February 28, 2024. The lease terms require a monthly payment of approximately $11,000. The Company vacated the facility in April 2019, in favor of its present facilities in Tucson AZ, which are provided by a shareholder on a rent-free basis. The Company is in negotiations with the owners regarding the settlement of its lease obligations and expects that the property will be subleased or a settlement with the landlord will be reached at an amount significantly less than the remaining payment obligations. At the date of abandonment, the Company had a remaining lease obligation of $631,587. During the year ended September 30, 2019, the Company recorded an accrual for the estimated potential settlement and wrote-off its $15,000 security deposit relating to the lease. During the three months ended December 31, 2019, the Company recorded an additional expense of $37,815 relating to the lease obligation.

XML 35 R10.htm IDEA: XBRL DOCUMENT v3.20.1
Lease Liabilities
3 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Lease Liabilities

NOTE 4 – LEASE LIABILITIES

 

In February 2019, the Company’s PSI subsidiary entered into a 24-month non-cancellable lease for its office facilities that requires monthly payments of $1,800 through January 2021. The Company adopted ASU 2016-02, Leases, effective October 1, 2019, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the lease as an operating lease and determined that the value of the lease assets and liability at the adoption date was $27,841 using a discount rate of 4.00%. During the three months ended December 31, 2019, the Company made payments of $5,144 towards the lease liability. As of December 31, 2019, lease liability amounted to $22,697.

 

ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Rent expense for the three months ended December 31, 2019 was $5,144. During the three months ended December 31, 2019, the Company reflected amortization of right of use asset of $5,144 related to this lease, resulting in a net asset balance of $22,697 as of December 31, 2019.

XML 36 R4.htm IDEA: XBRL DOCUMENT v3.20.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Sales:    
Total Sales $ 12,875
Cost of goods sold 7,725
Gross profit 5,150
Operating expenses 337,273 475,864
Loss from operations (337,273) (470,714)
Other expenses    
Amortization of debt discount (50,689)
Financing costs (51,434)
Interest expense (9,323) (4,851)
Total other expenses (9,323) (106,974)
NET LOSS (346,596) (577,688)
Net loss attributable to non-controlling interest 22,129 3,759
Loss from deconsolidation of non-controlling interest (405,383)
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC. $ (324,467) $ (979,312)
BASIC AND DILUTED LOSS PER SHARE $ (0.00) $ (0.01)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED 107,497,077 100,952,569
Trade [Member]    
Sales:    
Total Sales $ 7,675
Consulting Services [Member]    
Sales:    
Total Sales $ 5,200
XML 37 R8.htm IDEA: XBRL DOCUMENT v3.20.1
Summary of Significant Accounting Policies
3 Months Ended
Dec. 31, 2019
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/November 15, 2018     50 %
                 
 NEO Phototherapy LLC (“NEO”)   The State of Illinois   December 2018     51 %

 

Through October 2018, PSI was operated by PDC, a joint venture between PSI and the Medical Alliance, Inc (“TMA”). On November 15, 2018, the Company and TMA entered into a Withdraw and Mutual Release Agreement to terminate their joint venture agreement. In December 2018, the Company and its wholly-owned subsidiary, Psoria-Shield, Inc. (“PSI”), entered into a Joint Venture Agreement with PSI Gen 2 Funding, Inc. (“GEN2”), an Illinois corporation, to further development, marketing, licensing and/or sale of PSI technology and products. The joint venture is conducted through NEO Phototherapy, LLC, a recently formed Illinois limited liability company (“NEO”), with principal offices and records to be maintained at WCUI’s offices. See Non-Controlling Interests in Note 2 for more details.

 

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 three months ended December 31, 2019 and 2018, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At December 31, 2019 and 2018, the dilutive impact of outstanding stock options of 15,037,738 and 17,587,738 shares, respectively, and outstanding warrants for 66,484,049 and 68,192,442 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

 

Revenue Recognition

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The Company adopted this ASU on October 1, 2018 retrospectively, the cumulative effect of the initial application on our accumulated deficit on that date was immaterial.

 

For trade sales, the Company generates its revenue from sales contracts with customers with revenues being generated upon the shipment of merchandise, or for consulting services, revenue is recognized in the period services are rendered and earned under service arrangements with clients.

 

We sell our products through two main sales channels: 1) directly to customers who use our products (the “Direct Channel”) and 2) to distribution partners who resell our products (the “Indirect Channel”).

 

Under the Direct Channel, we sell our products to and we receive payment directly from customers who purchase our products. Under our Indirect Channel, we have entered into distribution agreements that allow the distributors to sell our products and fulfill performance obligations under the agreements.

 

We determine revenue recognition through the following steps:

 

  Identification of the contract, or contracts, with a customer

 

  Identification of the performance obligations in the contract

 

  Determination of the transaction price

 

  Allocation of the transaction price to the performance obligations in the contract

 

  Recognition of revenue when, or as, we satisfy a performance obligation.

 

Revenue is generally recognized upon shipment or when a service has been completed, unless we have significant performance obligations for services still to be completed. We recognize revenue when a material reversal is no longer probable. Payments received before the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue. There was no deferred revenue at December 31, 2019 and 2018.

 

Non-controlling Interests

 

Through November 2018, non-controlling interest represented 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.

 

On November 15, 2018, PSI and TMA entered into a Withdraw and Mutual Release Agreement to terminate their joint venture agreement. On the date of termination, the non-controlling interest’s share of the accumulated losses of the joint venture totaled to $405,383. Upon termination, during the three months ended December 31, 2018, the Company wrote-off the non-controlling interest’s share of the accumulated losses and recorded a loss from the deconsolidation of a non-controlling interest of $405,383.

 

In December 2018, PSI entered into a Joint Venture Agreement with GEN2 to further development, marketing, licensing and/or sale of PSI technology and products. Pursuant to the Joint Venture Agreement, the venture will be conducted through NEO. PSI and GEN2 will be the members of NEO, owning 50.5% and 36.0%, respectively, of the Units issued in connection with the organization of NEO. An additional 13.5% of such Units will be reserved for issuance as incentives for key employees and consultants. Until such shares are distributed, the Company controls 68% of the joint venture and GEN2 the remaining 32%. PSI and GEN2 will manage NEO’s day-to-day operations. PSI will contribute PSI technology to NEO and GEN2 will contribute $700,000. As of December 31, 2019, NEO’s operations required additional funding above the $700,000 documented in the agreement, and as of September 30, 2019, GEN2 had received $925,000 of investments to contribute to NEO. During the three months ended December 30, 2019, an additional $50,000 was contributed by GEN2 to NEO. As of December 31, 2019, GEN2 had received $975,000 of investments to contribute to NEO. As of December 31, 2019, the Company controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%. The Company recorded its proportionate share of the contributions received of $497,250 to additional paid-in-capital and $477,750 to non-controlling interest as of that date. During the three months ended December 31, 2019, NEO recorded a loss of $45,162 relating to its operations.

 

Repayment of the investment by GEN2 will begin through and upon the date which NEO has realized and retained cumulative net income/distributable cash in the amount of $300,000. Distributions thereafter will be made to PSI, GEN2 and other members in proportion to their respective Unit ownership, at the times and in the manner determined from time to time by the managers, in their sole discretion. GEN2 consists of accredited investors, and investment participation of $700,000 from several WCUI officers and directors, including Calvin R. O’Harrow and Roy M. Harsch.

 

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.

 

Leases

 

In February 2016, the FASB issued 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 twelve 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 leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements.

 

The Company adopted ASU 2016-02 effective October 1, 2019. As a result, we recorded right-of-use assets of $27,841, and lease liabilities of the same amount, as of that date. In accordance with ASU 2016-02, the right-of-use assets are being amortized over the life of the underlying leases, and monthly lease payments are being recorded as reductions to the lease liability and imputed interest expense. See Note 4 for additional information.

 

Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for interim and annual reporting periods beginning after December 15, 2019. The adoption of ASU 2016-13 is not expected to have a material impact on the Company’s financial position, results of operations, and cash flows.

 

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.

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Segment Reporting - Schedule of Operations of Reportable Segments (Details) - USD ($)
3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Total Sales $ 12,875
Cost of goods sold 7,725
Gross profit 5,150
Operating expenses 337,273 475,864
Loss from operations (337,273) (470,714)
Trade [Member]    
Total Sales 7,675
Consulting Services [Member]    
Total Sales 5,200
Corporate [Member]    
Total Sales
Cost of goods sold  
Gross profit  
Operating expenses 98,462 254,429
Loss from operations (98,462) (254,429)
Corporate [Member] | Trade [Member]    
Total Sales
Corporate [Member] | Consulting Services [Member]    
Total Sales
Medical Devices [Member]    
Total Sales
Cost of goods sold  
Gross profit  
Operating expenses 175,286 119,720
Loss from operations (175,286) (119,720)
Medical Devices [Member] | Trade [Member]    
Total Sales
Medical Devices [Member] | Consulting Services [Member]    
Total Sales
Authentication and Encryption [Member]    
Total Sales 12,875
Cost of goods sold   7,725
Gross profit   5,150
Operating expenses 63,525 101,715
Loss from operations (63,525) (96,565)
Authentication and Encryption [Member] | Trade [Member]    
Total Sales 7,675
Authentication and Encryption [Member] | Consulting Services [Member]    
Total Sales $ 5,200
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Subsequent Events (Details Narrative) - USD ($)
3 Months Ended 4 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Oct. 02, 2016
Dec. 31, 2019
Jan. 24, 2020
Mar. 25, 2020
Jan. 06, 2020
Jan. 01, 2020
Sep. 30, 2019
Loans payable to officers and shareholders   $ 534,250   $ 534,250         $ 399,250
Lease expiration date       Feb. 28, 2024          
StealthCo [Member] | Non Cancellable Lease Agreement [Member]                  
Lease expiration date     Sep. 30, 2021            
Lease term     5 years            
Board of Directors [Member]                  
Unexpired stock warrants, extension period   1 year              
Subsequent Event [Member]                  
Debt instrument, payment terms         Due one year from the date of issuance        
Number of securities called by warrants               66,000,000  
Incremental fair value of warrants $ 700,000                
Subsequent Event [Member] | Minimum [Member]                  
Exercise price of warrants               $ 0.12  
Subsequent Event [Member] | Maximum [Member]                  
Exercise price of warrants               $ 0.40  
Subsequent Event [Member] | September 30, 2020 [Member]                  
Number of securities called by warrants               20,000,000  
Subsequent Event [Member] | September 30, 2020 [Member] | Minimum [Member]                  
Exercise price of warrants               $ 0.15  
Subsequent Event [Member] | September 30, 2020 [Member] | Maximum [Member]                  
Exercise price of warrants               $ 0.25  
Subsequent Event [Member] | StealthCo [Member] | Ownership Agreement [Member]                  
Non-cancellable lease payment             $ 11,000    
Subsequent Event [Member] | Unsecured Loans [Member]                  
Debt instrument, interest rate, stated percentage           8.00%      
Subsequent Event [Member] | Officers and Shareholders [Member]                  
Loans payable to officers and shareholders           $ 235,000      
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Shareholders' Equity (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Dec. 31, 2019
Dec. 31, 2019
Sep. 30, 2019
Jan. 02, 2018
Jun. 30, 2010
Common stock, shares authorized 200,000,000 200,000,000 200,000,000    
Number options to purchase of common stock 62,500        
Options exercisable term 2 years 7 months 21 days        
Unvested compensation $ 314,812 $ 314,812      
Aggregate intrinsic value $ 3,257,434 3,257,434 $ 3,255,121    
Stock Option [Member]          
Stock based compensation   $ 65,738      
Employee [Member]          
Number options to purchase of common stock 62,500        
Fair value of stock options $ 2,313        
Stock option exercise price per share $ 0.04 $ 0.04      
Options exercisable term 5 years        
2010 Non-Qualified Stock Option Plan [Member]          
Common stock, shares authorized       30,000,000 7,500,000
2010 Non-Qualified Stock Option Plan [Member] | Stock Option [Member]          
Aggregate intrinsic value      
Shares of stock options remaining available for issuance 14,962,262 14,962,262      
Aggregate intrinsic value for warrant shares outstanding      
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Summary of Significant Accounting Policies (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Nov. 15, 2018
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Oct. 02, 2019
Sep. 30, 2019
Deferred revenue      
Measurement of tax benefit, percentage of realized upon settlement, minimum, description     More than 50 percent      
Non-controlling interest's share of accumulated losses of joint venture $ 405,383          
Loss from deconsolidation of non-controlling interest     405,383    
Noncontrolling interest, description   Pursuant to the Joint Venture Agreement, the venture will be conducted through NEO. PSI and GEN2 will be the members of NEO, owning 50.5% and 36.0%, respectively, of the Units issued in connection with the organization of NEO. An additional 13.5% of such Units will be reserved for issuance as incentives for key employees and consultants. Until such shares are distributed, the Company controls 68% of the joint venture and GEN2 the remaining 32%. PSI and GEN2 will manage NEO's day-to-day operations. PSI will contribute PSI technology to NEO and GEN2 will contribute $700,000. Repayment of the investment by GEN2 will begin through and upon the date which NEO has realized and retained cumulative net income/distributable cash in the amount of $300,000.        
Contributed capital   $ 700,000        
Joint venture percentage     51.00%      
Additional paid-in capital     $ 23,868,885     $ 23,777,647
Non-controlling interest     395,520     393,149
Operating loss     (337,273) $ (470,714)    
Distributable cash     300,000      
Right-of-use assets     22,697   $ 27,841
Lease liabilities     22,697   $ 27,841
NEO [Member]            
Contributed capital     50,000      
Additional funding     700,000      
GEN2 [Member]            
Investments to others     $ 975,000     $ 925,000
Joint venture percentage     39.00%      
Employees and Consultants [Member]            
Additional units reserved for issuance   13.50%        
Individual [Member]            
Joint venture percentage     10.00%      
Psoria-Shield, Inc [Member]            
Ownership percentage     50.50%      
Gen 2 Funding, Inc [Member]            
Ownership percentage     36.00%      
Proceeds from investment     $ 700,000      
Illinois Limited Liability Company [Member]            
Additional paid-in capital     497,250      
Non-controlling interest     477,750      
Operating loss     $ 45,162      
Stock Option [Member]            
Antidilutive securities excluded from computation of earnings per share     15,037,738 17,587,738    
Warrants [Member]            
Antidilutive securities excluded from computation of earnings per share     66,484,049 68,192,442    
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3 Months Ended
Dec. 31, 2019
$ / shares
Equity [Abstract]  
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Expected dividends
Expected volatility 157.60%
Risk free interest rate 1.60%
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3 Months Ended
Dec. 31, 2019
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
Date of acquisition/disposition Nov. 15, 2018
Attributable interest 50.00%
NEO Phototherapy, LLC, [Member]  
Name of consolidated subsidiary or entity NEO Phototherapy LLC ("NEO")
State or other jurisdiction of incorporation or organization The State of Illinois
Date of incorporation or formation Dec. 31, 2018
Attributable interest 51.00%
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Proposed Sale of Stealthco, Inc.
3 Months Ended
Dec. 31, 2019
Proposed Sale Of Stealthco Inc.  
Proposed Sale of Stealthco, Inc.

NOTE 9 – PROPOSED SALE OF STEALTHCO, INC.

 

On September 3, 2019, the Company’s Board of Directors unanimously approved, subject to stockholder approval: (1) execution and delivery of a proposed Share Exchange Agreement with DTI Holdings, Inc. (“DTI”) relating to the share exchange and transfer of certain assets of StealthCo, Inc. (“SCI”) pursuant to the terms and conditions of a Memorandum of Agreement in substantially the form of the copy presented to the Board (“Agreement”). As of September 18, 2019, holders of a majority of the outstanding shares of voting capital stock have executed written stockholder consents approving this action.

 

The Agreement provides, among other things, that: (1) DTI will pay the Company $500,000 upon the execution of a definitive share exchange agreement (“Share Exchange Agreement”) which the parties will endeavor to negotiate and execute as quickly as possible, and not later than October 15, 2019; (2) DTI will pay the Company an additional $500,000 within seven days following the completion date of the transfer of all assets and/or full ownership of SCI to DTI, with such date to occur within 120 days following execution of the Share Exchange Agreement; (3) DTI will issue to the Company 3,112,000 shares of DTI common stock and will guaranty that the value of the 3,112,000 shares of DTI common stock will have a value of at least $4.50 per share ($14,004,000, in the aggregate), as of December 31, 2021; (4) To the extent that the value of the DTI common shares, as of December 31, 2021, is less than $4.50 per share ($14,004,000, in the aggregate), DTI will issue additional shares of DTI common stock, at the then current fair market value, in an amount sufficient to cause the resulting aggregate value of all shares of DTI common stock issued to the Company to be $14,004,000, in the aggregate; (5) DTI will assign the assets transferred by SCI, including trademarks, intellectual properties, and patents, to its subsidiary, Femtobitz, Inc., a Delaware corporation, and will pay to the Company 1% of annual gross revenue arising from or relating to operation of Femtobitz, Inc.; and (6) Upon closing of the share exchange, the Company’s Chairman will be appointed an advisory board member of DTI and a board member of Femtobitz, Inc.

 

As of September 18, 2019, stockholders holding a majority of our outstanding common stock approved the share exchange and the Company began discussions and negotiations with DTI, which are currently on-going as of the date of this filing. There can be no assurance that the proposed transaction will be concluded successfully on the terms described or any alternate terms that may be proposed hereafter.

XML 48 R11.htm IDEA: XBRL DOCUMENT v3.20.1
Shareholders' Equity
3 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Shareholders' Equity

NOTE 5 – SHAREHOLDERS’ EQUITY

 

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.

 

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

 

During the three months ended December 31, 2019, the Company granted options to an employee to purchase a total of 62,500 shares of its common stock with an aggregate fair value of $2,313. The options have an exercise price of $0.04 per share and expire five years from the date of grant. The shares vested on December 31, 2019. The Company valued the options using a Black-Scholes option pricing model.

 

The assumptions used for the option granted during the three months ended December 31, 2019 are as follows:

 

Exercise price   $ 0.04  
Expected dividends     -  
Expected volatility     157.6 %
Risk free interest rate     1.60 %
Expected life of options     2.5  

 

During the three months ended December 31, 2019, the Company recorded $65,738 of stock compensation for the value of all outstanding options, and as of December 31, 2019, unvested compensation of $314,812 remained that will be amortized over the remaining vesting period.

 

The table below summarizes the Company’s stock option activities for the three months ended December 31, 2019:

  

      Number of Option Shares    

Exercise

Price Range Per Share

   

Weighted 

Average Exercise Price

   

Fair Value

at Date of Grant

 
                           
Balance, September 30, 2019       15,237,738     $ 0.03 - 2.00     $ 0.27     $ 3,255,121  
Granted       62,500       0.04       0.04       2,313  
Cancelled       -       -       -       -  
Exercised       -       -       -       -  
Expired       (262,500 )     0.11       0.11       -  
Balance, December 31, 2019       15,037,738     $ 0.03 – 2.00     $ 0.27     $ 3,257,434  
Vested and exercisable, December 31, 2019       12,350,238     $ 0.03 – 2.00     $ 0.30     $ 2,189,047  
                                   
Unvested, December 31, 2019       2,687,500     $ 0.14     $ 0.14     $ 1,068,387  

 

There was no aggregate intrinsic value for option shares outstanding at December 31, 2019. As of December 31, 2019, there were 14,962,262 shares of stock options remaining available for issuance under the 2010 Plan.

 

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2019:

  

      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  
                                                     
$ 0.06 - 0.39       13,575,238       2.93     $ 0.15       10,887,738       2.85     $ 0.15  
  0.40 - 0.99       62,500       2.25       0.40       62,500       2.25       0.40  
  1.00 - 1.99       750,000       1.00       1.00       750,000       1.00       1.00  
  2.00       650,000       1.00       2.00       650,000       1.00       2.00  
$ 0.06 - 2.00       15,037,738       2.75     $ 0.27       12,350,238       2.64     $ 0.30  

  

Stock Warrants

 

The table below summarizes the Company’s warrants activities for the three months ended December 31, 2019:

 

   

Number of

Warrant Shares

   

Exercise

Price Range

Per Share

    Weighted Average Exercise Price     Fair Value at Date of Issuance  
                         
Balance, September 30, 2019     66,484,049     $ 0.12 - 0.40     $ 0.17     $ 3,434,560  
Granted     -       -       -       -  
Cancelled     -       -       -       -  
Exercised     -       -       -       -  
Expired     -       -       -       -  
Balance, December 31, 2019     66,484,049     $ 0.12 - 0.40     $ 0.17     $ 3,434,560  
Vested and exercisable, December 31, 2019     66,484,049     $ 0.12 - 0.40     $ 0.17     $ 3,434,560  

 

There was no aggregate intrinsic value for warrant shares outstanding at December 31, 2019.

 

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2019:

  

      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     59,279,384       1.70     $ 0.15     59,279,384       1.70     $ 0.15
  0.21 – 0.40     7,204,665       0.61       0.26     7,204,665       0.61       0.26
                                               
$ 0.12 – 0.67     66,484,049       1.58     $ 0.17     66,484,049       1.58     $ 0.17

XML 49 R19.htm IDEA: XBRL DOCUMENT v3.20.1
Shareholders' Equity (Tables)
3 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Schedule of Assumptions Used for Options Granted

The assumptions used for the option granted during the three months ended December 31, 2019 are as follows:

 

Exercise price   $ 0.04  
Expected dividends     -  
Expected volatility     157.6 %
Risk free interest rate     1.60 %
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 December 31, 2019:

  

      Number of Option Shares    

Exercise

Price Range Per Share

   

Weighted 

Average Exercise Price

   

Fair Value

at Date of Grant

 
                           
Balance, September 30, 2019       15,237,738     $ 0.03 - 2.00     $ 0.27     $ 3,255,121  
Granted       62,500       0.04       0.04       2,313  
Cancelled       -       -       -       -  
Exercised       -       -       -       -  
Expired       (262,500 )     0.11       0.11       -  
Balance, December 31, 2019       15,037,738     $ 0.03 – 2.00     $ 0.27     $ 3,257,434  
Vested and exercisable, December 31, 2019       12,350,238     $ 0.03 – 2.00     $ 0.30     $ 2,189,047  
                                   
Unvested, December 31, 2019       2,687,500     $ 0.14     $ 0.14     $ 1,068,387  

Schedule of Outstanding and Exercisable Options by Exercise Price Range

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2019:

  

      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  
                                                     
$ 0.06 - 0.39       13,575,238       2.93     $ 0.15       10,887,738       2.85     $ 0.15  
  0.40 - 0.99       62,500       2.25       0.40       62,500       2.25       0.40  
  1.00 - 1.99       750,000       1.00       1.00       750,000       1.00       1.00  
  2.00       650,000       1.00       2.00       650,000       1.00       2.00  
$ 0.06 - 2.00       15,037,738       2.75     $ 0.27       12,350,238       2.64     $ 0.30  

Schedule of Warrant Activity

The table below summarizes the Company’s warrants activities for the three months ended December 31, 2019:

 

   

Number of

Warrant Shares

   

Exercise

Price Range

Per Share

    Weighted Average Exercise Price     Fair Value at Date of Issuance  
                         
Balance, September 30, 2019     66,484,049     $ 0.12 - 0.40     $ 0.17     $ 3,434,560  
Granted     -       -       -       -  
Cancelled     -       -       -       -  
Exercised     -       -       -       -  
Expired     -       -       -       -  
Balance, December 31, 2019     66,484,049     $ 0.12 - 0.40     $ 0.17     $ 3,434,560  
Vested and exercisable, December 31, 2019     66,484,049     $ 0.12 - 0.40     $ 0.17     $ 3,434,560  

Schedule of Outstanding and Exercisable Warrants by Exercise Price Range

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2019:

  

      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     59,279,384       1.70     $ 0.15     59,279,384       1.70     $ 0.15
  0.21 – 0.40     7,204,665       0.61       0.26     7,204,665       0.61       0.26
                                               
$ 0.12 – 0.67     66,484,049       1.58     $ 0.17     66,484,049       1.58     $ 0.17

XML 50 R9.htm IDEA: XBRL DOCUMENT v3.20.1
Loans Payable from Officers and Shareholders
3 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Loans Payable from Officers and Shareholders

NOTE 3 – LOANS PAYABLE FROM OFFICERS AND SHAREHOLDERS

 

As of September 30, 2019, loans payable from officers and shareholders of $399,250 were outstanding. During the three months ended December 31, 2019, the Company borrowed $135,000 from its officers and shareholders. All of the loans are unsecured, have an interest rate of eight percent and are due one year from the date of issuance. As of December 31, 2019, loans payable to officers and shareholders of $534,250 were outstanding.

XML 51 R32.htm IDEA: XBRL DOCUMENT v3.20.1
Segment Reporting - Schedule of Assets of Reportable Segments (Details) - USD ($)
Dec. 31, 2019
Sep. 30, 2019
Feb. 28, 2019
Cash $ 42,363 $ 53,147  
Prepaid expenses and other current assets 55,500 55,000  
Total current assets 97,863 108,147  
Right-of-use asset 22,697   $ 27,841
Total other assets 22,697 1,562  
TOTAL ASSETS 120,560 $ 109,709  
Corporate [Member]      
Cash 2,273    
Prepaid expenses and other current assets    
Total current assets 2,273    
Right-of-use asset    
Total other assets    
TOTAL ASSETS 2,273    
Medical Devices [Member]      
Cash 33,330    
Prepaid expenses and other current assets 55,500    
Total current assets 88,830    
Right-of-use asset 22,697    
Total other assets 22,697    
TOTAL ASSETS 111,527    
Authentication and Encryption [Member]      
Cash 6,760    
Prepaid expenses and other current assets    
Total current assets 6,760    
Right-of-use asset    
Total other assets    
TOTAL ASSETS $ 6,760    
XML 52 R36.htm IDEA: XBRL DOCUMENT v3.20.1
Proposed Sale of Stealthco, Inc. (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Dec. 31, 2021
Sep. 03, 2019
Dec. 31, 2018
Sep. 30, 2019
Dec. 31, 2019
Common stock new issue value     $ 10,000    
Share Exchange Agreement [Member] | DTI Holdings Inc [Member]          
Due from related party         $ 500,000
Due from related party in addition         $ 500,000
Agreement description   On September 3, 2019, the Company's Board of Directors unanimously approved, subject to stockholder approval: (1) execution and delivery of a proposed Share Exchange Agreement with DTI Holdings, Inc. ("DTI") relating to the share exchange and transfer of certain assets of StealthCo, Inc. ("SCI") pursuant to the terms and conditions of a Memorandum of Agreement in substantially the form of the copy presented to the Board ("Agreement"). As of September 18, 2019, holders of a majority of the outstanding shares of voting capital stock have executed written stockholder consents approving this action. The Agreement provides, among other things, that: (1) DTI will pay the Company $500,000 upon the execution of a definitive share exchange agreement ("Share Exchange Agreement") which the parties will endeavor to negotiate and execute as quickly as possible, and not later than October 15, 2019; (2) DTI will pay the Company an additional $500,000 within seven days following the completion date of the transfer of all assets and/or full ownership of SCI to DTI, with such date to occur within 120 days following execution of the Share Exchange Agreement; (3) DTI will issue to the Company 3,112,000 shares of DTI common stock and will guaranty that the value of the 3,112,000 shares of DTI common stock will have a value of at least $4.50 per share ($14,004,000, in the aggregate), as of December 31, 2021; (4) To the extent that the value of the DTI common shares, as of December 31, 2021, is less than $4.50 per share ($14,004,000, in the aggregate), DTI will issue additional shares of DTI common stock, at the then current fair market value, in an amount sufficient to cause the resulting aggregate value of all shares of DTI common stock issued to the Company to be $14,004,000, in the aggregate; (5) DTI will assign the assets transferred by SCI, including trademarks, intellectual properties, and patents, to its subsidiary, Femtobitz, Inc., a Delaware corporation, and will pay to the Company 1% of annual gross revenue arising from or relating to operation of Femtobitz, Inc.; and (6) Upon closing of the share exchange, the Company's Chairman will be appointed an advisory board member of DTI and a board member of Femtobitz, Inc. As of September 18, 2019, stockholders holding a majority of our outstanding common stock approved the share exchange and the Company began discussions and negotiations with DTI, which are currently on-going. There can be no assurance that the proposed transaction will be concluded successfully on the terms described or any alternate terms that may be proposed hereafter.      
Share Exchange Agreement [Member] | Femtobitz, Inc. [Member]          
Annual gross revenue       1.00%  
Share Exchange Agreement [Member] | Forecast [Member] | DTI Holdings Inc [Member]          
Common stock new issues 3,112,000        
Common stock value per share $ 4.50        
Common stock new issue value $ 14,004,000        
XML 53 R5.htm IDEA: XBRL DOCUMENT v3.20.1
Condensed Consolidated Statements of Shareholders' Deficit (Unaudited) - 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, 2018 $ 100,952 $ 22,450,252 $ (22,974,740) $ (423,536) $ (401,624) $ (825,160)
Balance, shares at Sep. 30, 2018 100,952,569          
Common shares issued for cash $ 143 9,857 10,000 10,000
Common shares issued for cash, shares 142,857          
Shares issued upon conversion of note payable $ 2,483 171,300 173,783 173,783
Shares issued upon conversion of note payable, shares 2,482,441          
Fair value of additional shares issued to conversions of note payable 51,434 51,434 51,434
Fair value of vested stock options   85,951 85,951 85,951
Fair value of common stock issued for services $ 120 9,480 9,600 9,600
Fair value of common stock issued for services, shares 120,000          
Termination of non-controlling interest agreement     (405,383) (405,383) 405,383 (405,383)
Contribution of capital by joint venture partner   255,000   255,000 120,000 375,000
Net loss     (573,929) (573,929) (3,759) (577,688)
Balance at Dec. 31, 2018 $ 103,698 23,033,274 (23,954,052) (817,080) 120,000 (697,080)
Balance, shares at Dec. 31, 2018 103,697,867          
Balance at Sep. 30, 2019 $ 107,497 23,777,647 (25,362,287) (1,477,143) 393,149 (1,083,994)
Balance, shares at Sep. 30, 2019 107,497,077          
Fair value of vested stock options 65,738 65,738 65,738
Termination of non-controlling interest agreement          
Contribution of capital by joint venture partner 25,500 25,500 24,500 50,000
Net loss     (324,467) (324,467) (22,129) (346,596)
Balance at Dec. 31, 2019 $ 107,497 $ 23,868,885 $ (25,686,754) $ (1,710,372) $ 395,520 $ (1,314,852)
Balance, shares at Dec. 31, 2019 107,497,077          
XML 54 R1.htm IDEA: XBRL DOCUMENT v3.20.1
Document and Entity Information
3 Months Ended
Dec. 31, 2019
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 Dec. 31, 2019
Amendment Flag false
Current Fiscal Year End Date --09-30
Entity Current Reporting Status Yes
Entity Interactive Data Current Yes
Entity Filer Category Non-accelerated Filer
Entity Small Business Flag true
Entity Emerging Growth Company false
Entity Shell Company false
Entity Common Stock, Shares Outstanding 107,497,077
Document Fiscal Period Focus Q1
Document Fiscal Year Focus 2020