Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained in this Report that are not statements of
historical fact may be deemed to be forward-looking statements. Forward-looking
information includes statements relating to future actions, prospective
products, future performance or results of current or anticipated products,
sales and marketing efforts, costs and expenses, interest rates, outcome of
contingencies, financial condition, results of operations, liquidity, business
strategies, cost savings, objectives of management, and other matters. You can
identify forward-looking statements by those that are not historical in nature,
particularly those that use terminology such as "may," "will," "should,"
"expects," "anticipates," "contemplates," "estimates," "believes," "plans,"
"projected," "predicts," "potential," or "continue" and similar expressions or
the negative of these similar terms. The Private Securities Litigation Reform
Act of 1995 provides a "safe harbor" for forward-looking information to
encourage companies to provide prospective information about themselves without
fear of litigation so long as that information is identified as forward-looking
and is accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those
projected in the information.
These forward-looking statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that we cannot predict. In
evaluating these forward-looking statements, you should consider various
factors, including the following: (a) those risks and uncertainties related to
general economic conditions, (b) whether we are able to manage our planned
growth efficiently and operate profitable operations, (c) whether we are able to
generate sufficient revenues or obtain financing to sustain and grow our
operations, (d) whether we are able to successfully fulfill our primary
requirements for cash, which are explained below under "Liquidity and Capital
Resources". We assume no obligation to update forward-looking statements, except
as otherwise required under the applicable federal securities laws. Unless
stated otherwise, terms such as the "Company," "Wearable Health," "we," "us,"
"our," and similar terms shall refer to Wearable Health Solutions, Inc., a
Nevada corporation, and its subsidiaries.
Results of Operations
Results for the Three Months Ended December 31, 2022, compared to the Three
Months Ended December 31, 2021
December 31, 2022 June 30, 2022
Working Capital $ $
Cash 45,474 70,505
Current Assets 124,750 297,409
Current Liabilities 2,555,044 2,431,287
Working Capital (Deficit) (2,430,294 ) (2,133,878 )
December 31, December 31,
2022 2021
Cash Flows for the Six Months Ended: $ $
Cash Flows used in Operating Activities (1,055,780) (1,806,812)
Cash Flows used in Investing Activities (9,442 ) (50,000 )
Cash Flows provided by Financing Activities 1,040,191 2,609,335
Net (Decrease) Increase in Cash During Period (25,031 ) 752,523
Operating Revenues
The Company had revenues of $198,039 and $304,524 for the three months ended
December 31, 2022 and 2021, respectively.
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Cost of Revenues
The Company's cost of revenues for the three months ended December 31, 2022 and
2021 was $99,418 and $143,138, respectively. Cost of revenues decreased for the
three months ended December 31, 2022 primarily due to less hardware purchases in
2022.
Gross Profit
The Company's gross profit for the three months ended December 31, 2022 was
$98,621, compared to $161,386 for the three months ended December 31, 2021. The
decrease in the Company's gross profit was due primarily to the decrease in
hardware revenues in 2022 as compared to 2021.
General and Administrative Expenses
General and administrative expenses consisted primarily of consulting fees,
professional fees, and legal and accounting expenses. For the three months ended
December 31, 2022, general and administrative expenses were $618,048 compared to
$768,162 for the three months ended December 31, 2021. The primary expenses for
the three months ended December 31, 2022 were salaries and wages and consulting
and professional fees totaling $419,934; the primary expenses for the three
months ended December 31, 2021 were salaries and wages and consulting and
professional fees totaling $460,933.
Other (Income) Expense, net
The Company had other (income) expense, net for the three months ended December
31, 2022 and 2021 of $20,364 and $(237,821), respectively. Other (income)
expense, net for the three months ended December 31, 2022 was all interest
expense. Other (income) expense, net for the three months ended December 31,
2021 consisted mainly of change in fair value of derivative instrument of
$(25,102), gain on debt extinguishment of $(80,313), gain on settlement of
accounts payable of $(156,618), and interest expense of $24,212.
Net loss
The net loss for the three months ended December 31, 2022, was $539,791 compared
to $368,985 for the three months ended December 31, 2021.
Results for the Six Months Ended December 31, 2022, compared to the Six Months
Ended December 31, 2021
Revenues
The Company had revenues of $414,499 and $606,619 for the six months ended
December 31, 2022 and 2021, respectively.
Cost of Revenues
The Company's cost of revenues for the six months ended December 31, 2022 and
2021 was $219,420 and $345,873, respectively.
Gross Profit
The Company's gross profit for the six months ended December 31, 2022 and 2021
was $195,079, and $260,746, respectively. The decrease in the Company's gross
profit in 2022 as compared to 2021 was due primarily to the decrease in hardware
sales.
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General and Administrative Expenses
General and administrative expenses consisted primarily of consulting fees,
professional fees, and legal and accounting expenses. For the six months ended
December 31, 2022, general and administrative expenses were $1,474,531 compared
to $4,967,662 for the six months ended December 31, 2021. The primary expenses
for 2022 were salaries and wages of $857,285; the primary expenses for 2021 were
salaries and wages and consulting and professional services of $3,806,466 and
381,374, respectively.
Other (Income) Expense, net
The Company had other (income) expense, net for the six months ended December
31, 2022 and 2021 of $9,106 and $16,804, respectively. Other (income) expense,
net for the six months ended December 31, 2022 consisted of interest expense of
$30,106 which was offset in part by $19,500 in settlement proceeds and interest
income of $1,500. The Company had other income (expense), net for the six months
ended December 31, 2021 of $16,804. Other (income) expense, net for the six
months ended December 31, 2021 consisted of change in fair value of derivative
instrument of $213,053, gain on debt extinguishment of $(96,145), gain on
settlement of accounts payable of $(156,616), and interest expense of $56,512.
Net loss
The net loss for the six months ended December 31, 2022, was $1,288,558 compared
to $4,723,720 for the comparable period ended December 31, 2021.
Liquidity and Capital Resources
The ability of the Company to continue as a going concern is dependent on the
Company's ability to raise additional capital and implement its business plan.
Since its inception, the Company has been funded by related parties through
capital investment and borrowing of funds and through the sale of equity.
At December 31, 2022, the Company had total current assets of $124,750. Current
assets consisted primarily of cash and inventory. At December 31, 2022, the
Company had total current liabilities of $2,555,044 compared to $2,431,287, at
June 30, 2022. Current liabilities consisted primarily of accounts payable,
accrued liabilities and accrued compensation, notes payable and convertible
notes.
We had negative working capital of $2,430,294 as of December 31, 2022.
Cash flow from Operating Activities
During the six months ended December 31, 2022, cash used in operating activities
was $(1,055,780) compared to $(1,806,812) for the same period ended December 31,
2021. The decrease in the amount of cash used in operating activities was
primarily due to the decrease in the net loss resulting from the lower salaries
and wages incurred in the six months ended December 31, 2022 as compared to the
six months ended December 31, 2021.
Cash flow from Financing Activities
For the six months ended December 31, 2022, cash provided by financing
activities was $1,040,191 compared to $2,609,335 provided during the six months
ended December 31, 2021.
Quarterly Developments
None.
Subsequent Developments
The Company evaluated events that have occurred after the balance sheet date but
before the financial statements are issued and determined that there are no
material events that are required to be disclosed.
On January 27, 2023, the Company terminated the employment of Jennifer Loria,
the Chief Operating Officer of the Company's operating subsidiary, Medical Alarm
Concepts, LLC.
On February 3, 2023, the plaintiffs in the case of Sandor Capital, LP and John
Lemak v. Wearable Health Solutions, Inc., informed the Company that they would
be discontinuing their legal action against the Company.
On February 7, 2023, the Company issued 2,662,500 shares valued at $28,846 or
$0.011 per share to certain members of management. These shares were recorded at
the stock price of the date of agreement or grant.
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Going Concern
The accompanying unaudited interim consolidated condensed financial statements
have been prepared in conformity with generally accepted accounting principles
which contemplate continuation of the Company on a going-concern basis. The
going concern basis assumes that assets are realized, and liabilities are
extinguished in the ordinary course of business at amounts disclosed in the
consolidated financial statements. The Company has incurred recurring losses
from operations and has an accumulated deficit of $40,711,940 as of December 31,
2022. The Company's ability to continue as a going concern depends upon its
ability to obtain adequate funding to support its operations through continuing
investments of debt and/or equity by qualified investors/creditors, internally
generated working capital and monetization of intellectual property assets.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. These consolidated financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern. Management is currently pursuing a business strategy which
includes raising the necessary funds to finance the Company's development and
marketing efforts.
Critical Accounting Estimates and Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Note 1 to the Financial Statements describes the
significant accounting policies and methods used in the preparation of the
Financial Statements. Estimates are used for, but not limited to, contingencies
and taxes. Actual results could differ materially from those estimates. The
following critical accounting policies are impacted significantly by judgments,
assumptions, and estimates used in the preparation of the Financial Statements.
We are subject to various loss contingencies arising in the ordinary course of
business. We consider the likelihood of loss or impairment of an asset or the
incurrence of a liability, as well as our ability to reasonably estimate the
amount of loss in determining loss contingencies. An estimated loss contingency
is accrued when management concludes that it is probable that an asset has been
impaired, or a liability has been incurred and the amount of the loss can be
reasonably estimated. We regularly evaluate current information available to us
to determine whether such accruals should be adjusted.
We recognize deferred tax assets (future tax benefits) and liabilities for the
expected future tax consequences of temporary differences between the book
carrying amounts and the tax basis of assets and liabilities. The deferred tax
assets and liabilities represent the expected future tax return consequences of
those differences, which are expected to be either deductible or taxable when
the assets and liabilities are recovered or settled. Future tax benefits have
been fully offset by a 100% valuation allowance as management is unable to
determine that it is more likely than not that this deferred tax asset will be
realized.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting
for Income Taxes, as part of its initiative to reduce complexity in accounting
standards. The amendments in the ASU are effective for fiscal years beginning
after December 15, 2020, including interim periods therein. Early adoption of
the standard is permitted, including adoption in interim or annual periods for
which financial statements have not yet been issued. The Company is currently
evaluating the effect, if any, that the ASU will have on its consolidated
financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible
Instruments and Contracts in an Entity's Own Equity (ASU 2020-06), which
simplifies the accounting for certain financial instruments with characteristics
of liabilities and equity, including convertible instruments and contracts in an
entity's own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the
liability and equity separation model for convertible instruments with a cash
conversion feature, and as a result, after adoption, entities will no longer
separately present in equity an embedded conversion feature for such debt.
Similarly, the embedded conversion feature will no longer be amortized into
income as interest expense over the life of the instrument. Instead, entities
will account for a convertible debt instrument wholly as debt unless (1) a
convertible instrument contains features that require bifurcation as a
derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible
debt instrument was issued at a substantial premium. Among other potential
impacts, this change is expected to reduce reported interest expense, increase
reported net income, and result in a reclassification of certain conversion
feature balance sheet amounts from shareholders' equity to liabilities as it
relates to the Company's convertible senior notes. Additionally, ASU 2020-06
requires the application of the if-converted method to calculate the impact of
convertible instruments on diluted earnings per share (EPS), which is consistent
with the Company's accounting treatment under the current standard. ASU 2020-06
is effective for fiscal years beginning after December 15, 2021, with early
adoption permitted for fiscal years beginning after December 15, 2020, and can
be adopted on either a fully retrospective or modified retrospective basis. The
Company early adopted the ASU on July 1, 2022, the beginning of its fiscal year.
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The Company reviewed all recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force), the AICPA and the SEC, and they did
not or are not believed by management to have a material impact on the Company's
present or future financial statements.
The Company has implemented all new accounting pronouncements that are in
effect. These pronouncements did not have any material impact on the financial
statements unless otherwise disclosed, and the Company does not believe that
there are any other new accounting pronouncements that have been issued that
might have a material impact on its financial position or results of operations.
Off Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources and would be considered
material to investors.
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WEARABLE HEALTH SOLUTIONS, INC. 
