WELLNESS CENTER USA, INC. Forward Looking Statements
Except for historical information, the following Plan of Operation 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 "Management's Discussion and Analysis or Plan of Operations" and "Description of Business," 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" and 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.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
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. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. 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. BackgroundWellness Center USA, Inc. ("WCUI" or the "Company") was incorporated inJune 2010 under the laws of theState 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, includingPsoria-Shield Inc. ("PSI") andStealthCo Inc. ("SCI"), d/b/aStealth 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.
Results of Operations for the year ended
Revenue and Cost of Goods Sold
Revenue for the years endedSeptember 30, 2021 and 2020 was$239,962 and$5,000 , respectively. The increase in 2021 was due to the increase in sales at PSI, due to the roll-out of their new Aurora medical device. Cost of sales for the year endedSeptember 30, 2021 was$228,580 . There was no cost of sales for the year endedSeptember 30, 2020 . Gross profit for the years endedSeptember 30, 2021 and 2020, was$11,382 and$5,000 , respectively. The gross profit increase in 2021 was due to the increase in sales. Operating Expenses
Operating expenses for the years ended
16 Other Income (Expenses) Other income during the year endedSeptember 30, 2021 consisted of$37,166 from the forgiveness of ourU.S. Small Business Administration PPP loan payable. Other expenses during the year endedSeptember 30, 2021 consisted of$134,449 of interest expense and$1,678 of debt discount amortization, totaling to a net expense of$98,961 . Other income during the year endedSeptember 30, 2020 consisted of$4,000 from aU.S. government grant relating to COVID-19 and$56,840 from the write-off of long outstanding accounts payable. Other expenses during the year endedSeptember 30, 2020 consisted of$507,265 relating to the cost of the modification of terms of stock warrants,$22,680 relating to the cost of the modification of terms of stock options,$43,815 of financing costs and$67,861 of interest expense, totaling to a net expense of$580,781 . Net Loss
Our net loss for the years endedSeptember 30, 2021 and 2020 was$1,326,817 and$2,502,375 , respectively. The decrease in the net loss in 2021 was primarily due to the decrease in operating expenses and total other expenses. Segment Information 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
(ii) Authentication and Encryption Products and Services: which stems from StealthCo, its wholly-owned subsidiary formed onMarch 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 onApril 4, 2014 .
The detailed segment information of the Company is as follows:
Operations by Segment for the Years Ended September 30, 2021 and 2020
For the Year Ended
September 30, 2021
Authentication and
Corporate Medical Devices Encryption Total
Trade Sales $ - $ 239,962 $ - $ 239,962
Cost of goods sold - 228,580 - 228,580
Gross profit - 11,382 - 11,382
Operating expenses 211,641 1,009,598 17,999 1,239,238
Loss from operations
(17,999 ) $ (1,227,856 )
For the Year Ended
September 30, 2020
Authentication and
Corporate Medical Devices Encryption Total
Trade Sales $ - $ - $ 5,000 $ 5,000
Cost of goods sold - - - -
Gross profit - - 5,000 5,000
Operating expenses 1,004,477 852,542 69,575 1,926,594
Loss from operations
(64,575 ) $ (1,921,594 )
Revenue for the Medical Devices segment for the year ended September 30, 2021
was $239,962 . There was no revenue or cost of sales for the Medical Devices
segment for the year ended September 30, 2020 . Cost of goods sold for the year
ended September 30, 2021 was $228,580 and gross profit was $11,382 . The increase
in gross profit in 2021 was due to the increase in sales. Operating expenses for
the years ended September 30, 2021 and 2020 was $1,009,598 and $852,542 ,
respectively. The increase in operating expenses in 2021 was primarily due to
the increase in employee and contract labor related costs. The loss from
operations for the years ended September 30, 2021 and 2020 was $998,216 and
$852,542 , respectively.
Revenue for the Authentication and Encryption segment for the year ended
September 30, 2020 was $5,000 . There was no revenue or cost of sales for the
year ended September 30, 2021 . The decrease in sales in 2021 was due to the
decrease in trade sales. There was no cost of goods sold for the year ended
September 30, 2020 and the gross profit was $5,000 . The decrease in gross profit
in 2021 was due to the decrease in sales. Operating expenses for the years ended
September 30, 2021 and 2020 was $17,999 and $69,575 , respectively. The decrease
in operating expenses in 2021 was primarily due to the decrease in labor costs,
consulting costs and professional fees in 2021, as there were very limited
operating activities for the segment in 2021. The loss from operations for the
years ended September 30, 2021 and 2020 was $17,999 and $64,575 , respectively.
The Corporate segment primarily provides executive management services for the
Company. Operating expenses for the years ended September 30, 2021 and 2020 was
$211,641 and $1,004,477 , respectively. The decrease in operating expenses in
2021 was primarily due to the decrease in professional fees and stock
compensation. The loss from operations for the years ended September 30, 2021
and 2020 was $211,641 and $1,004,477 , respectively.
17
Liquidity and Capital Resources
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the year endedSeptember 30, 2021 , the Company incurred a net loss of$1,326,817 and used cash in operations of$925,191 , and had a shareholders' deficit of$3,346,348 as ofSeptember 30, 2021 . In addition,$1,165,250 of notes payable to officers and shareholders and$75,834 of payroll taxes are past due. These factors raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
In addition, the Company's independent registered public accounting firm, in its
report on the Company's
AtSeptember 30, 2021 , the Company had cash on hand in the amount of$32,079 . 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 year endedSeptember 30, 2021 , the Company received$905,950 through short-term loans primarily from its officers and directors. 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 shareholders, in case of equity financing.
Comparison of years ended
As of
As of
Cash flows used in operating activities
During the year endedSeptember 30, 2021 , we used cash from operating activities of$925,191 , compared to$1,004,993 used in the year endedSeptember 30, 2020 . During the year endedSeptember 30, 2021 , we incurred a net loss of$1,326,817 and had non-cash expenses of$337,917 , compared to a net loss of$2,502,375 and non-cash expenses of$1,560,722 during the year endedSeptember 30, 2020 .
Cash flows used in investing activities
During the years ended
Cash flows provided by financing activities
During the year endedSeptember 30, 2021 , we had proceeds of$905,950 from loans payable from officers and shareholders. During the year endedSeptember 30, 2020 , we had proceeds of$796,000 from loans payable from officers and shareholders,$37,166 from aU.S. SBA loan and$170,000 from contributions of capital by its joint venture partners.
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.
Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts
PSI received FDA clearance for the Psoria-Light on
PSI's founder and past president filed a provisional patent application covering certain aspects of the technology that we intend to utilize in the development and commercialization of the Psoria-Light, including handheld ergonomics, emitter platform and LED arrangements, methods for treatment site detection, cooling methods, useful information displays, collection of digital images and graphical correlation to quantitative metrics, and base console designs. Two non-provisional patent applications were submitted claiming the prior filing date of the initial provisional application. 18 The first non-provisional application describes a unique distance sensor located at the tip of the Psoria-Light hand-piece, which detects the treatment site based on a projected field. The sensor can detect electrolytic/conductive surfaces, such as human skin, without requiring any physical or direct electrical contact. Further, the unique sensor can sense the treatment site at any point about the tip of the hand-piece and without causing any attenuation of the therapeutic UV light output. The second non-provisional application describes the integration and use of a digital camera in the Psoria-Light, including the location of the digital camera and how and when it is used to conveniently correspond to real-life treatment routines, how images are displayed and captured to memory, and how the images are arranged in patient records are illustrated. Additionally, the second non-provisional application describes the inclusion of clinician defined variables, such as health-related quality of life scores, and their placement into a graphical arrangement relative to treatment site images. Both the initial provisional patent application and the two non-provisional patent applications are owned by PSI's past president, who has granted PSI the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under the initial provisional patent application, any non-provisional patent applications filed by him covering the technology described in the initial provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light. PSI's past president filed a second provisional patent application containing concepts for the improvement of microelectronics packages and thermal management solutions, the improvement of handheld phototherapy devices in general (either used on humans, animals, or plants, or used on inanimate objects), and replacement of laser therapy devices with LED devices. PSI was granted the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under this second provisional patent application, any non-provisional patent applications covering the technology described in the second provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light. In addition to the foregoing, Stealth Mark devoted substantial effort and resources to develop and advance micro-particle security technologies in support of its business activities. Protection of the acquired Stealth Mark intellectual property is maintained through a combination of Patents, Trademarks, and Trade Secrets consisting of the following: U.S. Patent Issued "Title" - Summary
No. 6,647,649
- Generation of Micro-particle codes from marks
containing encrypted Micro-particles.
No. 7,720,254 May 18, 2010 "Automatic Micro-particle Mark Reader"
- Automatic readers for interrogating
Micro-particle marks.
No. 7,831.042 November 9, 2010 "Three-Dimensional Authentication Of Micro-particle
Mark
- Validation of 3D nature of micro-particle mark to
protect against counterfeiting of mark.
No. 7,885,428 February 8, 2011 "Automatic Micro-particle Mark Reader"
- Automatic readers for interrogating
micro-particle marks (broadened protection).
No. 8,033,450 October 11, 2011 "Expression Codes For Micro-particle Marks Based On
Signature Strings"
- Generation of expression codes ("fingerprints")
unique to each micro-particle mark to protect
against counterfeiting of marks.
No. 8,223,964 July 17, 2012 "Three-Dimensional Authentication Of Micro-particle
Mark
- Validation of 3D nature of micro-particle mark to
protect against counterfeiting of marks (broadened
protection).
19
Europe
WO/EP Patent Issued "Title" - Summary
Appl. No. Pending "Expression Codes For Micro-particle Marks Based On
07753043.4 Signature Strings"
- Generation of expression codes ("fingerprints")
unique to each micro-particle mark to protect
against counterfeiting of marks.
Appl. No. Pending "Three-Dimensional Authentication Of Micro-particle
07753034.3 Mark
- Validation of 3D nature of Micro-particle mark to
protect against counterfeiting of mark.
Trademarks Type Countries
Stealth Mark® Registered United States
European Community
Australia
StealthFire Not Registered United States
European Community
ActiveDuty™ Not Registered United States
Trade Secrets
Stealth Mark proprietary technologies and capabilities being maintained as Trade Secrets include, but are not limited to:
? Micro-particle Manufacturing ? Micro-particle Color Systems
? Technology advancements providing improvements in Automatic Reader performance
? Software solutions supporting Micro-particle security solutions
? Algorithms, artificial intelligence, and technologies related to Data
Intelligence
We will assess the need for any additional patent, trademark or copyright applications, franchises, concessions royalty agreements or labor contracts on an ongoing basis.
Employees
We currently employ our executive officers and as of
Summary of Significant Accounting Policies.
The Company's significant accounting policies are presented in the Notes to the Consolidated Financial Statements (see Note 2 of the audited consolidated financial statements included herein).
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