Thank you for posting in the Apple Support Communities. I see you're getting an error message when you update your Apple Watch.
There are a few points here that may help to Update your Apple Watch :
If you're not running iOS 12.1 on your iPhone, you can use the steps here to learn How to back up your iPhone, iPad, and iPod touch and Update your iPhone, iPad, or iPod touch .Before you begin
Update your iPhone to the latest version of iOS.
Check compatibility with watchOS 5
watchOS 5 requires iPhone 5s or later with iOS 12 or later, and Apple Watch Series 1 or later.
watchOS 5 isn't compatible with Apple Watch (first generation). Find your Apple Watch model.
Also, you mentioned you've reset your iPhone. What steps did you take? If you mean a restart, that's a great step; for the error you're seeing, it's most effective to restart the Apple Watch first, followed by the iPhone:
You might also try deleting the update file and re-downloading:
- Restart your Apple Watch. Press and hold the side button until you see Power Off, then drag the slider. To turn your watch on again, press and hold the side button.
- Restart your paired iPhone. Press and hold the Sleep/Wake button until the red slider appears, then drag the slider. To turn your iPhone on again, press and hold the Sleep/Wake button.
- Try to start the update again.
If the update won't start, open the Apple Watch app on your iPhone, tap General > Usage > Software Update, then delete the update file. After you delete the file, try to download and install watchOS again.I hope this helps you.
Kindest regards.