0001493152-21-008229.txt : 20210407 0001493152-21-008229.hdr.sgml : 20210407 20210407172442 ACCESSION NUMBER: 0001493152-21-008229 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 52 CONFORMED PERIOD OF REPORT: 20201231 FILED AS OF DATE: 20210407 DATE AS OF CHANGE: 20210407 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: 21813076 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, 2020

 

[  ] 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)

 

 

 

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 [  ] Non-Accelerated Filer [  ]
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, 2020 was 119,639,577.

 

 

 

 
 

 

FORM 10-Q

WELLNESS CENTER USA, INC.

DECEMBER 31, 2020

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 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
Item 4. Control and Procedures 25
     

PART II— OTHER INFORMATION

     
Item 1. Legal Proceedings 27
Item 1A. Risk Factors 27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
Item 3. Defaults Upon Senior Securities 28
Item 4. Mine Safety Disclosures. 28
Item 5. Other Information 28
Item 6. Exhibits 28
     
SIGNATURE 29

 

2
 

 

Wellness Center USA, Inc.

Condensed Consolidated Balance Sheets

 

   December 31,   September 30, 
   2020   2020 
   (Unaudited)     
ASSETS          
Current Assets          
Cash  $78,523   $51,320 
Accounts receivable   23,989    - 
Inventories   134,522    94,560 
Prepaid expenses and other current assets   500    500 
Total Current Assets   237,534    146,380 
           
Right of use asset   1,613    6,961 
Total Other Assets   1,613    6,961 
           
TOTAL ASSETS  $239,147   $153,341 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIT          
Current Liabilities          
Accounts payable and accrued expenses  $480,744   $408,297 
Payroll taxes payable – past due   87,834    92,334 
Lease liability   1,613    6,961 
Lease abandonment liability   672,878    672,878 
Loans payable from officers and shareholders, including $504,250 past due at December 31, 2020   1,460,250    1,165,250 
Total Current Liabilities   2,703,319    2,345,720 
           
Long-term Liabilities          
U.S. Small Business Administration PPP loan payable   37,166    37,166 
Total Liabilities   2,740,485    2,382,886 
           
Shareholders’ Deficit          
Common stock, par value $0.001, 200,000,000 shares authorized; 119,639,577 and 118,252,077 shares issued and outstanding, respectively   119,639    118,252 
Additional paid-in capital   25,104,736    25,053,616 
Accumulated deficit   (27,764,061)   (27,583,363)
Total Wellness Center USA shareholders’ deficit   (2,539,686)   (2,411,495)
           
Non-controlling interest   38,348    181,950 
Total Shareholder’s deficit   (2,501,338)   (2,229,545)
           
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT  $239,147   $153,341 

 

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, 
   2020   2019 
   (Unaudited) 
         
Trade sales  $90,499   $- 
           
Cost of goods sold   80,100    - 
           
Gross profit   10,399    - 
           
Operating expenses   308,541    337,273 
           
Loss from operations   (298,142)   (337,273)
           
Other expense          
Interest expense   (26,158)   (9,323)
Total other expense   (26,158)   (9,323)
           
NET LOSS   (324,300)   (346,596)
           
Net loss attributable to non-controlling interest   143,602    22,129 
           
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC.   (180,698)   (324,467)
           
BASIC AND DILUTED LOSS PER SHARE  $(0.00)  $(0.00)
           
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING          
BASIC AND DILUTED   118,960,909    107,497,077 

 

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)

 

   Common Stock   Additional Paid-in   Accumulated   Total WCUI   Non-controlling     
   Shares   Amount   Capital   Deficit   Deficit   Interest   Total 
                             
Balance, September 30, 2020   118,252,077   $118,252   $25,053,616   $(27,583,363)  $(2,411,495)  $181,950   $(2,229,545)
                                    
Fair value of vested stock options   -    -    10,882    -    10,882    -    10,882 
                                    
Fair value of common stock issued for services   1,387,500    1,387    40,238    -    41,625    -    41,625 
                                    
Net loss for the three months ended December 31, 2020   -    -    -    (180,698)   (180,698)   (143,602)   (324,300)
                                    
Balance, December 31, 2020   119,639,577   $119,639   $25,104,736   $(27,764,061)  $(2,539,686)  $38,348   $(2,501,338)
                                    
Balance, September 30, 2019   107,497,077   $107,497   $23,777,647   $(25,362,287)  $(1,477,143)  $393,149   $(2,229,545)
                                    
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    107,497,077   $107,497   $23,868,885   $(25,686,754)  $(1,710,372)  $395,520   $(1,314,852)

 

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, 
   2020   2019 
   (Unaudited) 
Cash Flows from Operating Activities        
Net loss  $(324,300)  $(346,596)
           
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation expense   -    1,562 
Amortization of right-of-use asset   5,348    5,144 
Provision for excess and slow moving inventories   50,000    - 
Fair value of common shares issued for services   41,625    - 
Fair value of stock options issued for services   10,882    65,738 
Changes in Assets and Liabilities          
(Increase) Decrease in:          
Accounts receivable   (23,989)   - 
Inventories   (89,962)   - 
Prepaid expenses and other assets   -    (500)
(Decrease) Increase in:          
Accounts payable and accrued expenses   72,447    84,012 
Payroll taxes payable   (4,500)   - 
Lease liability   (5,348)   (5,144)
Net cash used in operating activities   (267,797)   (195,784)
           
Cash Flows from Financing Activities          
Proceeds from loans payable from officers and shareholders   295,000    135,000 
Contribution of capital by joint venture partner   -    50,000 
Net cash provided by financing activities   295,000    185,000 
           
Net increase (decrease) in cash   27,203    (10,784)
           
Cash beginning of period   51,320    53,147 
Cash end of period  $78,523   $42,363 
           
Supplemental cash flows disclosures:          
Interest paid  $-   $- 
Taxes paid  $-   $- 
           
Supplemental non-cash disclosures:          
Initial recognition of right-of-use assets and operating lease liabilities upon adoption of ASC Topic 842  $-   $27,841 

 

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, 2020 AND 2019

 

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 sanitation purposes; 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, 2020 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021.

 

COVID-19 Considerations

 

In the period ended December 31, 2020, the COVID-19 pandemic did not have a material net impact on our operating results. In the future, the pandemic may cause reduced demand for our products if, for example, the pandemic results in a recessionary economic environment which negatively effects the consumers who purchase our products.

 

Our ability to operate without significant negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect our employees and our supply chain. The Company has endeavored to follow the recommended actions of government and health authorities to protect our employees. Since the onset of the COVID-19 pandemic, we maintained the consistency of our operations. However, the uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for example an inability of a key supplier or transportation supplier to source and transport materials) that could negatively impact our operations.

 

Through December 31, 2020, the COVID-19 pandemic has not negatively impacted the Company’s liquidity position as of such date. Through December 31, 2020, the Company continues to generate cash flows through financing activities to meet its short-term liquidity needs, and it expects to maintain access to those shareholder loans. The Company has not observed any material impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic.

 

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, 2020, the Company incurred a net loss of $324,300 and used cash in operations of $267,797, and had a shareholders’ deficit of $2,501,338 as of December 31, 2020. In addition, loans payable of $504,250 and payroll taxes of $87,834 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, 2020 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At December 31, 2020, the Company had cash on hand in the amount of $78,523. 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, 2020, the Company received $295,000 through short-term loans from officers and shareholders.

 

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 consolidated financial statements include the Company’s wholly owned subsidiaries and the accounts of its subsidiaries for which it was determined that Company has operational and management control. The Company’s consolidated subsidiaries and/or controlled 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 at September 30, 2019   Attributable interest at September 30, 2020 
Psoria-Shield Inc. (“PSI”)  The State of Florida 

June 2009

(August 2012)

   100%   51%(1)
StealthCo, Inc. (“StealthCo”)  The State of Illinois  March 2014   100%   100%
Psoria Development Company LLC. (“PDC”)  The State of Illinois 

January 2015/

November 2018

   0%   0%
NEO Phototherapy LLC (“NEO”)  The State of Illinois  December 2018   51%(1)   0%
Protec Scientific, Inc (“Protec”)  The State of New York  April 2020   0%   38%

 

(1) - Effective April 30, 2020, the Company’s 51% interest in NEO was converted into a 51% interest in PSI.

 

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, and 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, 2020 and 2019, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At December 31, 2020 and 2019, the dilutive impact of outstanding stock options of 12,665,238 and 15,037,738 shares, respectively, and outstanding warrants for 67,634,049 and 66,484,049 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

 

8
 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Revenue Recognition

 

The company records revenue under the guidance of Accounting Standards Codification (“ASC“) 606, Revenue from Contracts with Customers (Topic 606) which 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.

 

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, 2020 and 2019.

 

9
 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Non-controlling Interests

 

In December 2018, PSI entered into a Joint Venture Agreement with GEN2 for 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 Phototherapy, Inc. (“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. As of September 30, 2019, GEN2 had received $975,000 of investments to contribute to NEO. As of April 30, 2020, the Company controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%.

 

Effective April 30, 2020, the joint venture with GEN2 was reorganized. GEN2 shareholders exchanged their common shares in GEN2, and the individual exchanged his membership interests in NEO, for common shares representing 49% ownership in PSI. The Company retained its common shares in PSI, which provides the Company a 51% economic interest in the PSI technology and products developed by the joint venture. During three months ended December 31, 2020, PSI recorded a loss of $151,433 relating to its operations, of which $74,202 was allocated to the non-controlling interest.

 

Repayment of the $975,000 investment will begin through and upon the date which PSI has realized and retained cumulative net income/distributable cash in the amount of $300,000. The minority interest of PSI ownership consists of accredited investors, and investment participation of $750,000 from several WCUI officers and directors, including Calvin R. O’Harrow and Roy M. Harsch.

 

In May 2020, the Company’s subsidiary, PSI, agreed to become a majority shareholder in Protec Scientific, Inc. (“Protec”), a company formed in April 2020 by John Yorke for the purpose of designing, developing and marketing products that use spectral photonic emissions across a variety of applications. As of September 30, 2020, PSI had advanced $191,000 to Protec in furtherance of its agreement to acquire approximately 62% of Protec, with the Company’s share being approximately 32%, based on its PSI ownership. The remaining 30% share is to be attributed to PSI’s minority shareholders, based on their PSI ownership. During the year ended September 30, 2020, Protec received an additional $120,000 from non-affiliated investors, of which $74,400 was recorded to additional paid-in capital and $45,600 to the non-controlling interests. The additional investments gave the non-controlling interests a 38% ownership interest in Protec. During the three months ended December 31, 2020, Protec recorded a loss of $101,492, of which $69,400 was allocated to the non-controlling interests.

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value. Cost is computed on a first-in, first-out basis. At December 31, 2020, primarily all of the inventories consisted of raw materials or work-in-progress. The Company provides inventory reserves based on excess and obsolete inventories determined primarily by future demand forecasts. The write down amount, if any, is measured as the difference between the cost of the inventory and net realizable value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. At December 31, 2020, the Company recorded a reserve of $50,000 for excess and slow moving inventories. At September 30, 2020, no reserve was recorded for excess, slow moving or obsolete inventory.

 

10
 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Stock-Based Compensation

 

The Company periodically issues stock-based compensation to officers, directors, and consultants for services rendered, and as part of financing transactions. Such issuances vest and expire according to terms established at the issuance date. Stock-based payments to officers, directors, employees, and for acquiring goods and services from non-employees, which include grants of employee stock options, are recognized in the financial statements based on their fair values in accordance with Topic 718. Stock option grants, which are generally time vested, will be measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period.

 

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

 

Recently Issued Accounting Pronouncements

 

In 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, 2020, loans payable from officers and shareholders of $1,165,250 were outstanding. During the three months ended December 31, 2020, the Company borrowed $295,000 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, 2020, loans payable to officers and shareholders of $1,460,250 were outstanding and $504,250 was past due.

 

11
 

 

NOTE 4 – U.S. SMALL BUSINESS ADMINISTRATION LOAN PAYABLE

 

During the year ended September 30, 2020, the Company’s subsidiary, PSI, entered into a loan agreement with the United States Small Business Administration (SBA) under which the Company borrowed $37,166. The loan is unsecured, accrues interest at 1.0% and is due on April 23, 2022. Beginning in March 2021, PSI is required to make monthly interest payments and all principal and unpaid interest is due in April 2022. If PSI meets certain criteria as defined in the agreement, the loan may be forgiven at which time the Company would recognize a gain on debt forgiveness. As of the date of this filing, the Company had not yet applied for forgiveness of the loan. As of December 31, 2020, a total of $37,166 was outstanding on the loan.

 

NOTE 5 – LEASE LIABILITIES

 

Operating Lease

 

In February 2019, the Company’s PSI subsidiary entered into a 24-month non-cancellable lease for its office facilities that will require monthly payments of $1,850 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 asset and liability at the inception of the lease was $27,841, using a discount rate of 4.00%. As of September 30, 2020, the value of the lease asset and liability was $6,961, respectively. During the three months ended December 31, 2020, the Company made payments of $5,348 towards the lease liability. As of December 31, 2020, the lease liability amounted to $1,613.

 

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, 2020 was $5,348. During the three months ended December 31, 2020, the Company reflected amortization of the right of use asset of $5,348 related to this lease, resulting in a net asset balance of 1,613 as of December 31, 2020.

 

Other 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.

 

On or about June 29, 2020, we received notice that Hanover Hoffman Estates, LLC (“HHE”), filed case number 2020L006092 in the Circuit Court of Cook County alleging our failure to pay Base Rent and abandonment of certain office space in Hoffman Estates, Illinois subject to a Commercial Lease dated May 26, 2016. HHE seeks at least $672,878 in base rent and other amounts under the lease, as well as treble damages from our ex-CEO and two past Directors who were serving on our Board as of the date of the lease. We are currently evaluating the allegations, defenses and alternate actions. As of December 31, 2020, the Company has recorded the full amount of the judgement due.

 

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NOTE 6 – SHAREHOLDERS’ EQUITY

 

Restricted Stock Grants

 

In April 2020, the Company’s Board of Directors approved the issuance of a combined total of 20,170,000 restricted shares of the Company’s common stock to its Officers and Directors. A total of 7,120,000 shares vested in April 2020, while 1,800,000 will vest monthly from April 2020 through March 2021, and 11,250,000 will vest monthly from April 2020 through March 2023. Of the 13,050,000 shares that vest over time, a total of 1,387,500 shares vested during the three months ended December 31, 2020.

 

The following table summarizes restricted common stock activity:

 

  

Number of Restricted

Shares

   Fair Value  

Weighted

Average

Grant Date

Fair Value

 
             
Non-vested, September 30, 2020   10,275,000   $308,250   $0.03 
Granted   -    -    - 
Vested   (1,387,500)   (41,625)   0.03 
Forfeited   -    -    - 
Non-vested, December 31, 2020   8,887,500   $266,625   $0.03 

 

During the three months ended December 31, 2020, the Company recorded $41,625 of stock compensation for the value of restricted common stock vesting during the period, and as of December 31, 2020, unvested compensation of $266,625 remained that will be amortized over the remaining vesting period.

 

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.

 

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NOTE 6 – SHAREHOLDERS’ EQUITY (CONTINUED)

 

Stock Options (continued)

 

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.

 

The table below summarizes the Company’s stock option activities for the three months ended December 31, 2020:

 

  

Number of

Option Shares

  

Exercise

Price Range

Per Share

   Weighted Average Exercise Price 
             
Balance, September 30, 2020   14,127,738   $0.03 - 2.00   $0.29 
Granted   -    -    - 
Cancelled   -    -    - 
Exercised   -    -    - 
Expired   (1,462,500)   0.14 - 2.00    1.41 
Balance, December 31, 2020   12,665,238   $0.03 - 0.40   $0.10 
Vested and exercisable, December 31, 2020   9,702,738   $0.03 - 0.40   $0.12 
                
Unvested, December 31, 2020   2,962,500   $0.04   $0.04 

 

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2020:

 

    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 
                          
$0.03 - 0.39    12,602,738    6.75   $0.09    9,640,238    5.85   $0.12 
 0.40    62,500    1.25    0.40    62,500    1.25    0.40 
$0.03 - 0.40    12,665,238    6.72   $0.10    9,702,738    5.82   $0.12 

 

During the three months ended December 31, 2020, the Company recorded $10,882 of stock compensation for the value of options vesting during the period, and as of December 31, 2020, unvested compensation of $85,882 remained that will be amortized over the remaining vesting period.

 

The total aggregate intrinsic value for option shares outstanding at December 31, 2020 was $126,625. As of December 31, 2020, there were 17,334,762 shares of stock options remaining available for issuance under the 2010 Plan.

 

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NOTE 6 – SHAREHOLDERS’ EQUITY (CONTINUED)

 

Stock Warrants

 

The table below summarizes the Company’s warrants activities for the three months ended December 31, 2020:

 

  

Number of

Warrant Shares

   Exercise Price Range Per Share   Weighted Average Exercise Price 
             
Balance, September 30, 2020   67,634,049   $0.07 - 0.40   $0.16 
Granted   -    -    - 
Cancelled   -    -    - 
Exercised   -    -    - 
Expired   -    -    - 
Balance, December 31, 2020   67,634,049   $0.07 - 0.40   $0.16 
Vested and exercisable, December 31, 2020   67,634,049   $0.07 - 0.40   $0.16 

 

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2020:

 

    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    60,429,384    1.74   $0.15    60,429,384    1.74   $0.15 
  0.21 – 0.40    7,204,665    0.64    0.26    7,204,665    0.64    0.26 
                                 
$0.12 – 0.67    67,634,049    1.62   $0.16    67,634,049    1.62   $0.16 

 

There was no aggregate intrinsic value for warrant shares outstanding at December 31, 2020.

 

NOTE 7 – SEGMENT REPORTING

 

Reportable segments are components of an enterprise about which separate financial information is available and that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

 

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, and for sanitation purposes.

 

(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.

 

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The detailed segment information of the Company is as follows:

 

Assets By Segment

 

   December 31, 2020 
   Corporate   Medical Devices   Authentication and Encryption   Total 
ASSETS                    
Current Assets                    
Cash  $8,178   $67,709   $2,636   $78,523 
Accounts receivable   -    23,989    -    23,989 
Inventories   -    134,522    -    134,522 
Prepaid expenses and other current assets   500    -    -    500 
Total current assets   8,678    226,220    2,636    237,534 
                    
Right of use asset   -    1,613    -    1,613 
Total other assets   -    1,613    -    1,613 
                    
TOTAL ASSETS  $8,678   $227,833   $2,636   $239,147 

 

Operations by Segment

 

   For the Three Months Ended 
   December 31, 2020 
   Corporate   Medical Devices   Authentication and Encryption   Total 
                 
Trade sales  $-   $90,499   $-   $90,499 
                     
Cost of goods sold   -    80,100    -    80,100 
                     
Gross profit   -    10,399    -    10,399 
                     
Operating expenses   49,109    256,471    2,961    308,541 
                     
Loss from operations  $(49,109)  $(246,072)  $(2,961)  $(298,142)

  

   For the Three Months Ended 
   December 31, 2019 
   Corporate   Medical Devices   Authentication and Encryption   Total 
                 
Trade 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)

 

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NOTE 8 – LEGAL MATTERS

 

The Company is periodically engaged in legal proceedings arising from and relating to its business operations. Except as otherwise described herein, 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.

 

We continue efforts 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, the Company has negotiated settlement of all ex-employee wage and benefits claims except for two. The first regards unpaid wages claimed due together with interest at the rate of 4% per annum on such amount as the Company originally agreed upon in settlement negotiations. The ex-employee 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.

 

The second claim was filed with the Illinois Department of Labor asserting a violation of the Illinois Wage Payment and Collection Act by the Company’s former CEO. That claim alleges unpaid wages in the amount of $158,714.60 and unpaid vacation pay in the amount of $20,833.33 for a total amount of $179,547.90, as well as certain statutory damages including, but not limited to, 2% of the wages due per month plus attorneys’ fees if the ex-CEO elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim. The Company has filed its response to such claim with the Department denying the substantive allegations therein and asserting certain factual and legal defenses, including breach of fiduciary duty, as a bar to all claimed compensation. The claim remains pending, but as the date hereof, no suit has been filed against the Company asserting a violation of the Act based on said claim.

 

NOTE 9 – SUBSEQUENT EVENTS

 

Subsequent to December 31, 2020, the Company borrowed $355,000 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.

 

On April 1, 2021, the Company’s Board of Directors approved the issuance of a combined total of 3,750,000 restricted shares of the Company’s common stock to certain of its Officers and Directors for future services to be performed. The shares vest monthly from April 2023 through March 2024. The fair value of the shares on the date of grant was $187,500.

 

The Board also approved the issuance of a combined total of 10,085,714 restricted shares of the Company’s common stock to certain of its Officers and Directors in connection with their officer and shareholder loans. A total of 7,060,000 of the shares vested upon grant and 3,025,714 shares vest in April 2025. The fair value of the shares on the date of grant was $504,286.

 

On April 1, 2021, the Company’s Board of Directors approved the grant of stock options to its Chief Executive Officer (CEO) to purchase 1,300,000 shares of the Company’s common stock with an exercise price of $0.05 per share. The options expire ten years from the date of grant. The option grants are for future services to be performed by the CEO. The shares vest monthly from April 2023 through March 2024. The fair value of the shares on the date of grant was approximately $65,000.

 

The Board also approved the grant of stock options to its CEO to purchase 13,449,429 shares of the Company’s common stock with an exercise price of $0.05 per share. The options expire ten years from the date of grant. The option grants are in connection with his officer and shareholder loans. A total of 9,052,500 of the shares vested upon grant and 4,396,929 shares vest in April 2025. The fair value of the shares on the date of grant was approximately $670,000. In connection with the option grants, the CEO agreed to cancel 5,277,778 of his warrant shares that were scheduled to expire from September 2021 through December 2021.

 

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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 sanitation purposes; and (ii) authentication and encryption products and services. The segments are conducted through our wholly-owned subsidiaries, PSI and SCI.

 

COVID-19 Uncertainties

 

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. The responses by federal, state and local governments to restrict public gatherings and travel rapidly grew to include stay-at-home orders, school closures and mandatory restrictions on non-essential businesses and services that has adversely affected workforces, economies, and financial markets resulting in a significant economic downturn. The Company’s corporate office is located in Tucson, Arizona and its manufacturing facility is in Utica, New York. Since March 2020, we have been following the recommendations of local health authorities to minimize exposure risk for our employees, including temporary closures of our offices and having employees work remotely to the extent possibleThe order, which has subsequently been modified to provide for a gradual re-opening of businesses and travel, is to remain in place until further notice.

 

While this disruption is currently expected to be temporary, there is considerable uncertainty around the duration. We are actively monitoring the COVID-19 situation and its impact in the markets we serve. We are taking all precautionary measures as directed by health authorities and local and national governments. Due to continuing uncertainties regarding the ultimate scope and trajectory of COVID-19’s spread and evolution, it is impossible to predict the total impact that the pandemic will have on our business. If public and private entities continue to implement restrictive measures, the material adverse effect on our business, results of operations, financial condition and cash flows could persist.

 

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.

 

Joint Ventures

 

In December 2018, PSI entered into a Joint Venture Agreement with GEN2 for 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 Phototherapy, Inc. (“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. As of September 30, 2020, GEN2 had received $975,000 of investments to contribute to NEO. As of April 30, 2020, the Company controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%.

 

18
 

 

Effective April 30, 2020, the joint venture with GEN2 was reorganized. GEN2 shareholders exchanged their common shares in GEN2, and the individual exchanged his membership interests in NEO, for common shares representing 49% ownership in PSI. The Company retained its common shares in PSI, which provides the Company a 51% economic interest in the PSI technology and products developed by the joint venture. During three months ended December 31, 2020, PSI recorded a loss of $151,433 relating to its operations, of which $74,202 was allocated to the non-controlling interest.

 

Repayment of the $975,000 investment will begin through and upon the date which PSI has realized and retained cumulative net income/distributable cash in the amount of $300,000. The minority interest of PSI ownership consists of accredited investors, and investment participation of $750,000 from several WCUI officers and directors, including Calvin R. O’Harrow and Roy M. Harsch.

 

In May 2020, the Company’s subsidiary, PSI, agreed to become a majority shareholder in Protec Scientific, Inc. (“Protec”), a company formed in April 2020 by John Yorke for the purpose of designing, developing and marketing products that use spectral photonic emissions across a variety of applications. As of September 30, 2020, PSI had advanced $191,000 to Protec in furtherance of its agreement to acquire approximately 62% of Protec, with the Company’s share being approximately 32%, based on its PSI ownership. The remaining 30% share is to be attributed to PSI’s minority shareholders, based on their PSI ownership. During the year ended September 30, 2020, Protec received an additional $120,000 from non-affiliated investors, of which $74,400 was recorded to additional paid-in capital and $45,600 to the non-controlling interests. The additional investments gave the non-controlling interests a 38% ownership interest in Protec. During the three months ended December 31, 2020, Protec recorded a loss of $101,492, of which $69,400 was allocated to the non-controlling interests.

 

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.

 

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).

 

19
 

 

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.

 

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.

 

20
 

 

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.

 

Analysis of Financial Condition and Results of Operations

 

Results of Operations for the three months ended December 31, 2020 compared to the three months ended December 31, 2019.

 

Revenue and Cost of Goods Sold

 

Revenue for the three months ended December 31, 2020 was $90,499. There was no revenue, cost of sales or gross profit for the three months ended December 31, 2019. The increase in 2020 was due to the increase in revenues at PSI, as there was no revenue at SCI for each period. Cost of sales for the three months ended December 31, 2020 was $80,100. Gross profit for the three months ended December 31, 2020 was $10,399.

 

Operating Expenses

 

Operating expenses for the three months ended December 31, 2020 and 2019 were $308,541 and $337,273, respectively. The decrease in operating expenses in 2020 was due primarily to the decrease in labor and facility costs at SCI, offset by an increase in operating expenses at PSI, primarily labor-related costs.

 

Other Expenses

 

Other expenses during the three months ended December 31, 2020 and 2019 consisted of $26,158 and $9,323 of interest expense, respectively.

 

Net Loss

 

Our net loss for the three months ended December 31, 2020 was $324,300, compared to a net loss of $346,596 for the three months ended December 31, 2019. The decrease in the net loss in 2020 was primarily due to the decrease in operating expenses.

 

21
 

 

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, 2020 
   Corporate   Medical Devices   Authentication and Encryption   Total 
                 
Trade sales  $-   $90,499   $-   $90,499 
                     
Cost of goods sold   -    80,100    -    80,100 
                     
Gross profit   -    10,399    -    10,399 
                     
Operating expenses   49,109    256,471    2,961    308,541 
                     
Loss from operations  $(49,109)  $(246,072)  $(2,961)  $(298,142)

  

   For the Three Months Ended 
   December 31, 2019 
   Corporate   Medical Devices   Authentication and Encryption   Total 
                 
Trade 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)

 

22
 

 

Revenue for the Medical Devices segment for the three months ended December 31, 2020 was $90,499. There was no revenue or cost of goods sold for the Medical Devices segment for the three months ended December 31, 2019. The increase in sales in 2020 was due to the launch of PSI’s new FDA approved medical device named Aurora. Cost of sales during the three months ended December 31, 2020 was $80,100 and gross profit was $10,399. Operating expenses for the three months ended December 31, 2020 and 2019 was $256,471 and $175,286, respectively. The increase in operating expenses in 2020 was primarily due to the increase in labor-related costs and production-related costs. The loss from operations for the three months ended December 31, 2020 and 2019 was $246,072 and $175,286, respectively.

 

There was no revenue or cost of sales for the Authentication and Encryption segment for the three months ended December 31, 2020 and 2019. Operating expenses for the three months ended December 31, 2020 and 2019 was $2,961 and $63,525, respectively. The decrease in operating expenses in 2020 was primarily due to the decrease in labor and facility costs. The loss from operations for the three months ended December 31, 2020 and 2019 was $2,961 and $63,525, respectively.

 

The Corporate segment primarily provides executive management services for the Company. Operating expenses for the three months ended December 31, 2020 and 2019 was $49,109 and $98,462, respectively. The decrease in operating expenses in 2020 was due primarily to the decrease in professional fees. The loss from operations for the three months ended December 31, 2020 and 2019 was $49,109 and $98,462, 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, 2020, the Company incurred a net loss of $324,300 and used cash in operations of $267,797, and had a shareholders’ deficit of $2,501,338 as of December 31, 2020. In addition, loans payable of $504,250 and payroll taxes of $87,834 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, 2020 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At December 31, 2020, the Company had cash on hand in the amount of $78,523. 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, 2020, the Company received $295,000 through short-term loans from officers and shareholders. As of December 31, 2020, loans payable to officers and shareholders of $1,460,250 were outstanding, with $504,250 being past due. 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.

 

23
 

 

Comparison of three months ended December 31, 2020 and 2019

 

As of December 31, 2020, we had $78,523 in cash, negative working capital of $2,465,785 and an accumulated deficit of $27,764,061.

 

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.

 

Cash flows used in operating activities

 

During the three months ended December 31, 2020, the Company used cash flows in operating activities of $267,797, compared to $195,784 used in the three months ended December 31, 2019. During the three months ended December 31, 2020, the Company incurred a net loss of $324,300 and $57,855 of non-cash expenses, compared to a net loss of $346,596 and $72,444 of non-cash expenses during the three months ended December 31, 2019.

 

Cash flows used in investing activities

 

During the three months ended December 31, 2020 and 2019, the Company had no cash flows from investing activities.

 

Cash flows provided by financing activities

 

During the three months ended December 31, 2020, the Company had proceeds from loans payable from officers and shareholders of $295,000. 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.

 

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, 2020, filed with the Securities and Exchange Commission on February 8, 2021. 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, 2020.

 

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.

 

24
 

 

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, 2020, 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.

 

5. The Company has insufficient full time personnel with an appropriate level of technical accounting knowledge to SEC reporting requirements to timely meet the filing requirements.

 

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.

 

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;

 

25
 

 

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

 

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

 

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

 

As of the end of our most recent fiscal year, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, as of September 30, 2020, 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, 2020.

 

To address the material weaknesses set forth in items (1) and (2) 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.

 

26
 

 

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. Except as otherwise described herein, 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.

 

We continue efforts 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, the Company has negotiated settlement of all ex-employee wage and benefits claims except for two. The first regards unpaid wages claimed due together with interest at the rate of 4% per annum on such amount as the Company originally agreed upon in settlement negotiations. The ex-employee 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.

 

The second claim was filed with the Illinois Department of Labor asserting a violation of the Illinois Wage Payment and Collection Act by the Company’s former CEO. That claim alleges unpaid wages in the amount of $158,714.60 and unpaid vacation pay in the amount of $20,833.33 for a total amount of $179,547.90, as well as certain statutory damages including, but not limited to, 2% of the wages due per month plus attorneys’ fees if the ex-CEO elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim. The Company has filed its response to such claim with the Department denying the substantive allegations therein and asserting certain factual and legal defenses, including breach of fiduciary duty, as a bar to all claimed compensation. The claim remains pending, but as the date hereof, no suit has been filed against the Company asserting a violation of the Act based on said claim.

 

On or about June 29, 2020, the Company received notice that Hanover Hoffman Estates, LLC (“HHE”), filed case number 2020L006092 in the Circuit Court of Cook County alleging failure to pay Base Rent and abandonment of certain office space in Hoffman Estates, Illinois subject to a Commercial Lease dated May 26, 2016. HHE seeks at least $672,888 in base rent and other amounts under the lease, as well as treble damages from our ex-CEO and two past Directors who were serving on our Board as of the date of the lease. The Company has continued evaluation of the allegations, defenses and alternate actions, and it is engaged settlement negotiations which are on-going.

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

27
 

 

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.

 

28
 

 

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: April 7, 2021 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: April 7, 2021 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   April 7, 2021
Calvin O’Harrow        
         
/s/ Douglas W. Samuelson   Chief Financial Officer and Principal Accounting Officer   April 7, 2021
Douglas W. Samuelson        
         
/s/ Paul D. Jones   Director, President   April 7, 2021
Paul D. Jones        
         
/s/ Thomas E. Scott   Director, Secretary   April 7, 2021
Thomas E. Scott        
         
/s/ William E. Kingsford   Director   April 7, 2021
William E. Kingsford        
         
/s/ Roy M. Harsch   Director, Chairman   April 7, 2021
Roy M. Harsch        

 

29

  

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, 2020;

 

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: April 7, 2021  
   
/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, 2020;

 

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: April 7, 2021  
   
/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, 2020 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: April 7, 2021  
   
/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, 2020 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: April 7, 2021  
   
/s/ Douglas W. Samuelson  
Name: Douglas W. Samuelson  
Title: Chief Accounting Officer and Chief Financial Officer  

 

 

 

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Contractual Term Number of Warrants, Exercisable, Weighted Average Exercise Price Total current assets Right-of-use asset Total other assets TOTAL ASSETS Product and Service [Axis] Gross profit Loss from operations Loss Contingency Nature [Axis] Interest rate of negotiated settlement Claims amount Wages increase rate Claim alleges unpaid wages Unpaid vacation amount Loans payable to related parties Fair value of options granted Number of stock options granted to purchase Share exercise price Number of stock options cancelled Authentication and Encryption [Member] Board of Directors [Member] CEO [Member] Contribution of capital by joint venture partner. Employees and Consultants [Member] Exercise Price Range One [Member] Exercise Price Range Two [Member] Fair value of stock options issued for services. GEN2 [Member] Gen 2 Funding, Inc [Member] Increase (decrease) in lease liability. Initial recognition of right-of-use assets and operating lease liabilities upon adoption of ASC Topic 842. Interest rate of negotiated settlement. Medical Devices [Member] Neo Phototherapy LLC [Member] Non-Controlling Interests [Policy Text Block] Officers and Directors [Member] Psoria Development Company LLC. [Member] Psoria-Shield Inc. [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. 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. 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. StealthCo, Inc. 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Stock Options and Warrants ShareBasedCompensationSharesAuthorizedUnderStockNonOptionPlansExercisePriceRangeLowerRangeLimit ShareBasedCompensationSharesAuthorizedUnderStockNonOptionPlansExercisePriceRangeUpperRangeLimit EX-101.PRE 11 wcui-20201231_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.21.1
Document and Entity Information
3 Months Ended
Dec. 31, 2020
shares
Cover [Abstract]  
Entity Registrant Name Wellness Center USA, Inc.
Entity Central Index Key 0001516887
Document Type 10-Q
Document Period End Date Dec. 31, 2020
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 119,639,577
Document Fiscal Period Focus Q1
Document Fiscal Year Focus 2021
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Balance Sheets - USD ($)
Dec. 31, 2020
Sep. 30, 2020
Current Assets    
Cash $ 78,523 $ 51,320
Accounts receivable 23,989
Inventories 134,522 94,560
Prepaid expenses and other current assets 500 500
Total Current Assets 237,534 146,380
Right of use asset 1,613 6,961
Total Other Assets 1,613 6,961
TOTAL ASSETS 239,147 153,341
Current Liabilities    
Accounts payable and accrued expenses 480,744 408,297
Payroll taxes payable - past due 87,834 92,334
Lease liability 1,613 6,961
Lease abandonment liability 672,878 672,878
Loans payable from officers and shareholders, including $504,250 past due at December 31, 2020 1,460,250 1,165,250
Total Current Liabilities 2,703,319 2,345,720
Long-term Liabilities    
U.S. Small Business Administration PPP loan payable 37,166 37,166
Total Liabilities 2,740,485 2,382,886
Shareholders' Deficit    
Common stock, par value $0.001, 200,000,000 shares authorized; 119,639,577 and 118,252,077 shares issued and outstanding, respectively 119,639 118,252
Additional paid-in capital 25,104,736 25,053,616
Accumulated deficit (27,764,061) (27,583,363)
Total Wellness Center USA shareholders' deficit (2,539,686) (2,411,495)
Non-controlling interest 38,348 181,950
Total Shareholder's deficit (2,501,338) (2,229,545)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 239,147 $ 153,341
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
Dec. 31, 2020
Sep. 30, 2020
Statement of Financial Position [Abstract]    
Loans payable from officers and shareholders, past due amount $ 504,250  
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares, issued 119,639,577 118,252,077
Common stock, shares, outstanding 119,639,577 118,252,077
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Income Statement [Abstract]    
Trade sales $ 90,499
Cost of goods sold 80,100
Gross profit 10,399
Operating expenses 308,541 337,273
Loss from operations (298,142) (337,273)
Other expense    
Interest expense (26,158) (9,323)
Total other expense (26,158) (9,323)
NET LOSS (324,300) (346,596)
Net loss attributable to non-controlling interest 143,602 22,129
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC. $ (180,698) $ (324,467)
BASIC AND DILUTED LOSS PER SHARE $ (0.00) $ (0.00)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED 118,960,909 107,497,077
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.21.1
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, 2019 $ 107,497 $ 23,777,647 $ (25,362,287) $ (1,477,143) $ 393,149 $ (2,229,545)
Balance, shares at Sep. 30, 2019 107,497,077          
Fair value of vested stock options 65,738 65,738 65,738
Contribution of capital by joint venture partners 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          
Balance at Sep. 30, 2020 $ 118,252 25,053,616 (27,583,363) (2,411,495) 181,950 (2,229,545)
Balance, shares at Sep. 30, 2020 118,252,077          
Fair value of vested stock options 10,882 10,882 10,882
Fair value of common stock issued for services $ 1,387 40,238 41,625 41,625
Fair value of common stock issued for services, shares 1,387,500          
Net loss (180,698) (180,698) (143,602) (324,300)
Balance at Dec. 31, 2020 $ 119,639 $ 25,104,736 $ (27,764,061) $ (2,539,686) $ 38,348 $ (2,501,338)
Balance, shares at Dec. 31, 2020 119,639,577          
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Cash Flows from Operating Activities    
Net loss $ (324,300) $ (346,596)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation expense 1,562
Amortization of right-of-use asset 5,348 5,144
Provision for excess and slow moving inventories 50,000
Fair value of common shares issued for services 41,625
Fair value of stock options issued for services 10,882 65,738
(Increase) Decrease in:    
Accounts receivable (23,989)
Inventories (89,962)
Prepaid expenses and other assets (500)
(Decrease) Increase in:    
Accounts payable and accrued expenses 72,447 84,012
Payroll taxes payable (4,500)
Lease liability (5,348) (5,144)
Net cash used in operating activities (267,797) (195,784)
Cash Flows from Financing Activities    
Proceeds from loans payable from officers and shareholders 295,000 135,000
Contribution of capital by joint venture partner 50,000
Net cash provided by financing activities 295,000 185,000
Net increase (decrease) in cash 27,203 (10,784)
Cash beginning of period 51,320 53,147
Cash end of period 78,523 42,363
Supplemental cash flows disclosures:    
Interest paid
Taxes paid
Supplemental non-cash disclosures:    
Initial recognition of right-of-use assets and operating lease liabilities upon adoption of ASC Topic 842 $ 27,841
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.21.1
Basis of Presentation
3 Months Ended
Dec. 31, 2020
Accounting Policies [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 sanitation purposes; 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, 2020 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021.

 

COVID-19 Considerations

 

In the period ended December 31, 2020, the COVID-19 pandemic did not have a material net impact on our operating results. In the future, the pandemic may cause reduced demand for our products if, for example, the pandemic results in a recessionary economic environment which negatively effects the consumers who purchase our products.

 

Our ability to operate without significant negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect our employees and our supply chain. The Company has endeavored to follow the recommended actions of government and health authorities to protect our employees. Since the onset of the COVID-19 pandemic, we maintained the consistency of our operations. However, the uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for example an inability of a key supplier or transportation supplier to source and transport materials) that could negatively impact our operations.

 

Through December 31, 2020, the COVID-19 pandemic has not negatively impacted the Company’s liquidity position as of such date. Through December 31, 2020, the Company continues to generate cash flows through financing activities to meet its short-term liquidity needs, and it expects to maintain access to those shareholder loans. The Company has not observed any material impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic.

 

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, 2020, the Company incurred a net loss of $324,300 and used cash in operations of $267,797, and had a shareholders’ deficit of $2,501,338 as of December 31, 2020. In addition, loans payable of $504,250 and payroll taxes of $87,834 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, 2020 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At December 31, 2020, the Company had cash on hand in the amount of $78,523. 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, 2020, the Company received $295,000 through short-term loans from officers and shareholders.

 

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

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies
3 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Consolidation

 

The consolidated financial statements include the Company’s wholly owned subsidiaries and the accounts of its subsidiaries for which it was determined that Company has operational and management control. The Company’s consolidated subsidiaries and/or controlled 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 at September 30, 2019     Attributable interest at September 30, 2020  
Psoria-Shield Inc. (“PSI”)   The State of Florida  

June 2009

(August 2012)

    100 %     51 %(1)
StealthCo, Inc. (“StealthCo”)   The State of Illinois   March 2014     100 %     100 %
Psoria Development Company LLC. (“PDC”)   The State of Illinois  

January 2015/

November 2018

    0 %     0 %
NEO Phototherapy LLC (“NEO”)   The State of Illinois   December 2018     51 %(1)     0 %
Protec Scientific, Inc (“Protec”)   The State of New York   April 2020     0 %     38 %

 

(1) - Effective April 30, 2020, the Company’s 51% interest in NEO was converted into a 51% interest in PSI.

 

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, and 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, 2020 and 2019, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At December 31, 2020 and 2019, the dilutive impact of outstanding stock options of 12,665,238 and 15,037,738 shares, respectively, and outstanding warrants for 67,634,049 and 66,484,049 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

 

Revenue Recognition

 

The company records revenue under the guidance of Accounting Standards Codification (“ASC“) 606, Revenue from Contracts with Customers (Topic 606) which 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.

 

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, 2020 and 2019.

 

Non-controlling Interests

 

In December 2018, PSI entered into a Joint Venture Agreement with GEN2 for 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 Phototherapy, Inc. (“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. As of September 30, 2019, GEN2 had received $975,000 of investments to contribute to NEO. As of April 30, 2020, the Company controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%.

 

Effective April 30, 2020, the joint venture with GEN2 was reorganized. GEN2 shareholders exchanged their common shares in GEN2, and the individual exchanged his membership interests in NEO, for common shares representing 49% ownership in PSI. The Company retained its common shares in PSI, which provides the Company a 51% economic interest in the PSI technology and products developed by the joint venture. During three months ended December 31, 2020, PSI recorded a loss of $151,433 relating to its operations, of which $74,202 was allocated to the non-controlling interest.

 

Repayment of the $975,000 investment will begin through and upon the date which PSI has realized and retained cumulative net income/distributable cash in the amount of $300,000. The minority interest of PSI ownership consists of accredited investors, and investment participation of $750,000 from several WCUI officers and directors, including Calvin R. O’Harrow and Roy M. Harsch.

 

In May 2020, the Company’s subsidiary, PSI, agreed to become a majority shareholder in Protec Scientific, Inc. (“Protec”), a company formed in April 2020 by John Yorke for the purpose of designing, developing and marketing products that use spectral photonic emissions across a variety of applications. As of September 30, 2020, PSI had advanced $191,000 to Protec in furtherance of its agreement to acquire approximately 62% of Protec, with the Company’s share being approximately 32%, based on its PSI ownership. The remaining 30% share is to be attributed to PSI’s minority shareholders, based on their PSI ownership. During the year ended September 30, 2020, Protec received an additional $120,000 from non-affiliated investors, of which $74,400 was recorded to additional paid-in capital and $45,600 to the non-controlling interests. The additional investments gave the non-controlling interests a 38% ownership interest in Protec. During the three months ended December 31, 2020, Protec recorded a loss of $101,492, of which $69,400 was allocated to the non-controlling interests.

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value. Cost is computed on a first-in, first-out basis. At December 31, 2020, primarily all of the inventories consisted of raw materials or work-in-progress. The Company provides inventory reserves based on excess and obsolete inventories determined primarily by future demand forecasts. The write down amount, if any, is measured as the difference between the cost of the inventory and net realizable value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. At December 31, 2020, the Company recorded a reserve of $50,000 for excess and slow moving inventories. At September 30, 2020, no reserve was recorded for excess, slow moving or obsolete inventory.

 

Stock-Based Compensation

 

The Company periodically issues stock-based compensation to officers, directors, and consultants for services rendered, and as part of financing transactions. Such issuances vest and expire according to terms established at the issuance date. Stock-based payments to officers, directors, employees, and for acquiring goods and services from non-employees, which include grants of employee stock options, are recognized in the financial statements based on their fair values in accordance with Topic 718. Stock option grants, which are generally time vested, will be measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period.

 

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

 

Recently Issued Accounting Pronouncements

 

In 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 R9.htm IDEA: XBRL DOCUMENT v3.21.1
Loans Payable from Officers and Shareholders
3 Months Ended
Dec. 31, 2020
Debt Disclosure [Abstract]  
Loans Payable from Officers and Shareholders

NOTE 3 – LOANS PAYABLE FROM OFFICERS AND SHAREHOLDERS

 

As of September 30, 2020, loans payable from officers and shareholders of $1,165,250 were outstanding. During the three months ended December 31, 2020, the Company borrowed $295,000 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, 2020, loans payable to officers and shareholders of $1,460,250 were outstanding and $504,250 was past due.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.21.1
U.S. Small Business Administration Loan Payable
3 Months Ended
Dec. 31, 2020
U.s. Small Business Administration Loan Payable  
U.S. Small Business Administration Loan Payable

NOTE 4 – U.S. SMALL BUSINESS ADMINISTRATION LOAN PAYABLE

 

During the year ended September 30, 2020, the Company’s subsidiary, PSI, entered into a loan agreement with the United States Small Business Administration (SBA) under which the Company borrowed $37,166. The loan is unsecured, accrues interest at 1.0% and is due on April 23, 2022. Beginning in March 2021, PSI is required to make monthly interest payments and all principal and unpaid interest is due in April 2022. If PSI meets certain criteria as defined in the agreement, the loan may be forgiven at which time the Company would recognize a gain on debt forgiveness. As of the date of this filing, the Company had not yet applied for forgiveness of the loan. As of December 31, 2020, a total of $37,166 was outstanding on the loan.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.21.1
Lease Liabilities
3 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Lease Liabilities

NOTE 5 – LEASE LIABILITIES

 

Operating Lease

 

In February 2019, the Company’s PSI subsidiary entered into a 24-month non-cancellable lease for its office facilities that will require monthly payments of $1,850 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 asset and liability at the inception of the lease was $27,841, using a discount rate of 4.00%. As of September 30, 2020, the value of the lease asset and liability was $6,961, respectively. During the three months ended December 31, 2020, the Company made payments of $5,348 towards the lease liability. As of December 31, 2020, the lease liability amounted to $1,613.

 

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, 2020 was $5,348. During the three months ended December 31, 2020, the Company reflected amortization of the right of use asset of $5,348 related to this lease, resulting in a net asset balance of 1,613 as of December 31, 2020.

 

Other 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.

 

On or about June 29, 2020, we received notice that Hanover Hoffman Estates, LLC (“HHE”), filed case number 2020L006092 in the Circuit Court of Cook County alleging our failure to pay Base Rent and abandonment of certain office space in Hoffman Estates, Illinois subject to a Commercial Lease dated May 26, 2016. HHE seeks at least $672,878 in base rent and other amounts under the lease, as well as treble damages from our ex-CEO and two past Directors who were serving on our Board as of the date of the lease. We are currently evaluating the allegations, defenses and alternate actions. As of December 31, 2020, the Company has recorded the full amount of the judgement due.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.21.1
Shareholders' Equity
3 Months Ended
Dec. 31, 2020
Equity [Abstract]  
Shareholders' Equity

NOTE 6 – SHAREHOLDERS’ EQUITY

 

Restricted Stock Grants

 

In April 2020, the Company’s Board of Directors approved the issuance of a combined total of 20,170,000 restricted shares of the Company’s common stock to its Officers and Directors. A total of 7,120,000 shares vested in April 2020, while 1,800,000 will vest monthly from April 2020 through March 2021, and 11,250,000 will vest monthly from April 2020 through March 2023. Of the 13,050,000 shares that vest over time, a total of 1,387,500 shares vested during the three months ended December 31, 2020.

 

The following table summarizes restricted common stock activity:

 

   

Number of Restricted

Shares

    Fair Value    

Weighted

Average

Grant Date

Fair Value

 
                   
Non-vested, September 30, 2020     10,275,000     $ 308,250     $ 0.03  
Granted     -       -       -  
Vested     (1,387,500 )     (41,625 )     0.03  
Forfeited     -       -       -  
Non-vested, December 31, 2020     8,887,500     $ 266,625     $ 0.03  

 

During the three months ended December 31, 2020, the Company recorded $41,625 of stock compensation for the value of restricted common stock vesting during the period, and as of December 31, 2020, unvested compensation of $266,625 remained that will be amortized over the remaining vesting period.

 

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.

 

The table below summarizes the Company’s stock option activities for the three months ended December 31, 2020:

 

   

Number of

Option Shares

   

Exercise

Price Range

Per Share

    Weighted Average Exercise Price  
                   
Balance, September 30, 2020     14,127,738     $ 0.03 - 2.00     $ 0.29  
Granted     -       -       -  
Cancelled     -       -       -  
Exercised     -       -       -  
Expired     (1,462,500 )     0.14 - 2.00       1.41  
Balance, December 31, 2020     12,665,238     $ 0.03 - 0.40     $ 0.10  
Vested and exercisable, December 31, 2020     9,702,738     $ 0.03 - 0.40     $ 0.12  
                         
Unvested, December 31, 2020     2,962,500     $ 0.04     $ 0.04  

 

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2020:

 

      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  
                                       
$ 0.03 - 0.39       12,602,738       6.75     $ 0.09       9,640,238       5.85     $ 0.12  
  0.40       62,500       1.25       0.40       62,500       1.25       0.40  
$ 0.03 - 0.40       12,665,238       6.72     $ 0.10       9,702,738       5.82     $ 0.12  

 

During the three months ended December 31, 2020, the Company recorded $10,882 of stock compensation for the value of options vesting during the period, and as of December 31, 2020, unvested compensation of $85,882 remained that will be amortized over the remaining vesting period.

 

The total aggregate intrinsic value for option shares outstanding at December 31, 2020 was $126,625. As of December 31, 2020, there were 17,334,762 shares of stock options remaining available for issuance under the 2010 Plan.

 

Stock Warrants

 

The table below summarizes the Company’s warrants activities for the three months ended December 31, 2020:

 

   

Number of

Warrant Shares

    Exercise Price Range Per Share     Weighted Average Exercise Price  
                   
Balance, September 30, 2020     67,634,049     $ 0.07 - 0.40     $ 0.16  
Granted     -       -       -  
Cancelled     -       -       -  
Exercised     -       -       -  
Expired     -       -       -  
Balance, December 31, 2020     67,634,049     $ 0.07 - 0.40     $ 0.16  
Vested and exercisable, December 31, 2020     67,634,049     $ 0.07 - 0.40     $ 0.16  

 

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2020:

 

      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       60,429,384       1.74     $ 0.15       60,429,384       1.74     $ 0.15  
   0.21 – 0.40       7,204,665       0.64       0.26       7,204,665       0.64       0.26  
                                                     
$ 0.12 – 0.67       67,634,049       1.62     $ 0.16       67,634,049       1.62     $ 0.16  

 

There was no aggregate intrinsic value for warrant shares outstanding at December 31, 2020.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.21.1
Segment Reporting
3 Months Ended
Dec. 31, 2020
Segment Reporting [Abstract]  
Segment Reporting

NOTE 7 – SEGMENT REPORTING

 

Reportable segments are components of an enterprise about which separate financial information is available and that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

 

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, and for sanitation purposes.

 

(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, 2020  
    Corporate     Medical Devices     Authentication and Encryption     Total  
ASSETS                                
Current Assets                                
Cash   $ 8,178     $ 67,709     $ 2,636     $ 78,523  
Accounts receivable     -       23,989       -       23,989  
Inventories     -       134,522       -       134,522  
Prepaid expenses and other current assets     500       -       -       500  
Total current assets     8,678       226,220       2,636       237,534  
                                 
Right of use asset     -       1,613       -       1,613  
Total other assets     -       1,613       -       1,613  
                                 
TOTAL ASSETS   $ 8,678     $ 227,833     $ 2,636     $ 239,147  

 

Operations by Segment

 

    For the Three Months Ended  
    December 31, 2020  
    Corporate     Medical Devices     Authentication and Encryption     Total  
                         
Trade sales   $ -     $ 90,499     $ -     $ 90,499  
                                 
Cost of goods sold     -       80,100       -       80,100  
                                 
Gross profit     -       10,399       -       10,399  
                                 
Operating expenses     49,109       256,471       2,961       308,541  
                                 
Loss from operations   $ (49,109 )   $ (246,072 )   $ (2,961 )   $ (298,142 )

  

    For the Three Months Ended  
    December 31, 2019  
    Corporate     Medical Devices     Authentication and Encryption     Total  
                         
Trade 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 )
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.21.1
Legal Matters
3 Months Ended
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Legal Matters

NOTE 8 – LEGAL MATTERS

 

The Company is periodically engaged in legal proceedings arising from and relating to its business operations. Except as otherwise described herein, 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.

 

We continue efforts 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, the Company has negotiated settlement of all ex-employee wage and benefits claims except for two. The first regards unpaid wages claimed due together with interest at the rate of 4% per annum on such amount as the Company originally agreed upon in settlement negotiations. The ex-employee 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.

 

The second claim was filed with the Illinois Department of Labor asserting a violation of the Illinois Wage Payment and Collection Act by the Company’s former CEO. That claim alleges unpaid wages in the amount of $158,714.60 and unpaid vacation pay in the amount of $20,833.33 for a total amount of $179,547.90, as well as certain statutory damages including, but not limited to, 2% of the wages due per month plus attorneys’ fees if the ex-CEO elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim. The Company has filed its response to such claim with the Department denying the substantive allegations therein and asserting certain factual and legal defenses, including breach of fiduciary duty, as a bar to all claimed compensation. The claim remains pending, but as the date hereof, no suit has been filed against the Company asserting a violation of the Act based on said claim.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.21.1
Subsequent Events
3 Months Ended
Dec. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events

NOTE 9 – SUBSEQUENT EVENTS

 

Subsequent to December 31, 2020, the Company borrowed $355,000 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.

 

On April 1, 2021, the Company’s Board of Directors approved the issuance of a combined total of 3,750,000 restricted shares of the Company’s common stock to certain of its Officers and Directors for future services to be performed. The shares vest monthly from April 2023 through March 2024. The fair value of the shares on the date of grant was $187,500.

 

The Board also approved the issuance of a combined total of 10,085,714 restricted shares of the Company’s common stock to certain of its Officers and Directors in connection with their officer and shareholder loans. A total of 7,060,000 of the shares vested upon grant and 3,025,714 shares vest in April 2025. The fair value of the shares on the date of grant was $504,286.

 

On April 1, 2021, the Company’s Board of Directors approved the grant of stock options to its Chief Executive Officer (CEO) to purchase 1,300,000 shares of the Company’s common stock with an exercise price of $0.05 per share. The options expire ten years from the date of grant. The option grants are for future services to be performed by the CEO. The shares vest monthly from April 2023 through March 2024. The fair value of the shares on the date of grant was approximately $65,000.

 

The Board also approved the grant of stock options to its CEO to purchase 13,449,429 shares of the Company’s common stock with an exercise price of $0.05 per share. The options expire ten years from the date of grant. The option grants are in connection with his officer and shareholder loans. A total of 9,052,500 of the shares vested upon grant and 4,396,929 shares vest in April 2025. The fair value of the shares on the date of grant was approximately $670,000. In connection with the option grants, the CEO agreed to cancel 5,277,778 of his warrant shares that were scheduled to expire from September 2021 through December 2021.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Basis of Consolidation

Basis of Consolidation

 

The consolidated financial statements include the Company’s wholly owned subsidiaries and the accounts of its subsidiaries for which it was determined that Company has operational and management control. The Company’s consolidated subsidiaries and/or controlled 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 at September 30, 2019     Attributable interest at September 30, 2020  
Psoria-Shield Inc. (“PSI”)   The State of Florida  

June 2009

(August 2012)

    100 %     51 %(1)
StealthCo, Inc. (“StealthCo”)   The State of Illinois   March 2014     100 %     100 %
Psoria Development Company LLC. (“PDC”)   The State of Illinois  

January 2015/

November 2018

    0 %     0 %
NEO Phototherapy LLC (“NEO”)   The State of Illinois   December 2018     51 %(1)     0 %
Protec Scientific, Inc (“Protec”)   The State of New York   April 2020     0 %     38 %

 

(1) - Effective April 30, 2020, the Company’s 51% interest in NEO was converted into a 51% interest in PSI.

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, and 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, 2020 and 2019, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At December 31, 2020 and 2019, the dilutive impact of outstanding stock options of 12,665,238 and 15,037,738 shares, respectively, and outstanding warrants for 67,634,049 and 66,484,049 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

Revenue Recognition

Revenue Recognition

 

The company records revenue under the guidance of Accounting Standards Codification (“ASC“) 606, Revenue from Contracts with Customers (Topic 606) which 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.

 

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, 2020 and 2019.

Non-controlling Interests

Non-controlling Interests

 

In December 2018, PSI entered into a Joint Venture Agreement with GEN2 for 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 Phototherapy, Inc. (“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. As of September 30, 2019, GEN2 had received $975,000 of investments to contribute to NEO. As of April 30, 2020, the Company controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%.

 

Effective April 30, 2020, the joint venture with GEN2 was reorganized. GEN2 shareholders exchanged their common shares in GEN2, and the individual exchanged his membership interests in NEO, for common shares representing 49% ownership in PSI. The Company retained its common shares in PSI, which provides the Company a 51% economic interest in the PSI technology and products developed by the joint venture. During three months ended December 31, 2020, PSI recorded a loss of $151,433 relating to its operations, of which $74,202 was allocated to the non-controlling interest.

 

Repayment of the $975,000 investment will begin through and upon the date which PSI has realized and retained cumulative net income/distributable cash in the amount of $300,000. The minority interest of PSI ownership consists of accredited investors, and investment participation of $750,000 from several WCUI officers and directors, including Calvin R. O’Harrow and Roy M. Harsch.

 

In May 2020, the Company’s subsidiary, PSI, agreed to become a majority shareholder in Protec Scientific, Inc. (“Protec”), a company formed in April 2020 by John Yorke for the purpose of designing, developing and marketing products that use spectral photonic emissions across a variety of applications. As of September 30, 2020, PSI had advanced $191,000 to Protec in furtherance of its agreement to acquire approximately 62% of Protec, with the Company’s share being approximately 32%, based on its PSI ownership. The remaining 30% share is to be attributed to PSI’s minority shareholders, based on their PSI ownership. During the year ended September 30, 2020, Protec received an additional $120,000 from non-affiliated investors, of which $74,400 was recorded to additional paid-in capital and $45,600 to the non-controlling interests. The additional investments gave the non-controlling interests a 38% ownership interest in Protec. During the three months ended December 31, 2020, Protec recorded a loss of $101,492, of which $69,400 was allocated to the non-controlling interests.

Inventories

Inventories

 

Inventories are stated at the lower of cost or net realizable value. Cost is computed on a first-in, first-out basis. At December 31, 2020, primarily all of the inventories consisted of raw materials or work-in-progress. The Company provides inventory reserves based on excess and obsolete inventories determined primarily by future demand forecasts. The write down amount, if any, is measured as the difference between the cost of the inventory and net realizable value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. At December 31, 2020, the Company recorded a reserve of $50,000 for excess and slow moving inventories. At September 30, 2020, no reserve was recorded for excess, slow moving or obsolete inventory.

Stock-based Compensation

Stock-Based Compensation

 

The Company periodically issues stock-based compensation to officers, directors, and consultants for services rendered, and as part of financing transactions. Such issuances vest and expire according to terms established at the issuance date. Stock-based payments to officers, directors, employees, and for acquiring goods and services from non-employees, which include grants of employee stock options, are recognized in the financial statements based on their fair values in accordance with Topic 718. Stock option grants, which are generally time vested, will be measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period.

 

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

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

 

In 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 28 R17.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Schedule of Company's Consolidated Subsidiaries

The Company’s consolidated subsidiaries and/or controlled 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 at September 30, 2019     Attributable interest at September 30, 2020  
Psoria-Shield Inc. (“PSI”)   The State of Florida  

June 2009

(August 2012)

    100 %     51 %(1)
StealthCo, Inc. (“StealthCo”)   The State of Illinois   March 2014     100 %     100 %
Psoria Development Company LLC. (“PDC”)   The State of Illinois  

January 2015/

November 2018

    0 %     0 %
NEO Phototherapy LLC (“NEO”)   The State of Illinois   December 2018     51 %(1)     0 %
Protec Scientific, Inc (“Protec”)   The State of New York   April 2020     0 %     38 %

 

(1) - Effective April 30, 2020, the Company’s 51% interest in NEO was converted into a 51% interest in PSI.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.21.1
Shareholders' Equity (Tables)
3 Months Ended
Dec. 31, 2020
Equity [Abstract]  
Summary of Restricted Common Stock

The following table summarizes restricted common stock activity:

 

   

Number of Restricted

Shares

    Fair Value    

Weighted

Average

Grant Date

Fair Value

 
                   
Non-vested, September 30, 2020     10,275,000     $ 308,250     $ 0.03  
Granted     -       -       -  
Vested     (1,387,500 )     (41,625 )     0.03  
Forfeited     -       -       -  
Non-vested, December 31, 2020     8,887,500     $ 266,625     $ 0.03  
Schedule of Stock Option Activity

The table below summarizes the Company’s stock option activities for the three months ended December 31, 2020:

 

   

Number of

Option Shares

   

Exercise

Price Range

Per Share

    Weighted Average Exercise Price  
                   
Balance, September 30, 2020     14,127,738     $ 0.03 - 2.00     $ 0.29  
Granted     -       -       -  
Cancelled     -       -       -  
Exercised     -       -       -  
Expired     (1,462,500 )     0.14 - 2.00       1.41  
Balance, December 31, 2020     12,665,238     $ 0.03 - 0.40     $ 0.10  
Vested and exercisable, December 31, 2020     9,702,738     $ 0.03 - 0.40     $ 0.12  
                         
Unvested, December 31, 2020     2,962,500     $ 0.04     $ 0.04  
Schedule of Outstanding and Exercisable Options by Exercise Price Range

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2020:

 

      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  
                                       
$ 0.03 - 0.39       12,602,738       6.75     $ 0.09       9,640,238       5.85     $ 0.12  
  0.40       62,500       1.25       0.40       62,500       1.25       0.40  
$ 0.03 - 0.40       12,665,238       6.72     $ 0.10       9,702,738       5.82     $ 0.12  
Schedule of Warrant Activity

The table below summarizes the Company’s warrants activities for the three months ended December 31, 2020:

 

   

Number of

Warrant Shares

    Exercise Price Range Per Share     Weighted Average Exercise Price  
                   
Balance, September 30, 2020     67,634,049     $ 0.07 - 0.40     $ 0.16  
Granted     -       -       -  
Cancelled     -       -       -  
Exercised     -       -       -  
Expired     -       -       -  
Balance, December 31, 2020     67,634,049     $ 0.07 - 0.40     $ 0.16  
Vested and exercisable, December 31, 2020     67,634,049     $ 0.07 - 0.40     $ 0.16  
Schedule of Outstanding and Exercisable Warrants by Exercise Price Range

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2020:

 

      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       60,429,384       1.74     $ 0.15       60,429,384       1.74     $ 0.15  
   0.21 – 0.40       7,204,665       0.64       0.26       7,204,665       0.64       0.26  
                                                     
$ 0.12 – 0.67       67,634,049       1.62     $ 0.16       67,634,049       1.62     $ 0.16  

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.21.1
Segment Reporting (Tables)
3 Months Ended
Dec. 31, 2020
Segment Reporting [Abstract]  
Schedule of Assets of Reportable Segments

The detailed segment information of the Company is as follows:

 

Assets By Segment

 

    December 31, 2020  
    Corporate     Medical Devices     Authentication and Encryption     Total  
ASSETS                                
Current Assets                                
Cash   $ 8,178     $ 67,709     $ 2,636     $ 78,523  
Accounts receivable     -       23,989       -       23,989  
Inventories     -       134,522       -       134,522  
Prepaid expenses and other current assets     500       -       -       500  
Total current assets     8,678       226,220       2,636       237,534  
                                 
Right of use asset     -       1,613       -       1,613  
Total other assets     -       1,613       -       1,613  
                                 
TOTAL ASSETS   $ 8,678     $ 227,833     $ 2,636     $ 239,147  
Schedule of Operations of Reportable Segments

Operations by Segment

 

    For the Three Months Ended  
    December 31, 2020  
    Corporate     Medical Devices     Authentication and Encryption     Total  
                         
Trade sales   $ -     $ 90,499     $ -     $ 90,499  
                                 
Cost of goods sold     -       80,100       -       80,100  
                                 
Gross profit     -       10,399       -       10,399  
                                 
Operating expenses     49,109       256,471       2,961       308,541  
                                 
Loss from operations   $ (49,109 )   $ (246,072 )   $ (2,961 )   $ (298,142 )

  

    For the Three Months Ended  
    December 31, 2019  
    Corporate     Medical Devices     Authentication and Encryption     Total  
                         
Trade 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 )
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.21.1
Basis of Presentation (Details Narrative) - USD ($)
3 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Sep. 30, 2020
Sep. 30, 2019
Accounting Policies [Abstract]        
Entity incorporation, state country name Nevada      
Net loss $ (324,300) $ (346,596)    
Cash used in operations (267,797) (195,784)    
Shareholders' deficit (2,501,338) (1,314,852) $ (2,229,545) $ (2,229,545)
Loans payable 504,250      
Payroll taxes due 87,834   92,334  
Cash on hand 78,523   $ 51,320  
Short-term loans from officers $ 295,000 $ 135,000    
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
May 31, 2020
Dec. 31, 2018
Dec. 31, 2020
Dec. 31, 2019
Sep. 30, 2020
Apr. 30, 2020
Sep. 30, 2019
Deferred revenue            
Non-controlling interest, description   Pursuant to the Joint Venture Agreement, the venture will be conducted through NEO Phototherapy, Inc. ("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. As of September 30, 2019, GEN2 had received $975,000 of investments to contribute to NEO. As of April 30, 2020, the Company controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%.          
Operating loss     (298,142) $ (337,273)      
Non-controlling interest     38,348   $ 181,950    
Additional paid-in capital     25,104,736   25,053,616    
Inventory reserves     $ 50,000      
April 30, 2020 [Member]              
Non-controlling interest, description     The joint venture with GEN2 was reorganized. GEN2 shareholders exchanged their common shares in GEN2, and the individual exchanged his membership interests in NEO, for common shares representing 49% ownership in PSI. The Company retained its common shares in PSI, which provides the Company a 51% economic interest in the PSI technology and products developed by the joint venture. During three months ended December 31, 2020, PSI recorded a loss of $151,433 relating to its operations, of which $74,202 was allocated to the non-controlling interest.        
Operating loss     $ 151,433        
Non-controlling interest     74,202        
Repayment from investment     975,000        
Distributable cash     300,000        
GEN2 [Member]              
Investments to others             $ 975,000
Employees and Consultants [Member]              
Additional units reserved for issuance   13.50%          
Individual [Member]              
Ownership percentage           49.00%  
Joint venture percentage           51.00%  
Psoria-Shield, Inc [Member]              
Ownership percentage   50.50%          
Proceeds from investment     750,000        
Additional paid-in capital         191,000    
Gen 2 Funding, Inc [Member]              
Ownership percentage   36.00%          
Protec Scientific, Inc [Member]              
Operating loss     101,492        
Non-controlling interest         45,600    
Additional paid-in capital         74,400    
Acquisition description In May 2020, the Company's subsidiary, PSI, agreed to become a majority shareholder in Protec Scientific, Inc. ("Protec"), a company formed in April 2020 by John Yorke for the purpose of designing, developing and marketing products that use spectral photonic emissions across a variety of applications. As of September 30, 2020, PSI had advanced $191,000 to Protec in furtherance of its agreement to acquire approximately 62% of Protec, with the Company's share being approximately 32%, based on its PSI ownership. The remaining 30% share is to be attributed to PSI's minority shareholders, based on their PSI ownership. During the year ended September 30, 2020, Protec received an additional $120,000 from non-affiliated investors, of which $74,400 was recorded to additional paid-in capital and $45,600 to the non-controlling interests. The additional investments gave the non-controlling interests a 38% ownership interest in Protec.            
Loss allocated to the non-controlling interests     $ 69,400        
Protec Scientific, Inc [Member] | Non-affiliated Investors [Member]              
Additional paid-in capital         $ 120,000    
Stock Option [Member]              
Antidilutive securities excluded from computation of earnings per share     12,665,238 15,037,738      
Warrants [Member]              
Antidilutive securities excluded from computation of earnings per share     67,634,049 66,484,049      
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies - Schedule of Company's Consolidated Subsidiaries (Details)
3 Months Ended
Dec. 31, 2020
Sep. 30, 2020
Sep. 30, 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    
Month and Year of incorporation or formation 2009-06    
Month and Year of acquisition/disposition 2012-08    
Attributable interest   51.00% [1] 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    
Month and Year of incorporation or formation 2014-03    
Attributable interest   100.00% 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    
Month and Year of incorporation or formation 2015-01    
Month and Year of acquisition/disposition 2018-11    
Attributable interest   0.00% 0.00%
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    
Month and Year of incorporation or formation 2018-12    
Attributable interest   0.00% 51.00% [1]
Protec Scientific, Inc [Member]      
Name of consolidated subsidiary or entity Protec Scientific, Inc ("Protec")    
State or other jurisdiction of incorporation or organization The State of New York    
Month and Year of incorporation or formation 2020-04    
Attributable interest   38.00% 0.00%
[1] Effective April 30, 2020, the Company's 51% interest in NEO was converted into a 51% interest in PSI.
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies - Schedule of Company's Consolidated Subsidiaries (Details) (Parenthetical)
Sep. 30, 2020
Sep. 30, 2019
Psoria-Shield, Inc [Member]    
Attributable interest 51.00% [1] 100.00%
NEO Phototherapy, LLC, [Member]    
Attributable interest 0.00% 51.00% [1]
[1] Effective April 30, 2020, the Company's 51% interest in NEO was converted into a 51% interest in PSI.
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.21.1
Loans Payable from Officers and Shareholders (Details Narrative) - USD ($)
3 Months Ended
Dec. 31, 2020
Sep. 30, 2020
Debt Disclosure [Abstract]    
Loans payable from officers and shareholders   $ 1,165,250
Proceeds from officers and shareholders $ 295,000  
Loans payable to officers and shareholders 1,460,250  
Loans payable from officers and shareholders, past due amount $ 504,250  
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.21.1
U.S. Small Business Administration Loan Payable (Details) - USD ($)
3 Months Ended
Dec. 31, 2020
Sep. 30, 2020
U.s. Small Business Administration Loan Payable    
Debt instrument, face amount   $ 37,166
Debt interest rate   1.00%
Debt maturity date Apr. 23, 2022  
Debt maturity description Beginning in March 2021, PSI is required to make monthly interest payments and all principal and unpaid interest is due in April 2022.  
U.S. small business administration loan payable $ 37,166 $ 37,166
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.21.1
Lease Liabilities (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Jun. 29, 2020
Feb. 28, 2019
Dec. 31, 2020
Dec. 31, 2019
Sep. 30, 2020
Lease term   24 months      
Payment for lease liability   $ 1,850 $ 5,348    
Lease expiration date   Jan. 31, 2021      
Right of use assets   $ 27,841 1,613   $ 6,961
Lease, discount rate   4.00%      
Lease liability     1,613   $ 6,961
Lease rent expense     5,348    
Amortization of right of use asset     5,348 $ 5,144  
Monthly lease payment     11,000    
Lease obligation remaining     $ 631,587    
Hanover Hoffman Estates LLC [Member]          
Lease rent expense $ 672,878        
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.21.1
Shareholders' Equity (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Apr. 30, 2020
Dec. 31, 2020
Sep. 30, 2020
Jan. 02, 2018
Dec. 29, 2017
Common stock, shares authorized   200,000,000 200,000,000    
Stock options remaining available shares   12,665,238 14,127,738    
Restricted Stock [Member]          
Number of vested shares   1,387,500      
Stock based compensation   $ 41,625      
Unvested compensation   266,625      
Stock Option [Member]          
Stock based compensation   10,882      
Unvested compensation   85,882      
Aggregate intrinsic value   $ 126,625      
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]          
Stock options remaining available shares   17,334,762      
Vest Monthly from April 2020 Through March 2021 [Member]          
Number of vested shares 1,800,000        
Vest Monthly from April 2020 Through March 2023 [Member]          
Number of vested shares 11,250,000        
Vest Over Time [Member]          
Number of vested shares 13,050,000        
Board of Directors [Member]          
Number of restricted shares issued during period, shares 20,170,000        
Number of vested shares 7,120,000        
Warrant [Member]          
Aggregate intrinsic value for warrant        
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.21.1
Shareholders' Equity - Summary of Restricted Common Stock (Details)
3 Months Ended
Dec. 31, 2020
USD ($)
$ / shares
shares
Equity [Abstract]  
Number of Restricted Shares Non-vested, Beginning balance | shares 10,275,000
Number of Restricted Shares Non-vested, Granted | shares
Number of Restricted Shares Non-vested, Vested | shares (1,387,500)
Number of Restricted Shares Non-vested, Forfeited | shares
Number of Restricted Shares Non-vested, Ending balance | shares 8,887,500
Fair Value Non-vested, Beginning balance | $ $ 308,250
Fair Value Non-vested, Granted | $
Fair Value Non-vested, Vested | $ (41,625)
Fair Value Non-vested, Forfeited | $
Fair Value Non-vested, Ending balance | $ $ 266,625
Weighted Average Grant Date Fair Value Non-vested, Beginning balance | $ / shares $ 0.03
Weighted Average Grant Date Fair Value Non-vested, Granted | $ / shares
Weighted Average Grant Date Fair Value Non-vested, Vested | $ / shares 0.03
Weighted Average Grant Date Fair Value Non-vested, Forfeited | $ / shares
Weighted Average Grant Date Fair Value Non-vested, Ending balance | $ / shares $ 0.03
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.21.1
Shareholders' Equity - Schedule of Stock Option Activity (Details)
3 Months Ended
Dec. 31, 2020
$ / shares
shares
Number of Option Shares Outstanding, Number, Beginning balance | shares 14,127,738
Number of Option Shares Outstanding, Granted | shares
Number of Option Shares Outstanding, Cancelled | shares
Number of Option Shares Outstanding, Exercised | shares
Number of Option Shares Outstanding, Expired | shares (1,462,500)
Number of Option Shares Outstanding, Number, Ending balance | shares 12,665,238
Number of Option Shares Outstanding, Vested and exercisable, Ending balance | shares 9,702,738
Number of Option Shares Outstanding, Unvested, Ending balance | shares 2,962,500
Exercise Price Range Per Share, Granted
Exercise Price Range Per Share, Cancelled
Exercise Price Range Per Share, Exercised
Exercise Price Range Per Share, Unvested, Ending balance 0.04
Weighted Average Exercise Price, Number, Beginning balance 0.29
Weighted Average Exercise Price, Granted
Weighted Average Exercise Price, Cancelled
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Expired 1.41
Weighted Average Exercise Price, Number, Ending balance 0.10
Weighted Average Exercise Price, Vested and exercisable, Ending balance 0.12
Weighted Average Exercise Price, Unvested, Ending balance 0.04
Minimum [Member]  
Exercise Price Range Per Share, Number, Beginning balance 0.03
Exercise Price Range Per Share, Expired 0.14
Exercise Price Range Per Share, Number, Ending balance 0.03
Exercise Price Range Per Share, Vested and exercisable, Ending balance 0.03
Maximum [Member]  
Exercise Price Range Per Share, Number, Beginning balance 2.00
Exercise Price Range Per Share, Expired 2.00
Exercise Price Range Per Share, Number, Ending balance 0.40
Exercise Price Range Per Share, Vested and exercisable, Ending balance $ 0.40
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.21.1
Shareholders' Equity - Schedule of Outstanding and Exercisable Options by Exercise Price Range (Details) - $ / shares
3 Months Ended
Dec. 31, 2020
Sep. 30, 2020
Range of Exercise Prices, Lower Limit $ 0.03  
Range of Exercise Prices, Upper Limit $ 0.40  
Number of Options, Outstanding, Number 12,665,238 14,127,738
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 6 years 8 months 19 days  
Number of Options, Outstanding, Weighted Average Exercise Price $ 0.10 $ 0.29
Number of Options, Exercisable, Number 9,702,738  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 5 years 9 months 25 days  
Number of Options, Exercisable, Weighted Average Exercise Price $ 0.12  
Exercise Price Range One [Member]    
Range of Exercise Prices, Lower Limit 0.03  
Range of Exercise Prices, Upper Limit $ 0.39  
Number of Options, Outstanding, Number 12,602,738  
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 6 years 9 months  
Number of Options, Outstanding, Weighted Average Exercise Price $ 0.09  
Number of Options, Exercisable, Number 9,640,238  
Number of Options, Exercisable, Weighted Average Remaining Contractual Term 5 years 10 months 6 days  
Number of Options, Exercisable, Weighted Average Exercise Price $ 0.12  
Exercise Price Range Two [Member]    
Range of Exercise Prices, Upper Limit $ 0.40  
Number of Options, Outstanding, Number 62,500  
Number of Options, Outstanding, Weighted Average Remaining Contractual Term 1 year 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 1 year 2 months 30 days  
Number of Options, Exercisable, Weighted Average Exercise Price $ 0.40  
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.21.1
Shareholders' Equity - Schedule of Warrant Activity (Details) - Warrant [Member]
3 Months Ended
Dec. 31, 2020
$ / shares
shares
Number of Warrant Shares Outstanding, Number, Beginning Balance | shares 67,634,049
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 67,634,049
Number of Warrant Shares Outstanding, Vested and exercisable, Ending Balance | shares 67,634,049
Weighted Average Exercise Price, Number, Beginning Balance $ 0.16
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 0.16
Weighted Average Exercise Price, Vested and exercisable, Ending Balance 0.16
Minimum [Member]  
Weighted Average Exercise Price, Number, Beginning Balance 0.07
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 0.07
Weighted Average Exercise Price, Vested and exercisable, Ending Balance 0.07
Maximum [Member]  
Weighted Average Exercise Price, Number, Beginning Balance 0.40
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 0.40
Weighted Average Exercise Price, Vested and exercisable, Ending Balance $ 0.40
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.21.1
Shareholders' Equity - Schedule of Outstanding and Exercisable Warrants by Exercise Price Range (Details) - Warrant [Member] - $ / shares
3 Months Ended
Dec. 31, 2020
Sep. 30, 2020
Range of Exercise Prices, Lower Limit $ 0.12  
Range of Exercise Prices, Upper Limit $ 0.67  
Number of Warrants, Outstanding, Number 67,634,049 67,634,049
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 1 year 7 months 13 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.16  
Number of Warrants, Exercisable, Number 67,634,049  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 1 year 7 months 13 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.16  
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 60,429,384  
Number of Warrants, Outstanding, Weighted Average Remaining Contractual Term 1 year 8 months 26 days  
Number of Warrants, Outstanding, Weighted Average Exercise Price $ 0.15  
Number of Warrants, Exercisable, Number 60,429,384  
Number of Warrants, Exercisable, Weighted Average Remaining Contractual Term 1 year 8 months 26 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.15  
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 21 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 21 days  
Number of Warrants, Exercisable, Weighted Average Exercise Price $ 0.26  
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.21.1
Segment Reporting - Schedule of Assets of Reportable Segments (Details) - USD ($)
Dec. 31, 2020
Sep. 30, 2020
Feb. 28, 2019
Cash $ 78,523 $ 51,320  
Accounts receivable 23,989  
Inventories 134,522 94,560  
Prepaid expenses and other current assets 500 500  
Total current assets 237,534 146,380  
Right-of-use asset 1,613 6,961 $ 27,841
Total other assets 1,613 6,961  
TOTAL ASSETS 239,147 $ 153,341  
Corporate [Member]      
Cash 8,178    
Accounts receivable    
Inventories    
Prepaid expenses and other current assets 500    
Total current assets 8,678    
Right-of-use asset    
Total other assets    
TOTAL ASSETS 8,678    
Medical Devices [Member]      
Cash 67,709    
Accounts receivable 23,989    
Inventories 134,522    
Prepaid expenses and other current assets    
Total current assets 226,220    
Right-of-use asset 1,613    
Total other assets 1,613    
TOTAL ASSETS 227,833    
Authentication and Encryption [Member]      
Cash 2,636    
Accounts receivable    
Inventories    
Prepaid expenses and other current assets    
Total current assets 2,636    
Right-of-use asset    
Total other assets    
TOTAL ASSETS $ 2,636    
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.21.1
Segment Reporting - Schedule of Operations of Reportable Segments (Details) - USD ($)
3 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Trade sales $ 90,499
Cost of goods sold 80,100
Gross profit 10,399
Operating expenses 308,541 337,273
Loss from operations (298,142) (337,273)
Corporate [Member]    
Trade sales
Cost of goods sold
Gross profit
Operating expenses 49,109 98,462
Loss from operations (49,109) (98,462)
Medical Devices [Member]    
Trade sales 90,499
Cost of goods sold 80,100
Gross profit 10,399
Operating expenses 256,471 175,286
Loss from operations (246,072) (175,286)
Authentication and Encryption [Member]    
Trade sales
Cost of goods sold
Gross profit
Operating expenses 2,961 63,525
Loss from operations $ (2,961) $ (63,525)
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.21.1
Legal Matters (Details Narrative)
3 Months Ended
Dec. 31, 2020
USD ($)
Interest rate of negotiated settlement 4.00%
Ex- Employee [Member]  
Claims amount $ 21,600
Wages increase rate 2.00%
Former CEO [Member]  
Claims amount $ 179,548
Wages increase rate 2.00%
Claim alleges unpaid wages $ 158,715
Unpaid vacation amount $ 20,833
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.21.1
Subsequent Events (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Apr. 01, 2021
Apr. 30, 2020
Dec. 31, 2020
Apr. 07, 2021
Loans payable to related parties     $ 1,460,250  
Number of stock options granted to purchase      
Number of stock options cancelled      
Board of Directors [Member]        
Number of restricted shares issued during period, shares   20,170,000    
Number of vested shares   7,120,000    
Subsequent Event [Member]        
Loans payable to related parties       $ 355,000
Subsequent Event [Member] | Board of Directors [Member] | April 2023 Through March 2024 [Member]        
Number of restricted shares issued during period, shares 3,750,000      
Fair value of options granted $ 187,500      
Subsequent Event [Member] | Officers and Directors [Member]        
Number of restricted shares issued during period, shares 10,085,714      
Fair value of options granted $ 504,286      
Number of vested shares 7,060,000      
Subsequent Event [Member] | Officers and Directors [Member] | April 2025 [Member]        
Number of vested shares 3,025,714      
Subsequent Event [Member] | CEO [Member]        
Fair value of options granted $ 670,000      
Number of vested shares 9,052,500      
Number of stock options granted to purchase 13,449,429      
Share exercise price $ 0.05      
Subsequent Event [Member] | CEO [Member] | April 2023 Through March 2024 [Member]        
Fair value of options granted $ 65,000      
Number of stock options granted to purchase 1,300,000      
Share exercise price $ 0.05      
Subsequent Event [Member] | CEO [Member] | April 2025 [Member]        
Number of vested shares 4,396,929      
Subsequent Event [Member] | CEO [Member] | September 2021 through December 2021 [Member]        
Number of stock options cancelled 5,277,778      
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