UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X]	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, ~~2019~~2020

[ ]	TRANSITION REPORT UNDER 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)

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

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

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

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

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

Common Stock, par value $0.001

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X].

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]. No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K. [ ].

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

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer ~~[ ] Smaller reporting company [X]~~ (Do not check if a smaller reporting company) [ ] Smaller reporting company [X].

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ]. No [X]

There is no established public trading market for our common stock.

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of ~~the~~March ~~last business day of the registrant’s most recently completed fiscal quarter ended September 30~~31, ~~2019~~2020: $23,~~773~~698,~~921~~561.

As of September 30, ~~2019~~2020, the registrant had ~~107~~118,~~497~~252,077 shares of its common stock issued and outstanding.

Documents Incorporated by Reference: See Item 15.

TABLE OF CONTENTS

		PAGE	~~PAGE~~
	PART I
ITEM 1.	Business	3	3
ITEM 1A.	Risk Factors	6	8
ITEM 2.	Properties	13	16
ITEM 3.	Legal Proceedings	14	16
ITEM 4.	Mine Safety Disclosures	14	17
	PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	15	18
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	16	19
ITEM7A.	Quantitative and Qualitative Disclosures About Market Risk	20	22
ITEM 8.	Financial Statements and Supplementary Data	20	22
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	21	22
ITEM 9A.	Controls and Procedures	21	22
	PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	23	25
ITEM 11.	Executive Compensation	24	26
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	25	27
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	26	28
ITEM 14	Principal Accounting Fees and Services	26	28
	PART IV
ITEM 15.	Exhibits, Financial Statement Schedules	28	29
SIGNATURES		30	31

PART I

ITEM 1.

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.

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

WeDuring ~~conducted~~the period covered by this Report, PSI conducted operations through ~~Psoria~~joint ~~Development~~ventures. ~~Company~~During ~~LLC,~~the anperiod ~~Illinois~~ended ~~limited~~November ~~liability company (“PDC”)~~30, ~~from~~2018, ~~January~~operations ~~15,~~were ~~2015~~conducted through ~~October~~Psoria Development Company, ~~2018.~~LLC (“PDC”), ~~was~~ a joint venture ~~between~~with ~~WCUI/PSI and~~ The Medical Alliance, Inc., ~~a Florida corporation~~ (“TMA”). OnIn November ~~15,~~ 2018, ~~PSI~~the ~~and~~PDC ~~TMA~~joint venture was terminated. The non-controlling interest’s share of the ~~PDC~~accumulated losses of the joint venture. Onthrough termination totaled to $405,383, representing the ~~termination~~non-controlling ~~date~~interest holder’s proportionate share of the equity of the Company’s majority-owned subsidiary, PDC, as adjusted for the non-controlling interest holder’s proportionate share of the ~~accumulated~~earnings or losses ofand ~~the~~other ~~joint~~comprehensive ~~venture~~income ~~totaled~~(loss), ~~$405~~if any,~~383~~ with attribution of its share of losses even if such attribution results in a deficit non-controlling interest balance. During the year ended September 30, 2019, the Company wrote-off the non-controlling interest’s share of the accumulated losses and recorded a loss from the deconsolidation of a non-controlling interest of $405,383.

InSince December 2018, ~~the~~PSI ~~Company~~has ~~and~~conducted ~~PSI~~operations ~~entered~~through ~~into~~ a ~~Joint~~joint ~~Venture~~venture ~~Agreement~~ with ~~PSI~~ GEN2 Funding, Inc., ~~an Illinois corporation~~ (“~~GEN2~~Gen2”), to further ~~develop~~development, ~~market~~ marketing, ~~license~~licensing and/or ~~sell~~sale of PSI technology and products. ~~The~~Pursuant to the Joint Venture Agreement ~~provides~~, ~~for~~ the venture tois be conducted through NEO Phototherapy, ~~LLC,~~Inc. ~~an Illinois limited liability company~~ (“NEO”)~~, with~~. PSI and GEN2 towere ~~hold~~the ~~membership~~initial ~~Units~~members ~~representing~~of NEO, with 50.5% and 36.0% ~~ownership,~~of ~~respectively.~~the initial ItUnits ~~provides~~assigned ~~for~~to PSI and GEN2, respectively, and an additional 13.5% of such Units ~~to be~~ reserved for issuance as ~~incentive~~incentives for ~~awards to~~ key employees and consultants. ~~PSI~~Prior to issuance of reserved Units as incentives, the Company controlled 68% of the joint venture and GEN2 ~~are~~the toremaining 32%. PSI and GEN2 jointly manage NEO’s day-to-day operations. PSI contributed PSI technology to NEO and GEN2 agreed to contribute $700,000.

~~According~~As toof ~~the~~December ~~Joint~~31, ~~Venture Agreement~~2019, ~~PSI would contribute PSI technology to~~ NEO’s inoperations ~~consideration~~required ~~for~~additional ~~its~~funding ~~Units~~beyond ~~and~~Gen2’s ~~GEN2 would contribute~~ $700,000 ~~for its Units~~commitment. ~~Once~~As ~~NEO~~of ~~has~~September 30, ~~realized~~2019, ~~and~~GEN2 ~~retained~~had ~~cumulative~~received ~~net~~and ~~income/distributable~~contributed ~~cash~~an inadditional ~~the amount of~~ $~~300~~275,000~~, the~~ ~~next~~to ~~$700,000~~NEO. As of ~~realized~~April ~~and~~30, ~~retained~~2020, ~~cumulative~~the ~~net~~Company ~~income/distributable~~controlled ~~cash~~51% ~~would~~of the bejoint ~~distributed~~venture, to GEN2. ~~Distributions thereafter~~controlled ~~would~~39% beand ~~made~~another toindividual ~~PSI,~~controlled ~~GEN2~~the ~~and~~remaining ~~other~~10% ~~members,~~(as ifa ~~any,~~result inof ~~proportion~~the toissuance ~~their~~of ~~respective~~incentive Units). ~~Unit~~The ~~ownership,~~Company atrecorded ~~the~~its ~~times and~~proportionate inshare of the ~~manner~~contributions ~~determined~~received ~~from~~of ~~time~~$497,250 to ~~time~~additional bypaid-in-capital ~~the managers~~and $477,750 into ~~their~~non-controlling ~~sole~~interest ~~discretion~~as of that date.

AsEffective ofApril ~~September~~ 30, ~~2019~~2020, ~~NEO’s operations required funding in excess of~~ the ~~$700,000 initially anticipated by the~~ joint venture~~. As~~ ofwith ~~that~~GEN2 ~~date,~~was reorganized. GEN2 ~~had~~shareholders ~~contributed~~exchanged ~~$925,000~~their tocommon ~~NEO,~~shares ~~for~~in ~~which~~ GEN2, ~~received~~and ~~Units~~the individual ~~representing~~exchanged ahis ~~cumulative~~incentive ~~total~~Units ofin ~~39.0% ownership of~~ NEO., ~~Additional~~for ~~Units~~common shares representing ~~a 10~~49% ownership ~~interest~~ in ~~NEO~~PSI. ~~were~~The ~~awarded~~Company toretained ~~one individual as a key staff~~its ~~incentive~~common ~~from~~shares ~~the~~in ~~reserve initially established for such awards~~PSI, ~~with~~which noprovides ~~further~~the ~~awards~~Company ~~currently anticipated. As~~ a ~~result,~~51% ~~once NEO~~economic ~~has~~interest ~~realized and retained cumulative net income/distributable cash~~ in the ~~amount~~PSI oftechnology ~~$300,000, the next $975,000 of realized~~ and ~~retained~~products ~~cumulative~~developed ~~net~~by ~~income/distributable~~the ~~cash would be distributed to GEN2~~joint venture. ~~Distributions~~During ~~thereafter~~year ~~would~~ended beSeptember ~~made~~30, ~~to PSI~~2020, ~~GEN2 and~~ the ~~other~~entities ~~member,~~recorded ina ~~proportion~~combined toloss ~~their~~of ~~respective Unit ownership~~$333,809 atrelating ~~the~~to ~~times~~its ~~and~~operations, inof which ~~the~~$163,556 ~~manner~~was ~~determined~~allocated ~~from time~~ to ~~time by~~ the ~~managers,~~non-controlling ~~in their sole discretion~~interest.

~~GEN2~~Repayment ~~contributions~~of tothe ~~NEO~~$975,000 ~~were~~investment ~~derived~~will ~~from~~begin ~~its~~through ~~shareholders,~~and ~~which~~upon ~~consist~~the ofdate ~~accredited~~which ~~investors,~~PSI has realized and ~~which~~retained ~~include~~cumulative ~~several~~net ~~WCUI~~income/distributable ~~officers~~cash ~~and~~in ~~directors,~~the ~~including~~amount ~~Calvin~~of ~~R. O’Harrow~~$300, ~~Roy M~~000. ~~Harsch,~~PSI ~~William~~ownership E.consists ~~Kingsford,~~of ~~Douglas~~accredited ~~Samuelson~~investors, ~~Paul D. Jones~~ and ~~Thomas~~investment E.participation ~~Scott.~~of ~~GEN2 shareholders~~$750,000 ~~including~~from several ~~said~~WCUI officers and directors ~~of WCUI~~, ~~will~~including ~~share~~Calvin ~~any~~R. ~~realized~~O’Harrow and ~~retained~~Roy ~~cumulative net~~M. ~~income/distributable cash that may be distributed to GEN2~~Harsch.

As of September 30, 2019, the Company interest was adjusted to 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%. The Company recorded its proportionate share of $471,750 to additional paid-in-capital and $453,250 to non-controlling interest as of that date. During the year ended September 30, 2019, NEO recorded a loss of $122,655 relating to its operations.

In May 2020, 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 including, but not limited to, an anti-viral UV-C germicidal wand device to be marketed as the ProTec 9. It also agreed to license certain intellectual property and patented technology to Protec, on an exclusive basis, to use certain Licensed Patents, Know-how, Technical Data, and any Improvements to develop, make, have made, use, sell, offer to sell, distribute, export, import, and otherwise commercialize the Protec 9 within the United States and Canada, for a period continuing for so long as PSI owns the acquired common shares in Protec. The License Agreement requires Protec to pay a royalty of 4% of gross revenues arising from or relating to the servicing, selling, distributing, and other commercialization of Protec 9 products. Pursuant to the PSA, the Company’s Chairman, Calvin R. O’Harrow, will serve as member of Protec’s three-member Board of Directors. As of September 30, 2020, PSI had advanced $191,000 to Protec in furtherance of its agreement to acquire approximately 62% of Protec, with the Company’s derivative share being approximately 32%, based on its PSI ownership. The remaining 30% derivative share is to be attributed to PSI’s minority shareholders, based on their PSI ownership. During the year ended September 30, 2020, Protec received an additional $120,000 from non-affiliated investors, of which $74,400 was recorded to additional paid-in capital and $45,600 to the non-controlling interests. The additional investments gave the non-controlling interests a 38% ownership interest in Protec. During the year ended September 30, 2020, Protec recorded a loss of $172,174, of which $117,732 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 ~~b+oth~~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.

Proposed Share Exchange

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

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

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

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

Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts

PSI received FDA clearance for the Psoria-Light on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark for the Psoria-Light in the fourth quarter of 2011.

PSI’s founder and past president filed a provisional patent application covering certain aspects of the technology that we intend to utilize in the development and commercialization of the Psoria-Light, including handheld ergonomics, emitter platform and LED arrangements, methods for treatment site detection, cooling methods, useful information displays, collection of digital images and graphical correlation to quantitative metrics, and base console designs. Two non-provisional patent applications were submitted claiming the prior filing date of the initial provisional application.

The first non-provisional application describes a unique distance sensor located at the tip of the Psoria-Light hand-piece, which detects the treatment site based on a projected field. The sensor can detect electrolytic/conductive surfaces, such as human skin, without requiring any physical or direct electrical contact. Further, the unique sensor can sense the treatment site at any point about the tip of the hand-piece and without causing any attenuation of the therapeutic UV light output.

The second non-provisional application describes the integration and use of a digital camera in the Psoria-Light, including the location of the digital camera and how and when it is used to conveniently correspond to real-life treatment routines, how images are displayed and captured to memory, and how the images are arranged in patient records are illustrated. Additionally, the second non-provisional application describes the inclusion of clinician defined variables, such as health-related quality of life scores, and their placement into a graphical arrangement relative to treatment site images.

Both the initial provisional patent application and the two non-provisional patent applications are owned by PSI’s past president, who has granted PSI the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under the initial provisional patent application, any non-provisional patent applications filed by him covering the technology described in the initial provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.

PSI’s past president filed a second provisional patent application containing concepts for the improvement of microelectronics packages and thermal management solutions, the improvement of handheld phototherapy devices in general (either used on humans, animals, or plants, or used on inanimate objects), and replacement of laser therapy devices with LED devices. PSI was granted the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under this second provisional patent application, any non-provisional patent applications covering the technology described in the second provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.

In addition to the foregoing, Stealth Mark devoted substantial effort and resources to develop and advance micro-particle security technologies in support of its business activities. Protection of the acquired Stealth Mark intellectual property is maintained through a combination of Patents, Trademarks, and Trade Secrets consisting of the following:

U.S. Patent	Issued	“Title” – Summary
No. 6,647,649	November 18, 2003	“Micro-particle Taggant Systems” - Generation of Micro-particle codes from marks containing encrypted Micro-particles.
No. 7,720,254	May 18, 2010	“Automatic Micro-particle Mark Reader”- Automatic readers for interrogating Micro-particle marks.
No. 7,831.042	November 9, 2010	“Three-Dimensional Authentication Of Micro-particle Mark- Validation of 3D nature of micro-particle mark to protect against counterfeiting of mark.
No. 7,885,428	February 8, 2011	“Automatic Micro-particle Mark Reader”- Automatic readers for interrogating micro-particle marks (broadened protection).
No. 8,033,450	October 11, 2011	“Expression Codes For Micro-particle Marks Based On Signature Strings”- Generation of expression codes (“fingerprints”) unique to each micro-particle mark to protect against counterfeiting of marks.
No. 8,223,964	July 17, 2012	“Three-Dimensional Authentication Of Micro-particle Mark- Validation of 3D nature of micro-particle mark to protect against counterfeiting of marks (broadened protection).

Europe WO/EP Patent	Issued	“Title” – Summary
Appl. No. 07753043.4	Pending	“Expression Codes For Micro-particle Marks Based On Signature Strings”- Generation of expression codes (“fingerprints”) unique to each micro-particle mark to protect against counterfeiting of marks.
Appl. No. 07753034.3	Pending	“Three-Dimensional Authentication Of Micro-particle Mark- Validation of 3D nature of Micro-particle mark to protect against counterfeiting of mark.
Trademarks	Type	Countries
Stealth Mark®	Registered	United States European Community Australia
StealthFire	Not Registered	United States European Community
ActiveDuty™	Not Registered	United States

Trade Secrets

Stealth Mark proprietary technologies and capabilities being maintained as Trade Secrets include, but are not limited to:

● Micro-particle Manufacturing ● Micro-particle Color Systems ● Technology advancements providing improvements in Automatic Reader performance ● Software solutions supporting Micro-particle security solutions ● Algorithms, artificial intelligence, and technologies related to Data Intelligence

We will assess the need for any additional patent, trademark or copyright applications, franchises, concessions royalty agreements or labor contracts on an ongoing basis.

ITEM 1A.

RISK FACTORS

An investment in our securities involves an exceptionally high degree of risk and is extremely speculative in nature. The risks described below are the ones we believe are most important for you to consider. These risks are not the only ones that we face. If events anticipated by any of the following risks actually occur, our business, operating results or financial condition could suffer and the price of our common stock could decline.

WE HAVE RECEIVED A GOING CONCERN OPINION FROM OUR AUDITORS AND WE ARE CURRENTLY OPERATING AT A LOSS, WHICH RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

We have received a “Going Concern” opinion from our auditors. As reflected in the accompanying consolidated financial statements, the Company had ana ~~accumulated~~shareholders’ deficit at September 30, ~~2019~~2020, and a net loss and net cash used in operating ~~activities~~ activities for the fiscal year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is attempting to generate sufficient revenue; however, the Company’s cash position may not be sufficient enough to support the Company’s daily operations. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.

IT IS MOST LIKELY THAT WE WILL NEED TO SEEK ADDITIONAL FINANCING THROUGH SUBSEQUENT FUTURE PRIVATE OFFERING OF OUR SECURITIES.

Because the Company does not currently have any financing arrangements, and may not be able to secure favorable terms for future financing, the Company may need to raise capital through the sale of its common stock. The sale of additional equity securities will result in dilution to our shareholders.

UNFAVORABLE PUBLICITY OR CLIENT REJECTION OF OUR PRODUCTS OR SERVICES GENERALLY COULD REDUCE OUR SALES.

We will be highly dependent upon client acceptance of the safety, efficacy and quality of our products and services, as well as similar products or services offered by other companies. Client acceptance of products or services can be significantly influenced by scientific research or findings, national media attention and other publicity about product use or services. A product or service may be received favorably, resulting in high sales associated with that product or service that may not be sustainable as client preferences change. Future scientific research or publicity could be unfavorable to our industry or any of our particular products and services and may not be consistent with earlier favorable research or publicity. A future research report or publicity that is perceived by our consumers as less than favorable or that question earlier favorable research or publicity could have a material adverse effect on our ability to generate revenue. Adverse publicity in the form of published scientific research, statements by regulatory authorities or otherwise, whether or not accurate, that associates consumption or use of our products or services, or any other similar products and services, with illness or other adverse effects, or that questions the benefits of our or similar products or services, or claims that they are ineffective, could have a material adverse effect on our business, reputation, financial condition or results of operations.

COMPLYING WITH NEW AND EXISTING GOVERNMENT REGULATION, BOTH IN THE U.S. AND ABROAD, COULD SIGNIFICANTLY INCREASE OUR COSTS AND LIMIT OUR ABILITY TO MARKET OUR PRODUCTS AND SERVICES.

The production, packaging, labeling, advertising, distribution, licensing and/or sale of our products and services may be subject to regulation by several U.S. federal agencies, including the FDA, the Federal Trade Commission, the Consumer Product Safety Commission, and the Environmental Protection Agency, as well as various state, local and international laws and agencies of the localities in which our products and services are offered or are sold. Government regulations may prevent or delay the introduction or require design modifications of our products. Regulatory authorities may not accept the evidence of safety we present for existing or new products or services that we wish to market, or they may determine that a particular product or service presents an unacceptable health risk. If that occurs, we could be required to cease distribution of and/or recall products or terminate marketing of services that present such risks. Authorities may also determine that certain advertising and promotional claims, statements or activities are not in compliance with applicable laws and regulations and may determine that a particular statement is unacceptable as a “health claim.” Failure to comply with any regulatory requirements could prevent us from marketing particular existing or new products or services, or subject us to administrative, civil or criminal penalties.

WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY, AND OUR FAILURE TO COMPETE EFFECTIVELY COULD ADVERSELY AFFECT OUR MARKET SHARE, FINANCIAL CONDITION AND GROWTH PROSPECTS.

The U.S. healthcare solutions industry is a large and highly fragmented industry. The principle elements of competition in the industry are price, selection and distribution channel offerings. We believe the market is highly sensitive to the introduction of new products and services, which may rapidly capture a significant share of the market. We will compete for sales with heavily advertised national brands offered by large and well-funded companies. In addition, as certain products or services gain market acceptance, we may experience increased competition for those products or services as more participants enter the market. To the extent that we manufacture or engage third party manufacturers to produce any product, our manufacturing capabilities may not be adequate or sufficient to compete with large scale, direct or third-party manufacturers. Certain of our potential competitors are much larger than us and have longer operating histories, larger customer bases, greater brand recognition and greater resources for marketing, advertising and promotion of their products and services. They may be able to secure inventory from vendors on more favorable terms, operate with a lower cost structure or adopt more aggressive pricing policies. In addition, our potential competitors may be more effective and efficient in introducing new products or services. We may not be able to compete effectively, and our attempt to do so may require us to increase marketing and/or reduce our prices, which may result in lower margins. Failure to effectively compete could adversely affect our market share, financial condition and growth prospects.

OUR DECISIONS TO ACQUIRE PSI AND SCI WERE BASED UPON ASSUMPTIONS WHICH MAY PROVE TO BE ERRONEOUS.

Our decisions to acquire PSI and SCI were based upon assumptions regarding their respective existing and prospective operations, products and services, the potential market for their respective products and services, and our ability to integrate their respective operations in a manner that would enable us to launch the marketing and sale of their respective products and services. Our decisions were based upon information available to management, and assumptions made by management, at the time of each respective acquisition, regarding the potential viability of such products and services and our ability to integrate operations.

Our assumptions may prove to be erroneous. Each company is a small development stage company with a limited operating history. Each is currently operating at a loss, and there is no assurance that its business development plans and strategies will ever be successful, or that their respective products and services will be favorably perceived and accepted by our assumed potential customer populations.

PSI PROVIDES AN ALTERNATIVE APPROACH TO SKIN TREATMENT THAT IS NOVEL.

Psoriasis, eczema, and vitiligo, are common skin conditions that can be challenging to treat, and often cause clients significant psychosocial stress. Clients may elect 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~~chemotherapylike side effects. Ultraviolet (UV) phototherapy has been clinically validated as an alternate treatment modality for these disorders.

“Non-targeted” UV phototherapy may be administered by lamps that emit either UVA or UVB light to both diseased and healthy skin, with sun blocks and other UV barriers used to protect healthy skin. Non-targeted UV must be low dosage to avoid excessive exposure of healthy tissue. “Targeted” UV phototherapy may be administered at 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.

Psoria-Light treatment provides a targeted UV phototherapy that produces UVB light between 300 and 320 nm and UVA light between 350 and 395nm. It does not require consumption of dangerous chemicals or special environmental disposal, and is cost effective for clinicians. We believe these factors will increase client access to this type of treatment. We also believe that Psoria-Light treatment offers several unique and advanced features that 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 patient record integration capabilities; the ability to export to an external USB memory device a PDF file of patient 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).

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. While Psoria-Light treatment appears to have been beneficial to clients, without demonstrable harmful side effects or safety issues, there can be no assurance that we will be able to achieve and maintain such market acceptance by healthcare providers or clients.

WE RELY UPON PSI AND SCI PERSONNEL TO OPERATE THEIR RESPECTIVE BUSINESSES AND THE LOSS OF KEY PERSONNEL COULD HAVE A MATERIALLY ADVERSE AFFECT ON OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

We rely upon the current executive management of PSI and SCI to operate their respective business operations. Employment agreements with any key management personnel will not guarantee that any such personnel will remain affiliated with us.

If any of our key personnel were to cease their affiliation with us, our operating results could suffer. Further, we do not maintain key person life insurance on any executive officer. If we lose or are unable to obtain the services of key personnel, our business, financial condition or results of operations could be materially and adversely affected.

PSI AND SCI HAVE LIMITED EXPERIENCE IN MARKETING THEIR RESPECTIVE PRODUCTS AND SERVICES.

PSI and SCI each has undertaken initial, limited marketing efforts for their respective products and services. Their sales and marketing personnel will compete against the experienced and well-funded sales organizations of competitors. Their revenues and ability to achieve profitability will depend largely on the effectiveness of their respective sales and marketing personnel. Each will face significant challenges and risks related to marketing its services, including, but not limited to, the following:

	●	the ability to obtain access to or persuade adequate numbers of healthcare providers or clients to purchase and use their respective products and services;
	●	the ability to recruit, properly motivate, retain, and train adequate numbers of qualified sales and marketing personnel;
	●	the costs associated with hiring, training, maintaining, and expanding an effective sales and marketing team; and
	●	assuring compliance with applicable government regulatory requirements.

In addition, PSI plans to establish a network of distributors in selected foreign markets to market, sell and distribute the Psoria-Light device. If PSI fails to select or use appropriate foreign distributors, or if the sales and marketing strategies of such distributors prove ineffective in generating sales of the device, our revenues would be adversely affected and we might never become profitable.

COMMERCIALIZATION OF PRODUCTS AND SERVICES WILL REQUIRE US TO BUILD AND MAINTAIN SOPHISTICATED SALES AND MARKETING TEAMS.

None of our subsidiaries has any prior experience with commercializing their respective products and services. To successfully commercialize their products and services we will need to establish and maintain sophisticated sales and marketing teams. Experienced sales representatives may be difficult to locate and retain, and all new sales representatives will need to undergo extensive training. There is no assurance that we will be able to recruit and retain sufficiently skilled sales representatives, or that any new sales representatives will ultimately become productive. If we are unable to recruit and retain qualified and productive sales personnel, our ability to commercialize our products and services, and to generate revenues, will be impaired, and our business will be harmed.

WE FACE SIGNIFICANT COMPETITION FROM COMPANIES WITH GREATER RESOURCES AND WELL-ESTABLISHED SALES CHANNELS, WHICH MAY MAKE IT DIFFICULT FOR US TO ACHIEVE MARKET PENETRATION.

The markets for our subsidiaries’ respective products and services are highly competitive and are significantly affected by new treatment and product introductions. Direct competitors may enjoy competitive advantages, including:

	●	established service and product lines with proven results;
	●	brand awareness;
	●	name recognition;
	●	established product acceptance by healthcare providers and clients;
	●	established relationships with healthcare providers and clients;
	●	integrated distribution networks; and
	●	greater financial resources for product development, sales and marketing, and patent litigation.

Many competitors may have significantly greater funds to spend on the research, development, promotion and sale of new and existing services and products. These resources can enable them to respond more quickly to new or emerging technologies and changes in the market.

WE MAY BECOME INVOLVED IN FUTURE LITIGATION OR CLAIMS THAT MAY NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.

Healthcare providers and clients that use our subsidiaries’ products or services may bring product liability or other claims against us. To limit such exposure, each subsidiary plans to develop a comprehensive training and education program for persons using their respective products and services. There can be no assurance that such training and education programs will help avoid complications resulting from any provision of products or services. In addition, although they may provide such training and education, they may not be able to ensure proper provision of products or services in each instance and may be unsuccessful at avoiding significant liability exposure as a result. While we may currently maintain and plan to continue to maintain liability insurance in amounts we consider sufficient, such insurance may prove insufficient to provide coverage against any or all asserted claims. In addition, experience ratings and general market conditions may change at any time so as to render us unable to obtain or maintain insurance on acceptable terms, or at all. In addition, regardless of merit or eventual outcome, product liability and other claims may result in:

	●	the diversion of management’s time and attention from our business and operations;
	●	the expenditure of large amounts of cash on legal fees, expenses and payment of settlements or damages;
	●	decreased demand for our products and services; and
	●	negative publicity and injury to our reputation.

Each and every one of the foregoing consequences of claims and litigation could have a material adverse effect on us, our subsidiaries, and our business operations and financial condition.

HEALTHCARE PROVIDERS MAY BE UNABLE TO OBTAIN COVERAGE OR REIMBURSEMENT FROM THIRD-PARTY PAYORS FOR PSORIA-LIGHT TREATMENTS, WHICH COULD LIMIT OUR ABILITY TO MARKET PSI PRODUCTS AND SERVICES.

We expect that healthcare providers will bill various third-party payers, such as Medicare, Medicaid, other governmental programs, and private insurers, for Psoria-Light treatments. We believe that the cost of Psoria-Light treatments is generally already reimbursable under governmental programs and most private plans. Accordingly, we believe that healthcare providers will generally not require new billing authorizations or codes in order to be compensated for performing medically necessary procedures using Psoria-Light treatments. There can be no assurance, however, that coverage, coding and reimbursement policies of third-party payers will not change in the future. PSI’s success in selected foreign markets will also depend upon the eligibility of the Psoria-Light device for coverage and reimbursement by government-sponsored healthcare payment systems and third-party payers. In both the United States and foreign markets, healthcare cost-containment efforts are prevalent and are expected to continue. Prospective clients’ failure to obtain sufficient reimbursement could limit our ability to market PSI products and services and decrease our ability to generate revenue.

WE PLAN TO RELY ON THIRD PARTY DISTRIBUTORS FOR PSI SALES, MARKETING AND DISTRIBUTION ACTIVITIES IN FOREIGN COUNTRIES.

Although we plan to market and sell our products and services directly through sales representatives in the domestic market, we plan to rely on third party distributors to sell, market, and distribute the Psoria-Light device in selected international markets. Because we intend to rely on third party distributors for sales, marketing and distribution activities in international markets, we will be subject to a number of risks associated with our dependence on these third party distributors, including:

	●	lack of day-to-day control over the activities of third-party distributors;
	●	third-party distributors may not fulfill their obligations to us or otherwise meet our expectations;
	●	third-party distributors may terminate their arrangements with us on limited or no notice or may change the terms of these arrangements in a manner unfavorable to us for reasons outside of our control; and
	●	disagreements with our distributors could require or result in costly and time-consuming litigation or arbitration.

If we fail to establish and maintain satisfactory relationships with third-party distributors, we may be unable to sell, market and distribute the Psoria-Light device in international markets, our revenues and market share may not grow as anticipated, and we could be subject to unexpected costs which would harm our results of operations and financial condition.

TO THE EXTENT WE ENGAGE IN MARKETING AND SALES ACTIVITIES OUTSIDE THE UNITED STATES, WE WILL BE EXPOSED TO RISKS ASSOCIATED WITH EXCHANGE RATE FLUCTUATIONS, TRADE RESTRICTIONS AND POLITICAL, ECONOMIC AND SOCIAL INSTABILITY.

If we follow through with our plans to sell the Psoria-Light device in foreign markets, we will be subject to various risks associated with conducting business abroad. A foreign government may require us to obtain export licenses or may impose trade barriers or tariffs that could limit our ability to build our international presence. Our operations in some markets also may be adversely affected by political, economic and social instability in foreign countries. We may also face difficulties in managing foreign operations, longer payment cycles, problems with collecting accounts receivable, and limits on our ability to enforce our intellectual property rights. In addition, for financial reporting purposes, our foreign sales will be translated from local currency into U.S. dollars based on exchange rates and, if we do not hedge our foreign currency transactions, we will be subject to the risk of changes in exchange rates. If we are unable to adequately address the risks of doing business abroad, our business may be harmed.

THE PSORIA-LIGHT AND ANY FUTURE MEDICAL DEVICE PRODUCTS ARE SUBJECT TO A LENGTHY AND UNCERTAIN DOMESTIC REGULATORY PROCESS.

PSI’s Psoria-Light device and future medical device products, if any, are subject to extensive regulation in the United States by the FDA. The FDA regulates the research, testing, manufacturing, safety, labeling, storage, record keeping, promotion, distribution and production of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses. In order for us to market the Psoria-Light for use in the United States, we were required to first obtain clearance from the FDA pursuant to Section 510(k) of the Federal Food, Drug, and Cosmetic Act (the “FFDCA”).

Clearance under Section 510(k) requires demonstration that a new device is substantially equivalent to another device with 510(k) clearance or grandfather status. If the FDA agrees that a device is substantially equivalent to a predicate device, it will grant clearance to commercially market the device. The FDA has a statutory 90-day period to respond to a 510(k) submission. As a practical matter, clearance often takes longer. The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence. If the FDA determines that a device, or its intended use, is not “substantially equivalent,” the FDA will place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill much more rigorous pre-marketing requirements.

If the FDA does not act favorably or quickly in its review of a 501(k) submission, the submitting party may encounter significant difficulties and costs in its efforts to obtain FDA clearance or approval, all of which could delay or preclude the sale of a device. The FDA may request additional data or require the submitting party to conduct further testing or compile more data, including clinical data and clinical studies, in support of a 510(k) submission. Instead of accepting a 510(k) submission, the FDA may require the submitting party to submit a pre-market approval application (“PMA”), which is typically a much more complex and burdensome application than a 510(k). To support a PMA, the FDA may require that the submitting party conduct one or more clinical studies to demonstrate that the device is safe and effective. In addition, the FDA may place significant limitations upon the intended use of a device as a condition to a 510(k) clearance or PMA approval. Product applications can also be denied or withdrawn due to failure to comply with regulatory requirements or the occurrence of unforeseen problems following clearance or approval. Any delays or failure to obtain FDA clearance or approvals of any future medical device products we develop, any limitations imposed by the FDA on product use, or the costs of obtaining FDA clearance or approvals could have a material adverse effect on our business, financial condition and results of operations.

PSI submitted its 510(k) for the Psoria-Light to the FDA and on December 3, 2010 was assigned application number K103540. The 510(k) application for Psoria-Light was a traditional application and asserted that the Psoria-Light is “substantially equivalent” in intended use and technology to two predicate devices, the X-Trac Excimer Laser and the Dualight, which are competing targeted UV phototherapy devices. PSI began regulatory testing of the Psoria-Light in December 2010 for EMC and electrical safety (required for FDA and CE mark sales), and completed that testing in the second quarter of 2011. PSI received FDA clearance of the Psoria-Light on February11, 2011 (no. K103540). If and as the Psoria-Light is significantly modified subsequent to its FDA clearance, the FDA may require submission of a separate 510(k) or PMA for the modified product before it may be marketed in the United States.

If we develop any future medical device products we will be required to seek and obtain FDA approval prior to any marketing or sales in the United States and in accordance with the 510(k) or PMA process.

THE PSORIA-LIGHT WILL BE SUBJECT TO VARIOUS INTERNATIONAL REGULATORY PROCESSES AND APPROVAL REQUIREMENTS. IF WE DO NOT OBTAIN AND MAINTAIN THE NECESSARY INTERNATIONAL REGULATORY APPROVALS, WE WILL NOT BE ABLE TO MARKET AND SELL OUR PRODUCTS IN FOREIGN COUNTRIES.

To be able to market and sell PSI’s Psoria-Light device in other countries, we must obtain regulatory approvals and comply with the regulations of those countries. These regulations, including the requirements for approvals and the time required for regulatory review, vary from country to country. Obtaining and maintaining foreign regulatory approvals are expensive, and we cannot be certain that we will receive regulatory approvals in any foreign country in which we plan to market our product. If we fail to obtain or maintain regulatory approval in any foreign country in which we plan to market our product, our ability to generate revenue will be harmed.

The European Union requires that manufacturers of medical products obtain the right to affix the CE mark to their products before selling them in member countries of the European Union. The CE mark is an international symbol of adherence to quality assurance standards and compliance with applicable European medical device directives. In order to obtain the right to affix the CE mark to products, a manufacturer must obtain certification that its processes meet certain European quality standards.

PSI began regulatory testing of the Psoria-Light in December 2010 for EMC and electrical safety (required for FDA and CE mark sales), and completed that testing in the second quarter of 2011. PSI was granted permission to affix the CE mark to the Psoria-Light in the fourth quarter of 2011. If and as we modify the Psoria-Light product or develop other new products in the future, we would expect to apply for permission to affix the CE mark to such products. In addition, we would be subject to annual regulatory audits in order to maintain any CE mark permissions we may obtain. We do not know whether PSI will be able to obtain permission to affix the CE mark to its initial, future or modified products or that it will continue to meet the quality and safety standards required to maintain any permission it may receive. If we are unable to obtain permission to affix the CE mark to any of our products, we will not be permitted to sell our products in member countries of the European Union, which will have a material adverse effect on our business, financial condition and results of operations. In addition, if after receiving permission to affix the CE mark to any products, we are unable to maintain such permission, we will no longer be able to sell such products in member countries of the European Union.

OUR ABILITY TO ACHIEVE COMMERCIAL SUCCESS WILL DEPEND IN PART ON OBTAINING AND MAINTAINING PATENT PROTECTION (IF ANY) AND TRADE SECRET PROTECTION RELATING TO OUR PRODUCTS, THE TECHNOLOGY ASSOCIATED WITH OUR PRODUCTS, AND ANY OTHER PRODUCTS AND TECHNOLOGY WE MAY DEVELOP, AS WELL AS SUCCESSFULLY DEFENDING OUR PATENT(S) (IF ANY) AND LICENSED PATENTS (IF ISSUED) AGAINST THIRD PARTY CHALLENGES. IF WE ARE UNABLE TO OBTAIN AND MAINTAIN PROTECTION FOR OUR INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY, THE VALUE OF OUR PRODUCTS WILL BE ADVERSELY AFFECTED, AND WE WILL NOT BE ABLE TO PROTECT SUCH TECHNOLOGY FROM UNAUTHORIZED USE BY THIRD PARTIES.

Our commercial success will depend largely on our ability to obtain and maintain patent protection and intellectual property protection covering certain aspects of the technology that we intend to utilize in the development and commercialization of PSI’s initial medical device product, the Psoria-Light, and existing and future SCI products, to obtain and maintain patent and intellectual property protection for any other products that we may develop and seek to market. In order to protect our competitive position for the Psoria-Light, SCI products, and any other products that we may develop and seek to market, we, or our executive officers, as the case may be, will have to:

	●	prevent others from successfully challenging the validity or enforceability of our issued, pending, or licensed patents (if any);
	●	prevent others from infringing upon, our issued, pending, or licensed patents (if any) and our other proprietary rights;
	●	operate our business, including the production, sale and use of the Psoria-Light, SCI encryption products, and any other products, without infringing upon the proprietary rights of others;
	●	successfully enforce our rights to issued, pending, or licensed patents (if any) against third parties when necessary and appropriate; and
	●	obtain and protect commercially valuable patents or the rights to patents both domestically and abroad.

PSI was issued one patent on its Psoria-Light technology on July 9^th 2013, US 8,481,982, covering a unique patient safety feature. No other patents have been issued for PSI products or methods, or any of the other technology associated with such products, and we cannot guarantee that any other patents will be issued for such products or any of the technology associated with such products.

Stealth Mark devoted substantial effort and resources to develop and advance micro-particle security technologies in support of its business activities. Protection of the acquired Stealth Mark intellectual property is maintained through, among other things, six patents issued between November 18, 2003 and July 17, 2012 as US 6,647,649; 7,720,254; 7,831,042; 7,885,428; 8,033,450 and 8,223,964, and two pending European Applications.

Protection of intellectual property in the markets in which we compete is highly uncertain and involves complex legal and scientific questions. It may be difficult to obtain patents relating to our products or technology. Furthermore, any changes in, or unexpected interpretations of, the patent laws may adversely affect our ability to enforce our patent position.

WE EXPECT TO RELY ON TRADEMARKS, TRADE SECRET PROTECTIONS, KNOW-HOW AND CONTRACTUAL SAFEGUARDS TO PROTECT OUR NON-PATENTED INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY.

We expect to rely on trademarks, trade secret protections, know-how and contractual safeguards to protect our non-patented intellectual property and proprietary technology. Current employees, consultants and advisors have entered into, and future employees, consultants and advisors will be required to enter into, confidentiality agreements that prohibit the disclosure or use of confidential information. We also intend to enter into confidentiality agreements to protect our confidential information delivered to third parties for research and other purposes. There can be no assurance that we will be able to effectively enforce these agreements or that the subject confidential information will not be disclosed, that others will not independently develop substantially equivalent confidential information and techniques or otherwise gain access to our confidential information or that we can meaningfully protect our confidential information.

Costly and time-consuming litigation could be necessary to enforce and determine the scope and protect ability of confidential information, and failure to maintain the confidentiality of confidential information could adversely affect our business by causing us to lose any competitive advantage maintained through such confidential information.

The protection of proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies, both to protect proprietary rights and for competitive reasons, even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area.

Disputes may arise in the future with respect to the ownership of rights to any technology developed with consultants, advisors or collaborators. These and other possible disagreements could lead to delays in the collaborative research, development or commercialization of our products, or could require or result in costly and time-consuming litigation that may not be decided in our favor. Any such event could have a material adverse effect on our business, financial condition and results of operations by delaying or preventing our commercialization of innovations or by diverting our resources away from revenue-generating projects.

OUR ABILITY TO MARKET PRODUCTS IN FOREIGN COUNTRIES MAY BE IMPAIRED BY THE ACTIVITIES AND INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

We may elect to market and sell products in select international markets. Except for certain pending Stealth Mark European Applications, neither the Company nor any of our officers or directors has filed (nor does the Company or any of our officers or directors currently have an intention to file) for any international patent protection for any of our products or any of the technology associated with our products. However, to successfully enter into these international markets and achieve desired revenues internationally, we may need to enforce our patent and trademark rights (if any) against third parties that we believe may be infringing on our rights. The laws of some foreign countries do not protect intellectual property, including patents, to as great an extent as do the laws of the United States. Policing unauthorized use of our intellectual property is difficult, and there is a risk that despite the expenditure of significant financial resources and the diversion of management attention, any measures that we take to protect our intellectual property may prove inadequate in these countries. Our competitors in these countries may independently develop similar technology or duplicate our products, thus likely reducing our potential sales in these countries. Furthermore, our future patent rights (if any) may be limited in enforceability to the United States or certain other select countries, which may limit our intellectual property rights abroad.

NO MARKET CURRENTLY EXISTS FOR OUR SECURITIES AND WE CANNOT ASSURE YOU THAT SUCH A MARKET WILL EVER DEVELOP, OR IF DEVELOPED, WILL BE SUSTAINED.

Our common stock is not currently eligible for trading on any stock exchange and there can be no assurance that our common stock will be listed on any stock exchange in the future. We presently are listed on the NASD OTCQB Bulletin Board trading system pursuant to Rule 15c2-11 of the Securities Exchange Act of 1934, but there can be no assurance we will maintain such a listing. The bulletin board tends to be highly illiquid, in part because there is no national quotation system by which potential investors can track the market price of shares except through information received or generated by a limited number of broker-dealers that make a market in particular stocks. There is a greater chance of market volatility for securities that trade on the bulletin board as opposed to a national exchange or quotation system. This volatility may be caused by a variety of factors, including: the lack of readily available price quotations; the absence of consistent administrative supervision of “bid” and “ask” quotations; lower trading volume; and general market conditions. If no market for our shares materializes, you may not be able to sell your shares or may have to sell your shares at a significantly reduced price.

IF OUR SHARES OF COMMON STOCK ARE ACTIVELY TRADED ON A PUBLIC MARKET, THEY WILL IN ALL LIKELIHOOD BE PENNY STOCKS.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price per share of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.

WE WILL INCUR ONGOING COSTS AND EXPENSES FOR SEC REPORTING AND COMPLIANCE, AND WITHOUT REVENUE WE MAY NOT BE ABLE TO REMAIN IN COMPLIANCE, MAKING IT DIFFICULT FOR INVESTORS TO SELL THEIR SHARES, IF AT ALL.

We have a very limited number of market makers and are quoted on the OTC Electronic Bulletin Board. To be eligible for quotation, issuers must remain current in their filings with the SEC. In order for us to remain in compliance we will require future revenues to cover the cost of these filings, which could comprise a substantial portion of our available cash resources. If we are unable to generate sufficient revenues to remain in compliance it may be difficult for you to resell any shares you may purchase, if at all.

FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002 COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND STOCK PRICE.

Section 404 of the Sarbanes-Oxley Act of 2002 (“the Sarbanes-Oxley Act”) requires that we establish and maintain an adequate internal control structure and procedures for financial reporting and include a report of management on our internal control over financial reporting in our annual report on Form 10-K. That report must contain an assessment by management of the effectiveness of our internal control over financial reporting and must include disclosure of any material weaknesses in internal control over financial reporting that we have identified. During the period covered by this Report, the Company had three or fewer directors, with only one that was independent; accordingly, during such period, we could not establish board committees with independent members to oversee certain functions such as compensation or audit issues for internal control and reporting purposes. Until a majority of our board is comprised of independent members, if ever, there will be limited oversight of our management’s decisions and activities and little ability of shareholders to challenge or reverse those activities and decisions, even if they are not in the best interests of our shareholders.

THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products and services. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

WE DO NOT PAY DIVIDENDS ON OUR COMMON STOCK.

We have not paid any dividends on our common stock and do not anticipate paying dividends in the foreseeable future. We plan to retain earnings, if any, to finance the development and expansion of our business.

ITEM 2.

PROPERTIES

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

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

Through January 2019, PSI’s offices were located at 6408 West Linebaugh Avenue, Suite 103, Tampa, Florida, 33625. PSI’s telephone number is (866) 725-0969. In February 2019, PSI entered into a non-cancellable lease agreement to lease its office facilities located at 409 Mandeville Street, Utica, New York, 13502. The term of the lease is for two years and expires February 8, 2021, with monthly base rent of $1,800.

Through December 31, 2019, SCI offices were located at 273 Midway Lane, Oak Ridge, Tennessee 37830. On January 6, 2020, the Company entered into an agreement with the owners to terminate the agreement effective January 1, 2020. Under the agreement, the Company agreed to pay $11,000 and abandon certain Company property to the owners as documented in the agreement.

ITEM 3.

LEGAL PROCEEDINGS

The Company is periodically engaged in legal proceedings arising from and relating to its business operations. WeExcept 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. However, we recently decided to attempt to preserve revenue and reduce operating expenses through actions including, but not limited to, facilities consolidation and staff reductions, which we hope to implement through negotiated transactions with lessors, employees and other third parties. Such actions may result in disputes with and claims by such parties which, if not resolved through negotiations, may impact negatively the Company’s ability to continue as a going concern. To date, we have negotiated settlement of all but $89,301.87 in ex-employee wage and benefits claims, with agreement to pay such remaining amount, together with interest at the rate of 4% per annum on the principal amount from time to time outstanding, when and as cash flow permits. One of the employees claims additional amounts due for certain statutory damages under the Illinois Wage Payment and Collection which currently could exceed $21,600.00 and would increase at the rate of 2% of the wages due per month plus attorneys’ fees if the employee elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim.

InWe ~~periodic~~continue ~~reports~~efforts ~~the~~to ~~Company~~preserve ~~disclosed~~revenue ~~that~~and onreduce ~~May~~operating 25expenses through actions including, ~~2017~~but not limited to, ~~the~~facilities ~~SEC’s~~consolidation and ~~Chicago~~staff ~~Regional~~reductions, ~~Office~~which ~~informed~~we ithope ~~that~~to itimplement ~~had~~through ~~made a~~negotiated ~~preliminary~~transactions ~~determination~~with tolessors, ~~recommend~~employees ~~filing~~and ofother anthird ~~enforcement~~parties. Such ~~action~~actions ~~against~~may ~~the~~result ~~Company~~in disputes with and ~~its~~claims ~~CEO~~by ~~based~~such onparties ~~possible~~which, ~~violations of~~if ~~Section~~not ~~10(b)~~resolved ofthrough ~~the~~negotiations, ~~Exchange~~may ~~Act~~impact ~~and~~negatively the ~~Rule~~Company’s ~~10b-5~~ability ~~thereunder,~~to ~~and~~continue ~~Section~~as ~~17(~~a) ofgoing ~~the~~concern. ~~Securities~~To ~~Act~~date, ~~and~~the ~~Section~~Company ~~15(a)~~has negotiated settlement of all ex-employee ~~the~~wage ~~Exchange~~and ~~Act~~benefits claims except for two. ~~Subsequent~~The ~~discussions~~first ~~resulted~~regards inunpaid wages claimed due together with interest at the ~~submission~~rate of an4% ~~Offer~~per annum ofon ~~Settlement~~such ~~(“Settlement”)~~amount ~~through an~~as ~~administrative~~the ~~cease~~Company ~~and~~originally ~~desist~~agreed ~~action~~upon onin ~~November~~settlement ~~17,~~negotiations. ~~2017,~~The ~~which~~ex-employee ~~was~~claims ~~accepted~~additional byamounts due ~~the~~for ~~SEC~~certain onstatutory ~~April~~damages ~~12,~~under ~~2018,~~the asIllinois ~~disclosed on~~Wage ~~Form~~Payment 8Kand ~~filed~~Collection ~~April~~which ~~18,~~currently ~~2018~~could exceed $21,600.00 ~~Pursuant~~and towould increase at the ~~Settlement,~~rate of 2% of the ~~Company~~wages ~~neither~~due ~~admitted~~per ~~nor~~month ~~denied~~plus ~~any~~attorneys’ offees if the ~~allegations,~~employee ~~but was~~elects ~~enjoined~~to ~~from~~file ~~violating~~suit ~~the~~for ~~above-referenced~~a ~~Sections~~violation of ~~and~~the ~~Rule.~~Act ~~The~~and ~~Settlement~~is ~~imposed~~successful noin ~~financial~~obtaining ~~penalties~~a orjudgment ~~sanctions against~~on ~~the~~his ~~Company~~claim.

16The second claim was filed with the Illinois Department of Labor asserting a violation of the Illinois Wage Payment and Collection Act by the Company’s former CEO. That claim alleges unpaid wages in the amount of $158,714.60 and unpaid vacation pay in the amount of $20,833.33 for a total amount of $179,547.90, as well as certain statutory damages including, but not limited to, 2% of the wages due per month plus attorneys’ fees if the ex-CEO elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim. The Company has filed its response to such claim with the Department denying the substantive allegations therein and asserting certain factual and legal defenses, including breach of fiduciary duty, as a bar to all claimed compensation. The claim remains pending, but as the date hereof, no suit has been filed against the Company asserting a violation of the Act based on said claim.

~~The~~In ~~Form~~periodic 8Kreports ~~also~~on ~~disclosed~~Forms ~~that~~10K onand ~~April~~10Q ~~13,~~for ~~2018,~~ the ~~SEC~~periods ~~filed~~ending aSeptember ~~separate~~30, ~~complaint~~2017 ~~against~~and ~~the~~December ~~CEO~~31, in2017, respectively, the ~~U.S. District Court for~~Company ~~the~~disclosed ~~Northern~~that ~~District~~on ofMay ~~Illinois~~25, ~~asserting~~2017, the ~~allegations~~SEC’s ~~noted~~Chicago ~~above,~~Regional asOffice ~~well~~informed asit ~~allegations~~ that heit ~~manipulated~~had ~~the~~made ~~price of~~a ~~company~~preliminary ~~shares~~determination to ~~through~~recommend ~~undisclosed~~filing ~~trading,~~of ~~realizing~~an ~~more~~enforcement ~~than~~action ~~$130,000~~against ~~from such trading. On~~ the ~~date~~Company ofand ~~filing,~~its ~~the~~former CEO ~~voluntarily~~ ~~resigned~~based ason anpossible ~~officer~~violations ~~and~~of ~~director~~Section 10(b) of the ~~Company.~~Exchange ~~Without~~Act ~~admitting~~and orRule ~~denying~~10b-5 ~~the allegations~~thereunder, ~~the~~and ~~CEO~~Section ~~consented to~~17(a) ~~the entry~~ of the ~~judgment~~Securities Act, ~~which~~and ~~was~~Section ~~entered~~15(a) onof ~~September 26, 2018 by~~ the UExchange Act.S. Subsequent ~~District~~discussions ~~Court~~resulted ~~for~~in the ~~Northern~~submission ~~District~~ of ~~Illinois.~~ ~~The~~an ~~judgment~~Offer ~~permanently enjoined him from violating the anti-fraud provisions~~ of ~~Section~~Settlement 17(a“Settlement”) ofthrough ~~the~~an ~~Securities Act~~administrative ofcease ~~1933,~~and ~~Section~~desist ~~10(b)~~action ofon ~~the~~November ~~Securities~~17, ~~Exchange~~2017, ~~Act~~which ofwas ~~1934~~accepted ~~and~~by ~~Rule~~the ~~10b-5~~SEC ~~thereunder,~~on ~~and~~April ~~the~~12, ~~broker~~2018, ~~registration~~as ~~provisions of~~disclosed ~~Section~~on ~~15(a)~~Form of8K ~~the~~filed ~~Exchange~~April 18, ~~Act~~2018. ItPursuant ~~also~~to ~~bars~~the ~~him~~Settlement, ~~from~~the ~~serving~~Company asneither anadmitted ~~officer~~nor ordenied ~~director~~any of athe ~~public~~allegations, ~~company~~but ~~and~~was enjoined from ~~participating~~violating inthe ~~penny~~above-referenced ~~stock~~Sections ~~offerings,~~ and ~~ordered~~Rule. ~~disgorgement~~The ~~and~~Settlement ~~interest~~imposed ~~and~~no financial penalties toor besanctions ~~determined~~against by the ~~court~~Company.

OnThe ~~January~~former 31CEO was the subject of a separate SEC complaint in the U.S. District Court for the Northern District of Illinois, ~~2019~~asserting the allegations noted above, as well as allegations that he manipulated the ~~former~~price of company shares through undisclosed trading, realizing more than $130,000 from such trading. On the date of filing, the CEO voluntarily resigned as an officer and director of the Company. Without admitting or denying the allegations, the CEO consented to the entry of the judgment, which was ~~terminated~~entered on September 26, 2018 by the U.S. District Court for the Northern District of Illinois. The judgment permanently enjoined him from violating the anti-fraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and ~~his~~Rule ~~service~~10b-5 asthereunder, ~~Director~~and the broker registration provisions of ~~Business~~Section ~~Development~~15(a) ~~ceased~~of the Exchange Act. It also barred him from serving as an officer or director of ~~that~~a ~~date~~public company and from participating in penny stock offerings, and ordered disgorgement and interest and penalties to be determined by the court.

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

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

1714

PART II

ITEM 5.

MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

No Public Market for Our Common Stock

The market price of our common stock is subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market, and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general economic, business and political conditions, may adversely affect the market for our common stock, regardless of our actual or projected performance.

Common Stock

~~During~~On ~~the year ended~~ September 303, ~~2016~~2019, the Company’s ~~was~~Board ~~authorized~~of byDirectors unanimously approved the amendment of its Articles of Incorporation to ~~issue~~increase upthe total authorized capital stock from 185,000,000 common shares to 75200,000,000 common shares. As of September 18, 2019, holders of ~~common~~a majority of the outstanding shares of voting capital stock, ~~par~~executed ~~value~~written ~~$0.001~~stockholder ~~per~~consents ~~share~~approving this action and the Company amended its Articles of Incorporation through a filing of a Certificate of Amendment on October 11, 2019. Holders of shares of common stock have full voting rights, one vote for each share held of record. Shareholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to shareholders upon liquidation. Shareholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable. ~~During~~As ~~the~~of ~~year ended~~ September 30, ~~2017,~~2020 ~~the~~and ~~Company amended its Articles of Incorporation to authorize it to issue up to 185~~2019,~~000,000~~ ~~shares~~there ofwere ~~common stock~~118, ~~par value $0.001 per share~~252,077 ~~through~~and ~~a filing of a Certificate of Amendment on January 12~~107, ~~2017. As of September 30~~497,077 ~~2018, there were 100,952,569~~ shares of common stock issued and outstanding, respectively.

On September 3, 2019, the Company’s Board of Directors unanimously approved the amendment of its Articles of Incorporation to increase the total authorized capital stock from 185,000,000 common shares to 200,000,000 common shares. As of September 18, 2019, holders of a majority of the outstanding shares of voting capital stock executed written stockholder consents approving this action. As of September 30, 2019, there were 107,497,077 shares of common stock issued and outstanding.

Preferred Stock

The Company does not have any Preferred Stock authorized.

Dividends

We have not paid any cash dividends to our shareholders. The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.

Options

2010 Non-Qualified Stock Option Plan (“2010 Option Plan”)

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.

As of September 30, ~~2019~~2020 and ~~2018~~2019, 1514,~~237~~127,738 and 1715,~~946~~237,~~667~~738 shares, respectively, were outstanding under the 2010 Option Plan.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Action Stock Transfer Corp., having an office situated at 2469 E. Fort Union Blvd, Suite 214, Salt Lake City, UT 84121 and its telephone number is (801) 274-1088.

1815

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS.

Forward Looking Statements

Except for historical information, the following Plan of Operation contains forward-looking statements based upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding, among other things, (a) our projected sales and profitability, (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans, (e) our anticipated needs for working capital, (f) our lack of operational experience and (g) the benefits related to ownership of our common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis or Plan of Operations” and “Description of Business,” as well as in this Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Report will in fact occur as projected.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Background.

19Results of Operations for the year ended September 30, 2020 compared to the year ended September 30, 2019

Results of Operations for the year ended September 30, 2019 compared to the year ended September 30, 2018

Revenue and Cost of Goods Sold

Revenue for the years ended September 30, ~~2019~~2020 and ~~2018~~2019 was $335,~~375~~000 and $~~213~~33,~~723~~375, respectively. The decrease ~~of $180,348~~ in ~~2019~~2020 was ~~primarily~~ due to the decrease in sales inat the Authentication and Encryption segment, as there were no sales at the Medical Device segment for either year.

Cost of sales for the ~~years~~year ended September 30, 2019 ~~and 2018~~ was $20,025. ~~and~~There ~~$79~~was no cost of sales for the year ended September 30,~~960,~~ ~~respectively~~2020. Gross profit for the years ended September 30, ~~2019~~2020 and ~~2018~~2019, was $135,~~350~~000 and $~~133~~13,~~763~~350, respectively. The gross profit decrease ~~of $120,413~~ in ~~2019~~2020 was primarily due to the decrease in sales.

Operating Expenses

Operating expenses for the years ended September 30, ~~2019~~2020 and ~~2018~~2019 was $1,~~779~~926,~~934~~594 and $21,~~226~~779,~~362~~934, respectively. The ~~decrease~~increase in operating expenses ofin ~~$446,428~~2020 was due to the ~~decrease~~increase in operating expenses at ~~SCI~~the Medical Device segment and at the corporate segment, offset by the ~~increase~~ decrease in operating expenses at ~~the Medical Device segment~~SCI. The ~~decrease~~increase in expenses at the corporate segment primarily related to the ~~decrease~~ increase in stock compensation expenses and the fair value of common stock issued for services, and lease settlement expenses. Stock compensation expenses and the fair value of common stock issued for services totaled to $~~300~~583,~~925~~064 and $~~612~~379,~~503~~954 during the years ended September 30, ~~2019~~2020 and ~~2018~~2019, respectively. The increase in expenses at the Medical Device segment primarily related to the increase in employee and contract labor related costs.

Other Expenses

Other income during the year ended September 30, 2020 consisted of $4,000 from a U.S. government grant relating to COVID-19 and $56,840 from the write-off of long outstanding accounts payable. Other expenses during the year ended September 30, 2020 consisted of $507,265 relating to the cost of the modification of terms of stock warrants, $22,680 relating to the cost of the modification of terms of stock options, $43,815 of financing costs and $67,861 of interest expense, totaling to a net expense of $580,781. Other expenses during the year ended September 30, 2019 consisted of $72,078 of amortization of debt discount, $182,064 of financing costs and $25,298 of interest expense, totaling to $279,440.

Other expenses during the year ended September 30, 2018 consisted of $318,038 of amortization of debt discount, $158,400 relating to a loss on the modification of the conversion price on a convertible note payable, $5,445 relating to a loss on the modification of the exercise price on warrants in connection with the convertible note payable, $891,583 of financing costs, and $27,354 of interest expense. Total other expenses totaled to $1,400,820.

Net Loss

Our net loss for the years ended September 30, ~~2019~~2020 and ~~2018~~2019 was $2,~~046~~502,~~024~~375 and $32,~~493~~046,~~419~~024, respectively. The ~~decrease~~increase in the net loss ofin ~~$1,447,395~~2020 was ~~primarily~~ due to the ~~decrease~~increase in operating expenses ~~of $446,428 in 2019,~~ and ~~the decrease in~~ total other ~~expenses~~ ~~in 2019 of $1,121,380~~expenses.

Segment Information

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

The Company operates in the following business segments:

(i) Medical Devices: which stems from PSI, its wholly-owned subsidiary acquired on 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:

Operations by Segment

Operations by Segment

	For the Year Ended
	September 30, 2020
	Corporate			Medical Devices			Authentication and Encryption			Total
Sales:
Trade	$	-		$	-		$	5,000		$	5,000
Consulting services		-			-			-			-
Total Sales		-			-			5,000			5,000

Cost of goods sold		-			-			-			-

Gross profit		-			-			5,000			5,000

Operating expenses		1,004,477			852,542			69,575			1,926,594

Loss from operations	$	(1,004,477	)	$	(852,542	)	$	(64,575	)	$	(1,921,594	)

Operations by Segment
	For the Year Ended
	September 30, 2019
	Corporate			Medical Devices			Authentication and Encryption			Total
Sales:
Trade	$	-		$	-		$	19,508		$	19,508
Consulting services		-			-			13,867			13,867
Total Sales		-			-			33,375			33,375
Cost of goods sold		-			-			20,025			20,025
Gross profit		-			-			13,350			13,350
Operating expenses		782,961			641,236			355,737			1,779,934
Loss from operations	$	(782,961	)	$	(641,236	)	$	(342,387	)	$	(1,766,584	)

~~Operations~~There bywas ~~Segment~~no revenue or cost of sales for the Medical Devices segment for the years ended September 30, 2020 and 2019. Operating expenses for the years ended September 30, 2020 and 2019 was $852,542 and $641,236, respectively. The increase in operating expenses in 2020 was primarily due to the increase in employee and contract labor related costs. The loss from operations for the years ended September 30, 2020 and 2019 was $852,542 and $641,236, respectively.

	For the Year Ended
	September 30, 2018
	Corporate			Medical Devices			Authentication and Encryption			Total
Sales:
Trade	$	-		$	45,000		$	95,023		$	140,023
Consulting services		-			-			73,700			73,700
Total Sales		-			45,000			168,723			213,723
Cost of goods sold		-			-			79,960			79,960
Gross profit		-			45,000			88,763			133,763
Operating expenses		1,179,937			224,196			822,229			2,226,362
Loss from operations	$	(1,179,937	)	$	(179,196	)	$	(733,466	)	$	(2,092,599	)

Revenue for the Authentication and Encryption segment for the years ended September 30, 2020 and 2019 was $5,000 and $33,375, respectively. The decrease in sales in 2020 was due to the decrease in trade sales and consulting services. Cost of goods sold for the year ended September 30, 2019 was $20,025. There was no cost of goods sold for the year ended September 30, 2020. Gross profit for the years ended September 30, 2020 and 2019 was $5,000 and $13,350, respectively. The decrease in gross profit in 2020 was primarily due to the decrease in sales. Operating expenses for the years ended September 30, 2020 and 2019 was $69,575 and $355,737, respectively. The decrease in operating expenses in 2020 was primarily due to the decrease in labor costs, consulting costs and professional fees in 2020. The loss from operations for the years ended September 30, 2020 and 2019 was $64,575 and $342,387, respectively.

~~Revenue~~The ~~for~~Corporate ~~the Medical Devices~~ segment ~~for~~primarily ~~the~~provides ~~year~~executive ~~ended~~management ~~September~~services ~~30,~~for ~~2018~~the ~~was $45,000~~Company. ~~There~~Operating ~~was~~expenses ~~no revenue~~ for the ~~Medical~~years ~~Devices segment for the year~~ ended September 30, ~~2019.~~2020 ~~The~~and ~~decrease~~2019 ofwas $451,~~000 was due to the decrease in sales of their Psoria-Light devices. There were no cost of sales for the years ended September 30~~004,477 ~~2019~~ and ~~2018~~$782, ~~as their inventory had been written-off in previous years. Gross profit for the year ended September 30~~961, ~~2018 was 45,000~~respectively. The ~~decrease~~increase in ~~gross~~operating ~~profit~~expenses ~~of $45,000~~ in ~~2019~~ 2020 was primarily due to the increase ~~decreased sales~~ in ~~2019.~~stock ~~Operating~~compensation expenses ~~for~~and the ~~years~~fair ~~ended~~value ~~September 30, 2019 and 2018 was $641,236 and $224,196, respectively. The increase in operating expenses~~ of ~~$417,040~~common instock ~~2019~~issued ~~was~~for ~~due primarily to the increase in R&D expenses~~services, ~~consulting fees~~ and ~~contract~~lease ~~labor~~settlement costs. The loss from operations for the years ended September 30, ~~2019~~2020 and ~~2018~~2019 was $~~641~~1,~~236~~004,477 and $~~179~~782,~~196~~961, respectively.

Revenue for the Authentication and Encryption segment for the years ended September 30, 2019 and 2018 was $33,375 and $168,723, respectively. The decrease of $135,348 was due to the decrease in trade sales and consulting services. Cost of goods sold for the years ended September 30, 2019 and 2018 was $20,025 and $79,960, respectively. Gross profit for the years ended September 30, 2019 and 2018 was $13,350 and $88,763, respectively. The decrease in gross profit of $75,413 was primarily due to the decrease in sales. Operating expenses for the years ended September 30, 2019 and 2018 was $355,737 and $822,229, respectively. The decrease in operating expenses of $466,492 was due primarily to the decrease in labor costs, consulting costs and professional fees in 2019. The loss from operations for the years ended September 30, 2018 and 2017 was $342,387 and $733,466, respectively.17

The Corporate segment primarily provides executive management services for the Company. Operating expenses for the years ended September 30, 2019 and 2018 was $782,961 and $1,179,937, respectively. The decrease in operating expenses in 2019 of $396,976 was primarily due to the decrease in stock compensation expenses. The loss from operations for the years ended September 30, 2019 and 2018 was $782,961 and $1,179,937, respectively.

Liquidity and Capital Resources

~~The~~Going accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the year ended September 30, 2019, the Company incurred a net loss of $2,046,024 and used cash in operations of $1,219,313, and had a shareholders’ deficit of $1,083,994 as of September 30, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.Concern

AtThe ~~September~~accompanying ~~30,~~consolidated ~~2019,~~financial ~~the~~statements ~~Company~~have ~~had~~been ~~cash~~prepared on ~~hand~~a ingoing ~~the~~concern ~~amount~~basis, ofwhich ~~$53,147.~~contemplates ~~Management~~the ~~estimates~~realization of itassets ~~has~~and ~~sufficient~~the ~~cash~~settlement toof ~~operate through~~liabilities ~~February~~and ~~2020.~~commitments ~~The~~in ~~ability~~the tonormal ~~continue~~course asof abusiness. ~~going~~As ~~concern~~reflected isin ~~dependent~~the onaccompanying consolidated financial statements, the Company ~~attaining~~has not yet generated significant revenues and ~~maintaining~~has ~~profitable operations~~incurred inrecurring net losses. During the ~~future~~year ~~and~~ended ~~raising~~September ~~additional~~30, ~~capital~~2020, ~~soon~~the toCompany ~~meet~~incurred ~~its~~a ~~obligations~~net loss of $2,502,375 and ~~repay~~used ~~its~~cash ~~liabilities~~in ~~arising~~operations ~~from~~of ~~normal~~$1,004,993, ~~business~~and ~~operations~~had ~~when~~a ~~they~~shareholders’ ~~come~~deficit ~~due.~~of ~~Since~~$2,229,545 ~~inception~~as of September 30, we2020. ~~have~~In ~~funded~~addition, ~~our~~$396,250 ~~operations~~of ~~primarily~~notes ~~through~~payable ~~equity~~to officers and ~~debt~~shareholders ~~financings~~ and we$92,334 ~~expect~~of topayroll ~~continue~~taxes toare ~~rely~~past ondue. ~~these~~These ~~sources~~factors ofraise ~~capital~~substantial indoubt about the ~~future.~~Company’s ~~During~~ability to ~~the~~continue ~~year~~as ~~ended~~a ~~September~~going ~~30,~~concern. ~~2019,~~The ability of the Company ~~received~~ ~~$1,293,250~~to ~~through~~continue ~~loans~~as ~~payable~~a ~~from~~going ~~officers~~concern ~~and~~is ~~shareholders,~~dependent upon the ~~sale~~Company’s ability ofto ~~its~~raise ~~common~~additional ~~stock,~~funds and ~~from~~implement ~~contributions of~~its ~~capital~~strategies. byThe afinancial ~~joint~~statements ~~venture~~do ~~partner.~~not ~~Subsequent~~include toany ~~September~~adjustments ~~30,~~that ~~2019,~~might be necessary if the Company ~~received~~is ~~additional~~unable ~~advances~~to ~~from~~continue ~~shareholders of~~as ~~$310,000~~a ~~(see~~going ~~Note 13)~~concern.

21In addition, the Company’s independent registered public accounting firm, in its report on the Company’s September 30, 2020 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

At September 30, 2020, the Company had cash on hand in the amount of $51,320. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital soon to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, we have funded our operations primarily through equity and debt financings and we expect to continue to rely on these sources of capital in the future. During the year ended September 30, 2020, the Company received $1,003,166 through short-term loans and contributions of capital by a joint venture partner.

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

~~Our~~Comparison ~~independent~~of ~~registered~~years ~~public~~ended ~~accounting~~September ~~firm~~30, ~~issued~~2020 aand ~~going concern opinion. This means that they expressed substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital.~~2019

~~Comparison~~As of ~~years ended~~ September 30, ~~2019~~2020, we had $51,320 in cash, negative working capital of $2,199,340 and ~~2018~~an accumulated deficit of $27,603,611.

As of September 30, 2019, we had $53,147 in cash, negative working capital of $1,085,556 and an accumulated deficit of $25,~~383~~362,~~138~~287.

As of September 30, 2018, we had $4,210 in cash, negative working capital of $844,539 and an accumulated deficit of $22,974,740.

Cash flows used in operating activities

During the year ended September 30, ~~2019~~2020, we used cash ~~flows~~from in operating activities ~~from continuing operations~~ of $1,~~219~~004,~~313~~993, compared to $1,~~037~~219,~~073~~313 used in the year ended September 30, ~~2018~~2019. During the year ended September 30, ~~2019~~2020, we incurred a net loss of $2,~~046~~502,~~024~~ 375 and had non-cash expenses of $~~700~~1,~~153~~560,722, compared to a net loss of $32,~~493~~046,~~419~~024 and non-cash expenses of $2700,~~099,776~~153 during the year ended September 30, ~~2018~~2019.

Cash flows used in investing activities

During the years ended September 30, ~~2019~~2020 and ~~2018~~2019, we had no cash flows from investing activities.

Cash flows provided by financing activities

During the year ended September 30, ~~2019~~2020, we had proceeds of $796,000 from loans payable from officers and shareholders, of $~~358~~37,~~250,~~166 from ~~the sale~~ ofa ~~common~~U.S. ~~stock~~SBA ~~and~~loan ~~warrants of $10,000~~ and ~~proceeds of~~ $~~925~~170,000 from contributions of capital by its joint venture ~~partner~~partners. ~~The Company used cash to repay loans payable from officers and shareholders of $25,000.~~ During ~~the~~ year ended September 30, ~~2018~~2019, we had proceeds from loans payable from officers and shareholders of $~~434~~358,~~500~~250, ~~from convertible notes payable of~~ $~~250~~10,000, from the sale of common stock and ~~warrants of~~ $~~177~~925,000~~, and~~ from ~~the~~contributions ~~exercise~~ of ~~stock~~capital ~~warrants~~by ofits ~~$170,914~~joint venture partners. We used cash toof ~~repay~~ $25,000 for the repayment of loans payable from officers and shareholders ~~of $20,500~~.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts

PSI received FDA clearance for the Psoria-Light on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark for the Psoria-Light in the fourth quarter of 2011.

U.S. Patent	Issued	“Title” – Summary

No. 6,647,649	November 18, 2003	“Micro-particle Taggant Systems” - Generation of Micro-particle codes from marks containing encrypted Micro-particles.

No. 7,720,254	May 18, 2010	“Automatic Micro-particle Mark Reader” - Automatic readers for interrogating Micro-particle marks.

No. 7,831.042	November 9, 2010	“Three-Dimensional Authentication Of Micro-particle Mark - Validation of 3D nature of micro-particle mark to protect against counterfeiting of mark.

No. 7,885,428	February 8, 2011	“Automatic Micro-particle Mark Reader” - Automatic readers for interrogating micro-particle marks (broadened protection).

No. 8,033,450	October 11, 2011	“Expression Codes For Micro-particle Marks Based On Signature Strings” - Generation of expression codes (“fingerprints”) unique to each micro-particle mark to protect against counterfeiting of marks.

No. 8,223,964	July 17, 2012	“Three-Dimensional Authentication Of Micro-particle Mark - Validation of 3D nature of micro-particle mark to protect against counterfeiting of marks (broadened protection).

Europe WO/EP Patent	Issued	“Title” – Summary

Appl. No. 07753043.4	Pending	“Expression Codes For Micro-particle Marks Based On Signature Strings” - Generation of expression codes (“fingerprints”) unique to each micro-particle mark to protect against counterfeiting of marks.

Appl. No. 07753034.3	Pending	“Three-Dimensional Authentication Of Micro-particle Mark - Validation of 3D nature of Micro-particle mark to protect against counterfeiting of mark.

Trademarks	Type	Countries

Stealth Mark^®	Registered	United States European Community Australia

StealthFire	Not Registered	United States European Community

ActiveDuty™	Not Registered	United States

Trade Secrets

Stealth Mark proprietary technologies and capabilities being maintained as Trade Secrets include, but are not limited to:

	●	Micro-particle Manufacturing
	●	Micro-particle Color Systems
	●	Technology advancements providing improvements in Automatic Reader performance
	●	Software solutions supporting Micro-particle security solutions
	●	Algorithms, artificial intelligence, and technologies related to Data Intelligence

We will assess the need for any additional patent, trademark or copyright applications, franchises, concessions royalty agreements or labor contracts on an ongoing basis.

Employees

We currently employ our executive officers and as of September 30, 2020, PSI ~~has~~had eight employees and had several independent contractors.

Summary of Significant Accounting Policies.

The Company’s significant accounting policies are presented in the Notes to the Consolidated Financial Statements (see Note 2 of the audited consolidated financial statements included herein).

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to a smaller reporting company.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements are contained in pages F-1 through F-2122 which appear at the end of this annual report.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

The Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of September 30, ~~2019~~2020, the end of the period covered by this report. Based upon that evaluation, the Company’s CEO concluded that the Company’s disclosure controls and procedures are not effective at the reasonable assurance level due to the material weaknesses described below:

1. The lack of an independent audit committee and the lack of internal personnel necessary to provide accurate and timely regulatory filings.

2. The Company does not have written documentation of its internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to the Company. Management evaluated the impact of its failure to have written documentation of its internal controls and procedures on its assessment of its disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

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

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

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

In light of the material weaknesses, the management of the Company performed additional analysis and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with the accounting principles generally accepted in the United States of America. Accordingly, we believe that our consolidated financial statements included herein fairly present, in all material respects, our consolidated financial condition, consolidated results of operations and cash flows as of and for the reporting periods then ended.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officer and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; ● Only in accordance with authorizations of management and directors of the issuer; and provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made; ● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

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

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

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

As of the end of our most recent fiscal year, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, as of September 30, 2019, such internal control over financial reporting was not effective. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal control over financial reporting that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and (2) inadequate segregation of duties consistent with control objectives of having segregation of the initiation of transactions, the recording of transactions and the custody of assets. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of September 30, ~~2019~~2020.

To address the material weaknesses set forth in items (21) and (32) discussed above, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

This Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only the management’s report in this Report.

Management’s Remediation Initiatives

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

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

Changes in internal control over financial reporting.

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during the ~~fourth~~nine ~~quarter~~months ofended ~~our~~June ~~fiscal~~30, ~~year~~2020 ~~2019~~ that have materially affected, or are reasonably likely to to materially affect, our internal control over financial reporting.

2422

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Directors, Executive Officer and Control Persons

The following table sets forth the names and ages of our directors and executive officers during the period covered by this Report. Also the principal offices and positions with us held by each person and the date such person became a director or executive officer. Each executive officer was appointed by our Board of Directors. Our directors serve until the earlier occurrence of the election of his or her successor at the next meeting of shareholders, death, resignation or removal by the Board of Directors. There are no family relationships among our directors, and executive officers.

Name	Age	Position	Date
Calvin R. O’Harrow	7071	Chief Executive Officer, Chief Operating Officer, Director	May 2018
Douglas W. Samuelson	6061	Chief Financial Officer	Feb 2018
Paul D. Jones	7576	Director, President	Dec 2017
Thomas E. Scott	6263	Director, Secretary	Dec 2017
William E. Kingsford	7677	Director	Dec 2017
Roy M. Harsch	7374	Director, Chairman	Dec 2017
Andrew Kandalepas (2)	68	Former Chairman, CEO and CFO	June 2010
Ricky Howard (1)	66	Former President and CEO, SCI	April 2014

	(1)	Ricky Howard passed away suddenly in November 2018.
	(2)	Andrew Kandalepas resigned from the Board of Directors and as CEO in April 2018.

Audit Committee

During the period covered by this Report, the Board of Directors determined not to establish an audit committee because our limited resources and limited operating activities do not warrant the formation of an audit committee or the expense of doing so. We do not have a financial expert serving on the Board of Directors who meets the criteria for a financial expert under Item 401(e) of Regulation S-B due to our limited financial resources.

Certain Legal Proceedings

The Company is periodically engaged in legal proceedings arising from and relating to its business operations. We currently are not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect on our financial condition or results of operations. However, we recently decided to attempt to preserve revenue and reduce operating expenses through actions including, but not limited to, facilities consolidation and staff reductions, which we hope to implement through negotiated transactions with lessors, employees and other third parties. Such actions may result in disputes with and claims by such parties which, if not resolved through negotiations, may impact negatively the Company’s ability to continue as a going concern. To date, we have negotiated settlement of all but $89,301.87 in ex-employee wage and benefits claims, with agreement to pay such remaining amount, together with interest at the rate of 4% per annum on the principal amount from time to time outstanding, when and as cash flow permits. One of the employees claims additional amounts due for certain statutory damages under the Illinois Wage Payment and Collection which currently could exceed $21,600.00 and would increase at the rate of 2% of the wages due per month plus attorneys’ fees if the employee elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim.

In periodic reports the Company disclosed that on May 25, 2017, the SEC’s Chicago Regional Office informed it that it had made a preliminary determination to recommend filing of an enforcement action against the Company and its CEO based on possible violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act, and Section 15(a) of the Exchange Act. Subsequent discussions resulted in the submission of an Offer of Settlement (“Settlement”) through an administrative cease and desist action on November 17, 2017, which was accepted by the SEC on April 12, 2018, as disclosed on Form 8K filed April 18, 2018. Pursuant to the Settlement, the Company neither admitted nor denied any of the allegations, but was enjoined from violating the above-referenced Sections and Rule. The Settlement imposed no financial penalties or sanctions against the Company.

The Form 8K also disclosed that on April 13, 2018, the SEC filed a separate complaint against the CEO in the U.S. District Court for the Northern District of Illinois, asserting the allegations noted above, as well as allegations that he manipulated the price of company shares through undisclosed trading, realizing more than $130,000 from such trading. On the date of filing, the CEO voluntarily resigned as an officer and director of the Company. Without admitting or denying the allegations, the CEO consented to the entry of the judgment, which was entered on September 26, 2018 by the U.S. District Court for the Northern District of Illinois. The judgment permanently enjoined him from violating the anti-fraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the broker registration provisions of Section 15(a) of the Exchange Act. It also bars him from serving as an officer or director of a public company and from participating in penny stock offerings, and ordered disgorgement and interest and penalties to be determined by the court.

On January 31, 2019, the former CEO was terminated and his service as Director of Business Development ceased as of that date.

Compliance with Section 16(A) Of the Exchange Act.

Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and are required to furnish copies to the Company.

ITEM 11.

EXECUTIVE COMPENSATION

Executive Compensation

Summary Compensation Table

Name and Position	Year ($)		~~Salary ($)~~		Salary ($)		~~Other Annual Compensation Bonus ($)~~		Other Annual Compensation Bonus ($)		~~Restricted Stock (Shares)~~		Restricted Stock ($)		~~Options Awards (Shares)~~		Options Awards ($)		~~LTIP SARs ($)~~		LTIP SARs ($)		~~Payouts ($)~~		Payouts ($)		~~All Other Compensation ($)~~		All Other Compensation ($)
Calvin R. O’Harrow	~~2019~~	2020		-		-		-		-		-		-		-		127,500		-		-		-		-		-		-
Chief Executive Officer, Director	~~2018~~	2019		-		-		-		-		-		-		~~1,800,000~~		-		-		-		-		-		-		-
Douglas W. Samuelson	~~2019~~	2020		-		-		-		-		-		112,800		-		-		-		-		-		-		-		-
Chief Financial Officer	~~2018~~	2019		-		-		-		-		-		-		~~1,730,000~~		-		-		-		-		-		-		-
Paul D. Jones	~~2019~~	2020		-		-		-		-		-		60,000		-		-		-		-		-		-		-		-
Director, President	~~2018~~	2019		-		-		-		-		-		-		~~1,050,000~~		-		-		-		-		-		-		-
Thomas E. Scott	~~2019~~	2020		-		-		-		-		-		135,000		-		-		-		-		-		-		-		-
Director, Secretary	~~2018~~	2019		-		-		-		-		-		-		~~750,000~~		-		-		-		-		-		-		-
William E. Kingsford	~~2019~~	2020		-		-		-		-		-		60,000		-		-		-		-		-		-		-		-
Director	~~2018~~	2019		-		-		-		-		-		-		~~600,000~~		-		-		-		-		-		-		-
Roy M. Harsch	~~2019~~	2020		-		-		-		-		-		82,500		-		-		-		-		-		-		-		-
Director, Chairman	~~2018~~	2019		-		-		-		-		-		-		~~750,000~~		-		-		-		-		-		-		-
Andrew J. Kandalepas,	2019			133,333				-				-				-				-				-				-
Rick Howard, President,		2020				-				-				-				-				-				-				-
Former Chairman and CEO (1)	2018			182,375				-				-				1,300,000				-				-				-
former CEO of StealthCo (1)		2019				35,000				-				-				-				-				-				-
Rick Howard, President,	2019			35,000				-				-				-				-				-				-
former CEO of StealthCo (2)	2018			130,000				-				-				1,150,000				-				-				-

(1) ~~Andrew~~Ricky ~~Kandalepas~~Howard ~~resigned~~passed ~~from~~away ~~the~~suddenly ~~Board of Directors and as CEO~~ in ~~April~~November 2018.

(2) Ricky Howard passed away suddenly in November 2018.

There are no annuity, pension or retirement benefits proposed to be paid to officers, directors or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the Company or any of its subsidiaries, if any.

Management

On February 5, 2018, the Board of Directors appointed Calvin R. O’Harrow as Chief Operating Officer and a member of the Board. It accepted the resignation of Andrew J. Kandalepas, as Chief Financial Officer (CFO) and Chief Accounting Officer (CAO), and appointed Douglas Samuelson as CFO and CAO. In April 2018, Mr. Kandalepas resigned as Chief Executive Officer (CEO) and in May 2018, the Board approved the permanent appointment of Calvin O’Harrow as CEO.

Calvin O’Harrow started his career as a successful entrepreneur and moved on to a 34-year tenure as financial advisor at a prominent national wirehouse and wealth management firm, where he established unique team concepts designed to reward team members for their continued relationships with longstanding clients. Beyond this success, he has also been involved in several non-profit organizations and held a variety of positions in finance, sales and management. Mr. O’Harrow has a B.S. from the University of Wisconsin, Madison.

Doug Samuelson, CPA, brings over 20ten years of experience in public accounting, and over 20 years of experience in the private sector, including serving as CFO, Director and Controller in both private and publicly traded companies. In the past, he provided contract CFO services and assisted public companies with their Sarbanes-Oxley (SOX) compliance. He has worked for major accounting firms, including Arthur Andersen LLP and Cohn Reznick LLP. Mr. Samuelson received his B.S. degree in Accounting from the University of Utah and his M.S. degree in Computer Science from California State University, Northridge.

On January 12, 2015, the Company entered into the PDC Joint Venture Agreement with TMA to further develop, market, license and/or sell PSI technology and products. In December 2018, the PDC Joint Venture Agreement was terminated. Further development, marketing, licensing and/or sales of PSI Technology and products is expected to be conducted through NEO, the joint venture between the Company, PSI and GEN2.

During the period covered by this Report, Mr. Ricky Howard managed SCI’s business. Mr. Howard brought to SCI 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 joined Stealth Mark as V.P. of Operations at the early stage of development in 2006 and 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.

Stock Option Plan

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.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders

The following table presents certain information regarding the beneficial ownership of all shares of common stock at the date of this Report, for each executive officer and director of our Company and for each person known to us who owns beneficially more than five percent (5%) of the issued and outstanding shares of our common stock, during the period covered by this Report.

Name and Address of Beneficial Owner (1)	Number of Shares (2)		Options to Acquire Number of Shares (2)		Warrants to Acquire Number of Shares (2)		Number of Shares Inclusive of Options and Warrants		Percentage (%) of Security Ownership
Calvin R. O’Harrow, CEO, COO and Director		9,183,000		~~900~~3,525,000		11,791,112		2124,~~874~~499,112		1112.85	%
Douglas W. Samuelson, CFO		~~250~~3,020,000		~~480,000~~-		400,000		13,~~130~~420,000		01.67	%
Paul D. Jones, President, Director		12,~~263~~888,305		~~525,000~~-		1,111,111		23,~~899~~999,416		12.60	%
Thomas E. Scott, Secretary, Director		~~849~~3,599,710		~~375,000~~-		463,333		14,~~688~~063,043		02.91	%
William E. Kingsford, Director		13,~~933~~183,778		~~300,000~~-		2,338,731		45,~~572~~522,509		2.58	%
Roy M. Harsch, Director, Chairman		13,~~553~~053,254		~~375,000~~-		1,605,397		34,~~533~~658,651		12.94	%
Officers and Directors as a group		1524,~~033~~928,047		23,~~955~~525,000		17,709,684		3546,~~697~~162,731		1923.25	%
Total issued and outstanding		~~107~~118,~~497~~252,077		12,012,738		6667,~~484~~634,049		~~185~~196,~~993~~251,~~864~~364		100.00	%

	(1)	Except as otherwise noted below, the address of each of the persons shown in the above table is c/o Wellness Center USA, Inc., 145 E. University Boulevard, Tucson, AZ 85705.
	(2)	Includes, where applicable, shares of common stock issuable upon the exercise of options or warrants to acquire common stock held by such person that may be exercised within sixty (60) days after September 30, ~~2019~~2020. Also includes unvested shares of restricted stock as to which such person has voting power but no dispositive power and in which they are issuable within sixty (60) days after September 30, 2020. Unless otherwise indicated, we believe that all persons named in the table above have sole voting power and/or investment power with respect to all shares of common stock beneficially owned by them.

2725

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Party Transactions

During the period covered by this Report, related parties with whom the Company had transactions were:

Loans from Officers and Shareholders

As of September 30, ~~2017~~2018, loans payable tofrom officers and shareholders of $5966,000 were outstanding. During the year ended September 30, ~~2018~~2019, the Company borrowed $~~434~~358,~~500~~250 ~~under~~from 22its ~~short-term,~~officers ~~unsecured~~and ~~loans.~~shareholders ~~The loans have an interest rate of eight percent~~ and ~~are due one year from the date of issuance. During the year ended September 30, 2018, the Company~~ repaid $2025,~~500 of the loans payable and $407,~~000 ~~were converted into 2,800,713 shares of the Company’s common stock~~. InAll ~~connection with the conversion~~ of the loans ~~payable,~~ ~~the~~are ~~Company issued warrants to purchase 6~~unsecured,~~038,336~~ have ~~shares of common stock to the holders as~~ an ~~inducement~~interest torate ~~convert. The warrants expire five years from the date~~ of ~~grant~~eight ~~and~~percent ~~have~~per ~~exercise~~annum ~~prices of $0.14~~ and ~~$0.18~~are ~~per~~due ~~share.~~one ~~The fair value of the warrants of $689,934 was recorded as financing costs during the~~ year ~~ended~~from September 30, 2018 and was based on a probability affected Black-Scholes Merton option pricing model with stock prices of $0.13 and $0.14, volatility of 124.60% and 124.73% and risk-free rates of 2.37% and 2.43%. In addition to the ~~warrants, the Company offered certain loan holders, who were not officers or directors, to convert at a rate below the market price of the stock on the~~ date of ~~conversion~~issuance. An aggregate of 218,452 additional common shares were issued to these loan holders with a value of $30,583 on the date of conversion. The Company recorded the amount as a financing cost during the year ended September 30, 2018. As of September 30, ~~2018~~2019, loans payable ~~from~~to officers and shareholders of $66399,~~000~~250 were outstanding.

During the year ended September 30, ~~2019~~2020, the Company and its subsidiary, PSI, borrowed $~~358~~796,~~250~~000 from its officers and shareholders. The loans have an interest rate of eight percent and ~~repaid~~are due one year from the date of issuance. As of September 30, 2020, loans payable to officers and shareholders of $251,~~000~~165,250 were outstanding. All of the loans are unsecured, have an interest rate of eight percent and are due one year from the date of issuance. As of September 30, ~~2019~~2020, ~~loans~~the ~~payable~~Company’s to officers and ~~shareholders~~directors had ofthe following loans outstanding: Calvin O;Harrow - $~~399~~590,250; ~~were~~Roy ~~outstanding~~Harsch - $205,000; William Kingsford - $201,000; Paul Jones - $100,000; Douglas Samuelson - $40,000; Tom Scott - $20,000.

~~Common~~In December 2018, the Company and PSI entered into a Joint Venture Agreement with PSI GEN2 Funding, Inc. (“GEN2”), to further develop, market, license and/or sell PSI technology and products. GEN2 consists of accredited investors, and investment participation from several WCUI officers and directors, including Calvin R. O’Harrow and Roy M. Harsch. The Joint Venture Agreement provided for the venture to be conducted through NEO Phototherapy, LLC, an Illinois limited liability company (“NEO”). As of September 30, 2019, PSI controlled 51% of the joint venture, and the operations of the venture were consolidated with the Company for reporting purposes. Effective April 30, 2020, the joint venture with GEN2 was reorganized. GEN2 shareholders exchanged their common shares ~~issued~~in GEN2, and the individual exchanged his membership interests in NEO, for ~~cash~~common ~~from~~shares ~~Officer~~representing 49% ownership in PSI. As of September 30, 2020, Wellness controls 51% of the outstanding stock of PSI, and as such is consolidated for reporting purposes, and the remaining 49% is owned by the former owners of GEN2.

During the year ended September 30, 2018, the Company received $30,000 from the sale of 200,000 shares of its common stock from one of its officers. In connection with the sale, the Company issued a warrant to the officer to purchase 400,000 shares of the Company’s common stock. The warrants expire five years from the date of grant and has an exercise price of $0.18 per share.

Compensation of Former Chairman and Chief Executive Officer

During the ~~years~~year ended September 30, 2019 ~~and 2018~~, the Company’s former Chairman and Chief Executive Officer, Andrew J. Kandalepas, ~~was~~ was paid compensation of $133,333 ~~and $182,375, respectively~~. During the year ended September 30, 2018, he was also granted stock options to purchase 1,300,000 shares of the Company’s common stock at an exercise price of $0.14 per share. The options expire five years from the date of grant and the shares will vest in various periods. Mr. Kandalepas resigned as an officer and director in April 2018. As of September 30, 2019, ~~and 2018,~~ $33,964 ~~and $81,965~~ of accrued compensation was owed to Mr. Kandalepas.

Corporate Office Facility

The Company leased its corporate office facility in Hoffman Estates, Illinois pursuant to a non-cancellable lease initiated in July 2016 and expiring February 28, 2024. The Company vacated the facility in April 2019, in favor of its present facilities in Tucson AZ, which are provided by a shareholder on a rent-free basis.

Director Independence

Currently, the Company does not have a policy that its directors or a majority of its directors be independent of management. The Company intends to implement a policy that a majority of the Board members be independent of the Company’s management as the members of the board of director’s increases.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

The following table sets forth the fees billed to the Company for professional services rendered by the Company’s independent registered public accounting firm, for the years ended September 30, 2018 and 2017:

Fees	~~2019~~2020		~~2018~~2019
Audit fees	$	90,000	$	90,000
Audit Related Fees	$	-	$	-
Tax fees	$	-	$	-
All other fees	$	-	$	-
Total Fees	$	90,000	$	90,000

Audit Fees. Consist of fees billed for professional services rendered for the audits of our financial statements and reviews of our interim consolidated financial statements included in quarterly reports.

Tax Fees. Our auditors did not provide us with professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.

Pre-approval of All Services from the Independent Auditors

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us or our subsidiaries to render any auditing or permitted non-audit related service, the engagement be:

	●	approved by our audit committee; or

	●	entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.

We do not have an audit committee, however our board of directors acts as the audit committee, established pre-approval policies and procedures as to the particular service which do not include delegation of the audit committee’s responsibilities to management. Our board of directors pre-approves all services provided by our independent auditors and is informed of each service.

2827

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

a) Documents filed as part of this Annual Report

1. Financial Statements

2. Financial Statement Schedules

3. Exhibits

Exhibit Number	Description of Document	Filed Herewith	Incorporated by Reference To:
2.2	Exchange Agreement dated June 21, 2012 by and between Psoria-Shield Inc. and Wellness Center USA, Inc.		Exhibit 2.2 to the Registrant’s Amended Current Report on Form 8-KA3 filed on January 22, 2013.
2.4	Exchange Agreement dated February 28, 2014 by and between National Pain Centers, Inc. and Wellness Center USA, Inc.		Exhibit 2.4 to the Registrant’s Current Report on Form 8-K filed on ~~February~~January 28, 2014.
2.5	Purchase Agreement dated March 31, 2014 by and between SMI Holdings, Inc. d/b/a Stealth Mark, Inc. and Stealthco, Inc., a wholly-owned subsidiary of Wellness Center USA, Inc.		Exhibit 2.5 to the Registrant’s Current Report on Form 8-K filed on April 9, 2014.
3.1	Articles of Incorporation of the Registrant as filed with the Secretary of State of Nevada.		Exhibits 3.2 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.
3.2	Bylaws of the registrant.		Exhibits 3.2 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.
3.3	Certificate of Amendment as filed with the Secretary of State of Nevada on January 12, 2017.		~~Exhibit A to Registrant’s Information Statement on Schedule 14C filed January 12, 2017.~~
3.4	Certificate of Amendment as filed with the Secretary of State of Nevada on October 11, 2019.		Exhibit B to Registrant’s Information Statement on Schedule 14C filed September 18, 2019.
4.1	Subscription Agreement		Exhibits 99.1 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.
4.2	Form of warrant		Exhibits 99.2 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.
4.3	2010 Non-Qualified Stock Compensation Plan		Exhibits 99.3 to the Registrant’s Amended Registration Statement on Form S-1A1 filed on July 7, 2011.
5.4	Employment Agreement dated as of February 28, 2014 by and between Jay Joshi, M.D. and Wellness Center USA, Inc.		Exhibit 52.41 to the Registrant’s Current Report on Form 8-K filed on ~~February~~April 2810, 2014.
5.5	Employment Agreement dated as of July 1, 2014 by and between Rick Howard and Wellness Center USA, Inc.		Exhibit 5.5 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015.
5.6	Employment Agreement dated as of January 1, 2018 by and between Rick Howard and Wellness Center USA, Inc.		Exhibit 5.6 to the Registrant’s Annual Report on Form 10-K filed on February 20, 2018.
5.7	Employment Agreement dated as of January 1, 2018 by and between Lee Anne Patterson and Wellness Center USA, Inc.		Exhibit 5.7 to the Registrant’s Annual Report on Form 10-K filed on February 20, 2018.
5.8	Employment Agreement dated as of January 1, 2018 by and between Richard Neal and Wellness Center USA, Inc.		Exhibit 5.8 to the Registrant’s Annual Report on Form 10-K filed on February 20, 2018.

10.4	License Agreement dated as of August 25, 2009 by and between Psoria-Shield Inc. and Scot L. Johnson.		Exhibit 10.4 to the Registrant’s Amended Current Report on Form 8-KA3 filed on January 22, 2013.

10.5	License Agreement dated as of December 11, 2010 by and between Psoria-Shield Inc. and Scot L. Johnson.		Exhibit 10.5 to the Registrant’s Amended Current Report on Form 8-KA3 filed on January 22, 2013.

10.6	Management Service Agreement dated as of February 28, 2014 by and between National Pain Centers, Inc. and National Pain Centers, LLC		Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015

10.7	Agency Agreement dated as of October 24, 2014 by and between The Medical Alliance, Inc., Psoria-Shield, Inc. and Wellness Center USA, Inc.		Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015

10.8	Joint Venture Agreement dated as of January12, 2015 by and between The Medical Alliance, Inc., Psoria-Shield, Inc. and Wellness Center USA, Inc.		Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015
10.9	Joint Venture Agreement dated as of November 15, 2018 by and between PSI Gen 2 Funding, Inc., Psoria-Shield, Inc. and Wellness Center USA, Inc.		Exhibit 10.9 to the Registrant’s Form 8-K filed on November 15, 2018

21.1	List of subsidiaries of the Registrant		Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)	X

31.2	Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (**)	X

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)	X

32.2	Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (***)	X

101.INS	XBRL Instance Document ****	X

101. SCH	XBRL Taxonomy Extension Schema Linkbase Document ****	X

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document ****	X

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document ****	X

101.LAB	XBRL Taxonomy Extension Label Linkbase Document ****	X

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document ****	X

(*) Filed herewith.

(**) Included in Exhibit 32.1

(***) Included in Exhibit 32.2

(****) 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.

5.5	Employment Agreement dated as of July 1, 2014 by and between Rick Howard and Wellness Center USA, Inc.		Exhibit 5.5 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015.
5.6	Employment Agreement dated as of January 1, 2018 by and between Rick Howard and Wellness Center USA, Inc.		Exhibit 5.6 to the Registrant’s Annual Report on Form 10-K filed on February 20, 2018.
5.7	Employment Agreement dated as of January 1, 2018 by and between Lee Anne Patterson and Wellness Center USA, Inc.		Exhibit 5.7 to the Registrant’s Annual Report on Form 10-K filed on February 20, 2018.
5.8	Employment Agreement dated as of January 1, 2018 by and between Richard Neal and Wellness Center USA, Inc.		Exhibit 5.8 to the Registrant’s Annual Report on Form 10-K filed on February 20, 2018.
10.4	License Agreement dated as of August 25, 2009 by and between Psoria-Shield Inc. and Scot L. Johnson.		Exhibit 10.4 to the Registrant’s Amended Current Report on Form 8-KA3 filed on January 22, 2013.
10.5	License Agreement dated as of December 11, 2010 by and between Psoria-Shield Inc. and Scot L. Johnson.		Exhibit 10.5 to the Registrant’s Amended Current Report on Form 8-KA3 filed on January 22, 2013.
10.6	Management Service Agreement dated as of February 28, 2014 by and between National Pain Centers, Inc. and National Pain Centers, LLC		Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015
10.7	Agency Agreement dated as of October 24, 2014 by and between The Medical Alliance, Inc., Psoria-Shield, Inc. and Wellness Center USA, Inc.		Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015
10.8	Joint Venture Agreement dated as of January12, 2015 by and between The Medical Alliance, Inc., Psoria-Shield, Inc. and Wellness Center USA, Inc.		Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015
10.9	Joint Venture Agreement dated as of November 15, 2018 by and between PSI Gen 2 Funding, Inc., Psoria-Shield, Inc. and Wellness Center USA, Inc.		Exhibit 10.9 to the Registrant’s Form 8-K filed on November 15, 2018
21.1	List of subsidiaries of the Registrant		Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K filed on January 15, 2015
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)	X
31.2	Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (**)	X
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)	X
32.2	Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (***)	X
101.INS	XBRL Instance Document ****	X
101. SCH	XBRL Taxonomy Extension Schema Linkbase Document ****	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document ****	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document ****	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document ****	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document ****	X

(*)	Filed herewith.
(**)	Included in Exhibit 32.1
(***)	Included in Exhibit 32.2
(****)	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.

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: January 28, 2020	By:	/s/ Paul D. Jones
Date: February 8, 2021	By:	/s/ Paul D. Jones
		Paul D. Jones President (Duly Authorized Principal Executive Officer)
		Paul D. Jones
		President (Duly Authorized Principal Executive Officer)

	WELLNESS CENTER USA, INC.
Date: January 28, 2020	By:	/s/ Douglas W. Samuelson
Date: February 8, 2021	By:	/s/ Douglas W. Samuelson
		Douglas W. Samuelson Chief Financial Officer and Chief Accounting Officer (Duly Authorized Principal Accounting Officer)
		Douglas W. Samuelson
		Chief Financial Officer and Chief 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 R. O’Harrow	Chief Executive Officer, Chief Operating Officer, Director	~~January~~February 288, ~~2020~~2021
Calvin R. O’Harrow
/s/ Douglas W. Samuelson	Chief Financial Officer, Chief Accounting Officer	~~January~~February 288, ~~2020~~2021
Douglas W. Samuelson
/s/ Paul D. Jones	Director, President	~~January~~February 288, ~~2020~~2021
Paul D. Jones
/s/ Thomas E. Scott	Director, Secretary	~~January~~February 288, ~~2020~~2021
Thomas E. Scott
/s/ William E. Kingsford	Director	~~January~~February 288, ~~2020~~2021
William E. Kingsford
/s/ Roy M. Harsch	Director	~~January~~February 288, ~~2020~~2021
Roy M. Harsch

3130

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Wellness Center USA, Inc.

September 30, ~~2019~~2020 and ~~2018~~2019

Index to the Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at September 30, 2019 and 2018	F-3
Consolidated Balance Sheets at September 30, 2020 and 2019	F-3
Consolidated Statements of Operations for the Years Ended September 30, 2019 and 2018	F-4
Consolidated Statements of Operations for the Years Ended September 30, 2020 and 2019	F-4
Consolidated Statements of Shareholders’ Deficit for the Years Ended September 30, 2019 and 2018	F-5
Consolidated Statements of Shareholders’ Deficit for the Years Ended September 30, 2020 and 2019	F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 2019 and 2018	F-6
Consolidated Statements of Cash Flows for the Years Ended September 30, 2020 and 2019	F-6
Notes to the Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Wellness Center USA, Inc.

Chicago, Illinois

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Wellness Center USA, Inc. (the “Company”) as of September 30, ~~2019~~2020 and ~~2018~~2019, the related consolidated statements of operations, shareholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of September 30, ~~2019~~2020 and ~~2018~~2019, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company had a shareholders’ deficit at September 30, ~~2019~~2020, and incurred a net loss and utilized cash in operating activities during the year ended September 30, ~~2019~~2020. In addition, as of September 30, 2020, certain notes payable to officers and shareholders and payroll taxes were past due. These factors ~~raise~~ raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to ~~these~~ these matters are also described in Note 1 to the financial statements. The consolidated financial statements do not include any ~~adjustments~~ adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2016.

Weinberg & Company, P.A.

Los Angeles, California

~~January~~February 288, ~~2020~~2021

F-2

Wellness Center USA, Inc.

Consolidated Balance Sheets

	September 30,
	2019			2018
	2020			2019
ASSETS
Current Assets
Cash	$	5351,~~147~~320		$	453,~~210~~147
Prepaid expenses and other current assets		55,000			1,550
Inventories		94,560			-
Total Current Assets		108,147			5,760
Prepaid expenses and other current assets		500			55,000
Property and equipment, net		1,562			2,619
Total Current Assets		146,380			108,147
Other assets		-			16,760
Property and equipment, net		-			1,562
Total Other Assets		1,562			19,379
Right of use asset		6,961			-
TOTAL ASSETS	$	109,709		$	25,139
Total Other Assets		6,961			1,562
TOTAL ASSETS	$	153,341		$	109,709
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	~~794~~408,~~453~~297		$	~~572~~457,~~753~~037
Deferred revenue		-			8,624
Payroll taxes payable		92,334			102,834
Convertible notes payable		-			202,922
Lease liability		6,961			-
Loans payable from officers and shareholders		399,250			66,000
Lease abandonment liability		672,878			234,582
Total Current Liabilities		1,193,703			850,299
Loans payable from officers and shareholders, including $369,250 past due at September 30, 2020		1,165,250			399,250
Total Current Liabilities		2,345,720			1,193,703
Long-term Liabilities
U.S. Small Businessss Administration PPP loan payable		37,166			-
Total Liabilities		2,382,886			1,193,703
Shareholders’ Deficit
Common stock, par value $0.001, 200,000,000 shares authorized; 107,497,077 and 100,952,569 shares issued and outstanding, respectively		107,497			100,952
Common stock, par value $0.001, 200,000,000 shares authorized; 118,252,077 and 107,497,077 shares issued and outstanding, respectively		118,252			107,497
Additional paid-in capital		2325,~~777~~053,~~647~~616			2223,~~450~~777,~~252~~647
Accumulated deficit		(2527,~~362~~583,~~287~~363	)		(2225,~~974~~362,~~740~~287	)
Total Wellness Center USA shareholders’ deficit		(12,~~477~~411,~~143~~495	)		(~~423~~1,~~536~~477,143	)
Non-controlling interest		~~393~~181,~~149~~950			~~(401~~393,~~624~~149	)
Total Shareholder’s deficit		(12,~~083~~229,~~994~~545	)		(~~825~~1,~~160~~083,994	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	~~109~~153,~~709~~341		$	25109,~~139~~709

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

F-3

Wellness Center USA, Inc.

Consolidated Statements of Operations

	Year Ended September 30,
	Years Ended
	2019			2018
	September 30,
	2020			2019
Sales:
Trade	$	195,~~508~~000		$	~~140~~19,~~023~~508
Consulting services		~~13,867~~-			7313,~~700~~867
Total Sales		335,~~375~~000			~~213~~33,~~723~~375
Cost of goods sold		~~20,025~~-			7920,~~960~~025
Gross profit		135,~~350~~000			~~133~~13,~~763~~350
Operating expenses		1,~~779~~926,~~934~~594			21,~~226~~779,~~362~~934
Loss from operations		(1,~~766~~921,~~584~~594	)		(21,~~092~~766,~~599~~584	)
Other expenses
Other income (expense)
Amortization of debt discount		(72,078	)		(318,038	)
U.S. federal government COVID-19 grant		4,000			-
Financing costs		(182,064	)		(891,583	)
Amortization of debt discount		-			(72,078	)
Loss on modification of conversion price on convertible note payable		-			(158,400	)
Financing costs		(43,815	)		(182,064	)
Loss on modification of exercise price on warrants in connection with convertible note payable		-			(5,445	)
Cost of stock option modifications		(22,680	)		-
Interest expense		(25,298	)		(27,354	)
Cost of stock warrant modification		(507,265	)		-
Total other expenses		(279,440	)		(1,400,820	)
Interest expense		(67,861	)		(25,298	)
NET LOSS		(2,046,024	)		(3,493,419	)
Gain on debt forgiveness		56,840			-
Net loss attributable to non-controlling interest		63,860			84,236
Total other income (expense)		(580,781	)		(279,440	)
Loss from deconsolidation of non-controlling interest		(405,383	)		-
NET LOSS		(2,502,375	)		(2,046,024	)
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC.		(2,387,547	)		(3,409,183	)
Net loss attributable to non-controlling interest		281,299			63,860
Deemed dividend relating to settlement with shareholder		-			(433,000	)
Loss from deconsolidation of non-controlling interest		-			(405,383	)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(2,387,547	)	$	(3,842,183	)
NET LOSS ATTRIBUTABLE TO WELLNESS CENTER USA, INC.		(2,221,076	)		(2,387,547	)
BASIC AND DILUTED LOSS PER SHARE	$	(0.02	)	$	(0.0402	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED		105,421,218			94,475,383
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED		110,486,481			105,421,218

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

F-4

Wellness Center USA, Inc.

Consolidated Statements of Shareholders’ Deficit

For the Years Ended September 30, 2019 and 2018

	Common Stock				Additional Paid-in		Accumulated			Total WCUI			Non-controlling
	Shares		Amount		Capital		Deficit			Deficit			Interest			Total

Balance, September 30, 2018		100,952,569	$	100,952	$	22,450,252	$	(22,974,740	)	$	(423,536	)	$	(401,624	)	$	(825,160	)

Common shares issued for cash		142,857		143		9,857		-			10,000			-			10,000

Shares issued upon conversions of note payable		4,810,222		4,811		285,361		-			290,172			-			290,172

Fair value of common stock issued with convertible note payable		314,286		314		21,686		-			22,000			-			22,000

Fair value of additional shares issued upon conversions of note payable		-		-		160,064		-			160,064			-			160,064

Fair value of vested stock options		-		-		300,925		-			300,925			-			300,925

Fair value of common stock issued for services		1,277,143		1,277		77,752		-			79,029			-			79,029

Termination of non-controlling interest agreement		-		-		-		(405,383	)		(405,383	)		405,383			-

Contribution of capital by joint venture partner		-		-		471,750		-			471,750			453,250			925,000

Net loss for the year ended September 30, 2019		-		-		-		(1,982,164	)		(1,982,164	)		(63,860	)		(2,046,024	)

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		-		-		263,414		-			263,414			-			263,414

Fair value of common stock issued for services to Officers and Directors		9,895,000		9,895		286,955		-			296,850			-			296,850

Fair value of common stock issued for services to consultants		285,000		285		22,515		-			22,800			-			22,800

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 partners		-		-		99,900		-			99,900			70,100			170,000

Net loss for the year ended September 30, 2020		-		-		-		(2,221,076	)		(2,221,076	)		(281,299	)		(2,502,375	)

Balance, September 30, 2020		118,252,077	$	118,252	$	25,053,616	$	(27,583,363	)	$	(2,411,495	)	$	181,950		$	(2,229,545	)

	Common Stock				Additional Paid-in		Accumulated			Total WCUI			Non-controlling
	Shares		Amount		Capital		Deficit			Deficit			Interest			Total
Balance, September 30, 2017		90,284,916	$	90,285	$	19,069,211	$	(19,132,557	)	$	26,939		$	(317,388	)	$	(290,449	)
Common shares issued for cash		1,614,286		1,614		175,386		-			177,000			-			177,000
Exercise of stock warrants		1,407,619		1,407		169,507		-			170,914			-			170,914
Fair value of common stock issued for services		770,000		770		110,530		-			111,300			-			111,300
Shares issued upon conversions of note payable		1,745,631		1,746		172,817		-			174,563			-			174,563
Shares issued upon conversion of loans payable from officers and shareholders		2,800,713		2,801		404,199		-			407,000			-			407,000
Fair value of additional shares issued upon conversion of loans payable from officers and shareholders		218,452		218		30,365		-			30,583			-			30,583
Fair value of warrants issued as an inducement for conversion of loans payable from officers and shareholders		-		-		689,934		-			689,934			-			689,934
Fair value of vested stock options		-		-		612,503		-			612,503			-			612,503
Fair value of common stock issued in connection with convertible note payable		747,751		748		113,591		-			114,339			-			114,339
Fair value of shares and warrants issued upon settlement of favored nations clause		1,066,667		1,067		431,933		(433,000	)		-			-			-
Fair value of shares and warrants issued to a stockholder upon settlement		296,534		296		56,431		-			56,727			-			56,727
Discount on convertible note payable due to beneficial conversion and warrants		-		-		250,000		-			250,000			-			250,000
Loss on modification of conversion price and exercise price on warrants in connection with convertible note payable		-		-		163,845		-			163,845			-			163,845
Net loss for the year ended September 30, 2018		-		-		-		(3,409,183	)		(3,409,183	)		(84,236	)		(3,493,419	)
Balance, September 30, 2018		100,952,569		100,952		22,450,252		(22,974,740	)		(423,536	)		(401,624	)		(825,160	)
Common shares issued for cash		142,857		143		9,857		-			10,000			-			10,000
Shares issued upon conversion of note payable and accrued interest		4,810,222		4,811		285,361		-			290,172			-			290,172
Fair value of common stock issued with convertible note payable		314,286		314		21,686		-			22,000			-			22,000
Fair value of additional shares issued to induce conversions of note payable		-		-		160,064		-			160,064			-			160,064
Fair value of vested stock options		-		-		300,925		-			300,925			-			300,925
Fair value of common stock issued for services		1,277,143		1,277		77,752		-			79,029			-			79,029
Termination of non-controlling interest agreement		-		-		-		(405,383	)		(405,383	)		405,383			-
Contribution of capital by joint venture partner		-		-		471,750		-			471,750			453,250			925,000
Net loss for the year ended September 30, 2019		-		-		-		(1,982,164	)		(1,982,164	)		(63,860	)		(2,046,024	)
Balance, September 30, 2019		107,497,077	$	107,497	$	23,777,647	$	(25,362,287	)	$	(1,477,143	)	$	393,149		$	(1,083,994	)

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

F-5

Wellness Center USA, Inc.

Consolidated Statements of Cash Flows

	Year Ended
	Years Ended
	September 30,
	2019			2018
	2020			2019
Cash Flows from Operating Activities
Net loss	$	(2,~~046~~502,~~024~~375	)	$	(32,~~493~~046,~~419~~024	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		1,~~057~~562			21,~~507~~057
Amortization of debt discount		72,078			318,038
Gain on debt forgiveness		(56,840	)		-
Fair value of common shares issued for services		79,029			111,300
Amortization of right-of-use asset		20,880			-
Fair value of stock options issued for services		300,925			612,503
Amortization of debt discount		-			72,078
Fair value of additional shares issued upon conversion of loans payable
Fair value of common shares issued for services		319,650			79,029
from officers and shareholders		-			30,583
Fair value of stock options issued for services		263,414			300,925
Fair value of warrants issued upon conversion of loans payable
Fair value of additional shares issued upon conversions of note payable		-			160,064
from officers and shareholders		-			689,934
Fair value of warrants issued upon conversion of loan payable from shareholder		43,815			22,000
Fair value of additional shares issued to induce conversions of note payable		160,064			-
Loss on abandonment of lease		438,296			65,000
Fair value of common stock issued with convertible note payable		22,000			114,339
Cost of stock option modifications		22,680			-
Loss on abandonment of lease		65,000			-
Cost of warrant modification		507,265			-
Loss on modification of conversion price on convertible note payable		-			158,400
Loss on modification of exercise price on warrants in connection
with convertible note payable		-			5,445
Fair value of additional shares and warrants issued to a stockholder		-			56,727
Changes in Assets and Liabilities
(Increase) Decrease in:
Accounts receivable		-			24,999
Inventories		(39,560	)		-
Inventories		-			12,335
Prepaid expenses and other assets		(500	)		(36,690	)
Prepaid expenses and other assets		(36,690	)		201
(Decrease) Increase in:
Accounts payable and accrued expenses		~~171~~8,~~872~~100			~~378~~171,~~948~~872
Accrued payroll - officers		-			(13,440	)
Payroll taxes payable		(10,500	)		-
Deferred revenue		(8,624	)		(46,473	)
Lease liability		(20,880	)		-
Net cash used in operating activities		(1,219,313	)		(1,037,073	)
Deferred revenue		-			(8,624	)
Net cash used in operating activities		(1,004,993	)		(1,219,313	)
Cash Flows from Financing Activities
Proceeds from loans payable from officers and shareholders		~~358~~796,~~250~~000			~~434~~358,~~500~~250
Repayment of loans payable from officers and shareholders		~~(25,000~~-	)		(2025,~~500~~000	)
Proceeds from convertible note payable		-			250,000
Proceeds from U.S. Small Business Administration PPP loan payable		37,166			-
Common stock and warrants issued for cash		~~10,000~~-			~~177~~10,000
Exercise of stock warrants		-			170,914
Contribution of capital by joint venture partner		170,000			925,000
Contribution of capital by joint venture partner		925,000			-
Net cash provided by financing activities		1,003,166			1,268,250
Net cash provided by financing activities		1,268,250			1,011,914
Net increase (decrease) in cash		(1,827	)		48,937
Net increase (decrease) in cash		48,937			(25,159	)
Cash beginning of year		53,147			4,210
Cash beginning of year		4,210			29,369
Cash end of year	$	51,320		$	53,147
Cash end of year	$	53,147		$	4,210
Supplemental cash flows disclosures:
Interest paid	$	-		$	-
Taxes paid	$	-		$	-
Supplemental non-cash financing disclosures:
Debt discount on issuance of convertible note payable	$	-		$	250,000
Initial recognition of right-of-use assets and operating lease
Conversion of convertible note payable and accrued interest into common shares	$	290,172		$	184,126
liabilities upon adoption of ASC Topic 842	$	27,841		$	-
Conversion of loans payable from officers and shareholders into common shares	$	-		$	407,000
Reclassification of prepaid expenses to inventories	$	55,000		$	-
Conversion of loan payable from shareholder into common shares	$	30,000		$	-
Conversion of convertible note payable into common shares	$	-		$	290,172

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

F-6

WELLNESS CENTER USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, ~~2019~~2020 and ~~2018~~2019

NOTE 1 – BASIS OF PRESENTATION

Organization and Operations

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

The Company currently operates in the following business segments: (i) distribution of targeted Ultra Violet (“UV”) phototherapy devices for dermatology and sanitation purposes; and (ii) authentication and encryption products and services. The segments are operated, respectively, through PSI and SCI.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the year ended September 30, ~~2019~~2020, the Company incurred a net loss of $2,~~046~~502,~~024~~375 and used cash in operations of $1,~~219~~004,~~313~~993, and had a shareholders’ deficit of $12,~~083~~229,~~994~~545 as of September 30, ~~2019~~2020. In addition, $369,250 of notes payable to officers and shareholders and $92,334 of payroll taxes are past due. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

AtIn ~~September 30~~addition, ~~2019,~~ the Company’s ~~had~~independent ~~cash~~registered onpublic ~~hand~~accounting ~~in the amount of $53~~firm,~~147.~~ ~~Management estimates it has sufficient cash to operate through February 2020. 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~~report 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’s ~~During the year ended~~ September 30, ~~2019,~~2020 ~~the~~financial ~~Company received $1~~statements,~~293,250~~ ~~through~~has ~~loans~~raised ~~payable~~substantial ~~from~~doubt ~~officers~~about ~~and shareholders,~~ the ~~sale~~Company’s ofability ~~its~~to ~~common~~continue ~~stock,~~as ~~and from contributions of capital by~~ a ~~joint~~going ~~venture partner~~concern. ~~Subsequent to September 30, 2019, the Company received additional advances from shareholders of $310,000 (see Note 13).~~

NoAt ~~assurance~~September ~~can~~30, be2020, ~~given~~the ~~that~~Company ~~any~~had ~~future~~cash ~~financing~~on ~~will~~hand bein ~~available~~the ~~or,~~amount ifof ~~available~~$51,320. ~~that~~The itability ~~will~~to becontinue onas ~~terms~~a ~~that~~going ~~are~~concern ~~satisfactory~~is dependent toon the Company. ~~Even~~attaining ifand maintaining profitable operations in the ~~Company~~future isand ~~able~~raising additional capital soon to ~~obtain~~meet ~~additional~~its ~~financing,~~obligations and itrepay ~~may~~its ~~contain~~liabilities ~~undue~~arising ~~restrictions~~from onnormal ~~our~~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 ~~case~~future. ofDuring the ~~debt~~year ~~financing~~ended September 30, or2020, ~~cause~~the ~~substantial~~Company ~~dilution~~received ~~for~~$1,003,166 ~~our~~through ~~stock~~short-term ~~holders,~~loans inand ~~case~~contributions of ~~equity~~capital ~~financing~~by a joint venture partner.

F-7

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include the Company’s wholly owned subsidiaries and the accounts of its subsidiaries for which it was determined that Company has operational and management control. The Company’s consolidated subsidiaries and/or entities are as follows:

Name of consolidated subsidiary or entity	State or other jurisdiction of incorporation or organization	Date of incorporation or formation (date of acquisition/disposition, if applicable)	Attributable interest at September 30, 2019			Attributable interest at September 30, 2020
Psoria-Shield Inc. (“PSI”)	The State of Florida	June ~~17,~~ 2009 (August ~~24,~~ 2012)		100	%		51	% (1)
StealthCo, Inc. (“StealthCo”)	The State of Illinois	March ~~18,~~ 2014		100	%		100	%
Psoria Development Company LLC. (“PDC”)	The State of Illinois	January ~~15,~~ 2015/November 2018		500	%		0	%
NEO Phototherapy LLC (“NEO”)	The State of Illinois	December 2018		~~50.5~~51	% (1)		0	%
Protec Scientific, Inc (“Protec”)	The State of New York	April 2020		0	%		38	%

F(1) -7 Effective April 30, 2020, the Company's 51% interest in NEO was converted into a 51% interest in PSI.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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~~ 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 years ended September 30, ~~2019~~2020 and ~~2018~~2019, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At September 30, ~~2019~~2020 and ~~2018~~2019, the dilutive impact of outstanding stock options of 1514,~~237~~127,738 and 1715,~~946~~237,~~667~~738 shares, respectively, and outstanding warrants for 6667,~~484~~634,049 and 6766,~~907~~484,~~728~~049 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

F-8

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

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

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

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

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

We determine revenue recognition through the following steps:

● Identification of the contract, or contracts, with a customer ● Identification of the performance obligations in the contract ● Determination of the transaction price ● Allocation of the transaction price to the performance obligations in the contract ● Recognition of revenue when, or as, we satisfy a performance obligation.

~~Revenue is~~● ~~generally~~Identification ~~recognized~~of ~~upon~~the ~~shipment or when a service has been completed, unless we have significant~~ performance obligations ~~for~~ ~~services~~in ~~still to be completed. We recognize revenue when a material reversal is no longer probable. Payments received before~~ the ~~relevant criteria for revenue recognition are satisfied are recorded as deferred revenue. Deferred revenue at September 30, 2018 was $8,624. There was no deferred revenue at September 30, 2019.~~contract

~~F-8~~● Determination of the transaction price

●

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

●

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

Revenue is generally recognized upon shipment or when a service has been completed, unless we have significant performance obligations for services still to be completed. We recognize revenue when a material reversal is no longer probable. Payments received before the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue. There was no deferred revenue at September 30, 2020 and 2019.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is computed on a first-in, first-out basis. At September 30, 2020, primarily all of the inventories totaling to $94,560 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 market 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 September 30, 2020, no reserve was recorded for slow moving and obsolete inventory.

F-9

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and amortization. The total cost of property and equipment at September 30, 2020 and 2019 was $106,720, and total accumulated depreciation at September 30, 2020 and 2019 was $106,720 and $105,158, respectively. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The Company has determined the estimated useful lives of its property and equipment, as follows:

Computer equipment	5 years
Medical equipment	5 years
Furniture and fixtures	7 years
Vehicles	3 years
Software	3 years

Depreciation expense for the years ended September 30, 2020 and 2019 was $1,562 and $1,057, respectively.

Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the related accounts and the resulting gain or loss is reflected in the statements of operations.

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

Income Taxes

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The Company recorded a valuation allowance against its deferred tax assets as of September 30, ~~2019~~2020 and ~~2018~~2019.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

F-10

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value measurements

The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

	●	Level 1 — Quoted prices in active markets for identical assets or liabilities.
	●	Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
	●	Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of financial instruments such as cash, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying value of the loans payable from officers and shareholders approximate their fair value based on the fair market interest rates of these obligations.

FNon-9controlling Interests

~~NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)~~PDC

Non-controlling Interest

Through November 2018, non-controlling interest represented the non-controlling interest holder’s proportionate share of the equity of the Company’s majority-owned subsidiary, PDC. Non-controlling interest is adjusted for the non-controlling interest holder’s proportionate share of the earnings or losses and other comprehensive income (loss), if any, and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

On November 15, 2018, PSI and TMA entered into a Withdraw and Mutual Release Agreement to terminate their joint venture agreement. On the date of termination, the non-controlling interest’s share of the accumulated losses of the joint venture totaled to $405,383. Upon termination, during the ~~three~~year ~~months~~ ended ~~December~~September 3130, ~~2018~~2019, the Company wrote-off the non-controlling interest’s share of the accumulated losses and recorded a loss from the deconsolidation of a non-controlling interest of $405,383.

~~In December 2018,~~ PSI entered into a Joint Venture Agreement with GEN2 to further development, marketing, licensing and/or sale of PSI technology and products. Pursuant to the Joint Venture Agreement, the venture will be conducted through NEO. PSI and GEN2 will be the members of NEO, owning 50.5% and 36.0%, respectively, of the Units issued in connection with the organization of NEO. An additional 13.5% of such Units will be reserved for issuance as incentives for key employees and consultants. Until such shares are distributed, the Company controls 68% of the joint venture and GEN2 the remaining 32%. PSI and GEN2 will manage NEO’s day-to-day operations. PSI will contribute PSI technology to NEO and GEN2 will contribute $700,000. As of September 30, 2019, NEO’s operations required additional funding above the $700,000 documented in the agreement, and as of September 30, 2019, GEN2 had received $925,000 of investments to contribute to NEO. As of September 30, 2019, the Company controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%. The Company recorded its proportionate share of the contributions received of $471,750 to additional paid-in-capital and $453,250 to non-controlling interest as of that date. During the year ended September 30, 2019, NEO recorded a loss of $122,655 relating to its operations.

~~Repayment~~In December 2018, PSI entered into a Joint Venture Agreement with GEN2 to further development, marketing, licensing and/or sale of PSI technology and products. Pursuant to the ~~investment~~Joint byVenture ~~GEN2~~Agreement, the venture will ~~begin~~be conducted through NEO Phototherapy, Inc. (“NEO”). PSI and ~~upon~~GEN2 will be the ~~date~~members ~~which~~of NEO, ~~has~~owning ~~realized~~50.5% and ~~retained~~36.0%, ~~cumulative~~respectively, ~~net~~of ~~income/distributable cash~~the Units issued in connection with the ~~amount~~organization of ~~$300,000~~NEO. ~~Distributions~~An ~~thereafter~~additional 13.5% of such Units will be ~~made~~reserved tofor ~~PSI~~issuance as incentives for key employees and consultants. Until such shares are distributed, the Company controls 68% of the joint venture and GEN2 the remaining 32%. PSI and ~~other~~GEN2 ~~members~~will inmanage ~~proportion~~NEO’s day-to-day ~~their~~operations. ~~respective~~PSI will contribute PSI technology to NEO and GEN2 will contribute ~~Unit~~$700,000. ~~ownership~~As of December 31, at2019, NEO’s operations required additional funding above the ~~times~~$700,000 ~~and~~documented in the ~~manner~~agreement, and ~~determined~~as ~~from~~of ~~time~~September 30, 2019, GEN2 had received $925,000 of investments to ~~time~~contribute byto NEO. During the ~~managers~~year ended September 30, in2020, ~~their~~an ~~sole~~additional ~~discretion.~~$50,000 was contributed by GEN2 ~~consists~~ to NEO. As of ~~accredited~~September ~~investors~~30, ~~and~~2020, ~~investment~~GEN2 ~~participation~~had ofreceived $~~700~~975,000 ~~from~~of ~~several~~investments to ~~WCUI~~contribute ~~officers~~to ~~and~~NEO. ~~directors~~As of April 30, ~~including~~2020, ~~Calvin~~the RCompany controlled 51% of the joint venture, GEN2 controlled 39% and another individual controlled the remaining 10%. The Company recorded its proportionate share of the contributions received of $497,250 to additional ~~O’Harrow~~paid-in-capital and ~~Roy~~$477,750 M.to ~~Harsch~~non-controlling interest as of September 30, 2019.

F-11

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Non-controlling Interests (continued)

Effective April 30, 2020, the joint venture with GEN2 was reorganized. GEN2 shareholders exchanged their common shares in GEN2, and the individual exchanged his membership interests in NEO, for common shares representing 49% ownership in PSI. The Company retained its common shares in PSI, which provides the Company a 51% economic interest in the PSI technology and products developed by the joint venture. During year ended September 30, 2020, the entities recorded a combined loss of $333,809 relating to its operations, of which $163,556 was allocated to the non-controlling interest.

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

In May 2020, the Company’s subsidiary, PSI, agreed to become a majority shareholder in Protec Scientific, Inc. (“Protec”), a company formed in April 2020 by John Yorke for the purpose of designing, developing and marketing products that use spectral photonic emissions across a variety of applications. As of September 30, 2020, PSI had advanced $191,000 to Protec in furtherance of its agreement to acquire approximately 62% of Protec, with the Company’s share being approximately 32%, based on its PSI ownership. The remaining 30% share is to be attributed to PSI’s minority shareholders, based on their PSI ownership. During the year ended September 30, 2020, Protec received an additional $120,000 from non-affiliated investors, of which $74,400 was recorded to additional paid-in capital and $45,600 to the non-controlling interests. The additional investments gave the non-controlling interests a 38% ownership interest in Protec. During the year ended September 30, 2020, Protec recorded a loss of $172,174, of which $117,732 was allocated to the non-controlling interests.

Stock-Based Compensation

The Company periodically ~~grants~~issues stock-based ~~options~~compensation ~~and warrants~~ to ~~employees~~officers, directors, and ~~non-employees~~consultants infor ~~non-capital~~services ~~raising~~rendered, ~~transactions~~and as ~~compensation~~part ~~for~~of ~~services~~financing ~~rendered~~transactions. ~~The~~Such ~~Company~~issuances ~~accounts~~vest ~~for stock option~~ and ~~stock~~expire ~~warrant~~according ~~grants~~ to ~~employees~~terms ~~based~~established onat the ~~authoritative guidance~~issuance ~~provided by the Financial Accounting Standards Board where the value of the award is measured on the~~ date. ofStock-based ~~grant and~~payments ~~recognized~~to ~~over~~officers, ~~the~~directors, ~~vesting~~employees, ~~period.~~and ~~The Company accounts~~ for ~~stock~~acquiring ~~option~~goods and ~~stock~~services ~~warrant~~from ~~grants to~~ non-employees, inwhich ~~accordance with~~include ~~the~~grants ~~authoritative guidance~~ of ~~the~~employee ~~Financial~~stock options, ~~Accounting~~are ~~Standards~~recognized ~~Board~~in ~~where~~ the ~~value~~financial ofstatements ~~the stock compensation is determined~~ based ~~upon~~on ~~the~~their ~~measurement~~fair ~~date~~values atin ~~either~~accordance a)with ~~the~~Topic ~~date~~718. atStock option grants, which aare ~~performance~~generally ~~commitment~~time ~~is reached~~vested, orwill b)be measured at the grant date atfair ~~which the~~value ~~necessary~~and ~~performance~~charged to ~~earn~~operations ~~the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period~~ on a straight-line basis~~. In certain circumstances where there are no future performance~~ ~~requirements~~over by the ~~non-employee,~~vesting ~~option or warrant grants are immediately vested and the total stock-based compensation charge is recorded in the~~ period ~~of the measurement date~~.

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

F-1012

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than twelve months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements.

The Company adopted ASU 2016-02 effective October 1, 2019. As a result, we recorded a right-of-use asset of $27,841, and a lease liability of the same amount, as of that date. In accordance with ASU 2016-02, the right-of-use asset is being amortized over the life of the underlying lease, and monthly lease payments are being recorded as reductions to the lease liability and imputed interest expense. See Note 6 for additional information.

Recently Issued Accounting Pronouncements

In ~~February~~June 2016, the FASB issued ~~Accounting Standards Update (~~ASU) No. 2016-0213, ~~Leases.~~Credit ~~ASU~~Losses ~~2016~~-02 ~~requires~~Measurement aof ~~lessee~~Credit toLosses ~~record a~~on ~~right~~Financial ofInstruments ~~use~~(“ASC 326”). ~~asset~~The ~~and~~standard asignificantly ~~corresponding~~changes ~~lease~~how ~~liability~~entities onwill ~~the~~measure ~~balance~~credit ~~sheet~~losses for ~~all~~most ~~leases~~financial ~~with~~assets, ~~terms~~including ~~longer~~accounts and ~~than~~notes ~~12 months~~receivables. ~~ASU~~ ~~2016-02~~The isstandard ~~effective~~will ~~for~~replace ~~all~~today’s ~~interim~~“incurred ~~and~~loss” ~~annual~~approach ~~reporting~~with ~~periods~~an ~~beginning~~“expected ~~after~~loss” model, ~~December~~under ~~15,~~which ~~2018.~~companies ~~Early~~will ~~adoption~~recognize isallowances ~~permitted. A~~based ~~modified~~on ~~retrospective~~expected ~~transition~~rather ~~approach~~than isincurred ~~required~~losses. ~~for~~Entities ~~lessees~~will ~~for~~apply ~~capital~~the standard’s ~~and~~provisions ~~operating~~as ~~leases~~a ~~existing~~cumulative-effect ~~at,~~adjustment orto ~~entered into~~retained ~~after,~~earnings as of the beginning of the ~~earliest~~first ~~comparative~~ reporting period ~~presented~~ in which the ~~financial~~guidance ~~statements,~~is ~~with certain practical expedients available~~effective. The ~~Company~~standard is ineffective ~~the~~for ~~process~~interim ofand ~~evaluating~~annual ~~the~~reporting ~~impact~~periods beginning after December 15, 2019. The adoption of ASU 2016-0213 is not expected to have a material impact on the Company’s financial ~~statements~~position, results of operations, and ~~disclosures~~ cash flows.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718); Improvements to Non-Employee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 generally aligns the measurement and classification of share-based awards to non-employees with that of share-based awards to employees. Non-employee equity awards will be measured at the fair value of the equity instruments to be issued, as of the grant date, and the resulting amount will be recognized as expense over the expected or contractual term of the award. The ASU applies to all share-based payments to nonemployees in exchange for goods or services used or consumed in an entity’s own operations. It does not apply to instruments issued to a lender or investor in a financing transaction, or to instruments granted when selling goods or services to customers. ASU 2018-07 is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related 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 -– ~~PROPERTY~~LOANS PAYABLE FROM OFFICERS AND ~~EQUIPMENT~~SHAREHOLDERS

~~Property~~As of September 30, 2018, loans payable from officers and ~~equipment~~shareholders ~~consisted~~of $66,000 were outstanding. During the year ended September 30, 2019, the Company borrowed $358,250 from its officers and shareholders and repaid $25,000. All of the ~~following~~loans atare unsecured, have an interest rate of eight percent per annum and are due one year from the date of issuance. As of September 30, 2019, loans payable to officers and ~~2018:~~shareholders of $399,250 were outstanding.

	September 30, 2019			September 30, 2018
Vehicles	$	15,000		$	15,000
Computer equipment		10,456			10,456
Furniture and fixtures		23,998			23,998
Medical equipment		18,889			18,889
Software		23,207			23,207
Leasehold improvements		15,170			15,170
		106,720			106,720
Less: accumulated depreciation and amortization		(105,158	)		(104,101	)
Property and equipment, net	$	1,562		$	2,619

During the year ended September 30, 2020, the Company and its subsidiary, PSI, borrowed $796,000 from its officers and shareholders. The loans have an interest rate of eight percent per annum and are due one year from the date of issuance. During the year ended September 30, 2020, one of the loan holders who is not an officer or director, converted his loan in the amount of $30,000 into 575,000 shares of the Company’s common stock. In connection with the conversion of the loan payable, the Company issued the loan holder a warrant to purchase 1,150,000 shares of common stock as an inducement to convert. The warrants have an exercise price of $0.07 per share and expire five years from the date of grant. The fair value of the warrants of $43,815 was recorded as a financing cost during the year ended September 30, 2020 and was based on a probability affected Black-Scholes Merton pricing model with a stock price of $0.04, volatility of 187.0% and a risk-free rate of 0.20%.

~~Depreciation~~As ~~expense~~of ~~for~~September 30, 2020, loans payable to officers and shareholders of $1,165,250 were outstanding. All of the ~~years~~loans ~~ended~~are unsecured, have an interest rate of eight percent per annum and are due one year from the date of issuance. As of September 30, ~~2019~~2020, the Company’s officers and ~~2018~~directors ~~was~~had the following loans outstanding: Calvin O;Harrow - $1590,~~057~~250; ~~and~~Roy Harsch - $2205,~~507~~000; William Kingsford - $201,000; ~~respectively~~Paul Jones - $100,000; Douglas Samuelson - $40,000; Tom Scott - $20,000. As of September 30, 2020, $369,250 of these loans were past due.

F-1113

NOTE 4 – ~~LOANS~~U.S. ~~PAYABLE~~SMALL ~~FROM~~BUSINESS ~~OFFICERS~~ADMINISTRATION ~~AND~~LOAN ~~SHAREHOLDERS~~PAYABLE

~~As of September 30, 2017, loans payable to shareholders of $59,000 were outstanding.~~ During ~~the year ended September 30, 2018, the~~ ~~Company borrowed $434,500 under 22 short-term, unsecured loans. The loans have an interest rate of eight percent and are due one year from~~ the ~~date of issuance. During the~~ year ended September 30, ~~2018~~2020, the Company’s ~~repaid $20~~subsidiary,~~500~~ ~~of the loans payable and $407~~PSI,~~000~~ ~~were~~entered ~~converted~~ into ~~2,800,713~~a ~~shares~~loan ofagreement ~~the Company’s common stock. In connection~~ with the ~~conversion~~United ofStates ~~the loans~~Small ~~payable,~~Business ~~the~~Administration ~~Company~~(SBA) ~~issued~~under ~~warrants~~which ~~to purchase 6,038,336 shares of common stock to~~ the ~~holders~~Company asborrowed ~~an inducement to convert~~$37,166. The ~~warrants~~loan ~~expire~~is ~~five~~unsecured, ~~years~~accrues ~~from~~interest ~~the~~at ~~date of grant and have exercise prices of $0~~1.140% and ~~$0.18 per share. The fair value of~~is ~~the~~due ~~warrants~~on ofApril ~~$689~~23,~~934~~ ~~was~~2022. ~~recorded~~Beginning asin ~~financing~~October ~~costs during the year ended September 30~~2020, ~~2018~~PSI ~~and~~is ~~was~~required ~~based~~to onmake amonthly ~~probability affected~~interest ~~Black-Scholes~~payments ~~Merton~~and ~~option~~all ~~pricing~~principal ~~model with stock prices of $0.13~~ and ~~$0.14,~~unpaid interest ~~volatility~~is ofdue ~~124.60%~~in ~~and~~April ~~124~~2022.~~73%~~ ~~and risk-free~~If ~~rates~~PSI ofmeets ~~2.37%~~certain ~~and~~criteria ~~2.43%.~~as Indefined ~~addition~~in to the ~~warrants~~agreement, the ~~Company offered certain~~ loan ~~holders,~~may ~~who~~be ~~were~~forgiven ~~not officers or directors, to convert~~ at awhich ~~rate below~~ time the ~~market~~Company ~~price~~would ofrecognize ~~the~~a ~~stock~~gain on ~~the~~debt ~~date of conversion~~forgiveness. AnAs ~~aggregate~~ of ~~218,452 additional common shares were issued to these loan holders with a value of $30,583 on~~ the date of ~~conversion.~~this ~~The~~filing, ~~Company recorded~~ the ~~amount as~~Company ahad ~~financing~~not ~~cost~~yet ~~during~~applied ~~the~~for ~~year ended September 30, 2018. As of September 30, 2018, loans payable from officers and shareholders~~forgiveness of ~~$66,000~~the ~~were outstanding~~loan.

During the year ended September 30, 2019, the Company borrowed $358,250 from its officers and shareholders and repaid $25,000. All of 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 September 30, 2019, loans payable to officers and shareholders of $399,250 were outstanding.

NOTE 5 – CONVERTIBLE NOTE AGREEMENTS

In March 2018, the Company entered into a Convertible Note Payable Agreement with an individual under which the Company borrowed ~~notes~~$165,000. ~~payable~~The ~~consisted~~agreement had an initial maturity date of October 2018. Relating to the ~~following~~agreement, the Company recognized a debt discount of $165,000 at the date of issuance. The balance of the unamortized discount at September 30, 2018 was $3,837. During the year ended September 30, 2019, the Company amended the terms of the agreement by extending the maturity date to January 2019 and ~~2018:~~reducing the conversion price from $0.10 per share to $0.07 per share. The reduction of the conversion price caused the Company to issue an additional 744,732 shares, which on the dates of amendment had a combined total fair value of $51,434, which was recorded a financing cost during the year ended September 30, 2019. During the year ended September 30, 2019, the individual converted $165,000 of the convertible note payable and $8,783 of accrued interest into 2,482,441 shares of the Company’s common stock (including the 744,732 shares discussed above). During the year ended September 30, 2019, the Company amortized the remaining $3,837 of debt discount, leaving no unamortized balance at September 30, 2019. No amounts were outstanding under the agreement as of September 30, 2019.

	September 30, 2019		September 30, 2018
Convertible note payable (a)	$	-	$	165,000
Convertible note payable (b)		-		110,000
Debt discount – unamortized balance		-		(72,078	)
Convertible notes payable, net	$	-	$	202,922

In July 2018, the Company entered into another Convertible Note Payable Agreement with the same individual under which the Company borrowed an additional $110,000. The agreement had an initial maturity date of February 2019. Relating to the agreement, the Company recognized a debt discount of $110,000 at the date of issuance. The balance of the unamortized discount at September 30, 2018 was $68,241. .During the year ended September 30, 2019, the Company amended the terms of the agreement by reducing the conversion price from $0.15 per share to $0.05 per share. The reduction of the conversion price caused the Company to issue an additional 1,551,854 shares, which on the date of amendment had a fair value of $108,630, which was recorded a financing cost during the year ended September 30, 2019. During the year ended September 30, 2019, the Company amortized $68,241 of debt discount, leaving no unamortized balance at September 30, 2019. During the year ended September 30, 2019, the individual converted the note payable of $110,000 and $6,389 of accrued interest into 2,327,781 shares of the Company’s common stock (including the 1,551,854 shares discussed above). No amounts were outstanding under the agreement as of September 30, 2019.

~~(a)~~NOTE On6 ~~March~~– 5,LEASE 2018, the Company entered into a Convertible Note Payable Agreement with an individual under which the Company borrowed $165,000. Net proceeds received by the Company under the agreement after payment of a $15,000 fee to the lender was $150,000. In connection with the agreement, the Company issued the individual 300,000 restricted shares of its common stock with a fair value of $48,000 and warrants to purchase 660,000 shares of its common stock, which vested upon grant. The warrants expire five years from the date of grant and have an exercise price of $0.20 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.10 per share. The note matured in October 2018.LIABILITIES

~~The~~Operating Company calculated the related fair value of the warrants issued to the noteholder to be $55,032 using a Black Scholes Merton option pricing model and performing a relative value calculation. The Company then made a calculation to determine if a beneficial conversion feature (BCF) existed. The beneficial conversion was based upon the effective conversion price based on the proceeds received that were allocated to the convertible instrument. Based upon the Company’s calculation, it was determined that a beneficial conversion feature existed amounting to $94,968 and was recorded as a debt discount. As such the Company recognized a debt discount at the date of issuance in the aggregate amount of $165,000 relating to the $15,000 fees paid to the lender, the relative value of the warrants and the BCF. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the Convertible note (a valuation debt discount). The balance of the unamortized discount at September 30, 2018 was $3,837.Lease

~~During~~In February 2019, the ~~year~~Company’s ~~ended~~PSI ~~September~~subsidiary ~~30,~~entered ~~2019~~into a 24-month non-cancellable lease for its office facilities that requires monthly payments of $1,800 ~~the~~through January 2021. The Company ~~amended~~adopted ASU ~~the~~2016-02, ~~terms~~Leases, ofeffective ~~the~~October ~~agreement~~1, by2019, ~~extending~~which ~~the~~requires ~~maturity~~a ~~date~~lessee to ~~January~~record ~~2019~~a right-of-use asset and ~~reducing~~a ~~the~~corresponding ~~conversion~~lease ~~price~~liability ~~from~~at ~~$0.10~~the ~~per~~inception ~~share~~of tothe ~~$0.07~~lease ~~per~~initially ~~share.~~measured ~~The~~at ~~reduction~~the present value of the ~~conversion~~lease ~~price~~payments. The ~~caused~~Company classified the ~~Company to~~lease ~~issue~~as an ~~additional~~operating ~~744,732~~lease ~~shares,~~and ~~which~~determined onthat the ~~dates~~value of ~~amendment~~the ~~had~~lease aassets ~~combined~~and ~~total~~liability at ~~fair~~the ~~value~~adoption ofdate was $5127,~~434,~~841 ~~which~~using ~~was recorded~~ a ~~financing~~discount ~~cost~~rate ~~during~~of 4.00%. During the year ended September 30, ~~2019~~2020, the Company made payments of $20,880 towards the lease liability. As of September 30, 2020, the lease liability amounted to $6,961.

FASU 2016-1202 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Rent expense for the year ended September 30, 2020 was $21,600. During the year ended September 30, 2020, the Company reflected amortization of the right of use asset of $20,880, related to this lease, resulting in a net asset balance of $6,961 as of September 30, 2020.

~~NOTE 5 – CONVERTIBLE NOTE AGREEMENTS (CONTINUED)~~F-14

~~During~~NOTE ~~the~~6 ~~year~~– ~~ended~~LEASE ~~September~~LIABILITIES 30, 2019, the individual converted $165,000 of the convertible note payable and $8,783 of accrued interest into 2,482,441 shares of the Company’s common stock. During the year ended September 30, 2019, the Company amortized the remaining $3,837 of debt discount, leaving no unamortized balance at September 30, 2019. No amounts were outstanding under the agreement as of September 30, 2019.(CONTINUED)

~~(b)~~Other On July 11, 2018, the Company entered into another Convertible Note Payable Agreement with the same individual under which the Company borrowed an additional $110,000. Net proceeds received by the Company under the agreement after payment of a $10,000 fee to the lender was $100,000. In connection with the agreement, the Company issued the individual 200,000 restricted shares of its common stock with a fair value of $36,000 and warrants to purchase 440,000 shares of its common stock, which vested upon grant. The warrants expire five years from the date of grant and have an exercise price of $0.18 per share. The note payable accrues interest at eight percent per annum, is unsecured and is convertible at any time after the 90th day from the issue date into the Company’s common stock at the fixed conversion price of $0.15 per share. The note matures in February 2019, but may be extended at the option of the individual. The Company may prepay the note at any time immediately following the issue date upon seven days’ prior written notice. The note was converted into shares of the Company’s common stock (see below).Leases

The Company ~~calculated~~leased ~~the~~its ~~related~~corporate ~~fair~~office ~~value~~facility ofin ~~the~~Hoffman ~~warrants~~Estates, ~~issued~~Illinois topursuant ~~the noteholder~~ to bea ~~$66,440~~non-cancellable ~~using~~lease ainitiated ~~Black~~in ~~Scholes Merton~~July ~~option~~2016 ~~pricing model~~ and ~~performing~~expiring aFebruary ~~relative~~28, ~~value calculation~~2024. The ~~Company~~lease ~~then~~terms ~~made~~require a ~~calculation~~monthly topayment ~~determine~~of ifapproximately ~~a beneficial conversion feature (BCF) existed~~$11,000. The ~~beneficial~~Company ~~conversion~~vacated ~~was based upon~~ the ~~effective conversion price based on the proceeds~~ ~~received~~facility ~~that~~in ~~were~~April ~~allocated~~2019, toin ~~the~~favor ~~convertible~~of ~~instrument.~~its ~~Based~~present ~~upon~~facilities ~~the~~in ~~Company’s~~Tucson ~~calculation~~AZ, itwhich ~~was~~are ~~determined~~provided ~~that~~ by a ~~beneficial~~shareholder ~~conversion~~on ~~feature existed amounting to $33,560 and was recorded as~~ a ~~debt~~rent-free ~~discount~~basis. The ~~As such the~~ Company ~~recognized a~~is ~~debt~~in ~~discount~~negotiations atwith the ~~date~~owners ofregarding ~~issuance in~~ the ~~aggregate~~settlement ~~amount~~ of ~~$110,000~~its ~~relating~~lease toobligations ~~the~~and ~~$10,000~~expects ~~fees~~that ~~paid to~~ the ~~lender, the~~property ~~relative~~will ~~value~~be ofsubleased ~~the~~or ~~warrants~~a ~~and~~settlement with the ~~BCF.~~landlord ~~The~~will ~~note~~be ~~discount~~reached isat ~~being~~an ~~amortized~~amount ~~over~~significantly ~~the~~less ~~term~~than of the ~~note~~remaining ~~and the unamortized~~payment ~~portion~~obligations. isAt ~~recognized~~the asdate aof ~~reduction~~abandonment, to the ~~carrying~~Company ~~amount~~had ofa ~~the~~remaining ~~Convertible~~lease ~~note~~obligation (aof ~~valuation~~$631,587. ~~debt~~During ~~discount).~~the Asyear ofended September 30, ~~2018~~2019, the Company ~~had~~recorded ~~amortized~~an ~~$41,759~~accrual offor ~~debt~~its ~~discount,~~estimate ~~leaving~~for anthe ~~unamortized~~potential ~~balance~~settlement of this matter and wrote-off its $6815,~~241~~000 security atdeposit ~~September~~relating ~~30,~~to ~~2018~~the lease.

~~During~~On ~~the~~or ~~year~~about ~~ended~~June ~~September 30~~29, ~~2019~~2020, ~~the~~we ~~Company~~received ~~amended~~notice ~~the~~that ~~terms~~Hanover ofHoffman ~~the~~Estates, ~~agreement~~LLC by(“HHE”), ~~reducing~~filed case number 2020L006092 in the ~~conversion~~Circuit ~~price~~Court ~~from~~of ~~$0.15 per~~Cook ~~share~~County alleging our failure to ~~$0.05~~pay ~~per~~Base ~~share.~~Rent ~~The~~and ~~reduction~~abandonment of ~~the~~certain ~~conversion~~office ~~price~~space ~~caused~~in ~~the~~Hoffman ~~Company~~Estates, Illinois subject to ~~issue~~a anCommercial ~~additional~~Lease 1dated May 26,~~551,854~~ ~~shares~~2016. HHE seeks at least $672, ~~which~~878 onin base rent and other amounts under the lease, ~~date~~as ofwell ~~amendment~~as ~~had~~treble adamages ~~fair~~from ~~value~~our ofex-CEO ~~$108,630,~~and ~~which~~two ~~was~~past ~~recorded~~Directors awho ~~financing~~were ~~cost~~serving ~~during~~on our Board as of the ~~year~~date ~~ended~~of ~~September~~the lease. 30We are currently evaluating the allegations, ~~2019~~defenses and alternate actions.

During the year ended September 30, ~~2019~~2020, the Company ~~amortized~~recorded ~~$68,241~~an ofadditional ~~debt~~expense ~~discount,~~of ~~leaving no unamortized balance at September 30~~$438,296 ~~2019.~~relating Onto ~~April 2, 2019,~~ the ~~individual~~lease ~~converted the note payable of $110~~obligation,~~000~~ and ~~$6,389 of accrued interest into 2,327,781~~ ~~shares~~recorded of the ~~Company’s~~full ~~common~~amount ~~stock.~~of ~~No amounts were outstanding under~~ the ~~agreement~~judgement due as of September 30, ~~2019~~2020.

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

NOTE 7 – SHAREHOLDERS’ EQUITY

Authorized shares

AsOn of September 303, ~~2017~~2019, the Company’s ~~was~~Board ~~authorized~~of byDirectors unanimously approved the amendment of its Articles of Incorporation to ~~issue~~increase upthe tototal authorized capital stock from 185,000,000 common shares ofto 200,000,000 common shares. As of September 18, ~~stock~~2019, ~~par~~holders ~~value~~of ~~$0.001~~a ~~per~~majority ~~share~~of the outstanding shares of voting capital stock executed written stockholder consents approving this action and the Company amended its Articles of Incorporation through a filing of a Certificate of Amendment on October 11, 2019. Holders of shares of common stock have full voting rights, one vote for each share held of record. Shareholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to shareholders upon liquidation. Shareholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable. As of September 30, ~~2018~~2020 and ~~2017~~2019, there were ~~100~~ 118,~~952~~252,~~569~~077 and 90107,~~284~~497,~~916~~077 shares of common stock issued and outstanding, respectively.

OnCommon ~~September~~Shares 3,Issued ~~2019,~~for the Company’s Board of Directors unanimously approved the amendment of its Articles of Incorporation to increase the total authorized capital stock from 185,000,000 common shares to 200,000,000 common shares. As of September 18, 2019, holders of a majority of the outstanding shares of voting capital stock executed written stockholder consents approving this action and the Company amended its Articles of Incorporation through a filing of a Certificate of Amendment on October 11, 2019. As of September 30, 2019, there were 107,497,077 shares of common stock issued and outstanding.Cash

F-13

NOTE 6 – SHAREHOLDERS’ EQUITY (CONTINUED)

Common shares issued for cash

During the year ended September 30, 2018, the Company received $177,000 from the sale of 1,614,286 shares of its common stock. In connection with the sales, the Company issued warrants to the shareholders to purchase 3,228,572 shares of the Company’s common stock. The warrants expire five years from the date of grant and have exercise prices of $0.15 and $0.18 per share.

During the year ended September 30, 2019, the Company received $10,000 from the sale of 142,857 shares of its common stock. In connection with the sale, the Company issued a warrant to the shareholder to purchase 284,714 shares of the Company’s common stock. The warrant expires five years from the date of grant and has an exercise price of $0.15 per share.

Common ~~shares~~Shares ~~issued~~Issued for ~~services~~Services

During the year ended September 30, 2018, the Company issued 770,000 shares of its common stock valued at $111,300 for services provided by WCUI and PSI consultants. The shares were valued at the trading price of the common stock at the date of issuance and were recorded as compensation expense during the year ended September 30, 2018.

During the year ended September 30, 2019, the Company issued 1,277,143 shares of its common stock valued at $79,029 for services provided by WCUI consultants. The shares were valued at the trading price of the common stock at the date of issuance and were recorded as compensation expense during the year ended September 30, 2019.

~~Common~~During ~~Shares~~the ~~Issued~~year inended ~~Connection~~September ~~with~~30, 2020, the ~~Settlement~~Company issued 285,000 shares of anits ~~Equity~~common ~~Agreement~~stock valued at $22,800 for services provided by PSI consultants. The shares were valued at the trading price of the common stock at the date of issuance and were recorded as compensation expense during the year ended September 30, 2020.

During the year ended September 30, 2017, the Company completed a sale of common stock and warrants with a subscriber whereby the Company sold to the subscriber 1,600,000 shares of common stock and warrants to acquire 1,600,000 shares of common at a price of $0.40 per share, for total purchase consideration of $400,000 ($0.25 per unit). The subscription agreement also included a Favored Nation clause that in the event a subsequent private offering occurs at a price less than $.25 per share that was paid by the subscriber, then the subscriber’s stock unit price shall be proportionately adjusted to the identical ration of 40% discount of the market price in the date of the subscription agreement. Upon issuance of the instrument, no liability for the Favored Nation clause was considered necessary as it was determined that ASC 480-10 did not apply as it is a conditional obligation embedded in a share.

During the year ended September 2018, the Company sold 333,333 shares of common stock at $0.15 per share and a warrant to acquire 666,667 shares of common stock at $0.18 per share to an investor that triggered the Favored Nation clause. To avoid the issuance of any future potential shares, the Company and the subscriber entered in an agreement on May 15, 2018, whereby the Company would issue an additional 1,066,667 shares common stock to the subscriber, cancel the previously issued 1,600,000 warrants, and issue a new warrant to acquire 5,334,334 shares of common stock at $.18 per share.

To account for the issuance, the Company determined that other than par value, no other value would be ascribed to the additional 1,066,667 shares of common stock that were issued and due under the Favored Nations clause for the reasons detailed above. The Company also determined that it should record the incremental difference of $433,000 between the fair value of the canceled warrant of $185,000 and the fair value of new warrant of $618,000 at the date of the agreement. Given that no services were provided to the Company, the difference in fair value of the warrants before and after the modification was treated as a deemed dividend.

Subsequent to the above issuance, the Company and the shareholder entered into a settlement agreement that will eliminate the Favored Nation clause. As such, in November 2018, the Company issued 296,534 shares and a warrant to acquire 770,987 shares of common stock at $0.18 per share. The fair value of the shares issued was $17,792 and the fair value of the warrants was $38,935. As these values were part of a settlement agreement, the total amount of $56,727 was recorded as a financing cost during the year ended September 30, 2018.

F-14

NOTE 6 – SHAREHOLDERS’ EQUITY (CONTINUED)

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.

Grants during Fiscal Year Ended September 30, 2018

Options Granted in Accordance with Employment Agreements

During the year ended September 30, 2018, the Company entered into employment agreements with four employees of SCI. Under the agreements, the Company issued options to purchase a combined total of 2,800,000 shares of its common stock with a fair value of $396,308. The options are exercisable over a term of five years, with exercise prices ranging from $0.10 to $0.19. The Company valued the options using a Black-Scholes option pricing model. A combined total of 675,000 shares vested in equal amounts over a three-month period, starting on January 1, 2018, with the remainder vesting in equal amounts over the following one year and two months.

Further, beginning on January 1, 2018, they will be granted additional stock options to purchase up to an aggregate total of 275,000 shares of the Company’s common stock each quarter. The options are exercisable over a five-year period, are issuable on the last day of each quarter ending and vest immediately on the date of grant. All options accelerate and become fully vested upon the sale or change of control of the Company.

During the year ended September 30, 2019 and 2018, the Company recorded $44,275 and $271,804 of stock compensation, respectively, for the value of the options, and as of September 30, 2019, no unvested compensation remained that will be amortized over the remaining vesting period.

Other Grants

During the year ended September 30, 2018, the Company granted options to purchase 8,517,500 shares of its common stock to its officers, directors and employees with a fair value of $1,004,450. The options have an exercise price of $0.14 per share and expire five years from the date of grant. The shares will vest in various periods. The Company valued the options using a Black-Scholes option pricing model.

During the years ended September 30, 2019 and 2018, the Company recorded $256,650 and $340,699 of stock compensation, respectively, for the value of the vested options, and as of September 30, 2019, unvested compensation of $330,333 remained that will be amortized over the remaining vesting period.

The assumptions used for options granted during the year ended September 30, 2018 are as follows:

Exercise price	$	0.10 - 0.19
Expected dividends		-
Expected volatility		121.1% - 130.2	%
Risk free interest rate		2.01% - 2.85	%
Expected life of options		2.5

F-15

NOTE 67 – SHAREHOLDERS’ EQUITY (CONTINUED)

~~Stock~~Restricted ~~Options~~Stock ~~(Continued)~~Grants to Officers and Directors

~~Grants~~In April 2020, the Company’s Board of Directors approved the issuance of a combined total of 20,170,000 restricted shares of the Company’s common stock to its Officers and Directors. A total of 7,120,000 shares vested in April 2020, and a total of 1,800,000 will vest monthly 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 2,775,000 shares vested during ~~Fiscal~~the ~~Year~~year ~~Ended~~ended September 30, ~~2019~~2020.

~~During~~The ~~the~~following ~~year~~table ~~ended~~summarizes ~~September~~restricted ~~30, 2019, the Company granted options to an employee to purchase an aggregate total of 250,000 shares of its~~ common stock with an aggregate fair value of $10,366. The options have exercise prices ranging from $0.03 to $0.06 per share and expire five years from the date of grant. The shares vested equally each quarter beginning on December 31, 2018. The Company valued the options using a Black-Scholes option pricing model. During the year ended September 30, 2019, the Company recorded $10,366 of stock compensation for the value of the options, and as of September 30, 2019, no unvested compensation remained that will be amortized over the remaining vesting period.activity:

The assumptions used for options granted during the year ended September 30, 2019 are as follows:

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

Non-vested, September 30, 2019		-		$	-		$	-
Granted		20,170,000			605,100			0.03
Vested		(9,895,000	)		(296,850	)		0.03
Forfeited		-			-			-
Non-vested, September 30, 2020		10,275,000		$	308,250		$	0.03

Exercise price	$	0.03 - 0.06
Expected dividends		-
Expected volatility		126.8% - 144.0	%
Risk free interest rate		1.60% - 2.47	%
Expected life of options		2.5

Stock Options

~~The~~On ~~table~~December ~~below~~22, ~~summarizes~~2010, the Company’s ~~stock~~Board ~~option~~of ~~activities~~Directors ~~for~~approved the ~~years~~adoption ~~ended~~of ~~September~~the 30“2010 Non-Qualified Stock Option Plan” (“2010 Option Plan”) by unanimous consent. The 2010 Option Plan was initiated to encourage and enable officers, ~~2019~~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.

	Number of Option Shares			Exercise Price Range Per Share		Weighted Average Exercise Price		Fair Value at Date of Grant
Balance, September 30, 2017		6,822,500		$	0.10 – 2.00	$	0.51	$	1,865,628
Granted		11,317,500			0.10 – 0.19		0.14		1,379,127
Cancelled		(183,333	)		0.14		0.14		-
Exercised		-			-		-		-
Expired		(10,000	)		0.75		0.75		-
Balance, September 30, 2018		17,946,667		$	0.10 - 2.00	$	0.28	$	3,244,755
Granted		250,000			0.03 - 0.06		0.05		10,366
Cancelled		(646,429	)		0.14 – 0.19		0.17		-
Exercised		-			-		-		-
Expired		(2,312,500	)		0.13 – 0.40		0.37		-
Balance, September 30, 2019		15,237,738		$	0.03 – 2.00	$	0.27	$	3,255,121
Vested and exercisable, September 30, 2019		12,012,738		$	0.03 - 2.00	$	0.30	$	2,803,621
Unvested, September 30, 2019		3,225,000		$	0.14	$	0.14	$	451,500

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.

~~There~~The ~~was~~table nobelow ~~aggregate~~summarizes ~~intrinsic~~the ~~value~~Company’s ~~for~~stock option ~~shares~~activities ~~outstanding~~for atthe years ended September 30, 2020 and 2019.:

The following table summarizes information concerning outstanding and exercisable options as of September 30, 2019:

	Number of Option Shares			Exercise Price Range Per Share		Weighted Average Exercise Price

Balance, September 30,2018		17,946,667			$ 0.10 - 2.00	$	0.28
Granted		250,000			0.03 - 0.06		0.05
Cancelled		(646,429	)		0.14 - 0.19		0.17
Exercised		-			-		-
Expired		(2,312,500	)		0.13 - 0.40		0.37
Balance, September 30, 2019		15,237,738			0.03 - 2.00		0.28
Granted		5,000,000			0.04 - 0.09		0.05
Cancelled		(4,910,000	)		0.14 - 0.30		0.14
Exercised		-			-		-
Expired		(1,200,000	)		0.11 - 0.25		0.15
Balance, September 30, 2020		14,127,738			$ 0.03 – 2.00	$	0.23
Vested and exercisable, September 30, 2020		10,702,738			$ 0.03 – 2.00	$	0.29

Unvested, September 30, 2020		3,425,500		$	0.04	$	0.04

		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
$	0.01 - 0.39		13,775,238		3.11	$	0.15		10,300,238		3.07	$	0.15
	0.40 - 0.99		62,500		2.50		0.40		312,500		0.50		0.08
	1.00 - 1.99		750,000		1.25		1.00		750,000		1.25		1.00
	2.00		650,000		1.25		2.00		650,000		1.25		2.00
$	0.01 - 2.00		15,237,738		2.94	$	0.27		12,012,738		2.79	$	0.30

As of September 30, 2019, there were 14,762,262 shares of stock options remaining available for issuance under the 2010 Plan.

F-16

NOTE 67 – SHAREHOLDERS’ EQUITY (CONTINUED)

Stock ~~Warrants~~Options (continued)

~~During~~The ~~the~~following ~~year~~table ~~ended~~summarizes information concerning outstanding and exercisable options as of September 30, ~~2018~~2020:

● The Company issued warrants to purchase 3,228,572 shares with exercise prices of $0.15 and $0.18 per share as part of the sale of equity units. The warrants expire five years from the date of grant. ● The Company issued warrants to purchase 1,100,000 shares with an exercise price of $0.20 per share in connection with the issuance of a convertible notes payable (see Note 5). The warrants expire five years from the date of grant. ● The Company issued warrants to purchase 6,038,336 shares with exercise prices of $0.14 and $0.18 per share in connection with the conversion of loans payable from officers and shareholders (see Note 4). ● The Company issued warrants to purchase 6,104,322 shares with an exercise price of $0.18 per share in connection with the initial equity agreement that included a favored nation’s clause and the settlement of that equity agreement. Also, in connection with the agreement, a warrant to purchase 1,600,000 shares was also cancelled with an exercise price of $0.40 per share. ● Warrants were exercised to purchase 1,407,619 shares of the Company’s common stock for $170,914.

		Options Outstanding				Options Exercisable
	Range of Exercise Prices	Number Outstanding	Average Remaining Contractual Life (in years)		Weighted Average Exercise Price	Number Exercisable	Average Remaining Contractual Life (in years)		Weighted Average Exercise Price

$	0.03 - 0.39	12,665,238	5.54	$	0.09	9,240,238	4.14	$	0.11
	0.40 - 0.99	62,500	1.50		0.40	62,500	1.50		0.40
	1.00 - 1.99	750,000	0.25		1.00	750,000	0.25		1.00
	2.00	650,000	0.25		2.00	650,000	0.25		2.00
$	0.06 - 2.00	14,127,738	3.05	$	0.23	10,702,738	3.61	$	0.29

~~During~~The ~~the~~aggregate ~~year~~intrinsic ~~ended~~value ~~September~~for ~~30,~~option ~~2019,~~shares ~~the~~outstanding ~~Company~~at ~~issued~~September ~~a warrant to purchase 284~~30,~~714~~ ~~shares~~2020 ~~with~~was ~~an exercise price of~~ $0184,375.~~15 per share as part of the sale of equity units. The warrant expires five years from the date~~

~~The~~Stock ~~table~~Option ~~below~~Grants ~~summarizes~~during ~~the~~Fiscal ~~Company’s~~Year ~~warrants~~Ended ~~activities for the years ended~~ September 30, 2019 ~~and 2018:~~

	Number of Warrant Shares			Exercise Price Range Per Share		Weighted Average Exercise Price		Fair Value at Date of Issuance
Balance, September 30, 2017		64,161,304		$	0.12 - 1.00	$	0.24	$	2,151,219
Granted		16,471,230			0.14 - 0.20		0.17		1,283,341
Canceled		(1,600,000	)		0.40		0.40		-
Exercised		(1,407,619	)		0.12 – 0.15		0.12		-
Expired		(9,717,187	)		0.30 - 2.31		0.56		-
Balance, September 30, 2018		67,907,728		$	0.12 - 1.00	$	0.17	$	3,434,560
Granted		284,714			0.15		0.15		-
Cancelled		-			-		-		-
Exercised		-			-		-		-
Expired		(1,708,393	)		0.30 - 0.67		0.44		-
Balance, September 30, 2019		66,484,049		$	0.12 - 1.00	$	0.17	$	3,434,560
Vested and exercisable, September 30, 2019		66,484,049		$	0.12 - 1.00	$	0.17	$	3,434,560

During the year ended September 30, 2019, the Company granted options to an employee to purchase an aggregate total of 250,000 shares of its common stock with an aggregate fair value of $10,366. The options have exercise prices ranging from $0.03 to $0.06 per share and expire five years from the date of grant. The shares vested equally each quarter beginning on December 31, 2018. The Company valued the options using a Black-Scholes option pricing model. During the year ended September 30, 2019, the Company recorded $10,366 of stock compensation for the value of the options, and as of September 30, 2019, no unvested compensation remained that will be amortized over the remaining vesting period.

~~There~~The ~~was~~assumptions noused ~~aggregate~~for ~~intrinsic~~all ~~value~~of ~~for~~the ~~warrant~~options ~~shares~~granted ~~outstanding~~during atthe year ended September 30, 2019. are as follows:

Exercise price	$ 0.03 - $0.06
Expected dividends	-
Expected volatility	126.8% – 144.0	%
Risk free interest rate	1.60 % - 2.47	%
Expected life of options	2.5

Stock Option Activity during Fiscal Year Ended September 30, 2020

During the year ended September 30, 2020, the Company’s Board of Directors approved the cancellation of stock options to purchase 3,360,000 shares of the Company’s common stock with an exercise prices of $0.14 and $0.30 per share that had vested as of March 31, 2020, and 1,550,000 shares with an exercise price of $0.14 per share that were set to vest monthly from April 2020 through March 2021. All of the cancelled options were held by the Company’s Officers and Directors.

The Board approved the grant of stock options to its Chief Executive Officer to purchase 4,250,000 shares with an exercise price of $0.04 per share that expire ten years from the date of grant. The fair value of the shares was determined to be $127,500 as of the date of grant based on a Black-Scholes option model. A total of 1,125,000 shares vested during the year ended September 30, 2020 and 3,125,000 shares will vest monthly over the period from October 2020 through March 2023. Subsequent to the grant of these shares, the Board approved the following modifications relating to the Chief Executive Officer’s options:

	a.	Repricing of stock options to purchase 1,200,000 shares with an exercise price of $0.14 per share to $0.04 per share that had vested as of March 31, 2020,
	b.	Repricing of stock options to purchase 600,000 shares with an exercise price of $0.14 per share to $0.04 per share that were set to vest monthly from April 2020 through March 2021.
	c.	Extend the expiration of the options to ten years from the date of grant, rather than the five-year expiration the shares initially had.

F-17

NOTE 67 – SHAREHOLDERS’ EQUITY (CONTINUED)

Stock Option Activity during Fiscal Year Ended September 30, 2020 (continued)

In accounting for the modification, the Company calculated for the fair value of the options before modification using current valuation inputs including the Company’s closing stock price of $0.03 on May 28, 2020, a volatility metric of 183%, and a risk-free interest rate of 0.34%. The Company also calculated the fair value of the options after modification using the extended term and modified exercise price. The incremental fair value of the options resulting from the modifications was $22,680 that was recognized as an expense during the year ended September 30, 2020.

In addition to the options granted to the Company’s Chief Executive Officer noted above, during the year ended September 30, 2020, the Company granted options to several employee to purchase a total of 750,000 shares of its common stock with an aggregate fair value of $59,376. The options have an exercise price of $0.04 and $0.09 per share and expire five years from the date of grant. The shares vested on the date of grant. The Company valued the options using a Black-Scholes option pricing model.

The assumptions used for all of the options granted during the year ended September 30, 2020 are as follows:

Exercise price	$ 0.04 - $0.09
Expected dividends	-
Expected volatility	157.6% – 197.0	%
Risk free interest rate	0.17 % - 1.60	%
Expected life of options	2.5

During the years ended September 30, 2020 and 2019, the Company recorded in the aggregate $263,414 and $300,925, respectively of stock compensation for options vesting during those years, and as of September 30, 2020, unvested compensation of $96,764 remained that will be amortized over the remaining vesting period.

Stock Warrants

The table below summarizes the Company’s warrants activities for the year ended September 30, 2020:

	Number of Warrant Shares			Exercise Price Range Per Share		Weighted Average Exercise Price

Balance, September 30, 2018		67,907,728		$	0.12 - 1.00	$	0.17
Granted		284,714			0.15		0.15
Cancelled		-			-		-
Exercised		-			-		-
Expired		(1,708,393	)		0.30 - 0.67		0.44
Balance, September 30, 2019		66,484,049		$	0.12 - 0.40	$	0.17
Granted		1,150,000			0.07		0.07
Cancelled		-			-		-
Exercised		-			-		-
Expired		-			-		-
Balance, September 30, 2020		67,634,049		$	0.07 - 0.40	$	0.16
Vested and exercisable, September 30, 2020		67,634,049		$	0.07 - 0.40	$	0.16

During the year ended September 30, 2019, the Company issued a warrant to purchase 284,714 shares with an exercise price of $0.15 per share as part of the sale of equity units. The warrant expires five years from the date of grant.

During the year ended September 30, 2020, in connection with the conversion of a loan payable, the Company issued a warrant to purchase 1,150,000 shares with an exercise price of $0.07 per share with a fair value of $43,815. The warrant expires five years from the date of grant.

F-18

NOTE 7 – SHAREHOLDERS’ EQUITY (CONTINUED)

Stock Warrants (continued)

Effective January 1, 2020, the Company’s Board of Directors approved the extension of the Company’s unexpired stock warrants as of December 31, 2019, by an additional one year period. This change affected approximately 66,000,000 warrant shares including approximately 20,000,000 warrant shares that were set to expire by the year ending September 30, 2020. The 66,000,000 warrant ~~following~~shares ~~table~~had ~~summarizes~~exercise ~~information~~prices ~~concerning~~ranging ~~outstanding~~from ~~and~~$0.12 ~~exercisable~~per share to $0.40 per share. The incremental fair value of the warrants resulting from modification was $507,265 and was recognized as ofan expense during the year ended September 30, ~~2019:~~2020.

		Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number Outstanding		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price
$	0.12 – 0.20		59,279,384		1.90	$	0.15		59,279,384		1.90	$	0.15
	0.21 – 0.40		7,204,665		0.85		0.26		7,204,665		0.85		0.26
$	0.12 – 0.40		66,484,049		1.79	$	0.17		66,484,049		1.79	$	0.17

There was no aggregate intrinsic value for warrant shares outstanding at September 30, 2020.

~~NOTE~~The 7following –table ~~SEGMENT~~summarizes ~~REPORTING~~information concerning outstanding and exercisable warrants as of September 30, 2020:

		Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number Outstanding		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price

$	0.12 – 0.20		60,429,384		1.97	$	0.15		60,429,384		1.97	$	0.15
	0.21 – 0.40		7,204,665		0.88		0.26		7,204,665		0.88		0.26

$	0.12 – 0.40		67,634,049		1.85	$	0.16		67,634,049		1.85	$	0.16

NOTE 8 – SEGMENT REPORTING

The Company operates in the following business segments:

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

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

F-19

The detailed segment information of the Company is as follows:

Assets By Segment

	September 30, 2019
	September 30, 2020
	Corporate		Medical Devices		Authentication and Encryption		Total
ASSETS
Current Assets
Cash	$	501,~~892~~079	$	~~846~~44,444	$	15,~~409~~797	$	5351,~~147~~320
Prepaid expenses and other current assets		-		55,000		-		55,000
Inventories		-		94,560		-		94,560
Total current assets		50,892		55,846		1,409		108,147
Prepaid expenses and other current assets		500		-		-		500
Property and equipment, net		-		-		1,562		1,562
Total current assets		1,579		139,004		5,797		146,380
Total other assets		-		-		1,562		1,562
Right-of-use asset		-		6,961		-		6,961
TOTAL ASSETS	$	50,892	$	55,846	$	2,971	$	109,709
Total other assets		-		6,961		-		6,961
TOTAL ASSETS	$	1,579	$	145,965	$	5,797	$	153,341

Operations by Segment

For the Year Ended

September 30, 2019

September 30, 2020

Corporate

Medical Devices

Authentication and Encryption

Total

Sales:

Trade

195,~~508~~000

Consulting services

~~13,867~~-

Total Sales

335,~~375~~000

Cost of goods sold

~~20,025~~-

Gross profit

135,~~350~~000

Operating expenses

~~782~~1,~~961~~004,477

~~641~~852,~~236~~542

~~355~~69,~~737~~575

1,~~779~~926,~~934~~594

Loss from operations

(~~782~~1,~~961~~004,477

)

(~~641~~852,~~236~~542

)

(~~342~~64,~~387~~575

)

(1,~~766~~921,~~584~~594

)

Operations by Segment

For the Year Ended

September 30, 2018

September 30, 2019

Corporate

Medical Devices

Authentication and Encryption

Total

Sales:

Trade

~~45,000~~-

9519,~~023~~508

~~140~~19,~~023~~508

Consulting services

7313,~~700~~867

Total Sales

~~45,000~~-

~~168~~33,~~723~~375

~~213~~33,~~723~~375

Cost of goods sold

7920,~~960~~025

Gross profit

~~45,000~~-

8813,~~763~~350

~~133~~13,~~763~~350

Operating expenses

1782,~~179,937~~961

~~224~~641,~~196~~236

~~822~~355,~~229~~737

21,~~226~~779,~~362~~934

Loss from operations

(1782,~~179,937~~961

)

(~~179~~641,~~196~~236

)

(~~733~~342,~~466~~387

)

(21,~~092~~766,~~599~~584

)

F-18

NOTE 8 – LEGAL MATTERS

The Company is periodically engaged in legal proceedings arising from and relating to its business operations. We currently are not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect on our financial condition or results of operations. However, we recently decided to attempt to preserve revenue and reduce operating expenses through actions including, but not limited to, facilities consolidation and staff reductions, which we hope to implement through negotiated transactions with lessors, employees and other third parties. Such actions may result in disputes with and claims by such parties which, if not resolved through negotiations, may impact negatively the Company’s ability to continue as a going concern. To date, we have negotiated settlement of all but $89,302 in ex-employee wage and benefits claims, with agreement to pay such remaining amount, together with interest at the rate of 4% per annum on the principal amount from time to time outstanding, when and as cash flow permits. One of the employees claims additional amounts due for certain statutory damages under the Illinois Wage Payment and Collection which currently could exceed $21,600.00 and would increase at the rate of 2% of the wages due per month plus attorneys’ fees if the employee elects to file suit for a violation of the Act and is successful in obtaining a judgment on his claim.

On January 31, 2019, the former CEO was terminated and his service as Director of Business Development ceased as of that date.

NOTE 9 – COMMITMENTS

Operating Leases

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

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

In February 2019, the Company’s wholly-owned subsidiary, Psoria Shield, entered into a non-cancellable lease agreement to lease its office facilities in Utica, New York. The term of the lease is two years and expires February 8, 2021.

Minimum annual rental commitments for Psoria Shield under non-cancelable leases at September 30, 2019, excluding the office facility lease in Hoffman Estates, Illinois, are as follows:

Years ending September 30,	Amount
2020	$	21,600
2021		7,200
TOTAL	$	28,800

Rent expense was $180,946 and $188,801 for the years ended September 30, 2019 and 2018, respectively.

F-19

NOTE 9 – COMMITMENTS (CONTINUED)

Employment Contracts

During the year ended September 30, 2018, the Company entered into employment agreements with four employees of StealthCo (including Ricky Howard), under which their employment shall continue in effect for a period of three years. Each agreement allows for a base salary with an accumulated amount of $350,000 that can increase each year based on certain profitability goals of SCI or SCI products. Under the agreements, the Company will issue options to purchase shares of its common stock as discussed in Note 6. As of September 30, 2019, one of the employees was still employed by the Company.

NOTE 10 – INCOME TAXES

At September 30, 2019, the Company had net operating loss (“NOL”) carryforwards for federal income tax purposes of approximately $18 million that may be offset against future taxable income through 2038. No tax benefit has been reported with respect to these net operating loss (NOL) carryforwards because the Company believes that the realization of the Company’s net deferred tax assets of approximately $4,000,000 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carryforwards are offset by a full valuation allowance.

The Company recognizes as income tax expense, interest and penalties on uncertain tax provisions. As of September 30, 2019, and 2018, the Company has not accrued interest or penalties related to uncertain tax positions. Tax years 2015 through 2018 remain open to examination by the major taxing jurisdictions to which the Company is subject.

The Company’s effective income tax rate differs from the amount computed by applying the federal statutory income tax rate to loss before income taxes as follows:

	September 30, 2019			September 30, 2018
Income tax benefit at federal statutory rate		(21.0	)%		(21.0	)%
State income tax benefit, net of federal benefit		(4.0	)%		(4.0	)%
Change in valuation allowance		25.0	%		25.0	%
Income taxes at effective income tax rate		-	%		-	%

The components of deferred taxes consist of the following at September 30, 2019 and 2018:

	September 30, 2019			September 30, 2018
Net operating loss carryforwards	$	4,657,556		$	4,307,629
Less: Valuation allowance		(4,657,556	)		(4,307,629	)
Net deferred tax assets	$	-		$	-

NOTE 11 – RELATED PARTY TRANSACTIONS

Compensation of Former Chairman and Chief Executive Officer

During the year ended September 30, 2018, the Company’s former Chairman and Chief Executive Officer, Andrew J. Kandalepas, was paid compensation $182,375 and was granted stock options to purchase 1,300,000 shares of the Company’s common stock at an exercise price of $0.14 per share. The options expire five years from the date of grant and the shares will vest in various periods. Mr. Kandalepas resigned as an officer and director in April 2018, but continued to be employed as Director of Business Development through January 2019. During the year ended September 30, 2019, Mr. Kandalepas was paid compensation of $133,333. As of September 30, 2019 and 2018, $33,964 and $81,965 of accrued compensation, respectively, was owed to Mr. Kandalepas.

Corporate Office Facility

F-20

NOTE 129 – ~~PROPOSED~~LEGAL ~~SALE OF STEALTHCO, INC.~~ MATTERS

OnThe ~~September~~Company 3,is ~~2019,~~periodically ~~the~~engaged ~~Company’s~~in ~~Board~~legal ofproceedings ~~Directors~~arising ~~unanimously~~from ~~approved,~~and ~~subject~~relating to ~~stockholder~~its ~~approval:~~business ~~(1)~~operations. ~~execution~~Except as otherwise ~~and~~described ~~delivery~~herein, ofwe acurrently ~~proposed~~are ~~Share~~not ~~Exchange~~involved ~~Agreement~~in ~~with~~any ~~DTI~~litigation ~~Holdings,~~that ~~Inc.~~we ~~(“DTI”)~~believe ~~relating~~could tohave ~~the~~a ~~share~~material ~~exchange~~adverse effect on our ~~and~~financial ~~transfer~~condition or results of ~~certain~~operations. ~~assets~~There ofis ~~StealthCo~~no action, ~~Inc.~~suit, ~~(“SCI”)~~proceeding, ~~pursuant~~inquiry toor ~~the~~investigation ~~terms~~before ~~and~~or ~~conditions~~by ofany court, apublic ~~Memorandum~~board, ~~of Agreement~~government inagency, ~~substantially~~self-regulatory organization or body pending or, to the ~~form~~knowledge of the ~~copy~~executive ~~presented~~officers of toour ~~the~~Company ~~Board~~or ~~(“Agreement”).~~any As of ~~September~~our 18subsidiaries, ~~2019~~threatened against or affecting our Company, ~~holders~~ our common stock, any of aour ~~majority~~subsidiaries or of ~~the~~our ~~outstanding~~Company’s ~~shares~~or ofour ~~voting~~subsidiaries’ ~~capital~~officers ~~stock~~or directors in their capacities as such, in which an adverse decision could have ~~executed~~a ~~written~~material ~~stockholder~~adverse ~~consents~~effect ~~approving~~on ~~this~~our ~~action~~financial condition or results of operations.

~~The~~We ~~Agreement~~continue ~~provides,~~efforts ~~among~~to ~~other~~preserve ~~things,~~revenue ~~that:~~and ~~(1)~~reduce ~~DTI~~operating ~~will~~expenses ~~pay~~through ~~the~~actions ~~Company $500~~including,~~000~~ ~~upon~~but ~~the~~not ~~execution~~limited ~~of a definitive share exchange agreement (“Share Exchange Agreement”) which the parties will endeavor~~ to, ~~negotiate~~facilities ~~and execute as quickly as possible,~~consolidation and ~~not~~staff ~~later than October 15~~reductions, ~~2019;~~which ~~(2)~~we ~~DTI~~hope ~~will~~to ~~pay~~implement ~~the~~through ~~Company~~negotiated antransactions ~~additional~~with ~~$500~~lessors,~~000~~ ~~within~~employees ~~seven~~and ~~days~~other ~~following~~third ~~the completion~~parties. ~~date~~Such ofactions ~~the~~may ~~transfer~~result ofin ~~all~~disputes ~~assets~~with and~~/or~~ ~~full~~claims ~~ownership~~by ofsuch ~~SCI~~parties ~~to DTI~~which, ~~with~~if ~~such~~not ~~date~~resolved tothrough ~~occur~~negotiations, ~~within~~may ~~120~~impact ~~days following execution~~negatively of the ~~Share~~Company’s ~~Exchange~~ability ~~Agreement; (3) DTI will issue~~ to ~~the~~continue ~~Company~~as ~~3,112,000 shares of DTI common stock and will guaranty that the value of the 3,112,000 shares of DTI common stock will have~~ a ~~value~~going ~~of at least $4~~concern.50 ~~per~~To ~~share ($14~~date,~~004,000,~~ in the ~~aggregate), as~~Company ofhas ~~December~~negotiated ~~31,~~settlement ~~2021; (4) To the extent that the value~~ of ~~the~~all ~~DTI~~ex-employee wage ~~common~~and ~~shares,~~benefits asclaims ofexcept ~~December~~for ~~31, 2021, is less than $4~~two.~~50 per~~ ~~share~~The ~~($14,004,000,~~first inregards ~~the~~unpaid ~~aggregate),~~wages ~~DTI~~claimed ~~will~~due ~~issue~~together ~~additional~~with ~~shares~~interest ~~of DTI common stock,~~ at the ~~then~~rate ~~current~~of ~~fair~~4% ~~market~~per ~~value,~~annum inon ansuch amount ~~sufficient~~as ~~to cause~~ the ~~resulting~~Company ~~aggregate~~originally ~~value~~agreed ofupon ~~all~~in ~~shares~~settlement ofnegotiations. ~~DTI~~The ~~common~~ex-employee ~~stock~~claims ~~issued~~additional ~~to the Company~~amounts todue befor ~~$14,004,000,~~certain instatutory ~~the~~damages ~~aggregate;~~under ~~(5) DTI will assign~~ the ~~assets~~Illinois ~~transferred~~Wage byPayment ~~SCI, including trademarks, intellectual properties,~~ and ~~patents,~~Collection towhich ~~its~~currently ~~subsidiary,~~could ~~Femtobitz,~~exceed ~~Inc.~~$21,600.00 ~~a Delaware corporation,~~ and ~~will~~would increase ~~pay~~at to the ~~Company~~rate 1of 2% of ~~annual~~the ~~gross~~wages ~~revenue arising~~due ~~from~~per ormonth ~~relating~~plus toattorneys’ ~~operation~~fees ofif ~~Femtobitz,~~the ~~Inc.;~~employee ~~and~~elects ~~(6)~~to ~~Upon~~file ~~closing~~suit offor ~~the~~a ~~share~~violation of ~~exchange,~~ the ~~Company’s~~Act ~~Chairman will~~and beis ~~appointed~~successful anin ~~advisory~~obtaining ~~board member of DTI and~~ a ~~board~~judgment ~~member~~on ofhis ~~Femtobitz, Inc~~claim.

AsThe ofsecond ~~September~~claim ~~18,~~was ~~2019,~~filed ~~stockholders~~with ~~holding~~the aIllinois ~~majority~~Department of ~~our~~Labor ~~outstanding~~asserting ~~common~~a ~~stock~~violation ~~approved~~of the ~~share~~Illinois ~~exchange~~Wage Payment and Collection Act by the Company ~~began~~’s ~~discussions~~former CEO. That claim alleges unpaid wages in the amount of $158,714.60 and ~~negotiations~~unpaid ~~with~~vacation ~~DTI~~pay in the amount of $20,833.33 ~~which~~for ~~are~~a ~~currently~~total ~~on-going~~amount of $179,547.90, as well as certain statutory damages including, put not limited to, 2% of the ~~date~~wages due per month plus attorneys’ fees if the ex-CEO elects to file suit for a violation of ~~this~~the ~~filing~~Act and is successful in obtaining a judgment on his claim. ~~There~~The ~~can~~Company behas ~~no assurance~~filed ~~that~~its response to such claim with the ~~proposed~~Department ~~transaction~~denying ~~will~~the besubstantive allegations ~~concluded~~therein ~~successfully~~and onasserting certain factual and legal defenses, including breach of fiduciary duty, as a bar to all claimed compensation. The claim remains pending, but as the ~~terms~~date ~~described~~hereof, orno ~~any~~suit ~~alternate~~has ~~terms~~been ~~that~~filed ~~may~~against the Company asserting a violation beof ~~proposed~~the ~~hereafter~~Act based on said claim.

~~NOTE~~In 13periodic –reports ~~SUBSEQUENT~~on ~~EVENTS~~Forms 10K and 10Q for the periods ending September 30, 2017 and December 31, 2017, respectively, the Company disclosed that on May 25, 2017, the SEC’s Chicago Regional Office informed it that it had made a preliminary determination to recommend filing of an enforcement action against the Company and its former CEO based on possible violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act, and Section 15(a) of the Exchange Act. Subsequent discussions resulted in the submission of an Offer of Settlement (“Settlement”) through an administrative cease and desist action on November 17, 2017, which was accepted by the SEC on April 12, 2018, as disclosed on Form 8K filed April 18, 2018. Pursuant to the Settlement, the Company neither admitted nor denied any of the allegations, but was enjoined from violating the above-referenced Sections and Rule. The Settlement imposed no financial penalties or sanctions against the Company.

~~Subsequent~~The toformer ~~September~~CEO 30was the subject of a separate SEC complaint in the U.S. District Court for the Northern District of Illinois, ~~2019~~asserting the allegations noted above, as well as allegations that he manipulated the ~~Company~~price ~~borrowed~~of company shares through undisclosed trading, realizing more than $~~310~~130,000 from ~~its~~such ~~officers~~trading. On the date of filing, the CEO voluntarily resigned as an officer and ~~shareholders~~director of the Company. ~~All~~Without admitting or denying the allegations, the CEO consented to the entry of the ~~loans~~judgment, ~~are~~which ~~unsecured~~was entered on September 26, ~~have~~2018 by the U.S. District Court for the Northern District of Illinois. The judgment permanently enjoined him anfrom ~~interest~~violating ~~rate~~the anti-fraud provisions of ~~eight~~Section ~~percent~~17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and ~~are~~Rule ~~due~~10b-5 ~~one~~thereunder, ~~year~~and ~~from~~the broker registration provisions of Section 15(a) of the ~~date~~Exchange Act. It also barred him from serving as an officer or director of ~~issuance~~a public company and from participating in penny stock offerings, and ordered disgorgement and interest and penalties to be determined by the court.

~~Subsequent~~On toor ~~September~~about 30June 29, ~~2019~~2020, anthe ~~additional~~Company ~~$50~~received notice that Hanover Hoffman Estates,~~000~~ ~~was~~LLC ~~contributed~~(“HHE”), byfiled ~~GEN2~~case number 2020L006092 in the Circuit Court of Cook County alleging failure to ~~NEO~~pay Base Rent and asabandonment of ~~December~~certain 31office space in Hoffman Estates, Illinois ~~2019~~subject to a Commercial Lease dated May 26, ~~GEN2~~2016. ~~had~~HHE ~~received~~seeks at least $~~975~~672,~~000~~888 in base rent and other amounts under the lease, as well as treble damages from our ex-CEO and two past Directors who were serving on our Board as of ~~investments~~the todate ~~contribute~~of tothe ~~NEO~~lease. The ~~(see~~Company ~~Note~~has 2)continued evaluation of the allegations, defenses and alternate actions, and it is engaged settlement negotiations which are on-going.

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

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NOTE 10 – INCOME TAXES

At September 30, 2020, the Company had net operating loss (“NOL”) carryforwards for federal income tax purposes of approximately $20 million that may be offset against future taxable income through 2040. No tax benefit has been reported with respect to these net operating loss (NOL) carryforwards because the Company believes that the realization of the Company’s net deferred tax assets of approximately $5,000,000 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carryforwards are offset by a full valuation allowance.

The Company recognizes as income tax expense, interest and penalties on uncertain tax provisions. As of September 30, 2020, and 2019, the Company has not accrued interest or penalties related to uncertain tax positions. Tax years 2017 through 2020 remain open to examination by the major taxing jurisdictions to which the Company is subject.

The Company’s effective income tax rate differs from the amount computed by applying the federal statutory income tax rate to loss before income taxes as follows:

	September 30, 2020			September 30, 2019

Income tax benefit at federal statutory rate		(21.0	)%		(21.0	)%
State income tax benefit, net of federal benefit		(4.0	)%		(4.0	)%
Change in valuation allowance		25.0	%		25.0	%
Income taxes at effective income tax rate		-	%		-	%

The components of deferred taxes consist of the following at September 30, 2020 and 2019:

	September 30, 2020			September 30, 2019
Net operating loss carryforwards	$	5,117,750		$	4,657,556
Less: Valuation allowance		(5,117,750	)		(4,657,556	)
Net deferred tax assets	$	-		$	-

NOTE 11 – SUBSEQUENT EVENTS

Subsequent to September 30, 2020, the Company borrowed $375,000 from its officers and shareholders. All of 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 the date of this filing, the Company’s officers and directors had the following loans outstanding: Calvin O;Harrow - $745,250; Roy Harsch - $235,000; William Kingsford - $291,000; Paul Jones - $100,000; Douglas Samuelson - $40,000; Thomas Scott - $20,000.

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Filing Compare · Wellness Center USA, Inc.