UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~December 3031, 2021

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

For the transition period from ___________ to ___________

WELLNESS CENTER USA, INC.

(Name of small business issuer in its charter)

nevada

333-173216

27-2980395

(State or other jurisdiction of

incorporation or organization)

Commission

File Number

(IRS Employee

Identification No.)

145 E. University Boulevard, Tucson, AZ 85705

(Address of Principal Executive Offices)

(847) 925-1885

(Issuer Telephone number)

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

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

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

Title of each class registered:		Name of each exchange on which registered:
None		None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.001

(Title of class)

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

Yes ☒ 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 ☒ 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 ☐ ~~Non-~~Accelerated Filer ☐ Smaller Reporting Company ☒ 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 ☒

The number of shares issued and outstanding of each of the issuer’s classes of common equity as of ~~June~~December 3031, 2021 was ~~122~~125,~~277~~177,077.

FORM 10-Q

WELLNESS CENTER USA, INC.

~~JUNE~~DECEMBER 3031, 2021

TABLE OF CONTENTS

PART I— FINANCIAL INFORMATION

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	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Control and Procedures	22

PART II— OTHER INFORMATION

Item 1	Legal Proceedings	23
Item 1A	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures.	24
Item 5.	Other Information	24
Item 6.	Exhibits	24

SIGNATURE		25

Item 1.	Condensed Consolidated Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Control and Procedures	24

PART II— OTHER INFORMATION

Item 1	Legal Proceedings	25
Item 1A	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures.	26
Item 5.	Other Information	26
Item 6.	Exhibits	26

SIGNATURE

Wellness Center USA, Inc.

Condensed Consolidated Balance Sheets

	June 30,			September 30,
	December 31,			September 30,
	2021			~~2020~~2021
	(Unaudited)	~~(Unaudited)~~
ASSETS
Current Assets
Cash	$	4115,~~799~~960		$	5132,~~320~~079
Accounts receivable		~~37,500~~956			-
Inventories, net		~~129~~24,~~130~~000			9450,~~560~~000
Prepaid expenses and other current assets		-			500
Total Current Assets		40,916			82,079
Total Current Assets		208,429			146,380
TOTAL ASSETS	$	40,916		$	82,079
Right of use asset		-			6,961
Total Other Assets		-			6,961
TOTAL ASSETS	$	208,429		$	153,341
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	~~549~~682,~~069~~708		$	~~408~~624,~~297~~337
Payroll taxes payable, past due		8071,334			9275,~~334~~834
Lease liability		-			6,961
Lease abandonment liability		672,878			672,878
Loans payable from officers and shareholders, including $1,045,250 past due at June 30, 2021		1,916,250			1,165,250
Loans payable from officers and shareholders, including $1,451,250 past due at December 31, 2021 - net of debt discount of $11,447 and $15,822, respectively		2,111,753			2,055,378
Total Current Liabilities		3,~~218~~538,~~531~~673			23,~~345~~428,~~720~~427
Long-term Liabilities
U.S. Small Business Administration PPP loan payable		37,166			37,166
Total Liabilities		3,255,697			2,382,886
Shareholders’ Deficit
Common stock, par value $0.001, 200,000,000 shares authorized;
Common stock, par value $0.001, 200,000,000 shares authorized; 125,127,077 and 123,877,077 shares issued and outstanding, respectively		125,127			123,877
122,277,077 and 118,252,077 shares issued and outstanding, respectively		122,277			118,252
Additional paid-in capital		25,300,505			25,258,005
122,277,077 and 118,252,077 shares issued and outstanding, respectively		122,277			118,252
Accumulated deficit		(28,521,841	)		(28,389,628	)
Additional paid-in capital		25,198,355			25,053,616
Total Wellness Center USA shareholders’ deficit		(3,096,209	)		(3,007,746	)
Accumulated deficit		(28,130,835	)		(27,583,363	)
Non-controlling interest		(401,548	)		(338,602	)
Total Wellness Center USA shareholders’ deficit		(2,810,203	)		(2,411,495	)
Total Shareholder’s deficit		(3,497,757	)		(3,346,348	)
Non-controlling interest		(237,065	)		181,950
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	40,916		$	82,079
Total Shareholder’s deficit		(3,047,268	)		(2,229,545	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	208,429		$	153,341

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

Wellness Center USA, Inc.

Condensed Consolidated Statements of Operations

	2021			2020			2021			2020
	Three Months Ended
	Three Months Ended						Nine Months Ended
	December 31,
	June 30,						June 30,
	2021			2020
	2021			2020			2021			2020
	(Unaudited)
	(Unaudited)						(Unaudited)
Trade sales	$	164,552		$	90,499
Trade sales	$	78,620		$	-		$	220,769		$	5,000
Cost of goods sold		26,000			80,100
Cost of goods sold		10,400			-			149,450			-
Gross profit		138,552			10,399
Gross profit		68,220			-			71,319			5,000
Operating expenses		287,749			308,541
Operating expenses		272,666			813,380			943,425			1,573,783
Loss from operations		(149,197	)		(298,142	)
Loss from operations		(204,446	)		(813,380	)		(872,106	)		(1,568,783	)
Other expenses:
Other expenses
Interest expense		(41,587	)		(26,158	)
U.S. federal government COVID-19 grant		-			4,000			-			4,000
Amortization of debt discount		(4,375	)		-
Financing costs		-			(43,815	)		-			(43,815	)
Total other expenses		(45,962	)		(26,158	)
Cost of stock option modifications		-			(22,680	)		-			(22,680	)
NET LOSS		(195,159	)		(324,300	)
Cost of stock warrant modification		-			-			-			(507,265	)
Net loss attributable to non-controlling interest		62,946			143,602
Interest expense		(36,230	)		(19,751	)		(94,381	)		(45,285	)
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC.	$	(132,213	)	$	(180,698	)
Total other expenses		(36,230	)		(82,246	)		(94,381	)		(615,045	)
BASIC AND DILUTED LOSS PER SHARE	$	(0.00	)	$	(0.00	)
NET LOSS		(240,676	)		(895,626	)		(966,487	)		(2,183,828	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED		124,502,077			118,960,909
Net loss attributable to non-controlling interest		87,079			76,568			419,015			120,747
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC.		(153,597	)		(819,058	)		(547,472	)		(2,063,081	)
BASIC AND DILUTED LOSS PER SHARE	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.02	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED		122,096,521			110,919,467			120,257,205			108,634,540
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED		122,096,521			110,919,467			120,257,205			108,634,540

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

Wellness Center USA, Inc.

Condensed Consolidated Statements of Shareholders’ Deficit (Unaudited)

	Shares		Amount		Capital		Deficit			Deficit			Interest			Total
	Common Stock				Additional Paid-in		Accumulated			Total WCUI			Non-controlling
	Shares		Amount		Capital		Deficit			Deficit			Interest			Total
Balance, March 31, 2021 (unaudited)		121,027,077	$	121,027	$	25,155,855	$	(27,977,238	)	$	(2,700,356	)	$	(149,986	)	$	(2,850,342	)
Balance, September 30, 2021		123,877,077	$	123,877	$	25,258,005	$	(28,389,628	)	$	(3,007,746	)	$	(338,602	)	$	(3,346,348	)
Fair value of vested stock options
Fair value of common stock issued for services		1,250,000		1,250		42,500		-			43,750			-			43,750
Fair value of common stock issued for services to officers and directors		1,250,000		1,250		42,500		-			43,750			-			43,750
Fair value of warrants issued upon conversion of loan payable from shareholder
Net loss for the three months ended December 31, 2021		-		-		-		(132,213	)		(132,213	)		(62,946	)		(195,159	)
Cost of stock option modifications
Balance, December 31, 2021 (unaudited)		125,127,077	$	125,127	$	25,300,505	$	(28,521,841	)	$	(3,096,209	)	$	(401,548	)	$	(3,497,757	)
Conversion of loan payable from shareholder into common shares
Conversion of loan payable from shareholder into common shares, shares
Cost of warrant modification
Contribution of capital by joint venture partners
Net loss for the three months ended June 30, 2021		-		-		-		(153,597	)		(153,597	)		(87,079	)		(240,676	)
Balance, June 30, 2021 (unaudited)		122,277,077	$	122,277	$	25,198,355	$	(28,130,835	)	$	(2,810,203	)	$	(237,065	)	$	(3,047,268	)
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		-		-		2110,~~764~~882		-			2110,~~764~~882			-			2110,~~764~~882
Fair value of common stock issued for services		4,025,000		4,025		122,975		-			127,000			-			127,000
Fair value of common stock issued for services to officers and directors		1,387,500		1,387		40,238		-			41,625			-			41,625
Net loss for the nine months ended June 30, 2021		-		-		-		(547,472	)		(547,472	)		(419,015	)		(966,487	)
Net loss for the three months ended December 31, 2020		-		-		-		(180,698	)		(180,698	)		(143,602	)		(324,300	)
Balance, June 30, 2021 (unaudited)		122,277,077	$	122,277	$	25,198,355	$	(28,130,835	)	$	(2,810,203	)	$	(237,065	)	$	(3,047,268	)
Balance, December 31, 2020 (unaudited)		119,639,577	$	119,639	$	25,104,736	$	(27,764,061	)	$	(2,539,686	)	$	38,348		$	(2,501,338	)
Balance, March 31, 2019 (unaudited)		107,497,077	$	107,497	$	24,441,950	$	(26,606,310	)	$	(2,056,863	)	$	373,470		$	(1,683,393	)
Fair value of vested stock options		-		-		66,306		-			66,306			-			66,306
Fair value of common stock issued for services		8,247,500		8,248		239,177		-			247,425			-			247,425
Fair value of warrants issued upon conversion of loan payable from shareholder		-		-		43,815		-			43,815			-			43,815
Cost of stock option modifications		-		-		22,680		-			22,680			-			22,680
Conversion of loan payable from shareholder into common shares		575,000		575		29,425		-			30,000			-			30,000
Net loss for the three months ended June 30, 2020		-		-		-		(819,058	)		(819,058	)		(76,568	)		(895,626	)
Balance, June 30, 2020 (unaudited)		116,319,577	$	116,320	$	24,843,353	$	(27,425,368	)	$	(2,465,695	)	$	296,902		$	(2,168,793	)
Balance, September 30, 2019		107,497,077	$	107,497	$	23,777,647	$	(25,362,287	)	$	(1,477,143	)	$	393,149		$	(1,083,994	)
Fair value of vested stock options		-		-		197,844		-			197,844			-			197,844
Fair value of common stock issued for services		8,247,500		8,248		239,177		-			247,425			-			247,425
Fair value of warrants issued upon conversion of loan payable from shareholder		-		-		43,815		-			43,815			-			43,815
Cost of stock option modifications		-		-		22,680		-			22,680			-			22,680
Cost of stock warrant modification		-		-		507,265		-			507,265			-			507,265
Conversion of loan payable from shareholder into common shares		575,000		575		29,425		-			30,000			-			30,000
Contribution of capital by joint venture partner		-		-		25,500		-			25,500			24,500			50,000
Net loss for the nine months ended June 30, 2020		-		-		-		(2,063,081	)		(2,063,081	)		(120,747	)		(2,183,828	)
Balance, June 30, 2020 (unaudited)		116,319,577	$	116,320	$	24,843,353	$	(27,425,368	)	$	(2,465,695	)	$	296,902		$	(2,168,793	)

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

Wellness Center USA, Inc.

Condensed Consolidated Statements of Cash Flows

	2021			2020
	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2021			2020
	(Unaudited)
Cash Flows from Operating Activities
Net loss	$	(~~966~~195,~~487~~159	)	$	(2324,~~183,828~~300	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		-			1,562
Amortization of right-of-use asset		-			5,348
Amortization of right-of-use asset		6,961			15,584
Amortization of debt discount		4,375			-
Provision for excess and slow moving inventories		~~100,000~~-			-50,000
Fair value of common shares issued for services		~~127~~43,~~000~~750			~~247~~41,~~425~~625
Fair value of vested stock options		21,764			197,844
Fair value of stock options issued for services		-			10,882
Fair value of warrants issued upon conversion of loan payable from shareholder					43,815
Loss on abandonment of lease					438,296
Loss on modification of conversion price on convertible note payable					22,680
Cost of warrant modification		-			507,265
Changes in Assets and Liabilities
(Increase) Decrease in:
Accounts receivable		(~~37,500~~956	)		(523,~~000~~989	)
Inventories		~~(134~~26,~~570~~000	)		(1789,~~075~~962	)
Prepaid expenses and other assets		500			(500	)
(Decrease) Increase in:
Accounts payable and accrued expenses		~~140~~58,~~772~~371			2272,~~521~~447
Payroll taxes payable		(124,~~000~~500	)		(64,~~000~~500	)
Lease liability		~~(6,961~~-	)		(155,~~584~~348	)
Net cash used in operating activities		(~~760~~68,~~521~~119	)		(~~730~~267,~~995~~797	)
Cash Flows from Financing Activities
Proceeds from loans payable from officers and shareholders		~~751~~52,000			~~685~~295,000
Proceeds from U.S. Small Business Administration PPP loan payable		-			37,166
Net cash provided by financing activities		52,000			295,000
Contribution of capital by joint venture partner		-			50,000
Net increase (decrease) in cash		(16,119	)		27,203
Net cash provided by financing activities		751,000			772,166
Cash beginning of period		32,079			51,320
Net increase (decrease) in cash		(9,521	)		41,171
Cash end of period	$	15,960		$	78,523
Cash beginning of period		51,320			53,147
Cash end of period	$	41,799		$	94,318
Supplemental cash flows disclosures:
Interest paid	$	-		$	-
Taxes paid	$	-		$	-
Supplemental non-cash disclosures:
Initial recognition of right-of-use assets and operating lease
Initial recognition of right-of-use assets and operating lease liabilities upon adoption of ASC Topic 842	$	-		$	27,841
Reclassification of prepaid expenses to inventories	$	-		$	55,000
Conversion of loan payable from shareholder into common shares	$	-		$	30,000

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

WELLNESS CENTER USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE ~~NINE~~THREE MONTHS ENDED ~~JUNE~~DECEMBER 3031, 2021 ~~and~~AND 2020

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~~Ultraviolet ~~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 ~~nine~~three months ~~ended~~ ~~June~~ended 30December 31, 2021 are not necessarily indicative of the results that may be expected for the year ending September 30, ~~2021~~2022.

COVID-19 Considerations

During the ~~period~~three months ended ~~June~~December 3031, 2021, the COVID-19 pandemic did not have a material net impact on our operating results. In the future, ~~the~~ 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~~customers 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 ~~June~~December 3031, 2021, the COVID-19 pandemic has not negatively impacted the Company’s liquidity position as of such date. Through ~~June~~ 30December 31, 2021, 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 ~~nine~~three months ended ~~June~~December 3031, 2021, the Company incurred a net loss of $~~966~~195,~~487~~159 and used cash in operations of $~~760~~68,~~521~~119, and had a shareholders’ deficit of $3,~~047~~497,~~268~~757 as of ~~June~~December 3031, 2021. In addition, loans payable of $1,~~045~~451,250 and payroll taxes of $8071,334 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.

InAt ~~addition~~December 31, 2021, the Company’s ~~independent~~had ~~registered~~cash ~~public~~on ~~accounting~~hand ~~firm~~in the amount of $15,960. inThe ~~its~~ability ~~report~~to oncontinue as a going concern is dependent on the Company’s ~~September~~attaining ~~30,~~and ~~2020~~maintaining profitable operations in the future and raising additional capital soon to meet its obligations ~~financial~~and ~~statements~~repay its liabilities arising from normal business operations when they come due. Since inception, ~~has~~we ~~raised~~have ~~substantial~~funded ~~doubt~~our ~~about~~operations primarily ~~the~~through ~~Company’s~~equity ~~ability~~and debt financings and we expect to continue asto arely ~~going~~on ~~concern~~these sources of capital in the future. During the three months ended December 31, 2021, the Company received $52,000 through short-term loans from officers and shareholders.

At June 30, 2021, the Company had cash on hand in the amount of $41,799. 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 nine months ended June 30, 2021, the Company received $751,000 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 stockholders, in case of equity financing.

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~~December 3031, ~~2020~~2021			~~Attributable interest at June 30, 2021~~
Psoria-Shield Inc. (“PSI”)	The State of Florida	June 2009 (August 2012)		51	%~~(1)~~		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	%
Protec Scientific, Inc (“Protec”)	The State of New York	April 2020		32	%
NEO Phototherapy LLC (“NEO”)	The State of Illinois	December 2018		0	%		0	%
Protec Scientific, Inc (“Protec”)	The State of New York	April 2020		38	%		38	%

~~(1)~~All intercompany -transactions ~~Effective~~are ~~April~~eliminated ~~30,~~upon ~~2020,~~Consolidation. The ~~the~~non-controlling ~~Company’s~~interests ~~51%~~of ~~interest~~our insubsidiaries ~~NEO~~where ~~was~~we ~~converted~~have ~~into~~operational acontrol ~~51%~~have ~~interest~~been insegregated ~~PSI~~on the accompanying financial statements.

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 ~~nine~~ three months ended ~~June~~December 3031, 2021 and 2020, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At ~~June~~December 3031, 2021 and 2020, the dilutive impact of outstanding stock options of 54,~~277~~777,738 and 1312,~~765~~665,238 shares, respectively, and outstanding warrants for 3431,~~712~~454,~~074~~297 and 67,634,049 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.

8The Company sells its products through two main sales channels: 1) directly to customers who use its products (the “Direct Channel”) and 2) to distribution partners who resell its products (the “Indirect Channel”).

WeUnder ~~sell~~the ~~our~~Direct ~~products~~Channel, ~~through~~the ~~two~~Company ~~main~~sells ~~sales~~its ~~channels:~~products 1)to and receives payment directly tofrom customers who ~~use~~purchase ~~our~~its products. (Under the Indirect ~~“Direct~~ Channel”), ~~and 2)~~the toCompany has entered into distribution ~~partners~~agreements ~~who~~that ~~resell~~allow ~~our~~the distributors to sell its products (and fulfill performance obligations under the ~~“Indirect~~agreements. During the three months ended December 31, 2021 and 2020, all of the Company’s products were sold through its Direct 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 wethe ~~have~~Company has significant performance obligations for services still to be completed. WeThe ~~recognize~~Company recognizes 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 ~~June 30~~31, 2021 and ~~September 30,~~ 2020.

Non-controlling Interests

PSI

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 to be conducted through NEO Phototherapy, Inc. (“NEO”). PSI and GEN2 were the members of NEO, owning 50.5% and 36.0%, respectively. 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 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. During three and nine months ended June 30, 2021, PSI recorded a loss of $168,350 and $506,860, respectively, relating to its operations, of which $82,491 and $248,361, respectively, was allocated to the non-controlling interest.

As of September 30, 2019, GEN2 had received $975,000 of investments to contribute to NEO. 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. As of June 30, 2021, PSI had not recorded any cumulative net income/distributable cash. The minority interest of PSI ownership consists of accredited investors, and investment participation of $750,000 from some of the Company’s officers and directors, including Calvin R. O’Harrow and Roy M. Harsch.

Protec

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. As of September 30, 2020, PSI had contributed $191,000 to Protec with the Company’s share being approximately 32%, based on its PSI ownership. The remaining 30% share is attributed to PSI’s minority shareholders. During the year ended September 30, 2020, Protec received an additional $120,000 from non-affiliated investors. The additional investments gave the non-controlling interests a 68% ownership interest in Protec. During the three and nine months ended June 30, 2021, Protec recorded a loss of $6,710 and $249,567, respectively, of which $4,589 and $170,654 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 ~~June~~December 3031, 2021, 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 ~~June~~December 31, 2021 and September 30, 2021, the Company recorded a reserve of $~~100~~173,~~000~~930 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 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. Recognition of compensation expense for non-employees is in the same period and manner as if the Company has paid cash for the services.

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~~ compensation expense recorded in future periods.

~~Recently Issued Accounting Pronouncements~~9

~~In June~~Recent ~~2016,~~Accounting 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.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 October 1, 2023. 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.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. An issuer measures the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 is not expected to have a material impact on the Company’s financial statements or disclosures.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

NOTE 3 – LOANS PAYABLE FROM OFFICERS AND SHAREHOLDERS

As of September 30, ~~2020~~2021, loans payable ~~from~~to officers and shareholders of $2,055,378 were outstanding and $1,165,250 ~~were~~was ~~outstanding~~past due. During the ~~nine~~three months ended ~~June 30~~December 31, 2021, the Company and its subsidiary, PSI, borrowed $~~751~~52,000 from its officers and shareholders. ~~All of the~~ The loans ~~are unsecured,~~ have an interest rate of eight percent per annum and are due one year from the date of issuance. As of ~~June~~December 3031, 2021, loans payable to officers and shareholders of $12,~~916~~111,~~250~~ 753 were outstanding and $1,~~045~~451,250 was past due.

During the year ended September 30, 2021, in connection with a loan in the amount of $25,000, the Company awarded the lender 350,000 shares of its common stock, valued at $17,500 on the date of grant. The Company recorded the fair value of the shares as a discount to the debt, which will be amortized over the life of the loan. During the year ended September 30, 2021, the Company amortized $1,678 of the debt discount and the balance of the unamortized discount at September 30, 2021 was $15,822. During the three months ended December 31, 2021, the Company amortized $4,375 of the debt discount and the balance of the unamortized discount at December 31, 2021 was $11,447.

NOTE 4 – LEASE LIABILITIES

~~Operating~~ Lease settlement liability

InThe ~~February 2019, the~~ Company’s ~~PSI~~leased ~~subsidiary entered into a 24-month non-cancellable lease for~~ its corporate office ~~facilities~~facility ~~that~~in ~~will~~Hoffman ~~require monthly payments of $1~~Estates,~~850~~ ~~through~~Illinois ~~January~~pursuant ~~2021.~~to ~~The~~a ~~Company adopted ASU 2016~~non-~~02,~~cancellable ~~Leases,~~lease ~~effective~~initiated ~~October~~in 1,July ~~2019, which requires a~~2016 ~~lessee to record a right-of-use asset~~ and aexpiring ~~corresponding~~February ~~lease~~28, ~~liability~~2024. atThe ~~the inception of the~~ lease ~~initially~~terms ~~measured~~require ata ~~the~~monthly ~~present value~~payment of ~~the~~approximately ~~lease payments~~$11,000. The Company ~~classified~~vacated the ~~lease as an operating lease and determined that the value of the lease asset~~facility ~~and~~in ~~liability~~April ~~at the inception of the lease was $27~~2020,~~841,~~ ~~using~~in afavor ~~discount rate~~ of ~~4.00%.~~its Aspresent offacilities ~~September~~in ~~30,~~Tucson ~~2020~~AZ, ~~the~~which ~~value~~are ofprovided ~~the~~by ~~lease asset~~a ~~and~~shareholder ~~liability~~on ~~was~~a ~~$6,961,~~rent-free ~~respectively~~basis. ~~During~~At the ~~three~~date of ~~and nine months ended June 30~~vacation, ~~2021,~~ the Company ~~made~~had ~~payments~~a ofremaining ~~$1,613 and $6,961, respectively, towards the~~ lease ~~liability.~~obligation As of ~~June 30~~$631, ~~2021, the lease liability was fully paid off~~587.

~~ASU~~On ~~2016-02~~or ~~requires~~about ~~recognition~~June in29, 2020, the ~~statement~~Company ofreceived ~~operations~~notice ofthat aHanover ~~single~~Hoffman ~~lease~~Estates, ~~cost~~LLC (“HHE”), ~~calculated~~filed socase ~~that~~number 2020L006092 in the ~~cost~~Circuit Court of ~~the~~Cook ~~lease~~County isalleging ~~allocated over~~a ~~the~~failure ~~lease~~to ~~term~~pay Base Rent and abandonment of certain office space in Hoffman Estates, ~~generally~~Illinois subject onto a ~~straight-line~~Commercial ~~basis.~~Lease ~~Rent~~dated ~~expense~~May ~~for~~26, 2016 (the ~~three~~“HHE ~~and~~Litigation”). ~~nine~~HHE ~~months~~sought ~~ended~~at ~~June~~least 30$672,878 ~~2021~~in ~~was~~base ~~$1,794~~rent and other ~~$7,142,~~amounts ~~respectively.~~under ~~During~~ the ~~three~~lease, ~~and~~as ~~nine~~well ~~months~~as ~~ended~~treble ~~June~~damages ~~30,~~from ~~2021,~~ the Company’s ~~reflected~~ex-CEO ~~amortization~~and oftwo ~~right~~past ofDirectors ~~use~~who ~~asset~~were serving on our Board as of ~~$1,613~~the ~~and~~date ~~$6,961,~~of ~~respectively,~~the ~~related~~lease. toAs ~~this~~of ~~lease~~December 31, ~~resulting~~2021, inthe noCompany ~~net~~has ~~asset~~recorded ~~balance~~the asfull amount of ~~June~~the ~~30,~~judgement ~~2021~~due.

~~Other~~On ~~Leases~~October -6, ~~lease~~2021, ~~abandonment~~HHE ~~liability~~and the Company settled the HHE Litigation pursuant to an agreement providing, among other things, that the Company agree to the entry of a final judgment order on the complaint in the amount of $725,795, which includes $657,194 in base rent awarded HHE by the Court on HHE’s Motion for Summary Judgment and the additional fees claimed by HHE and costs. HHE will forebear on the enforcement of the judgment and will provide the Company a satisfaction of the judgment upon the payment by the Company of $350,000, plus interest on the principal amount thereof outstanding from time to time at the rate of 5% per annum (the “Settlement Amount”), until the Settlement Amount is paid in full.

~~The~~An ~~Company~~initial ~~leased~~payment ~~its~~of ~~corporate~~$125,000 ~~office~~was ~~facility~~due inJanuary ~~Hoffman Estates~~1, ~~Illinois~~2022. ~~pursuant~~The toCompany received a ~~non-cancellable~~letter ~~lease~~of ~~initiated~~default infrom ~~July~~HHE ~~2016 and~~on ~~expiring~~January ~~February~~20, 282022, ~~2024.~~which ~~The~~provided the ~~lease~~Company ~~terms~~30 ~~require~~days ato ~~monthly~~make the payment ofor ~~approximately~~HHE ~~$11,000.~~could ~~The~~seek ~~Company~~collection ~~vacated~~of the ~~facility in~~Agreed ~~April~~Final ~~2019,~~Judgement inAmount ~~favor~~ of ~~its present facilities in Tucson AZ~~$725,795. ~~which~~The ~~are~~Company ~~provided~~made the bypayment aof ~~shareholder~~$125,000 on aFebruary ~~rent-free~~10, ~~basis~~2022. The ~~Company is~~balance inof ~~negotiations~~$225,000 ~~with~~will ~~the~~be ~~owners~~paid ~~regarding~~over ~~the~~a ~~settlement~~five-year ofperiod ~~its~~beginning ~~lease~~on ~~obligations~~January ~~and~~1, ~~expects~~2023, as ~~that~~follows: ~~the~~January ~~property~~1, ~~will~~2023 be– ~~subleased or~~$15,000 aplus ~~settlement~~accrued ~~with~~interest ~~the~~only; ~~landlord~~January ~~will~~1, be2024 ~~reached~~– at$15,000 anplus ~~amount~~accrued ~~significantly~~interest ~~less~~only; ~~than~~January 1, ~~the~~2025 ~~remaining~~– ~~payment~~$45,000 ~~obligations.~~plus Ataccrued ~~the~~interest; ~~date of~~January ~~vacation~~1, ~~the~~2026 ~~Company~~– ~~had~~$75,000 aplus ~~remaining~~accrued ~~lease~~interest; ~~obligation~~and ofJanuary 1, 2027 – $~~631~~75,~~587~~000 plus accrued interest.

OnAs orof ~~about~~December ~~June 29~~31, ~~2020~~2021, ~~we received notice that Hanover Hoffman Estates, LLC (“HHE”), filed case number 2020L006092 in~~ the ~~Circuit~~ ~~Court~~Company ofhas ~~Cook~~recorded ~~County~~a ~~alleging~~lease ~~our~~settlement ~~failure~~liability ~~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~~will ~~amounts~~adjust ~~under~~any ~~the~~remaining ~~lease, as~~balance ~~well as treble damages from our ex-CEO and two past Directors who were serving on our Board as~~ of the liability ~~date~~after of the ~~lease.~~Company Wehas ~~are~~completed ~~currently evaluating~~ the ~~allegations,~~payment ~~defenses~~ and ~~alternate~~satisfaction ~~actions, and continuing settlement negotiations. As~~ of ~~June 30, 2021,~~ the ~~Company has recorded a liability of~~ $~~672~~350,~~878~~000 ~~for~~Settlement ~~the full amount of the judgement due~~Amount.

NOTE 5 – SHAREHOLDERS’ EQUITY

Restricted Stock Grants to Officers and Directors

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 shares vested from April 2020 through March 2021, and a total of 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 937,500 and 3,712,500 shares vested during the three and nine months ended June 30, 2021, respectively.

During the three months ended June 30, 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 its Officers and Directors, all of which will vest monthly from April 2021 through March 2024. A total of 312,500 shares vested during the three and nine months ended June 30, 2021, respectively.

During the three months ended June 30, 2021, the Company’s Board of Directors approved the issuance of a combined total of 41,353,731 restricted shares of the Company’s common stock to its Officers and Directors, all of which will only be issued upon the sale or merger of the Company. No stock compensation was recorded relating to that grant as management feels it is a remote possibility that a sale or merger of the Company will happen within the next twelve months. In relation to that grant, a total of 16,093,018 warrant shares held by the Officers and Directors were cancelled (see Stock Warrants below).

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		3,750,000			187,500			0.05
Vested		(4,025,000	)		(127,000	)		0.03
Forfeited		-			-			-
Non-vested, June 30, 2021		10,000,000		$	368,750		$	0.03

SUMMARY OF RESTRICTED COMMON STOCK

During the three and nine months ended June 30, 2021, the Company recorded $43,750 and $127,000, respectively, of stock compensation for the value of restricted common stock vesting during the period, and as of June 30, 2021, unvested compensation of $368,750 remained that will be amortized over the remaining vesting period.

	Number of Restricted Shares			Fair Value			Weighted Average Grant Date Fair Value

Non-vested, September 30, 2021		8,750,000		$	325,000		$	0.03
Granted		-			-			-
Vested		(1,250,000	)		(43,750	)		0.04
Forfeited		-			-			-
Non-vested, December 31, 2021		7,500,000		$	281,250		$	0.04

During the three months ended December 31, 2021, the Company recorded $43,750 of stock compensation for the value of vested restricted common stock, and as of December 31, 2021, unvested compensation of $281,250 remained that will be amortized over the remaining vesting period, through March 2024.

In addition to the above grants, during the year ended September 30, 2021, the Company’s Board of Directors approved the issuance of a combined total of 41,353,731 restricted shares of the Company’s common stock to its Officers and Directors, all of which will only be issued upon the sale or merger of the Company. No stock compensation was recorded relating to that grant as management feels it is a remote possibility that a sale or merger of the Company will happen within the next twelve months. The Company will account for the shares once they are granted to its Officers and Directors.

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 ~~nine~~three months ended ~~June~~December 3031, 2021:

SCHEDULE OF STOCK OPTION ACTIVITY

	Number of Option Shares	~~Number of Option Shares~~			Exercise Price Range Per Share	~~Exercise Price Range Per Share~~		Weighted Average Exercise Price	~~Weighted Average Exercise Price~~
Balance, September 30, 2020			14,127,738				$ 0.03 - 2.00		$	0.29
Balance, September 30, 2021		5,277,738				$ 0.03 - 0.26		$	0.15
Granted		-	-			-	-		-	-
Cancelled		-	~~(7,262,500~~	)		-	~~0.04 – 0.40~~		-	~~0.06~~
Exercised		-	-			-	-		-	-
Expired		(500,000	~~(1,587,500~~)	)		0.12	~~0.11 - 2.00~~		0.12	~~1.29~~
Balance, June 30, 2021			5,277,738				$ 0.03 - 0.26		$	0.15
Balance, December 31, 2021		4,777,738				$ 0.03 - 0.26		$	0.15
Vested and exercisable, June 30, 2021			5,277,738				$ 0.03 - 0.26		$	0.15
Vested and exercisable, December 31, 2021		4,777,738				$ 0.03 - 0.26		$	0.15
Unvested, June 30, 2021			-			$	-		$	-
Unvested, December 31, 2021		-			$	-		$	-

12The following table summarizes information concerning outstanding and exercisable options as of December 31, 2021:

The following table summarizes information concerning outstanding and exercisable options as of June 30, 2021:

		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 - 0.26		54,~~277~~777,738		1.8348	$	0.15		-4,777,738		-1.48	$	-0.15
$	0.03 - 0.26		54,~~277~~777,738		51.0748	$	0.1015		-4,777,738		-1.48	$	-0.15

During the three months ended ~~June~~December 3031, 2021, ~~the~~no ~~Company’s~~stock ~~Board~~compensation ofwas ~~Directors~~recorded ~~approved~~for the ~~cancellation~~value of ~~6,050,000~~options ~~option~~vesting ~~shares~~during ~~held~~ the ~~Company’s~~period, ~~Chief Executive Officer (CEO)~~ and as ~~replaced~~of ~~them~~December ~~with~~31, a2021, ~~grant~~no ofunvested ~~6,050,000~~compensation ~~option~~remained ~~shares~~ that will ~~only~~ be ~~granted upon~~amortized ~~the~~over ~~sale or merger of~~ the ~~Company.~~remaining Novesting ~~stock compensation was recorded relating to that grant as management feels it is a remote possibility that a sale or merger of the Company will happen within the next twelve months~~period.

~~During~~As ~~the~~of ~~nine~~December ~~months ended June 30~~31, 2021, ~~the~~there ~~Company~~were ~~recorded $21~~25,~~764 of stock compensation for the value of options vesting during the period~~222,262 ~~and~~shares as of ~~June~~stock ~~30,~~options ~~2021,~~remaining noavailable ~~unvested~~for ~~compensation~~issuance ~~remained~~under ~~that will be amortized over~~ the ~~remaining vesting~~2010 ~~period~~Plan. There was no ~~stock~~aggregate ~~compensation~~intrinsic ~~recorded~~value ~~during~~for ~~the~~option ~~three~~shares ~~months~~outstanding ~~ended~~at ~~June~~December 3031, 2021~~, for the value of options vesting during the period~~.

The total aggregate intrinsic value for option shares outstanding at June 30, 2021 was $625. As of June 30, 2021, there were 24,722,262 shares of stock options remaining available for issuance under the 2010 Plan.12

Stock Warrants

The table below summarizes the Company’s warrants activities for the ~~nine~~three months ended ~~June~~December 3031, 2021:

SCHEDULE OF WARRANT ACTIVITY

	Number of Warrant Shares	~~Number of Warrant Shares~~			Exercise Price Range Per Share	~~Exercise Price Range Per Share~~		Weighted Average Exercise Price	~~Weighted Average Exercise Price~~
Balance, September 30, 2020			67,634,049			$	0.07 - 0.40		$	0.16
Balance, September 30, 2021		32,032,075			$	0.07 - 0.40		$	0.16
Granted		-	-			-	-		-	-
Cancelled		-	~~(16,093,018~~	)		-	~~0.12 - 0.18~~		-	~~0.15~~
Exercised		-	-			-	-		-	-
Expired		(577,778	~~(16,828,957~~)	)		0.15	~~0.15 - 0.25~~		0.15	~~0.17~~
Balance, June 30, 2021			34,712,074			$	$ 0.07 - 0.40		$	0.17
Balance, December 31, 2021		31,454,297			$	0.07 - 0.40		$	0.16
Vested and exercisable, June 30, 2021			34,712,074			$	$ 0.07 - 0.40		$	0.17
Vested and exercisable, December 31, 2021		31,454,297			$	0.07 - 0.40		$	0.16

The following table summarizes information concerning outstanding and exercisable warrants as of ~~June~~December 3031, 2021:

		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
$	0.1207 – 0.20		3130,~~082~~504,~~075~~297		21.0355	$	0.16		3130,~~082~~504,~~075~~297		21.0355	$	0.16
	0.21 – 0.40		3,629,999		0.48		0.31		3,629,999		0.48		0.31
	0.21 –0.40		950,000		1.21		0.33		950,000		1.21		0.33
$	0.1207 – 0.6740		3431,~~712~~454,~~074~~297		1.8654	$	0.1716		3431,~~712~~454,~~074~~297		1.8654	$	0.1716

13There was no aggregate intrinsic value for warrant shares outstanding at December 31, 2021.

During the three months ended June 30, 2021, the Company’s Board of Directors approved the cancellation of 16,093,018 warrant shares held by the Company’s Officers and Directors. See Restricted Stock Grants above relating to this cancellation.

There was no aggregate intrinsic value for warrant shares outstanding at June 30, 2021.

NOTE 6 – SEGMENT REPORTING

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

The Company operates in the following business segments:

(i) Medical Devices: which stems from PSI, its wholly-owned subsidiary acquired on August 24, 2012, a developer, manufacturer, marketer and distributer of targeted Ultra Violet (“UV”) phototherapy devices for the treatment of skin diseases, 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

June 30, 2021

December 31, 2021

Corporate

Medical Devices

Authentication and Encryption

Total

ASSETS

Current Assets

Cash

~~900~~1,571

3912,~~019~~086

12,~~880~~303

4115,~~799~~960

Accounts receivable

~~37,500~~956

Inventories

~~129~~24,~~130~~000

Total current assets

~~900~~1,571

~~205~~37,~~649~~042

12,~~880~~303

~~208~~40,~~429~~916

TOTAL ASSETS

~~900~~1,571

~~205~~37,~~649~~042

12,~~880~~303

~~208~~40,~~429~~916

Operations by Segment for the Three Months Ended ~~June~~December 3031, 2021 and 2020

For the Three Months Ended

June 30, 2021

December 31, 2021

Corporate

Medical Devices

Authentication and Encryption

Total

Trade Sales

78164,~~620~~552

Cost of goods sold

1026,~~400~~000

Gross profit

68138,~~220~~552

Operating expenses

4239,~~849~~990

~~226~~244,~~575~~964

32,~~242~~795

~~272~~287,~~666~~749

Loss from operations

(4239,~~849~~990

)

(~~158~~106,~~355~~412

)

(32,~~242~~795

)

(~~204~~149,~~446~~197

)

	For the Three Months Ended
	June 30, 2020
	December 31, 2020
	WCUI			PSI			Stealthco
	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		~~620~~49,~~650~~109			~~208~~256,~~047~~471			~~(15~~2,~~317~~961	)		~~813~~308,~~380~~541
Loss from operations	$	(~~620~~49,~~650~~109	)	$	(~~208~~246,~~047~~072	)	$	15(2,~~317~~961	)	$	(~~813~~298,~~380~~142	)

Operations by Segment for the Nine Months Ended June 30, 2021 and 2020

	For the Nine Months Ended
	June 30, 2021
	Corporate			Medical Devices			Authentication and Encryption			Total
Trade Sales	$	-		$	220,769		$	-		$	220,769
Cost of goods sold		-			149,450			-			149,450
Gross profit		-			71,319			-			71,319
Operating expenses		138,619			791,589			13,217			943,425
Loss from operations	$	(138,619	)	$	(720,270	)	$	(13,217	)	$	(872,106	)

	For the Nine Months Ended
	June 30, 2020
	WCUI			PSI			Stealthco
	Corporate			Medical Devices			Authentication and Encryption			Total
Trade Sales	$	-		$	-		$	5,000		$	5,000
Cost of goods sold		-			-			-			-
Gross profit		-			-			5,000			5,000
Operating expenses		861,611			590,158			122,014			1,573,783
Loss from operations	$	(861,611	)	$	(590,158	)	$	(117,014	)	$	(1,568,783	)

NOTE 7 – LEGAL MATTERS

The Company is periodically engaged in legal proceedings arising from and relating to its business operations. Except as otherwise described herein ~~and in Note 4~~, we currently are not involved in any litigation that we believe could have a material adverse effect on our financial ~~condition~~ condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, ~~government~~ 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.

WeThe ~~continue~~Company continues efforts to preserve revenue and reduce operating expenses through actions including, but not limited to, facilities ~~consolidation~~ consolidation and staff reductions, which weit ~~hope~~hopes 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 ~~The~~claim ~~first~~filed ~~regards~~with ~~unpaid~~the ~~wages~~Illinois ~~claimed~~Department ~~due~~of ~~together~~Labor ~~with~~asserting ~~interest~~a atviolation of the ~~rate~~Illinois ~~of 4%~~Wage ~~per~~Payment ~~annum~~and onCollection ~~such~~Act ~~amount~~by as the Company’s ~~originally~~former ~~agreed~~CEO. ~~upon~~That inclaim ~~settlement~~alleges ~~negotiations.~~unpaid ~~The~~wages ~~ex-employee~~in ~~claims~~the ~~additional~~amount ~~amounts due~~of ~~for~~$158,715 ~~certain~~and ~~statutory~~unpaid ~~damages~~vacation pay ~~under~~in the ~~Illinois~~amount ~~Wage~~of ~~Payment~~$20,833 ~~and~~for ~~Collection~~a ~~which~~total ~~currently~~amount ~~could~~of ~~exceed~~ $21179,~~600 and~~548, ~~would~~as ~~increase~~well atas ~~the~~certain ~~rate~~statutory ofdamages including, but not limited to, 2% of of the wages due per month plus attorneys’ fees if the ~~employee~~ex-CEO elects to file suit for a violation of the Act and is successful in 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.

~~The~~As ~~second~~discussed ~~claim~~in ~~was~~Note ~~filed~~5, ~~with~~on ~~the~~or ~~Illinois~~about ~~Department~~June of29, ~~Labor~~2020, ~~asserting~~HHE afiled ~~violation~~case ofnumber ~~the~~2020L006092 ~~Illinois~~in ~~Wage Payment and Collection Act by~~ the ~~Company’s~~Circuit ~~former~~Court ~~CEO.~~of ~~That~~Cook ~~claim~~County ~~alleges~~alleging ~~unpaid~~failure to ~~wages~~pay inBase ~~the~~Rent ~~amount~~and abandonment of ~~$158,715 and~~certain ~~unpaid~~office ~~vacation~~space ~~pay~~ in ~~the~~Hoffman ~~amount of $20~~Estates,~~833 for~~ aIllinois ~~total~~subject ~~amount~~to ofa ~~$179,548, as~~Commercial ~~well~~Lease asdated ~~certain~~May ~~statutory damages including~~26, ~~but not limited to,~~2016 ~~2% of~~ (the ~~wages~~“HHE ~~due~~litigation”). ~~per~~HHE ~~month~~sought ~~plus~~at ~~attorneys’~~least ~~fees~~$672,888 ifin ~~the~~base ~~ex-CEO~~rent ~~elects~~and toother ~~file~~amounts ~~suit~~under ~~for~~the alease, ~~violation~~as ofwell ~~the~~as ~~Act~~treble ~~and is successful~~damages infrom ~~obtaining~~our aex-CEO ~~judgment~~and ontwo ~~his~~past ~~claim.~~Directors ~~The~~who ~~Company~~were ~~has~~serving ~~filed~~on ~~its~~our ~~response~~Board toas ~~such~~of ~~claim with~~ the ~~Department~~date ~~denying~~of the ~~substantive~~lease. ~~allegations therein~~On ~~and~~October ~~asserting~~6, ~~certain~~2021, ~~factual~~HHE and ~~legal~~the ~~defenses,~~Company agreed ~~including~~to ~~breach~~a ofsettlement ~~fiduciary~~on ~~duty,~~the asterms adiscussed ~~bar~~in toNote ~~all~~5 ~~claimed compensation~~above. ~~The claim~~On ~~remains~~February ~~pending~~10, ~~but as the date hereof~~2022, ~~no suit has been filed against~~ the ~~Company~~initial ~~asserting~~payment ~~a violation~~ of ~~the~~$125,000 ~~Act~~was ~~based~~paid onto ~~said~~HHE ~~claim~~(see Note 5).

On or about January 8, 2021, Periklis Papadopoulus, a former Director who was named as an additional Defendant in the HHE litigation, filed a counterclaim against the Company seeking indemnification for attorneys’ fees he incurred in obtaining his dismissal from the HHE litigation. Subsequent to September 30, 2021, the Company settled the counterclaim by agreeing to pay $41,914, with $15,000 payable on or about January 4, 2022 and the balance in sixteen monthly installments commencing June 4, 2022, each in the amount of $1,791. The settlement amount shall be reduced to $37,000 if it is paid prior to April 1, 2022, or $39,000 if paid before July 1, 2022. The Company agreed to entry of a judgment in the amount of $41,914 to secure payments under the settlement agreement. This amount is included in Accounts payable and accrued expenses on the accompanying Balance Sheets. Upon payment of the settlement, Papadopoulos will provide the Company with a satisfaction of judgment. Subsequent to December 31, 2021, the Company made the initial payment of $15,000.

NOTE 8 – SUBSEQUENT EVENTS

Subsequent to ~~June~~December 3031, 2021, the Company borrowed $~~154~~254,~~950~~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 October 6, 2021, the Company and a former landlord (“HHE”) agreed to a settlement agreement providing, among other things, that HHE will provide the Company a satisfaction of the judgment upon the payment by the Company of $350,000, plus interest. An initial payment of $125,000 was due January 1, 2022. On February 10, 2022, the initial payment of $125,000 was paid to HHE (see Note 4).

In February 2022, the Company entered into a loan agreement with the U.S Small Business Association (SBA) in the amount of $304,700. The note accrues interest at 3.75% per annum and calls for monthly payments of $1,569 beginning in February 2024. The loan is secured by all of the assets of the Company and is personally guaranteed by the Company’s Chief Executive Officer.

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 possible. The 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%.

~~Effective~~In ~~April~~December 302018, ~~2020,~~PSI ~~the~~entered ~~joint~~into ~~venture~~a ~~with~~Joint ~~GEN2~~Venture ~~was~~Agreement ~~reorganized.~~with GEN2 ~~shareholders~~for ~~exchanged~~further ~~their common shares in GEN2~~development, ~~and the individual exchanged his membership interests in NEO~~marketing, ~~for~~licensing ~~common~~and/or ~~shares~~sale ~~representing~~of ~~49% ownership in~~ PSI~~. The Company retained its common shares~~ intechnology ~~PSI,~~and ~~which~~products ~~provides~~to ~~the~~be ~~Company~~conducted athrough ~~51%~~NEO ~~economic~~Phototherapy, ~~interest~~Inc. in(“NEO”). ~~the~~ PSI ~~technology~~ and ~~products~~GEN2 ~~developed~~were by the ~~joint~~members ~~venture.~~of ~~During~~NEO, owning ~~three~~50.5% and ~~nine~~36.0%, ~~months~~respectively. ~~ended~~As ~~June~~of April 30, ~~2021~~2020, ~~PSI~~the ~~recorded~~Company acontrolled ~~loss~~51% of ~~$168,350~~the ~~and~~joint ~~$506~~venture,~~860,~~ ~~respectively,~~GEN2 ~~relating~~controlled to39% ~~its~~and ~~operations, of~~another ~~which~~individual ~~$82,491~~controlled ~~and $248,361, respectively, was allocated to~~ the ~~non-controlling~~remaining ~~interest~~10%.

~~Repayment~~Effective ofApril ~~the~~30, ~~$975~~2020,~~000~~ ~~investment~~the ~~will~~joint ~~begin~~venture ~~through~~with ~~and~~GEN2 ~~upon~~was ~~the~~reorganized. ~~date~~GEN2 ~~which~~shareholders ~~PSI~~exchanged ~~has~~their ~~realized~~common ~~and~~shares ~~retained~~in ~~cumulative~~GEN2, ~~net~~and ~~income/distributable~~the individual ~~cash~~exchanged inhis ~~the~~membership ~~amount~~interests ofin ~~$300~~NEO,~~000~~ for common shares representing 49% ownership in PSI. The ~~minority~~Company ~~interest~~retained ofits common shares in PSI, ~~ownership~~which ~~consists~~provides ofthe ~~accredited~~Company ~~investors,~~a 51% economic interest in the PSI technology and ~~investment~~products ~~participation~~developed by the joint venture. During ofthe ~~$750~~three months ended December 31,~~000~~ ~~from~~2021, ~~several~~PSI ~~WCUI~~recorded ~~officers~~a ~~and~~loss ~~directors~~of $123,909 ~~including~~relating ~~Calvin~~to R.its ~~O’Harrow~~operations, ~~and~~of ~~Roy~~which M.$60,716 ~~Harsch~~was allocated to the non-controlling interest.

InAs ~~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~~GEN2 had ~~advanced~~received $~~191~~975,000 ~~to Protec in furtherance~~ of ~~its~~investments ~~agreement~~ to ~~acquire~~contribute ~~approximately~~to ~~62%~~NEO. Repayment of ~~Protec, with~~ the ~~Company’s share being approximately 32%~~$975,000 ~~based~~investment onwill ~~its PSI ownership. The remaining~~begin ~~30%~~through ~~share~~and isupon tothe bedate ~~attributed~~which to PSI’s ~~minority~~has ~~shareholders,~~realized ~~based~~and onretained ~~their~~cumulative ~~PSI~~net ~~ownership.~~income/distributable ~~During~~cash in the ~~year~~amount ~~ended September 30, 2020, Protec received an additional $120,000 from non-affiliated investors,~~ of ~~which~~ $74300,~~400 was recorded to additional paid-in capital and $45,600 to the non-controlling interests~~000. The minority ~~additional~~interest ~~investments~~of ~~gave~~PSI ~~the non-controlling interests a 68%~~ ownership ~~interest in~~consists ~~Protec.~~of ~~During~~accredited ~~the~~investors, ~~three~~ and ~~nine~~investment ~~months~~participation ~~ended~~of ~~June 30~~$750,000 ~~2021,~~from ~~Protec~~several ~~recorded~~WCUI ~~a loss of $6,710~~ officers and ~~$249~~directors,~~567,~~ ~~respectively,~~including ofCalvin ~~which $4,589~~R. ~~and $170~~O’Harrow,~~654~~ ~~was~~William ~~allocated~~Kingsford toand ~~the~~Roy ~~non-controlling~~M. ~~interests~~Harsch.

Protec

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. As of September 30, 2020, PSI had contributed $191,000 to Protec with the Company’s share being approximately 32%, based on its PSI ownership. The remaining 30% share is attributed to PSI’s minority shareholders. During the three months ended December 31, 2020, Protec received an additional $120,000 from non-affiliated investors. The additional investments gave the non-controlling interests a 68% ownership interest in Protec. During the three months ended December 31, 2021, Protec recorded a loss of $3,262, of which $2,231 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).

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.

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

ActiveDuty™

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

The proprietary algorithmic architecture of ActiveDuty™ creates the first systemic reporting mechanism to deliver strategic and tactical results supported by an intense worldwide analysis of patterns of human behavior. The ActiveDuty™ global framework is heuristic in nature, capable of comprehending big data across the digital spectrum and speaks all the major languages. Up until now, there has not existed a unified system that could actively measure this lifecycle that is a collection of discreet and seemingly random behaviors of criminals anywhere within the digital domain. Criminals change their identities but not their basic behaviors.

SCI was managed initially by Ricky Howard, who brought over thirty years of experience in operations management and executive positions in a variety of industries ranging from entrepreneurial startups to Fortune 500 companies. He played an integral role in bringing the company’s capabilities to its present status including design and creation of its manufacturing capabilities, implementation of its ERP inventory controls system, software and hardware development, marketing and sales materials processes and day-to-day operational procedures and processes. In November 2018, Mr. Howard passed away suddenly and Mr. O’Harrow took over operations of SCI’s business on an interim basis.

Analysis of Financial Condition and Results of Operations

Results of Operations for the three months ended ~~June~~December 3031, 2021 compared to the three months ended ~~June~~December 3031, 2020.

Revenue and Cost of Goods Sold

Revenue for the three months ended ~~June~~December 3031, 2021 and 2020 was $78164,~~620.~~552 ~~There~~and ~~was~~$90,499, norespectively. ~~revenue~~Gross orprofit ~~cost of goods sold~~ for the three months ended December ~~June 30~~31, ~~2020.~~ ~~The~~2021 ~~increase~~and in2020 ~~revenue~~was in$138,552 ~~2021~~and ~~related~~$10,399, torespectively. ~~the~~The increase in revenues atand ~~PSI~~gross ~~due~~profit toin ~~the~~2021 ~~roll-out~~was ofdue ~~their~~to ~~new~~the ~~Aurora medical device.~~increase ~~Cost~~in ofrevenues ~~sales~~and ~~for~~gross ~~the~~profit ~~three~~at ~~months ended June 30~~PSI, ~~2021~~as there was ~~$10,400.~~no ~~Gross~~revenue ~~profit~~at SCI for ~~the~~each ~~three months ended June 30, 2021 was $68,220~~period.

Operating Expenses

Operating expenses for the three months ended ~~June~~December 3031, 2021 and 2020 were $~~272~~287,~~666~~749 and $~~813~~308,~~380~~541, respectively. The decrease in operating expenses in 2021 was due primarily to the slight decrease in ~~consulting~~operating ~~fees~~expenses at PSI, ~~employee~~primarily labor-related costs ~~and stock compensation~~.

Other Expenses

Other expenses during the three months ended ~~June~~December 3031, 2021 and 2020 consisted of $41,587 and $3626,~~230~~158 of interest expense., ~~Other income during the three months~~respectively, ~~ended~~and ~~June~~debt ~~30,~~discount ~~2020~~amortization ~~consisted~~ of $4,~~000~~375 ~~from a U.S. government grant relating to COVID-19. Other expenses~~ during the three months ended ~~June~~ ~~30,~~December ~~2020 consisted of $22~~31,~~680~~ ~~relating to the cost of the modification of terms of stock options, $43,815 of financing costs and $19,751 of interest expense, totaling to a net expense of $82,246~~2021.

Net Loss

Our net loss for the three months ended ~~June~~December 3031, 2021 was $~~240~~195,~~676~~159, compared to a net loss of $~~895~~324,~~626~~300 for the three months ended ~~June 30,~~December 31, 2020. The decrease in the net loss in 2021 was primarily due to the ~~decrease~~increase in ~~operating~~sales and ~~other~~gross profit in 2021, and the decrease in operating expenses.

Results of Operations for the nine months ended June 30, 2021 compared to the nine months ended June 30, 2020.

Revenue and Cost of Goods Sold

Revenue for the nine months ended June 30, 2021 and 2020 was $220,769 and $5,000, respectively. The increase in revenue in 2021 related to the increase in revenues at PSI due to the roll-out of their new Aurora medical device. Cost of sales for the nine months ended June 30, 2021 was $149,450. There was no cost of sales for the nine months ended June 30, 2020. Gross profit for the nine months ended June 30, 2021 and 2020 was $71,319 and $5,000, respectively.

Operating Expenses

Operating expenses for the nine months ended June 30, 2021 and 2020 were $943,425 and $1,573,783, respectively. The decrease in operating expenses in 2021 was due primarily to the decrease in consulting fees, employee-related costs and stock compensation.

Other Expenses

Other expenses during the nine months ended June 30, 2021 consisted of $94,381 of interest expense. Other income during the nine months ended June 30, 2020 consisted of $4,000 from a U.S. government grant relating to COVID-19. Other expenses during the nine months ended June 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 $45,285 of interest expense, totaling to a net expense of $615,045.

Net Loss

Our net loss for the nine months ended June 30, 2021 was $966,487, compared to a net loss of $2,183,828 for the nine months ended June 30, 2020. The decrease in the net loss in 2021 was primarily due to the decrease in operating and other expenses.

Results of Operations by Segment

The Company currently maintains two business segments:

(i) Medical Devices: which it provided through PSI, its 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

	(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.

(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 ~~June~~December 3031, 2021 and 2020

For the Three Months Ended

June 30, 2021

December 31, 2021

Corporate

Medical Devices

Authentication and Encryption

Total

Trade Sales

78164,~~620~~552

Cost of goods sold

1026,~~400~~000

Gross profit

68138,~~220~~552

Operating expenses

4239,~~849~~990

~~226~~244,~~575~~964

32,~~242~~795

~~272~~287,~~666~~749

Loss from operations

(4239,~~849~~990

)

(~~158~~106,~~355~~412

)

(32,~~242~~795

)

(~~204~~149,~~446~~197

)

	For the Three Months Ended
	June 30, 2020
	December 31, 2020
	WCUI			PSI			Stealthco
	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		~~620~~49,~~650~~109			~~208~~256,~~047~~471			~~(15~~2,~~317~~961	)		~~813~~308,~~380~~541
Loss from operations	$	(~~620~~49,~~650~~109	)	$	(~~208~~246,~~047~~072	)	$	15(2,~~317~~961	)	$	(~~813~~298,~~380~~142	)

Revenue for the Medical Devices segment for the three months ended ~~June~~December 3031, 2021 and 2020 was $78164,~~620.~~552 ~~There~~and ~~was no revenue or cost of goods sold for the Medical Devices segment for the three months ended June 30~~$90,499, ~~2020~~respectively. The increase in sales in 2021 was due to the ~~increase~~launch inof ~~trade sales.~~PSI’s ~~Cost~~new ofFDA ~~goods~~approved ~~sold~~medical ~~for~~device named Aurora. Gross profit during the three months ended ~~June~~December 3031, 2021 and 2020 was $10138,~~400~~552 and ~~the gross profit was~~ $6810,~~220~~399, respectively. Operating expenses for the three months ended ~~June~~December 3031, 2021 and 2020 was $~~226~~244,~~575~~964 and $~~208~~256,~~047~~471, respectively. The ~~increase~~decrease in operating expenses in 2021 was primarily due to the ~~increase~~decrease in ~~employee~~labor-related costs ~~and contract labor~~. The loss from operations for the three months ended ~~June 30~~December 31, 2021 and 2020 was $~~158~~106,~~355~~412 and $~~208~~246,~~047~~072, respectively.

There was no revenue or cost of ~~goods~~sales ~~sold~~ for the Authentication and Encryption segment for the three months ended ~~June~~December 3031, 2021 and 2020. Operating expenses for the three months ended ~~June~~December 3031, 2021 and 2020 was $32,~~242~~795 and $~~(15~~2,~~317)~~961, respectively. The ~~increase in operating expenses in 2021 was primarily due to the increase in other expenses. The income (~~loss) from operations for the three months ended ~~June 30~~December 31, 2021 and 2020 was $(32,~~242)~~795 and $152,~~317~~961, respectively.

21The Corporate segment primarily provides executive management services for the Company. Operating expenses for the three months ended December 31, 2021 and 2020 was $39,990 and $49,109, respectively. The decrease in operating expenses in 2021 was due primarily to the decrease in professional fees. The loss from operations for the three months ended December 31, 2021 and 2020 was $39,990 and $49,109, respectively.

The Corporate segment primarily provides executive management services for the Company. Operating expenses for the three months ended June 30, 2021 and 2020 was $42,849 and $620,650, 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 three months ended June 30, 2021 and 2020 was $42,489 and $620,650, respectively.20

Operations by Segment for the Nine Months Ended June 30, 2021 and 2020

	For the Nine Months Ended
	June 30, 2021
	Corporate			Medical Devices			Authentication and Encryption			Total
Trade Sales	$	-		$	220,769		$	-		$	220,769
Cost of goods sold		-			149,450			-			149,450
Gross profit		-			71,319			-			71,319
Operating expenses		138,619			791,589			13,217			943,425
Loss from operations	$	(138,619	)	$	(720,270	)	$	(13,217	)	$	(872,106	)

	For the Nine Months Ended
	June 30, 2020
	WCUI			PSI			Stealthco
	Corporate			Medical Devices			Authentication and Encryption			Total
Trade Sales	$	-		$	-		$	5,000		$	5,000
Cost of goods sold		-			-			-			-
Gross profit		-			-			5,000			5,000
Operating expenses		861,611			590,158			122,014			1,573,783
Loss from operations	$	(861,611	)	$	(590,158	)	$	(117,014	)	$	(1,568,783	)

Revenue for the Medical Devices segment for the nine months ended June 30, 2021 was $220,769. There was no revenue or cost of goods sold for the Medical Devices segment for the nine months ended June 30, 2020. The increase in 2021 was due to the increase in trade sales. Cost of goods sold for the nine months ended June 30, 2021 was $149,450 and the gross profit was $71,319. Operating expenses for the nine months ended June 30, 2021 and 2020 was $791,589 and $590,158, respectively. The increase in operating expenses in 2021 was primarily due to the increase in employee-related costs and contract labor. The loss from operations for the nine months ended June 30, 2021 and 2020 was $720,270 and $590,158, respectively.

Revenue for the Authentication and Encryption segment for the nine months ended June 30, 2020 was $5,000. There was no revenue or cost of goods sold for the Authentication and Encryption segment for the nine months ended June 30, 2021. The decrease in revenues in 2021 was due to the decrease in trade sales and consulting services. There was no cost of goods sold for the nine months ended June 30, 2020 and the gross profit was $5,000. The gross profit decrease in 2021 was due to the decrease in sales. Operating expenses for the nine months ended June 30, 2021 and 2020 was $13,217 and $122,014, respectively. The decrease in operating expenses in 2021 was primarily due to the decrease in stock compensation costs and employee-related costs. The loss from operations for the nine months ended June 30, 2021 and 2020 was $13,217 and $117,014, respectively.

The Corporate segment primarily provides executive management services for the Company. Operating expenses for the nine months ended June 30, 2021 and 2020 was $138,619 and $861,611, 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 nine months ended June 30, 2021 and 2020 was $138,619 and $861,611, respectively.

Liquidity and Capital Resources

~~The~~Going 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 nine months ended June 30, 2021, the Company incurred a net loss of $966,487 and used cash in operations of $760,521, and had a shareholders’ deficit of $3,047,268 as of June 30, 2021. In addition, loans payable of $1,045,250 and payroll taxes of $80,334 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.Concern

22The 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, 2021, the Company incurred a net loss of $195,159 and used cash in operations of $68,119, and had a shareholders’ deficit of $3,497,757 as of December 31, 2021. In addition, loans payable of $1,451,250 and payroll taxes of $71,334 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.

AtNo ~~June~~assurance ~~30,~~can ~~2021,~~be ~~the~~given ~~Company~~that ~~had~~any ~~cash~~future onfinancing ~~hand~~will inbe ~~the~~available ~~amount~~or, ofif ~~$41~~available,~~799.~~ ~~The~~that ~~ability~~it towill ~~continue~~be ~~as a going concern is dependent~~ on ~~the Company~~terms ~~attaining~~that ~~and~~are ~~maintaining~~satisfactory ~~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~~Company. ~~During~~Even ~~the~~if ~~nine months ended June 30, 2021,~~ the Company ~~received~~is ~~$751,000~~able ~~through~~to ~~short-term~~obtain ~~loans~~additional ~~from its officers and shareholders. As of June 30~~financing, ~~2021, loans~~it ~~payable~~may tocontain ~~officers~~undue ~~and~~restrictions ~~shareholders~~on ofour $1operations,~~916,250~~ ~~were~~in ~~outstanding,~~the case of ~~which~~debt ~~$1,045,825~~financing ~~were~~or ~~past~~cause ~~due.~~substantial ~~All~~dilution offor ~~the~~our ~~loans are unsecured~~stockholders, ~~have~~ anin ~~interest~~case ~~rate~~ of ~~eight~~equity ~~percent and are due one year from the date of issuance~~financing.

NoComparison 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~~three ~~financing~~months orended ~~cause~~December ~~substantial dilution for our stock holders~~31, in2021 ~~case~~and ~~of equity financing.~~2020

~~Comparison~~As of ~~nine~~December ~~months~~31, ~~ended~~2021, ~~June~~we 30had $15,960 ~~2021~~in cash, negative working capital of $3,497,757 and ~~2020~~an accumulated deficit of $28,521,841.

As of ~~June~~December 3031, ~~2021~~2020, we had $4178,~~799~~523 in cash, negative working capital of $32,~~010~~465,~~102~~785 and an accumulated deficit of $2827,~~130~~764,~~835~~061.

As of June 30, 2020, we had $94,318 in cash, negative working capital of $2,143,884 and an accumulated deficit of $27,463,732.

Cash flows used in operating activities

During the ~~nine~~three months ended ~~June~~December 3031, 2021, the Company used cash flows in operating activities of $~~760~~68,~~521~~119, compared to $~~730~~267,~~995~~797 used in ~~the~~ ~~nine~~the three months ended ~~June~~December 3031, 2020. During the ~~nine~~three months ended ~~June~~December 3031, 2021, the Company incurred a net loss of $~~966~~195,~~487~~ 159 and $~~255~~48,~~725~~ 125 of non-cash expenses, compared to a net loss of $2324,~~183,828~~300 and $1107,~~474,471~~885 of non-cash expenses during the ~~nine~~three months ended December ~~June 30~~31, 2020.

Cash flows used in investing activities

During the ~~nine~~three months ended ~~June~~December 3031, 2021 and 2020, the Company had no cash flows from investing activities.

Cash flows provided by financing activities

During the ~~nine~~three months ended ~~June~~December 3031, 2021, the Company had proceeds from loans payable from officers and shareholders of $~~751~~52,000. During ~~the~~ ~~nine~~the three months ended ~~June~~December 3031, 2020, the Company had proceeds ~~of $685,000~~ from loans payable from officers and shareholders, ~~$37,166~~of ~~from a U.S. SBA loan and~~ $50295,000 ~~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.

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~~2021, filed with the Securities and Exchange Commission on February 815, ~~2021~~2022. 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 ~~nine~~three months ended ~~June~~December 3031, 2021.

Recently Issued Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting Companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard 2201) 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~~We ~~Company~~have ~~carried~~identified ~~out~~material anweaknesses ~~evaluation,~~in ~~with~~our ~~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 June 30, 2021, 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~~internal ~~are~~control ~~not~~over ~~effective~~financial ~~at the reasonable assurance level due to the material weaknesses described below:~~reporting.

1.Maintaining ~~The~~effective ~~lack~~internal ofcontrol anover ~~independent~~financial ~~audit~~reporting ~~committee~~ and ~~the~~effective ~~lack~~disclosure ofcontrols ~~internal~~and ~~personnel~~procedures are necessary for us to ~~provide~~produce reliable ~~accurate~~financial statements. We have evaluated our internal control over financial reporting and ~~timely~~our ~~regulatory~~disclosure ~~filings~~controls and procedures and concluded that they were not effective as of December 31, 2021.

2.A ~~The~~material ~~Company~~weakness ~~does~~is ~~not~~defined ~~have~~as ~~written~~a ~~documentation~~deficiency, or a combination of ~~its~~deficiencies, in internal control ~~policies~~over ~~and~~financial ~~procedures.~~reporting ~~Written~~such ~~documentation~~that there is a reasonable possibility that a material misstatement of ~~key~~our ~~internal controls~~annual ~~over~~or interim financial ~~reporting~~statements iswill anot ~~requirement~~be ofprevented ~~Section~~or detected ~~404~~on ofa ~~the~~timely ~~Sarbanes-Oxley~~basis. ~~Act~~The ~~which~~material isweaknesses ~~applicable~~we toidentified ~~the~~are (i) The Company. ~~Management evaluated~~does ~~the~~not ~~impact~~have ofan ~~its~~independent ~~failure~~audit tocommittee; (ii) the Company does not have written documentation of its internal ~~controls~~control policies and procedures; on(iii) ~~its~~The ~~assessment~~Company does not have sufficient segregation of duties within its ~~disclosure~~accounting functions; (iv) The Company has insufficient full-time personnel with an appropriate level of current U.S. GAAP and SEC reporting requirements to timely meet regulatory filing requirements, and (v) The Company had ineffective controls over our financial statement close and ~~procedures~~reporting process and ~~has~~did ~~concluded~~not provide reasonable assurance that ~~the~~accounts ~~control~~were ~~deficiency~~complete and accurate and agreed to detailed support and that ~~resulted~~reconciliations ~~represented~~of aaccounts ~~material~~were ~~weakness~~properly performed, reviewed and approved.

3. The Company ~~does~~is ~~not~~committed ~~have~~to ~~sufficient~~remediating ~~segregation~~its ofmaterial ~~duties~~weaknesses ~~within~~as ~~its~~promptly ~~accounting~~as ~~functions~~possible. However, ~~which~~there iscan abe ~~basic~~no ~~internal~~assurance ~~control.~~as ~~Due~~ to when these ~~its~~material ~~size~~weaknesses ~~and~~will ~~nature,~~be ~~segregation~~remediated ofor ~~all~~that ~~conflicting~~additional ~~duties~~material ~~may~~weaknesses will not ~~always~~arise bein ~~possible~~the ~~and~~future. ~~may~~Even ~~not~~effective beinternal ~~economically~~control can ~~feasible.~~provide ~~However,~~ only reasonable assurance with respect to the ~~extent~~preparation ~~possible,~~and ~~the~~fair ~~initiation~~presentation of ~~transactions~~financial statements. Any failure to remediate the material weaknesses, or the ~~custody~~development of ~~assets~~new ~~and~~material ~~the~~weaknesses ~~recording~~in ofour ~~transactions~~internal ~~should~~control beover ~~performed~~financial byreporting, could result ~~separate~~in ~~individuals.~~material ~~Management~~misstatements ~~evaluated~~in ~~the~~our ~~impact~~financial ofstatements, ~~its~~which ~~failure~~in toturn could have ~~segregation~~a ofmaterial ~~duties~~adverse effect on ~~its~~our ~~assessment~~financial condition and the trading price of ~~its~~our ~~disclosure~~common stock and we could fail to meet our financial reporting obligations. We have identified weaknesses in our internal controls, and ~~procedures~~we ~~and~~cannot ~~has~~provide ~~concluded~~assurances that ~~the~~these ~~control~~weaknesses ~~deficiency~~will ~~that~~be ~~resulted~~effectively ~~represented~~remediated aor that additional material weaknesses ~~weakness~~will not occur in the future.

2422

4.If ~~The~~not ~~Company~~remediated, ~~does~~our ~~not~~failure ~~have~~to ~~sufficient~~establish ~~segregation~~and ofmaintain ~~duties~~effective sodisclosure ~~that~~controls ~~one~~and ~~person~~procedures ~~can~~and ~~initiate~~internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each ~~authorize~~of which could have a material adverse effect on our financial condition and ~~execute~~the ~~transactions~~trading price of our common stock.

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.

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 ~~nine~~three months ended ~~June~~December 3031, 2021 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.

WeThe ~~continue~~Company continues efforts to preserve revenue and reduce operating expenses through actions including, but not limited to, facilities ~~consolidation~~ consolidation and staff reductions, which weit ~~hope~~hopes 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 ~~The~~claim ~~first~~filed ~~regards~~with ~~unpaid~~the ~~wages~~Illinois ~~claimed~~Department ~~due~~of ~~together~~Labor ~~with~~asserting ~~interest~~a atviolation ~~the rate~~ of 4%the ~~per~~Illinois ~~annum~~Wage Payment onand ~~such~~Collection ~~amount~~Act as by the Company’s ~~originally~~former ~~agreed~~CEO. ~~upon~~That inclaim ~~settlement~~alleges ~~negotiations.~~unpaid ~~The~~wages ~~ex-employee~~in ~~claims~~the ~~additional~~amount ~~amounts~~of ~~due~~$158,715 ~~for~~and ~~certain~~unpaid ~~statutory damages~~vacation ~~under~~pay in the ~~Illinois~~amount ~~Wage~~of ~~Payment~~$20,833 ~~and~~for ~~Collection~~a ~~which~~total ~~currently~~amount ~~could~~of ~~exceed~~ $21179,~~600.00~~548, ~~and~~as ~~would~~well ~~increase~~as atcertain ~~the~~statutory ~~rate~~damages ofincluding, but not limited to, 2% of the wages due per month plus attorneys’ fees if the ~~employee~~ex-CEO elects to file suit for a violation of the Act and is successful in ~~obtaining~~ 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.

~~The~~As ~~second~~discussed ~~claim~~in ~~was~~Note ~~filed~~5, ~~with~~on ~~the~~or ~~Illinois~~about ~~Department~~June of29, ~~Labor~~2020, ~~asserting~~HHE afiled ~~violation~~case ofnumber 2020L006092 in the ~~Illinois~~Circuit ~~Wage~~Court ~~Payment~~of ~~and~~Cook ~~Collection~~County ~~Act~~alleging byfailure ~~the~~to ~~Company’s~~pay ~~former~~Base ~~CEO.~~Rent ~~That~~and ~~claim~~abandonment ~~alleges~~of ~~unpaid~~certain ~~wages~~office space in ~~the~~Hoffman ~~amount~~Estates, ofIllinois ~~$158,714.60~~subject ~~and~~to ~~unpaid~~a ~~vacation~~Commercial ~~pay~~Lease indated ~~the~~May ~~amount~~26, of2016 ~~$20,833.33~~(the ~~for~~“HHE alitigation”). ~~total~~HHE ~~amount~~sought ofat least $~~179~~672,~~547.90,~~888 asin ~~well~~base asrent ~~certain~~and ~~statutory~~other ~~damages~~amounts ~~including,~~under ~~but~~the ~~not limited to~~lease, 2%as ofwell ~~the~~as ~~wages~~treble ~~due~~damages ~~per~~from ~~month~~our ~~plus attorneys’ fees if the~~ ex-CEO ~~elects to file suit for a violation of the Act~~ and istwo ~~successful~~past inDirectors ~~obtaining~~who awere ~~judgment~~ serving on ~~his~~our ~~claim.~~Board ~~The~~as ~~Company~~of ~~has filed its response to such claim with~~ the ~~Department~~date ~~denying~~of the ~~substantive~~lease. ~~allegations~~On ~~therein~~October ~~and~~6, ~~asserting certain~~2021, ~~factual~~HHE and ~~legal~~the ~~defenses,~~Company agreed ~~including~~to ~~breach~~a ofsettlement ~~fiduciary~~on ~~duty,~~the asterms adiscussed ~~bar~~in toNote ~~all~~5 ~~claimed compensation~~above. ~~The~~On ~~claim~~February ~~remains pending~~10, ~~but~~ ~~as the date hereof~~2022, ~~no suit has been filed against~~ the ~~Company~~initial ~~asserting~~payment ~~a violation~~ of ~~the~~$125,000 ~~Act~~was ~~based~~paid onto ~~said~~HHE (see ~~claim~~Note 5).

On or about ~~June~~January 298, ~~2020~~2021, ~~the~~Periklis ~~Company~~Papadopoulus, ~~received~~a ~~notice~~former ~~that~~Director ~~Hanover~~who ~~Hoffman~~was ~~Estates,~~named ~~LLC~~as (“an additional Defendant in the HHE”) litigation, filed a ~~case~~counterclaim ~~number~~against ~~2020L006092~~ the Company seeking indemnification for attorneys’ fees he incurred in obtaining his dismissal from the HHE ~~Circuit~~litigation. ~~Court~~Subsequent ofto ~~Cook~~September ~~County~~30, ~~alleging~~2021, ~~failure~~the Company settled the counterclaim by agreeing to pay ~~Base~~$41,914, ~~Rent~~with ~~and~~$15,000 ~~abandonment~~payable on ofor ~~certain~~about ~~office~~January ~~space~~4, in2022 ~~Hoffman~~and ~~Estates,~~the ~~Illinois subject~~balance toin asixteen ~~Commercial~~monthly ~~Lease~~installments ~~dated~~commencing ~~May~~June 264, ~~2016.~~2022, ~~HHE~~each ~~seeks~~in atthe ~~least~~amount of $~~672~~1,~~888~~791. inThe settlement ~~base~~amount ~~rent~~shall ~~and~~be ~~other~~reduced ~~amounts~~to ~~under~~$37,000 ~~the~~if ~~lease,~~it asis ~~well as~~paid ~~treble~~prior ~~damages~~to ~~from~~April ~~our~~1, ~~ex-CEO~~2022, ~~and~~or ~~two~~$39,000 ~~past~~if ~~Directors~~paid ~~who~~before ~~were~~July ~~serving~~1, on2022. ~~our~~The ~~Board~~Company agreed asto entry of a judgment in the ~~date~~amount of $41,914 to secure payments under the ~~lease~~settlement agreement. ~~The~~Upon ~~Company~~payment ~~has~~of ~~continued~~the settlement, ~~evaluation~~Papadopoulos ofwill provide the ~~allegations,~~Company ~~defenses~~with ~~and~~a ~~alternate~~satisfaction ~~actions,~~of ~~and~~judgment. itSubsequent isto ~~engaged~~December ~~settlement~~31, ~~negotiations~~2021, ~~which~~the ~~are~~Company ~~on-going~~made the initial payment of $15,000.

2523

Item 1A. Risk Factors

Not required for smaller reporting companies.

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

Exhibit No.		Description
31.1 31.2		Certification of Principal Executive Officer Pursuant to Rule 13a-14* Certification of Principal Financial Officer Pursuant to Rule 13a-14*
31.1		Certification of Principal Executive Officer Pursuant to Rule 13a-14*
32.1 32.2		CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act* CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act*
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		Inline XBRL Instance Document**
101.SCH		Inline XBRL Taxonomy Extension Schema**
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase**
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase**
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase**
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase**
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* 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.

2624

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: September 30, 2021	By:	/s/ Paul D. Jones
Date: March 31, 2022	By:	/s/ Paul D. Jones
		Paul D. Jones
		President
		President (Duly Authorized Principal Executive Officer)
		(Duly Authorized Principal Executive Officer)

	WELLNESS CENTER USA, INC.
Date: September 30, 2021	By:	/s/ Douglas W. Samuelson
Date: March 31, 2022	By:	/s/ Douglas W. Samuelson
		Douglas W. Samuelson Chief Financial Officer and Principal Accounting Officer (Duly Authorized Principal Accounting Officer)
		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	~~September~~March 3031, ~~2021~~2022
Calvin O’Harrow
/s/ Douglas W. Samuelson	Chief Financial Officer and Principal Accounting Officer	~~September~~March 3031, ~~2021~~2022
Douglas W. Samuelson
/s/ Paul D. Jones	Director, President	~~September~~March 3031, ~~2021~~2022
Paul D. Jones
/s/ Thomas E. Scott	Director, Secretary	~~September~~March 3031, ~~2021~~2022
Thomas E. Scott
/s/ William E. Kingsford	Director	~~September~~March 2931, ~~2021~~2022
William E. Kingsford
/s/ Roy M. Harsch	Director, Chairman	~~September~~March 3031, ~~2021~~2022
Roy M. Harsch

2725

Filing Compare · Wellness Center USA, Inc.