NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Nature of Business
The Condensed Consolidated Financial Statements include the accounts of World Health Energy Holdings, Inc. (“WHEH”) and its wholly owned subsidiaries, World Health Energy, Inc. (“WHE”) and FSC Solutions, Inc. (FSC), an online software solutions trading company.
WHE’s corporate offices are located in Aventura, Florida. World Health Energy is a holding company which owns algae tech and software companies/businesses the company does not have revenues yet but is planning on launching at least one product in the 3rd quarter. The Company is looking and needs to raise capital for its going concerns until it produces revenues. WHE is planning to spinoff its businesses into subsidiary public companies.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of the Company, the accompanying unaudited condensed consolidated financial statements contain all the adjustments (which are of a normal recurring nature) necessary for a fair presentation. Operating results for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. For further information, refer to the financial statements and the footnotes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission.
(2) Basis of Presentation and Consolidation
The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) on the accrual basis of accounting. All significant intercompany accounts and transactions have been eliminated in consolidation. The interim financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, necessary in order to make the financial statements not misleading.
(3) Significant Accounting Policies
a) Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
b) Loss per share
The Company has adopted Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
260-10-50,
Earnings Per Share
, which provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Basic and diluted losses per share were the same at the reporting dates as there were no common stock equivalents outstanding at June 30, 2017 or 2016.
c) Cash and Cash Equivalents
The Company considers all highly-liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at
June 30, 2017 or December 31, 2016.
d) Property & Equipment and Depreciation
Property and equipment is stated at cost and was depreciated using the straight line method over the estimated useful lives of the respective assets of three years. Routine maintenance, repairs and replacement costs are expensed as incurred and improvements that extend the useful life of the assets are capitalized. When office equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized in operations. At June 30, 2017 and December 31, 2016 property and equipment, valued at $4,353, was fully depreciated.
e) Revenue Recognition
The Company plans to recognize revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin Topic 13, Revenue Recognition and FASB ASC 605-15-25,
Revenue Recognition
. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.
f) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carryforwards, is required to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities result in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.
The Company’s income tax returns are subject to examination by tax authorities. Generally, the statute of limitations related to the Company’s federal and state income tax return is three years from the date of filing. The state impact of any federal changes for prior years remains subject to examination for a period up to five years after formal notification to the states.
Management has evaluated tax positions in accordance with FASB ASC 740,
Income Taxes
, and has not identified any significant tax positions, other than those disclosed.
g) Recently Issued Accounting Pronouncements
The Company reviewed all recent accounting pronouncements issued by the Financial Accounting Standards Board (including its Emerging Issues Task Force), the AICPA and the SEC and they did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
(4
) Going Concern
The accompanying Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern. The Company’s financial position and operating results raise substantial doubt about the Company’s ability to continue as a going concern, as reflected by the net losses of $26,143,212 accumulated through June 30, 2017. The Condensed Consolidated Financial Statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is presently seeking to raise permanent equity capital in the capital markets to eliminate negative working capital and provide working capital. Failure to raise equity capital or secure some other form of long-term debt arrangement will cause the Company to further increase its negative working capital deficit and could result in the Company having to curtail or cease operations. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations.
(
5
) Income Taxes
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes for the six months ended
June 30, 2017 and 2016 are as follows:
Income tax at federal statutory rate
|
|
|
(34.00
|
)%
|
State tax, net of federal effect
|
|
|
(3.96
|
)%
|
|
|
|
37.96
|
%
|
Valuation allowance
|
|
|
(37.96
|
)%
|
Effective rate
|
|
|
0.00
|
%
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
At
June 30, 2017 and December 31, 2016, the Company’s only significant deferred income tax asset was a cumulative net tax operating loss of approximately $23 million that is available to offset future taxable income, if any, in future periods, subject to expiration and other limitations imposed by the Internal Revenue Service. Management has considered the Company's operating losses incurred to date and believes that a full valuation allowance against the deferred tax assets is required at
June 30, 2017 and December 31. 2016. The net operating losses began to expire in 2006 and generally are available for 20 years from the date incurred.
(6
) Related Parties
At June 30, 2017 and December 31, 2016, the Company had $120,000 and $59,157, respectively, included in Due to affiliates in the accompanying condensed consolidated balance sheets that is due to a stockholder for amounts paid to certain vendors for services rendered. The amounts are non-interest bearing and due upon demand.
At June 30, 2017 and December 31, 2016, the Company had $347,341 and $280,336, respectively, included in Due to affiliates in the accompanying condensed consolidated balance sheets that is due to a stockholder and consultant of the Company for services rendered as a business advisor and for amounts paid to certain vendors for services rendered. The amounts are non-interest bearing and due upon demand.
At June 30, 2017 and December 31, 2016, the Company had $64,000 included in Due to affiliates in the accompanying condensed consolidated balance sheets that is due to a stockholder and consultant of the Company for services rendered as the previous Chief Executive Officer of the Company. The amounts are non-interest bearing and due upon demand.
At June 30, 2017 and December 31, 2016, the Company had $0 and $117,598, respectively, included in Due to affiliates in the accompanying condensed consolidated balance sheets that is due to a stockholder for amounts paid to certain vendors for services rendered. The amount is non-interest bearing and due upon demand.
At June 30, 2017 and December 31, 2016, the Company had $59,714 and $48,491, respectively, included in Due to affiliates in the accompanying condensed consolidated balance sheets that is due to a stockholder and consultant of the Company for amounts paid to certain vendors for services rendered. The amounts are non-interest bearing and due upon demand.
At June 30, 2017 and December 31, 2016, the Company had $155,485 included in Due to affiliates in the accompanying condensed consolidated balance sheets that is due to creditors of FSC, a business acquired by the Company during 2015. The amounts are non-interest bearing and due upon demand.
(7
)
Convertible Note Payable
During 2015, the Company issued a convertible note payable with a third party for $21,474. The note is non-interest bearing and is convertible to common stock at $0.0001 per share (or the comparable rate following any share split or reverse split) on the conversion date. During 2015 the note holder became the CEO and is now a related party. The note is due to be converted in the third Quarter of 2017.
(8) Commitments & Contingencies
During the normal course of business, the Company may be exposed to litigation. In the event the Company were to become aware of potential litigation, it would evaluate the merits of the case in accordance with ASC 450-20-50,
Contingencies
. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. At June 30, 2017, the Company is not aware of any contingent liabilities that should be reflected in the accompanying Condensed Consolidated Financial Statements.
(9) Business Acquisitions
On March 13, 2016, FSC entered into a Stock Purchase Agreement (the “
Agreement
”) with Natalie Stock, Ltd. for the purchase of all of the outstanding shares of Amid Financial Centre, Ltd. (“Amid”), a Mauritius Company that operates as a broker-dealer. The company paid an initial deposit of $20,000.
The Closing of the Agreement was subject to customary closing conditions.
During 2016, the likelihood of both the acquisition going ahead and repayment of the $20,000 deposit were deemed unlikely by December 31, 2016, and, as a result the $20,000 was written off as an expense in 2016.