UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
eWellness
Healthcare Corporation
(Exact
Name of Registrant as Specified in its Charter)
Nevada
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8082
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45-1560906
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(State
or other Jurisdiction
of
Incorporation)
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(Primary
Standard Industrial
Classification
Code)
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(IRS
Employer
Identification
No.)
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11825
Major Street, Culver City, CA 90230, Phone: (310) 915-9700
(Address
and Telephone Number of Registrant’s Principal Executive Offices and Principal Place of Business)
Incorp
Services Inc., 3773 Howard Hughes Parkway, Suite 500s, Las Vegas, NV 89169
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(Agent
for Service)
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Copies
to:
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Thomas
J. Craft, Jr., Esq.
P.O.
Box 4143
Tequesta,
FL 33469
(561)
317-7036
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Approximate
date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box. [X]
If
this Form is filed to register additional securities for an Offering pursuant to Rule 462(b) under the Securities Act of 1933,
please check the following box and list the Securities Act registration Statement number of the earlier effective registration
statement for the same Offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box
and list the Securities Act registration statement number of the earlier effective registration statement for the same Offering.
[ ]
If
delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
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
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[ ]
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Accelerated
filer
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[ ]
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Non-accelerated
filer
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[ ]
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Smaller
reporting company
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[X]
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Emerging
growth company
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[X]
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Calculation
of Registration Fee
Title
of Securities To Be Registered
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Amount
to be Registered(1)
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Proposed
Maximum Offering
Price
Per Share
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Proposed
Maximum Aggregate Offering Price(2)
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Registration
Fee(3)
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Common Stock, $0.001 per share
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16,569,000
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$
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0.08
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$
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1,325,520
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$
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165.03
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(1)
Consists of up to 16,569,000 shares of Common Stock to be sold to Triton Funds LP under the Equity Purchase Agreement dated June
21, 2018.
(2)
The Offering price has been estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c)
of the Securities Act and is based upon the closing price of $0.08 per share of the Registrant’s Common Stock on the OTCQB
Market on July 20, 2018.
(3)
Calculated pursuant to Rule 457(o) and based on the closing price per share of $0.08 for eWellness Healthcare Corporation’s
Common Stock on July 20, 2018 as reported by the OTCQB.
The
Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The
information in this Prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission becomes effective. This Prospectus is not an offer to sell these securities
and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS
SUBJECT
TO COMPLETION ON JULY__, 2018
eWELLNESS
HEALTHCARE CORPORATION
16,569,000
SHARES OF COMMON STOCK
This
Prospectus relates to the resale of 16,569,000 shares of our Common Stock, par value $0.001 per share (the “Common Stock”),
issuable to Triton Funds LP, a selling stockholder pursuant to an Equity Purchase Agreement (the “Equity Agreement”),
dated June 21, 2018, that we entered into with Triton Funds LP (“Triton” or the “Selling Stockholder”).
The Equity Agreement permits us to sell up to one million five hundred thousand ($1,500,000) dollars in shares of our common stock,
par value $0.001 (sometimes referred to as the “Capital Call Shares”), to Triton until December 31, 2018 or until
$1,500,000 of such Capital Call Shares have been sold.
The
Selling Stockholder may sell all or a portion of the Capital Call Shares being offered pursuant to this Prospectus at the prevailing
market prices at the time of saleor at negotiated prices.
The
total amount of shares of Common Stock which may be sold pursuant to this Prospectus would constitute 9.89% of the Company’s
issued and outstanding Common Stock as of July 16, 2018, assuming that the selling security holders will sell all of the shares
offered for sale.
Triton
as the Selling Stockholder is deemed to be an “underwriter” within the meaning of the Securities Act of 1933, as amended
(the “Act”) and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters”
within the meaning of the Act in connection with such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts
under the Act.
Our
Common Stock is subject to quotation on OTCQB Market under the symbol EWLL. On July 20, 2018, the last reported sales price for
our Common Stock was $0.08 per share. We urge prospective purchasers of our Common Stock to obtain current information about the
market prices of our Common Stock. We will not receive any proceeds from the sale of shares of our Common Stock by the Selling
Stockholder. However, we will receive proceeds from the sale of shares of our Common Stock pursuant to our exercise our right
to sell Capital Call Shares to Triton. We will pay for expenses of this offering, except that the Selling Stockholder will pay
any broker discounts or commissions or equivalent expenses and expenses of its legal counsel applicable to the sale of its shares.
The
prices at which the Selling Security Holders may sell the shares of Common Stock in this Offering will be determined by the prevailing
market price for the shares of Common Stock or in negotiated transactions.
Our
independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern.
Investing
in our Common Stock involves a high degree of risk. See “Risk Factors” to read about factors you should consider before
buying shares of our Common Stock.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
Date of This Prospectus is: July __, 2018
TABLE
OF CONTENTS
Please
read this Prospectus carefully and in its entirety. This Prospectus contains disclosure regarding our business, our financial
condition and results of operations and risk factors related to our business and our Common Stock, among other material disclosure
items. We have prepared this Prospectus so that you will have the information necessary to make an informed investment decision.
You
should rely only on information contained in this Prospectus. We have not authorized any other person to provide you with different
information. This Prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the
offer or sale is not permitted. The information in this Prospectus is complete and accurate as of the date on the front cover,
but the information may have changed since that date.
The
Registration Statement containing this Prospectus, including the exhibits to the Registration Statement, provides additional information
about our Company and the Common Stock offered under this Prospectus. The Registration Statement, including the exhibits and the
documents incorporated herein by reference, can be read on the Securities and Exchange Commission website or at the Securities
and Exchange Commission offices mentioned under the heading “Where You Can Find More Information.”
PROSPECTUS
SUMMARY
This
summary highlights selected information contained elsewhere in this Prospectus. It does not contain all the information that you
should consider before investing in the Common Stock. You should carefully read the entire Prospectus, including “Risk Factors”,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Financial Statements,
before making an investment decision. In this Prospectus, the terms “eWellness” “Company,” “Registrant,”
“we,” “us” and “our” refer to eWellness Healthcare Corporation, a Nevada corporation.
Business
Plan
eWellness
Healthcare Corporation (f/k/a Dignyte, Inc.), (the “eWellness”, “Company”, “we”, “us”,
“our”) was incorporated in the State of Nevada on April 7, 2011.
eWellness
plans to generate revenue from Third Party Healthcare Administrators (“TPA”) employees, PTs and corporate wellness
licensees on a contractually recurring PHZIO session fee basis. Our PHZIO platform is anticipated to transform the access, cost
and quality dynamics of physical therapy (“PT”) delivery for the market participants. eWellness further believes any
patient, employer, health plan or healthcare professional interested in a better approach to PT is a potential PHZIO platform
user.
Our
PHZIO platform completely disrupts the current in-clinic business model of the $30 billion PT industry. Innovators in other industries
have solved access, cost and quality inefficiencies through the implementation of technology platforms and business models that
deliver products and services on-demand and create new economies by connecting and empowering both consumers and businesses. We
have taken the same approach to solving the pervasive access, cost and quality challenges facing the current access to PT clinics.
eWellness’ underlying technology platform is complex, deeply integrated and purpose-built over the past four years for the
evolving PT marketplace. eWellness’ PHZIO platform is highly scalable and can support substantial growth of third party
licensees. eWellness’ PHZIO platform provides for broad interconnectivity between PT practitioners and their patients, uniquely
positioning the Company as a focal point in the rapidly evolving PT industry to introduce innovative, technology-based solutions,
such as remote patient monitoring, post-discharge treatment plan adherence and in-home care.
The
Company’s 5-Year Agreement with Endeavor Plus.
On October 19, 2017 eWellness executed a 5-year Comprehensive Physical
Therapy Services Agreement with Endeavor Plus Services, Inc. (“EPS”), a fast-growing healthcare plan administrator.
EPS projects having approximately 100,000 healthcare members in 2018. This level of sales will allow the Company to gain cash
flow positive operations by the end of 2018. Additionally, if EPS is able to continue on their projected growth rate over the
next 12-18 months an additional 500,000 new members would be added. Endeavor Plus, Inc. (“EPI”), the parent company
of EPS, has taken the lead in a movement to assist small group employers to leave fully insured health plans and use partially
self-funded ERISA qualified health insurance plans that are new and innovative and embrace a new era of Consumer-Driven Health
Care Planning (CDHC). EPI’s mission is to bring about innovative changes using existing law and regulations to change the
traditional health insurance models to drive down healthcare costs while offering significantly better benefits to both small
and midsize group employers and their employees. This is accomplished further by having these employers and their employees to
participate in the Endeavor Plus Plan, a CDHC program with technology-driven health care programs that are affordable, manageable
and responsive to the demand for higher quality care with cost transparency, integrated health information and better provider
access and communication and better outcomes.
EPS/PHZIO
Marketing Plans.
eWellness and EPS intend to commence system, sales and marketing integration, to position eWellness to begin
onboarding and treating EPS members in second half of 2018. EPS is a third-party administrator (TPA), which is an organization
that processes insurance claims or certain aspects of employee benefit plans for small and medium sized companies. EPS is projecting
to grow rapidly in the small group health insurance market which has annual premiums of over $384 billion. Approximately 84% of
this market is traditional full insurance. EPS is expected to grow rapidly by offering these small employers the ability to self-
insure through excellent plan design and reinsurance. The Company is excited to be chosen as their PT gatekeeper as well as wellness
program supplier. Our comprehensive PT & wellness programs and consulting services are anticipated to provide EPS with new
products that will: (1) build new sales channels that increase their current health insurance business, and (2) create new revenue
sources through the introduction of such products.
The
Company Partnership with LifeWallet (“LW”)
On February 22, 2018 the Company signed a Partnership Agreement to
co-market the Company’s PHZIO platform with LW (https://www.lifewallet.com) which provides employers, communities and healthcare
professionals with a simple, consumer centric, integrated platform to assess the health of their population and monitor their
progress towards better health. LifeWallet™ is transforming the delivery of care and revolutionizing the health care to
wellness process with a consumer centric health platform and modern digital assistants that promote better outcomes. LW’s
employees are dedicated to making the best products on earth. LWt™ is creating a one of a kind technology region in the
south and has brought in developers from leading technology companies including Apple.
Concierge
PT Medical Service.
The Company will be provisioning to EPS and/or LW insureds a new and highly unique patient treatment protocol
that includes “white glove” concierge in-home or in-office PT assessments and digital care treatments to enhance the
medical treatment and help improve patient treatment outcomes. The Company will become the exclusive provider of “white
glove” concierge in-home or in-office PT assessments, digital physical therapy and a wellness program to the individuals
covered by EPS and or LW. The Company has been selected to be the gatekeeper for all EPS and or LW PT treatments. As the PT treatment
gatekeeper, the Company will conduct an online consultation with each patient to assess the complexity involved with the patient
presentation. From the online consultation, an in-home or in-office evaluation of the patient may be prescribed. Through this
initial evaluation, a plan of care will be designed for each patient that in most cases is anticipated to include digital therapy
sessions.
PreHabPT.
Any individuals covered by EPS and/or LW, who are seeking non-emergency orthopedic surgery shall first receive a concierge
online consultation, in-home or in-office PT therapy evaluation and will be prescribed a four to eight-week prehabpt.com exercise
program prior to any surgery. Another in-home or in-office PT evaluation will be made following surgery and a treatment plan will
be initiated. PreHabPT is up to an eight-week physician to patient pre-surgical (Prehab) digital therapeutic exercise treatment
system for patients that anticipate having total join replacement (knee, hip and or shoulder) or back surgeries.
PurePT.
PurePT is a patient and independent PT digital treatment platform for connecting new patients to PT’s that are seekingto
be treated with our PHZIO treatment system. Patient program assessments can be made in the privacy of a patient’s home or
office. PurePT connects new patients to PT’s, particularly in states that have direct access rules where patient’s
insurance will reimburse for treatment without requiring a physician’s prescription. PurePT puts the patient first.
PHZIO
Comprehensive Wellness Program
Any EPS and/or LW insureds may, after an in-home or in-office PT assessment, enroll in a -month
comprehensive wellness program. The top line wellness goals of our PHZIO wellness exercise program is to graduate at least 60%
of inducted patients through our 6-month program. Patients should expect to experience an average of a 20% reduction in BMI, a
two-inch reduction in waist size, weight loss of at least 10 pounds, significant overall improvement in balance, coordination,
flexibility, strength and lumbopelvic stability. Patients also should score better on Functional Outcomes Scales (Oswestry and
LEFS) which indicates improved functional activity levels due to reduced low back, knee and hip pain.
The
PHZIO Solution: A New PT Delivery System
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SaaS
technology platform solution for providers bundling rehabilitation services and employer wellness programs: PTs are able to
evaluate and screen patients and calculate joint angles using drawing tool
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First
real-time remote monitored one-to-many PT treatment platform for home use;
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Ability
for PTs to observe multiple patients simultaneously in real-time;
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Solves
what has been a structural problem and limitation in post-acute care practice growth.
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PT
practices can experience 20% higher adherence and compliance rates versus industry standards; and
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Tracking
to 30% increase in net income for a PT practice.
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PHZIO
Evaluation
The
PT provider is able to connect in real time with a patient or employee to gather a history, observe posture, perform movement
and functional tests, assess joint range of motion, and instruct the patient on special tests. The provider is then able to educate
the patient on his/her condition using a screen sharing feature and develop a plan of care based on clinical findings and decisions.
A therapeutic exercise plan can be prescribed using PHZIO’s extensive exercise video library.
PHZIO
Treatment Session
The
image below illustrates a typical PHZIO treatment session from a patient’s point of view. There is communication between
patients and PTs conducted via audio, text and or video messaging. The patient is also able to examine form during the exercise
sessions. The monitoring PT is remotely monitoring the patient real-time from the PT office.
Patient
program adherence in 2016 and 2017 was nearly 85 percent due the real-time patient monitoring and the at-home use of the platform.
Now PT practices have a way to scale profitably using a technology platform that can help them grow beyond the limits of the typical
brick and mortar PT clinic.
The
Company’s initial PHZIO application is a 6-month exercise program for patients with back, knee or hip pain. The next two
platforms, released in the third quarter of 2016, include a total knee and hip replacement exercise program. These hip and knee
programs have been designed to be integrated into any hospital or medical group’s Medicare CMS bundled payment model for
post-acute care PT.
Our
PHZIO platform enables patients to engage with live or on-demand video-based PT telemedicine treatments from their home or office.
Following a physician’s exam and prescription for PT to treat back, knee or hip pain, a patient can be examined by a PT
and, if found appropriate, inducted into the Company’s PHZIO program that includes a progressive 6-month telemedicine exercise
program (including monthly in-clinic check-ups). All PHZIO treatments are monitored by a licensed therapist that sees everything
the patient is doing while providing professional guidance and feedback in real-time. This ensures treatment compliance by the
patient, maintains the safety and integrity of the prescribed exercises, tracks patient metrics and captures pre-and post-treatment
evaluation data. PHZIO unlocks a host of potential for revolutionizing patient treatment models and directly links back to the
established brick and mortar PT clinic. This unique model enables any PT practice to be able to execute more patient care while
utilizing their same resources and creates more value than was ever before possible.
Our
PHZIO platform, including design, testing, exercise intervention, follow-up, and exercise demonstration, has been developed by
accomplished Los Angeles based PT, Darwin Fogt, who currently serves as the Company’s CEO. Mr. Fogt has extensive experience
and education working with diverse populations from professional athletes to morbidly obese. He understands the most beneficial
exercise prescription to achieve optimal results and has had enormous success in motivating all patient types to stay consistent
in working toward their goals. Additionally, his methods have proven effective and safe as he demonstrates exercises with attention
to proper form to avoid injury. Mr. Fogt has established himself as a national leader in his field and has successfully implemented
progressive solutions to delivering PT. He has consulted with and been published by numerous national publications including
Runner’s
World
,
Men’s Health
,
Men’s Journal
, and various PT specific magazines. He has 13 plus years of experience
rehabilitating the general population, as well as professional athletes, Olympic gold medalists and celebrities. He has bridged
the gap between PT and fitness by opening Evolution Fitness, which uses licensed PTs to teach high intensity circuit training
fitness classes. He also founded one of the first exclusive prenatal and postnatal PT clinic in the country. Mr. Fogt is a leader
in advancing the profession to incorporate research-based methods and focus on not only rehabilitation but also wellness, functional
fitness, performance, and prevention. He can recognize that the national healthcare structure (federal and private insurance)
is moving toward a model of prevention and that the PT profession will take a larger role in providing wellness services to patients.
Our
underlying technology platform is complex, deeply integrated and purpose-built for the evolving PT marketplace. Our PHZIO platform
is highly scalable and can support substantial growth of third party licensees. Our PHZIO platform provides for broad interconnectivity
between PT practitioners and their patients and, we believe, uniquely positions us as a focal point in the rapidly evolving PT
industry to introduce innovative, technology-based solutions, such as remote patient monitoring, post-discharge treatment plan
adherence and in-home care.
Background
on our PHZIO Technology
The
Company’s Chief Technology Officer (“CTO”), Curtis Hollister, a program developer and a content manager support
our PHZIO system. They are located in Ottawa Canada. The below noted chart contains information on our PHZIO System.
IP
and Licensing
We
have licensed our telemedicine platform from Bistromatics Inc., a company owned by our CTO, for perpetuity for any telemedicine
application in any market worldwide. The below noted chart highlights what we have built to date.
Summary
of Risk Factors
This
Offering, which provides for the registration of the Capital Call Shares by Triton as the Selling Stockholder and the subsequent
public resale of such shares, involves substantial risk. Our ability to execute our business strategy is also subject to certain
risks. The risks described under the heading “Risk Factors” included elsewhere in this Prospectus may cause us not
to realize the full benefits of our business plan and strategy or may cause us to be unable to successfully execute all or part
of our strategy. Some of the most significant challenges and risks include the following:
●
Our Auditor has expressed substantial doubt as to our ability to continue as a going concern.
●
Our limited operating history does not afford investors a sufficient history on which to base an investment decision.
●
Our revenues will be dependent upon acceptance of our Platform by patients and insurances, specifically changes in insurances
reimbursement policies, will cause us to curtail or cease operations.
●
We may face new entrances and increasing competition in the Distance Monitored Physical Therapy market.
●
We cannot be certain that we will obtain patents for our proprietary technology or that such patents will protect us.
●
The availability of a large number of authorized but unissued shares of Common Stock may, upon their issuance, lead to dilution
of existing stockholders.
●
Our stock is thinly traded, sale of your holding may take a considerable amount of time.
Before
you invest in our Common Stock, you should carefully consider all the information in this Prospectus, including matters set forth
under the heading “Risk Factors.”
Where
You Can Find Us
The
Company’s principal executive office and mailing address is at 11825 Major Street, Culver City, CA 90230, Phone: (310) 915-9700
Our
Filing Status as a “Smaller Reporting Company”
We
are a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned
subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual
revenues of less than $50 million during the most recently completed fiscal year. As a “smaller reporting company,”
the disclosure we will be required to provide in our SEC filings are less than it would be if we were not considered a “smaller
reporting company.” Specifically, “smaller reporting companies” are able to provide simplified executive compensation
disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act of 2002 requiring that
independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial
reporting; are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21,
2013; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being permitted
to provide two years of audited financial statements in annual reports rather than three years. Decreased disclosures in our SEC
filings due to our status as a “smaller reporting company” may make it harder for investors to analyze the Company’s
results of operations and financial prospects.
Implications
of Being an Emerging Growth Company
We
qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified
reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
●
A requirement to have only two years of audited financial statements and only two years of related MD&A;
●
Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over
financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”);
●
Reduced disclosure about the emerging growth company’s executive compensation arrangements; and
●
No non-binding advisory votes on executive compensation or golden parachute arrangements.
We
have already taken advantage of these reduced reporting burdens in this Prospectus, which are also available to us as a smaller
reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
In
addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Act”) for complying with new
or revised accounting standards. We have elected to take advantage of the extended transition period for complying with new or
revised accounting standards, which allows us to delay the adoption of new or revised accounting standards that have different
effective dates for public and private companies until those standards apply to private companies. As a result of this election,
our financial statements contained in this Form S-1 may not be comparable to companies that comply with public company effective
dates. The existing scaled executive compensation disclosure requirements for smaller reporting companies will continue to apply
to our filings for so long as our Company is an emerging growth company, regardless of whether the Company remains a smaller reporting
company.
We
could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year
in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as
defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Common Stock that is held by non-affiliates
exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which
we have issued more than $1 billion in non-convertible debt during the preceding three year period.
For
more details regarding this exemption, see “Management’s Discussion and Analysis of Financial Condition and Results
of Operations - Critical Accounting Policies.”
The
Offering
This
Prospectus relates to the resale of up to 16,569,000 shares of the Common Shares, issuable to Triton, the Selling Stockholder,
pursuant to a “Capital Call Right” under the Equity Agreement, dated June 21, 2018, that we entered into with Triton.
The Equity Agreement permits us to sell up to one million five hundred thousand ($1,500,000) dollars in shares of our Common Stock
to Triton until December 31, 2018 or until $1,500,000 of such shares have been called Capital Call Shares.
Common
Stock offered by Selling Shareholders
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This
Prospectus relates to the resale of 16,569,000 shares of our Common Stock, issuable to Triton
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Common
Stock outstanding before the Offering
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167,684,971
shares of Common Stock as of July 20, 2018.
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Common
Stock outstanding after the Offering
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184,253,971
shares of Common Stock (1)
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Terms
of the Offering
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The
Selling Security Holders will determine when and how they will sell the Common Stock offered in this Prospectus. The prices
at which the Selling Security Holders may sell the shares of Common Stock in this Offering will be determined by the prevailing
market price for the shares of Common Stock or in negotiated transactions.
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Termination
of the Offering
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The
Offering will conclude upon such time as all of the Common Stock has been sold pursuant to the Registration Statement.
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Trading
Market
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Our
Common Stock is subject to quotation on the OTCQB Market under the symbol “EWLL”.
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Use
of proceeds
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The
Company is not selling any shares of the Common Stock covered by this Prospectus. As such, we will not receive any of the
Offering proceeds from the registration of the shares of Common Stock covered by this Prospectus. See “Use of Proceeds.”
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Risk
Factors
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The
Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the
loss of his/her/its entire investment. See “Risk Factors”.
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(1)
This total reflects the number of shares of Common Stock that will be outstanding assuming that all of16,569,000Capital Call Shares
to be put to Triton are, in fact, issued and sold to Triton under the Equity Agreement.
SUMMARY
OF FINANCIAL INFORMATION
The
following summary financial data should be read in conjunction with “Management’s Discussion and Analysis,”
“Plan of Operation” and the Financial Statements and Notes thereto, included elsewhere in this Prospectus. The statement
of operations data is derived from our condensed financial statements for the three months ended March 31, 2018 and 2017 and the
years ended December 31, 2017 and 2016. The balance sheets data are derived from the condensed balance sheet statement for the
three months ended March 31, 2018 and our audited balance sheet statements for the years ended December 31, 2017 and 2016.
Statement
of Operations Data:
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For
the Three Months Ended
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For
the Three Months Ended
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For
the Year
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For
the Year
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March
31, 2018
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March
31, 2017
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December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
general and administrative expenses
|
|
|
(196,690
|
)
|
|
|
(183,337
|
)
|
|
|
(801,308
|
)
|
|
|
(309,805
|
)
|
Total
operating expenses
|
|
|
(811,215
|
)
|
|
|
(989,348
|
)
|
|
|
(3,348,781
|
)
|
|
|
(3,371,460
|
)
|
Interest
expense
|
|
|
(179,909
|
)
|
|
|
(103,353
|
)
|
|
|
(516,060
|
)
|
|
|
(981,575
|
)
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,216,266
|
|
Net
income (loss)
|
|
$
|
(473,973
|
)
|
|
$
|
4,161,845
|
|
|
$
|
(1,032,891
|
)
|
|
$
|
(12,460,694
|
)
|
Net
income (loss) per share – basic
|
|
$
|
(0.00
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.51
|
)
|
Net
income (loss) per share – diluted
|
|
$
|
(0.00
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.51
|
)
|
Weighted
average number of shares outstanding - basic
|
|
|
145,882,450
|
|
|
|
60,043,059
|
|
|
|
108,864,680
|
|
|
|
24,267,074
|
|
Weighted
average number of shares outstanding - diluted
|
|
|
145,882,450
|
|
|
|
89,107,951
|
|
|
|
108,864,680
|
|
|
|
24,267,074
|
|
Balance
Sheet Data:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
Cash
and restricted cash
|
|
$
|
125,098
|
|
|
$
|
6,882
|
|
|
$
|
13,995
|
|
Total
current assets
|
|
|
303,245
|
|
|
|
186,709
|
|
|
|
737,041
|
|
Total
assets
|
|
|
325,698
|
|
|
|
205,684
|
|
|
|
758,228
|
|
Total
current liabilities
|
|
|
3,589,449
|
|
|
|
3,834,973
|
|
|
|
10,755,729
|
|
Total
liabilities
|
|
|
3,589,449
|
|
|
|
3,834,973
|
|
|
|
10,755,729
|
|
Total
stockholders’ deficit
|
|
$
|
(3,263,751
|
)
|
|
$
|
(3,629,289
|
)
|
|
$
|
(9,997,501
|
)
|
Total
liabilities and shareholders’ deficit
|
|
$
|
325,698
|
|
|
$
|
205,684
|
|
|
$
|
758,228
|
|
Special
Note Regarding Forward-Looking Statements
The
information contained in this Prospectus, including in the documents incorporated by reference into this Prospectus, includes
some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking statements
include, but are not limited to, statements regarding our management’s expectations, hopes, beliefs, intentions and/or strategies
regarding the future, including our financial condition and results of operations. In addition, any statements that refer to projections,
forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking
statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,”
“expects,” “intends,” “may,” “might,” “plans,” “possible,”
“potential,” “predicts,” “projects,” “seeks,” “should,” “would”
and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words
does not mean that a statement is not forward-looking.
The
forward-looking statements contained in this Prospectus are based on current expectations and beliefs concerning future developments
and the potential effects on the parties and the transaction. There can be no assurance that future developments actually affecting
us will be those anticipated. These that may cause actual results or performance to be materially different from those expressed
or implied by these forward-looking statements, including the following forward-looking statements involve a number of risks,
uncertainties (some of which are beyond the parties’ control) or other assumptions.
RISK
FACTORS
The
shares of our Common Stock being offered for resale by the Selling Shareholders are highly speculative in nature, involve a high
degree of risk and should be purchased only by persons who can afford to lose their entire amount invested in the Common Stock.
Accordingly, prospective investors should carefully consider, along with other matters referred to herein, the following risk
factors in evaluating our business before purchasing any shares of Common Stocks. If any of the following risks actually occurs,
our business, financial condition or operating results could be materially adversely affected. In such case, you may lose all
or part of your investment. You should carefully consider the risks described below and the other information in this Prospectus
before investing in our Common Stock.
Risks
Related to our Financial Condition
Our
Independent Registered Public Accounting Firm has expressed substantial doubt as to our ability to continue as a going concern.
The
audited financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments
that might result if we cease to continue as a going concern. We believe that to continue as a going concern, including the costs
of being a public company, we will need approximately $100,000 per year simply to cover the administrative, legal and accounting
fees. We plan to fund these expenses primarily through cash flow, the sale of restricted shares of our common stock and the issuance
of convertible notes.
Based
on our financial statements for the years ended December 31, 2017 and 2016, our independent registered public accounting firm
has expressed substantial doubt as to our ability to continue as a going concern. To date we have not generated any revenue.
Investing
in our securities involves a great deal of risk. Careful consideration should be made of the following factors as well as other
information included in this Prospectus before deciding to purchase our common stock. Our business, financial condition or results
of operations could be affected materially and adversely by any or all these risks.
We
may need to raise additional capital to fund continuing operations and an inability to raise the necessary capital or to do so
on acceptable terms could threaten the success of our business.
To
date, our operations have been funded entirely from the proceeds from equity and debt financings or loans from our management.
While we have sufficient funds to launch our Platform in Los Angeles, we will likely require substantial additional capital in
the near future.
We
currently anticipate that our available capital resources will be sufficient to meet our expected working capital and capital
expenditure requirements for the near future. We anticipate that we will require an additional $1.5 million during the next twelve
months to fulfill our business plan. However, such resources may not be sufficient to fund the long-term growth of our business.
If we determine that it is necessary to raise additional funds, we may choose to do so through strategic collaborations, licensing
arrangements through our “White Labeling” strategy, public or private equity or debt financing, a bank line of credit,
or other arrangements.
We
cannot be sure that any additional funding will be available on terms favorable to us or at all. Any additional equity financing
may be dilutive to our shareholders, new equity securities may have rights, preferences or privileges senior to those of existing
holders of our shares of Common stock. Debt or equity financing may subject us to restrictive covenants and significant interest
costs. If we obtain funding through a strategic collaboration or licensing arrangement, we may be required to relinquish our rights
to our product or marketing territories. If we are unable to obtain the financing necessary to support our operations, we may
be required to defer, reduce or eliminate certain planned expenditures or significantly curtail our operations.
We
are an early stage company with a going concern qualification to our financial statements and pursue a relatively new business
model in an emerging and rapidly evolving market, which makes it difficult to evaluate our future prospects.
We
are an early stage company with a short operating history and pursue a relatively new business model in an emerging and rapidly
evolving market, which makes it difficult to evaluate its future prospects; as a pre-revenue, early stage entity, it is subject
to all of the risks inherent in a young business enterprise, such as, among other things, lack of market recognition and limited
banking and financial relationships. As a result, we have little operating history to aid in assessing future prospects. We will
encounter risks and difficulties as an early stage company in a new and rapidly evolving market. We may not be able to successfully
address these risks and difficulties, which could materially harm our business and operating results.
Our
financial statements as of December 31, 2017 were prepared under the assumption that we will continue as a going concern. The
independent registered public accounting firm that audited our 2017 financial statements, in their report, included an explanatory
paragraph referring to our recurring losses since inception and expressing substantial doubt in our ability to continue as a going
concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our ability
to continue as a going concern depends on our ability to obtain additional equity or debt financing, attain further operating
efficiencies, reduce expenditures, and, ultimately, to generate revenue.
We
may be subject to liability for failure to comply with Rule 419 under the Securities Act.
We
may be subject to liability for failure to comply with Rule 419 under the Securities Act. Prior to our acquisition of eWellness
Corporation, we did not technically comply with the requirements of Rule 419 under the Securities Act. We previously offered for
sale in a direct public offering 1,000,000 shares of our Common stock, pursuant to Rule 419 of the Securities Act (the “419
Transaction”) and filed a Registration Statement on Form S-1 (File No. 333-181440) that was declared effective by the SEC
on September 14, 2012 (the “419 Registration Statement”). We sold 1,000,000 shares of our Common stock (the “Shares”)
to investors at a price of $0.10 per share, for total subscription proceeds of $100,000 pursuant to the 419 Registration Statement.
We used 10% of the subscription proceeds as permitted under Rule 419 and the amount remaining in trust as of the date of the closing
of the Share Exchange was $90,000 (the “Trust Account Balance”). Prior to the Share Exchange, we were considered a
“blank check” company and a “shell” company and therefore, needed to fully comply with Rule 419. Among
other things, Rule 419 requires that we deposit the securities being offered and proceeds of the offering contemplated by the
419 Registration Statement into an escrow or trust account pending the execution of an agreement for an acquisition or merger.
If a consummated acquisition meeting the requirements of Rule 419 did not occur by a date 18 months after the September 14, 2012
effective date of the 419 Registration Statement, Rule 419(e)(2)(iv) requires a blank check company to return the funds held in
the escrow account to all investors who participated in the offering within five (5) business days
2
. When we did
not complete the Share Exchange by March 18, 2014, rather than physically return the funds, we gave the investors who participated
in the financing that was initially conducted pursuant to Rule 419, the right to have their funds returned or use their funds
to purchase the same shares in a private offering to be conducted pursuant to Rule 506(b) of the Securities Act; all of the investors
directed us to use their respective funds for the private placement. Regardless, after various comments and discussions with the
SEC’s staff within the division of corporate finance, it seems that such constructive compliance with Rule 419 is not permissible
and we should have physically returned the investors’ funds when the Share Exchange was not completed by March 18, 2014.
Ultimately, although we responded to all of the comments, the SEC continued to have concerns about the issues it raised and terminated
its review of the relevant Form 8-K without clearing all of the comments and stated it would take further steps its deems necessary.
Consequently, the SEC may bring an enforcement action or commence litigation against us for failure to strictly comply with Rule
419. If any claims or actions were to be brought against us relating to our lack of compliance with Rule 419, we could be subject
to penalties (including criminal penalties), required to pay fines, make damages payments or settlement payments. In addition,
any claims or actions could force us to expend significant financial resources to defend ourselves, could divert the attention
of our management from our core business and could harm our reputation.
Risks
Related to our Platform and our Business
Our
telemedicine platform is new and has only limited operation experience
.
The
Company has developed and tested its unique telemedicine platform
www.PHZIO
that is a Distance Monitored Physical Therapy
Program (“PHZIO program”) to pre-diabetic, cardiac and health challenged patients, through contracted physician practices
and healthcare systems specifically designed to help prevent patients that are pre-diabetic from becoming diabetic.
Our
success is currently dependent upon our ability to maintain and develop relationship with physicians.
Now
that we are using our PHZIO platform to generate our success, we are dependent upon our CEO’s continuing ability to maintain
current relationships with other physicians and our collective ability to establish relationships with other physicians. If we
cannot generate new relationships or current relationships do not translate into service contracts or license agreements for our
PHZIO platform, we may not have alternative streams of revenue and therefore we may need to cease operations until such time as
we find an alternative provider or forever.
Our
Platform may not be accepted in the marketplace
.
Uncertainty
exists as to whether our Platform will be accepted by the market without additional widespread PT or patient acceptance. A number
of factors may limit the market acceptance of our Platform, including the availability of alternative products and services as
well as the price of our Platform services relative to alternative products. There is a risk that PT or patient acceptance will
be encouraged to continue to use other products and/or methods instead of ours. We are assuming that, notwithstanding the fact
that our Platform is new in the market, PT or patient acceptance will elect to use our Platform because it will permit to safe
valuable PT’s time.
PT
or patient needs to be persuaded that our Platform service is justified for the anticipated benefit, but there is no assurance
that sufficient numbers of patients will be convinced to enable a successful market to develop for our Platform.
Our
revenues will be dependent upon acceptance of our Platform product by the market. The failure of such acceptance will cause us
to curtail or cease operations.
Our
revenues are expected to come from our Platform. As a result, we will continue to incur operating losses until such time as revenues
reach a mature level and we are able to generate sufficient revenues from our Platform to meet our operating expenses. There can
be no assurance that PTs or patients will adopt our Platform. In the event that we are not able to market and significantly increase
the number of PTs or patients that use our Platform, or if we are unable to charge the necessary prices, our financial condition
and results of operations will be materially and adversely affected.
Defects
or malfunctions in our Platform could hurt our reputation, sales and profitability.
The
acceptance of our Platform depends upon its effectiveness and reliability. Our Platform is complex and is continually being modified
and improved, and as such may contain undetected defects or errors when first introduced or as new versions are released. To the
extent that defects or errors cause our Platform to malfunction and our customers’ use of our Platform is interrupted, our
reputation could suffer, and our potential revenues could decline or be delayed while such defects are remedied. We may also be
subject to liability for the defects and malfunctions.
There
can be no assurance that, despite our testing, errors will not be found in our Platform or new releases, resulting in loss of
future revenues or delay in market acceptance, diversion of development resources, damage to our reputation, adverse litigation,
or increased service, any of which would have a material adverse effect upon our business, operating results and financial condition.
Software
failures, breakdowns in the operations of our servers and communications systems or the failure to implement system enhancements
could harm our business.
Our
success depends on the efficient and uninterrupted operation of our servers and communications systems. A failure of our network
or data gathering procedures could impede services and could result in the loss of PT and patients. While all of our operations
will have disaster recovery plans in place, they might not adequately protect us. Despite any precautions we take, damage from
fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins and similar events at our computer
facilities could result in interruptions in the flow of data to our servers and from our servers to our clients. In addition,
any failure by our computer environment to provide our required data communications capacity could result in interruptions in
our service. In the event of a server failure, we could be required to transfer our client data collection operations to an alternative
provider of server hosting services. Such a transfer could result in delays in our ability to deliver our products and services
to our clients.
Additionally,
significant delays in the planned delivery of system enhancements, improvements and inadequate performance of the systems once
they are completed could damage our reputation and harm our business. Long-term disruptions in the infrastructure caused by events
such as natural disasters, the outbreak of war, the escalation of hostilities and acts of terrorism, particularly involving cities
in which we have offices, could adversely affect our businesses. Although, we plan to carry property and business interruption
insurance for our business operations, our coverage might not be adequate to compensate us for all losses that may occur.
We
face risks related to the storage of customers’ and their end users’ confidential and proprietary information.
Our
Platform is designed to maintain the confidentiality and security of our patients’ confidential and proprietary data that
are stored on our server systems, which may include sensitive personal data. However, any accidental or willful security breaches
or other unauthorized access to these data could expose us to liability for the loss of such information, time-consuming and expensive
litigation and other possible liabilities as well as negative publicity. Techniques used to obtain unauthorized access or to sabotage
systems change frequently and generally are difficult to recognize and react to. We may be unable to anticipate these techniques
or implement adequate preventative or reactionary measures.
We
might incur substantial expense to further develop our Platform which may never become sufficiently successful.
Our
growth strategy requires the successful launch of our Platform. Although management will take every precaution to ensure that
our Platform will, with a high degree of likelihood, achieve commercial success, there can be no assurance that this will be the
case. The causes for failure of our Platform once commercialized can be numerous, including:
●
|
market
demand for our Platform proves to be smaller than we expect;
|
●
|
further
Platform development turns out to be costlier than anticipated or takes longer; our Platform requires significant adjustment
post commercialization, rendering the Platform uneconomic or extending considerably the likely investment return period; additional
regulatory requirements may increase the overall costs of the development; patent conflicts or unenforceable intellectual
property rights; and PTs and clients may be unwilling to adopt and/or use our Platform.
|
●
|
Compliance
with changing regulations concerning corporate governance and public disclosure may result in additional expenses.
|
We
are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a
timely manner, our business could be harmed, and our stock price could decline.
Rules
adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls
over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered
public accounting firm. The standards that must be met for management to assess the internal controls over financial reporting
as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed
standards.
We
expect to incur expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict
how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial
reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may
not be able to complete the assessment and remediation process on a timely basis. In addition, although attestation requirements
by our independent registered public accounting firm are not presently applicable to us, we could become subject to these requirements
in the future and we may encounter problems or delays in completing the implementation of any resulting changes to internal controls
over financial reporting. In the event that our Chief Executive Officer or Chief Financial Officer determine that our internal
control over financial reporting is not effective as defined under Section 404, we cannot predict how the market prices of our
shares will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.
These
and other new or changed laws, rules, regulations and standards are, or will be, subject to varying interpretations in many cases
due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided
by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance practices. Our efforts to comply with evolving laws, regulations
and standards are likely to continue to result in increased general and administrative expenses and a diversion of management
time and attention from revenue-generating activities to compliance activities. Further, compliance with new and existing laws,
rules, regulations and standards may make it more difficult and expensive for us to maintain director and officer liability insurance,
and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. Members of our board
of directors and our principal executive officer and principal financial officer could face an increased risk of personal liability
in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors
and executive officers, which could harm our business. We continually evaluate and monitor regulatory developments and cannot
estimate the timing or magnitude of additional costs we may incur as a result.
We
cannot be certain that we will obtain patents for our Platform and technology or that such patents will protect us from competitors.
We
believe that our success and competitive position will depend in part on our ability to obtain and maintain patents for our Platform,
which is both costly and time consuming. We still are in the process to evaluate the patent potentials of our Platform. The Patent
Office typically requires 12-24 months or more to process a patent application. There can be no assurance that any of our potential
patent applications will be approved. However, we have decided to launch our Platform without patent protection. There can be
no assurance that any potential patent issued or licensed to us will provide us with protection against competitive products,
protect us against changes in industry trends which we have may not have anticipated or otherwise protect the commercial viability
of our Platform, or that challenges will not be instituted against the validity or enforceability of any of our future patents
or, if instituted, that such challenges will not be successful. The cost of litigation to uphold the validity of a patent and
enforce it against infringement can be substantial. Even issued patents may later be modified or revoked by the Patent and Trademark
Office or in legal proceedings. Patent applications in the United States are maintained in secrecy until the patent issues and,
since publication of patents tends to lag behind actual discoveries, we cannot be certain that if we obtain patents for our product,
we were the first creator of the inventions covered by a pending patent applications or the first to file patent applications
on such inventions.
Liability
issues are inherent in the Healthcare industry and insurance is expensive and difficult to obtain, we may be exposed to large
lawsuits.
Our
business exposes us to potential liability risks, which are inherent in the Healthcare industry. While we will take precautions,
we deem to be appropriate to avoid liability suits against us, there can be no assurance that we will be able to avoid significant
liability exposure. Liability insurance for the Healthcare industry is generally expensive. We have obtained professional indemnity
insurance coverage for our Platform. There can be no assurance that we will be able to maintain such coverage on acceptable terms,
or that any insurance policy will provide adequate protection against potential claims. A successful liability claim brought against
us may exceed any insurance coverage secured by us and could have a material adverse effect on our results or ability to continue
our Platform.
We
depend upon reimbursement by third-party payers.
Substantially
all of our revenues are anticipated to be derived from private third-party PT clinics that gain their revenue to pay our licensing
fees from insurance payers. Initiatives undertaken by industry and government to contain healthcare costs affect the profitability
of our licensee clinics. These payers attempt to control healthcare costs by contracting with healthcare providers to obtain services
on a discounted basis. We believe that this trend will continue and may limit reimbursement for healthcare services. If insurers
or managed care companies from whom we receive substantial payments were to reduce the amounts paid for services, our profit margins
may decline, or we may lose PT licensees if they choose not to renew our contracts with these insurers at lower rates. In addition,
in certain geographical areas, our operations may be approved as providers by key health maintenance organizations and preferred
provider plans; failure to obtain or maintain these approvals would adversely affect our financial results. Although we created
a business plan that will enable us to achieve revenue based on current reimbursement policies, if our belief that the insurance
industry is poised for change, to offer more reimbursement for the services we seek to provide is not realized, we may not achieve
the success we predict and we may not be able to carry out all the plans we disclose herein related to telemedicine. Ultimately,
a shift in thinking and a willingness to adapt to new physical therapy telemedicine services and reimbursement thereof by healthcare
providers is needed for the successful integration of our PHZIO telemedicine Platform in mainstream healthcare environments.
We
will need to increase the size of our organization and may experience difficulties in managing growth.
At
present, we are a small company. We expect to experience a period of expansion in headcount, infrastructure and overhead and anticipate
that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant
added responsibilities on members of management, including the need to identify, recruit, maintain and integrate new managers.
Our future financial performance and its ability to compete effectively will depend, in part, on its ability to manage any future
growth effectively.
We
will need to increase the size of our organization and may experience difficulties in managing growth.
At
present, we are a small company. We expect to experience a period of expansion in headcount, infrastructure and overhead and anticipate
that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant
added responsibilities on members of management, including the need to identify, recruit, maintain and integrate new managers.
Our future financial performance and its ability to compete effectively will depend, in part, on its ability to manage any future
growth effectively.
Dependence
on Key Existing and Future Personnel
Our
success will depend, to a large degree, upon the efforts and abilities of our officers and key management employees. The loss
of the services of one or more of our key employees could have a material adverse effect on our operations. In addition, as our
business model is implemented, we will need to recruit and retain additional management and key employees in virtually all phases
of our operations. Key employees will require a strong background in our industry. We cannot assure that we will be able to successfully
attract and retain key personnel.
Currently,
our management’s participation in our business and operations is limited
To
date, we have been unable to offer cash compensation to our officers due to our lack of revenue. Accordingly, each of the Company’s
executive officers maintain jobs outside of their position at eWellness. Although each of our executive officers have prepared
to devote their efforts, on a full-time basis, towards our objectives once we can afford executive compensation commensurate with
that being paid in the marketplace, until such time, our officers will not devote their full time and attention to the operations
of the Company. None of our officers have committed a specific portion of their time or an approximate number of hours per week
in writing to the objectives of the company and no assurances can be given as to when we will be financially able to engage our
officers on a full-time basis and therefore, until such time, it is possible that the inability of such persons to devote their
full-time attention to the Company may result in delays in progress toward implementing our business plan.
We
operate in a highly competitive industry
Although
we are not aware of any other Distance Monitored Physical Therapy Telemedicine Program precisely like ours, and targeting our
specific population, we shall encounter competition from local, regional or national entities, some of which have superior resources
or other competitive advantages in the larger physical therapy space. Intense competition may adversely affect our business, financial
condition or results of operations. We may also experience competition from companies in the wellness space. These competitors
may be larger and more highly capitalized, with greater name recognition. We will compete with such companies on brand name, quality
of services, level of expertise, advertising, product and service innovation and differentiation of product and services. As a
result, our ability to secure significant market share may be impeded. Although we believe our PHZIO services will enable us to
service more patients than traditional physical therapy providers, if these more established offices or providers start offering
similar services to ours, their name recognition or experience may enable them to capture a greater market share.
Limited
product testing and operations
We
have built out the technology PHZIO Platform and video library necessary to execute our planned business strategy. Of course,
there may be other factors that prevent us from successfully marketing a product including, but not limited to, our limited cash
resources. Further, our proposed reimbursement plan and the eventual operating results could susceptible to varying interpretations
by scientists, medical personnel, regulatory personnel, statisticians and others, which may delay, limit or prevent our executing
our proposed business plan.
We
face substantial competition, and others may discover, develop, acquire or commercialize products before or more successfully
than we do
We
operate in a highly competitive environment. Our products compete with other products or treatments for diseases for which our
products may be indicated. Other healthcare companies have greater clinical, research, regulatory and marketing resources than
us. In addition, some of our competitors may have technical or competitive advantages for the development of technologies and
processes. These resources may make it difficult for us to compete with them to successfully discover, develop and market new
products.
We
depend upon the cultivation and maintenance of relationships with the physicians in our markets.
Our
success is dependent upon referrals from physicians in the communities that our PT licensees will service and their ability to
maintain good relations with these physicians and other referral sources. Physicians referring patients to their clinics are free
to refer their patients to other therapy providers or to their own physician owned therapy practice. If our PT licensees are unable
to successfully cultivate and maintain strong relationships with physicians and other referral sources, our business may decrease,
and our net operating revenues may decline.
We
also depend upon our ability to recruit and retain experienced PTs
Our
future revenue generation is dependent upon referrals from physicians in the communities our clinics serve, and our ability to
maintain good relations with these physicians. Our PT licensees are the front line for generating these referrals and we are dependent
on their talents and skills to successfully cultivate and maintain strong relationships with these physicians. If they cannot
recruit and retain our base of experienced and clinically skilled therapists, our business may decrease, and our net operating
revenues may decline.
Our
revenues may fluctuate due to weather
We
anticipate having a considerable number of PT licensees in locations in states that normally experience snow and ice during the
winter months. Also, a considerable number of our clinics may be located in states along the Gulf Coast and Atlantic Coast, which
are subject to periodic winter storms, hurricanes and other severe storm systems. Periods of severe weather may cause physical
damage to our facilities or prevent our staff or patients from traveling to our clinics, which may cause a decrease in our future
net operating revenues.
We
may incur closure costs and losses
The
competitive, economic or reimbursement conditions in the markets in which we operate may require us to reorganize or to close
certain clinical locations. In the event a clinic is reorganized or closed, we may incur losses and closure costs. The closure
costs and losses may include, but are not limited to, lease obligations, severance, and write-down or write-off of intangible
assets.
Certain
of our internal controls, particularly as they relate to billings and cash collections, are largely decentralized at our clinic
locations
Our
future PT licensees’ operations are largely decentralized and certain of our internal controls, particularly the processing
of billings and cash collections, occur at the clinic level. Taken as a whole, we believe our future internal controls for these
functions at our PT licensees clinical facilities will be adequate. Our controls for billing and collections largely depend on
compliance with our written policies and procedures and separation of functions among clinic personnel. We also intend to maintain
corporate level controls, including an audit compliance program, that are intended to mitigate and detect any potential deficiencies
in internal controls at the clinic level. The effectiveness of these controls to future periods are subject to the risk that controls
may become inadequate because of changes in conditions or the level of compliance with our policies and procedures deteriorates.
Risks
Related to Regulation
Our
products and related services may be subject to product liability legal claims, which could have an adverse effect on our business,
results of operations and financial condition.
Certain
of our products provide applications that relate to patient clinical information. Any failure by our products to provide accurate
and timely information concerning patients, their medication, treatment and health status, generally, could result in claims against
us which could materially and adversely impact our financial performance, industry reputation and ability to market new system
sales. In addition, a court or government agency may take the position that our delivery of health information directly, including
through licensed practitioners, or delivery of information by a third-party site that a consumer accesses through our websites,
exposes us to assertions of malpractice, other personal injury liability, or other liability for wrongful delivery/handling of
healthcare services or erroneous health information. We anticipate that in the future we will maintain insurance to protect against
claims associated with the use of our products as well as liability limitation language in our end-user license agreements, but
there can be no assurance that our insurance coverage or contractual language would adequately cover any claim asserted against
us. A successful claim brought against us in excess of or outside of our insurance coverage could have an adverse effect on our
business, results of operations and financial condition. Even unsuccessful claims could result in our expenditure of funds for
litigation and management time and resources.
Certain
healthcare professionals who use our Cloud-based products will directly enter health information about their patients including
information that constitutes a record under applicable law that we may store on our computer systems. Numerous federal and state
laws and regulations, the common law and contractual obligations, govern collection, dissemination, use and confidentiality of
patient-identifiable health information, including:
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state
and federal privacy and confidentiality laws;
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contracts
with clients and partners;
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state
laws regulating healthcare professionals;
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Medicaid
laws;
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the
HIPAA and related rules proposed by the Health Care Financing Administration; and
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Health
Care Financing Administration standards for Internet transmission of health data.
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HIPAA
establishes elements including, but not limited to, federal privacy and security standards for the use and protection of Protected
Health Information. Any failure by us or by our personnel or partners to comply with applicable requirements may result in a material
liability to us.
Although
we have systems and policies in place for safeguarding Protected Health Information from unauthorized disclosure, these systems
and policies may not preclude claims against us for alleged violations of applicable requirements. Also, third party sites and/or
links that consumers may access through our web sites may not maintain adequate systems to safeguard this information or may circumvent
systems and policies we have put in place. In addition, future laws or changes in current laws may necessitate costly adaptations
to our policies, procedures, or systems.
There
can be no assurance that we will not be subject to product liability claims, that such claims will not result in liability in
excess of our insurance coverage, that our insurance will cover such claims or that appropriate insurance will continue to be
available to us in the future at commercially reasonable rates. Such product liability claims could adversely affect our business,
results of operations and financial condition.
There
is significant uncertainty in the healthcare industry in which we operate, and we are subject to the possibility of changing government
regulation, which may adversely impact our business, financial condition and results of operations
.
The
healthcare industry is subject to changing political, economic and regulatory influences that may affect the procurement processes
and operation of healthcare facilities. During the past several years, the healthcare industry has been subject to an increase
in governmental regulation of, among other things, reimbursement rates and certain capital expenditures.
Recently
enacted public laws reforming the U.S. healthcare system may have an impact on our business. The Patient Protection and Affordable
Care Act (H.R. 3590; Public Law 111-148) (“PPACA”) and The Health Care and Education Reconciliation Act of 2010 (H.R.
4872) (the “Reconciliation Act”), which amends the PPACA (collectively the “Health Reform Laws”), were
signed into law in March 2010. The Health Reform Laws contain various provisions which may impact us and our patients. Some of
these provisions may have a positive impact, while others, such as reductions in reimbursement for certain types of providers,
may have a negative impact due to fewer available resources. Increases in fraud and abuse penalties may also adversely affect
participants in the health care sector, including us.
Various
legislators have announced that they intend to examine further proposals to reform certain aspects of the U.S. healthcare system.
Healthcare providers may react to these proposals, and the uncertainty surrounding such proposals, by curtailing or deferring
investments, including those for our systems and related services. Cost-containment measures instituted by healthcare providers
as a result of regulatory reform or otherwise could result in a reduction of the allocation of capital funds. Such a reduction
could have an adverse effect on our ability to sell our systems and related services. On the other hand, changes in the regulatory
environment have increased and may continue to increase the needs of healthcare organizations for cost-effective data management
and thereby enhance the overall market for healthcare management information systems. We cannot predict what effect, if any, such
proposals or healthcare reforms might have on our business, financial condition and results of operations.
As
existing regulations mature and become better defined, we anticipate that these regulations will continue to directly affect certain
of our products and services, but we cannot fully predict the effect now. We have taken steps to modify our products, services
and internal practices as necessary to facilitate our compliance with the regulations, but there can be no assurance that we will
be able to do so in a timely or complete manner. Achieving compliance with these regulations could be costly and distract management’s
attention and divert other company resources, and any noncompliance by us could result in civil and criminal penalties.
Developments
of additional federal and state regulations and policies have the potential to positively or negatively affect our business. Our
software is not anticipated to be considered a medical device by the FDA. Yet, if it were, it could be subject to regulation by
the U.S. Food and Drug Administration (“FDA”) as a medical device. Such regulation could require the registration
of the applicable manufacturing facility and software and hardware products, application of detailed record-keeping and manufacturing
standards, and FDA approval or clearance prior to marketing. An approval or clearance requirement could create delays in marketing,
and the FDA could require supplemental filings or object to certain of these applications, the result of which could adversely
affect our business, financial condition and results of operations.
We
may be subject to false or fraudulent claim laws.
There
are numerous federal and state laws that forbid submission of false information or the failure to disclose information in connection
with submission and payment of physician claims for reimbursement. In some cases, these laws also forbid abuse of existing systems
for such submission and payment. Any failure of our services to comply with these laws and regulations could result in substantial
liability including, but not limited to, criminal liability, could adversely affect demand for our services and could force us
to expend significant capital, research and development and other resources to address the failure. Errors by us or our systems
with respect to entry, formatting, preparation or transmission of claim information may be determined or alleged to be in violation
of these laws and regulations. Determination by a court or regulatory agency that our services violate these laws could subject
us to civil or criminal penalties, invalidate all or portions of some of our client contracts, require us to change or terminate
some portions of our business, require us to refund portions of our services fees, cause us to be disqualified from serving clients
doing business with government payers and have an adverse effect on our business.
We
are subject to the Stark Law, which may result in significant penalties.
Provisions
of the Omnibus Budget Reconciliation Act of 1993 (42 U.S.C. § 1395nn) (the “Stark Law”) prohibit referrals by
a physician of “designated health services” which are payable, in whole or in part, by Medicare or Medicaid, to an
entity in which the physician or the physician’s immediate family member has an investment interest or other financial relationship,
subject to several exceptions. Unlike the Fraud and Abuse Law, the Stark Law is a strict liability statute. Proof of intent to
violate the Stark Law is not required. Physical therapy services are among the “designated health services”. Further,
the Stark Law has application to the Company’s management contracts with individual physicians and physician groups, as
well as, any other financial relationship between us and referring physicians, including any financial transaction resulting from
a clinic acquisition. The Stark Law also prohibits billing for services rendered pursuant to a prohibited referral. Several states
have enacted laws similar to the Stark Law. These state laws may cover all (not just Medicare and Medicaid) patients. Many federal
healthcare reform proposals in the past few years have attempted to expand the Stark Law to cover all patients as well. As with
the Fraud and Abuse Law, we consider the Stark Law in planning our clinics, marketing and other activities, and believe that our
operations are in compliance with the Stark Law. If we violate the Stark Law, our financial results and operations could be adversely
affected. Penalties for violations include denial of payment for the services, significant civil monetary penalties, and exclusion
from the Medicare and Medicaid programs.
If
our products fail to comply with evolving government and industry standards and regulations, we may have difficulty selling our
products.
We
may be subject to additional federal and state statutes and regulations in connection with offering services and products via
the Internet. On an increasingly frequent basis, federal and state legislators are proposing laws and regulations that apply to
Internet commerce and communications. Areas being affected by these regulations include user privacy, pricing, content, taxation,
copyright protection, distribution, and quality of products and services. To the extent that our products and services are subject
to these laws and regulations, the sale of our products and services could be harmed.
We
incur significant costs as a result of operating as a public company and our management will have to devote substantial time to
public company compliance obligations.
The
Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission (“SEC”),
and the stock exchange, has imposed various requirements on public companies, including requiring changes in corporate governance
practices. Our management and other personnel will need to devote a substantial amount of time to these compliance requirements
and any new requirements that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may impose on public companies.
Moreover, these rules and regulations, along with compliance with accounting principles and regulatory interpretations of such
principles, have increased and will continue to increase our legal, accounting and financial compliance costs and have made and
will continue to make some activities more time-consuming and costly. For example, we expect these rules and regulations to make
it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept
reduced policy limits and coverage or incur substantial costs to maintain the same or similar coverage. These rules and regulations
could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board
committees, or as executive officers. We will evaluate the need to hire additional accounting and financial staff with appropriate
public company experience and technical accounting and financial knowledge. We estimate the additional costs we expect to be incurred
as a result of being a public company to be up to $500,000 annually.
Part
of the requirements as a public company will be to document and test our internal control procedures in order to satisfy the requirements
of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal
controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments.
The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and
react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain
a system of internal controls that is adequate to satisfy our reporting obligations as a public company.
Effective
internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system
of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal
executive officer and principal financial officer, or persons performing similar functions, and effected by our 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 generally accepted accounting principles.
We
cannot assure you that we will not, in the future, identify areas requiring improvement in our internal control over financial
reporting. We cannot assure that the measures we will take to remediate any areas in need of improvement will be successful or
that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue
our growth. If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to
fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject
us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative
effect on the market price for shares of our common stock.
Risks
Relating to Our Securities
There
is a limited market for our Common Stock, and there may never be, an active market for our Common Stock and we cannot assure you
that the Common Stock will remain liquid or that it will continue to be listed on a securities exchange.
Our
Common Stock is subject to quotation on the OTCQB market and trades under the symbol “EWLL.” An investor may find
it difficult to obtain accurate quotations as to the market value of the Common Stock and trading of our Common Stock may be extremely
sporadic. For example, several days may pass before any shares may be traded. A more active market for the Common Stock may never
develop. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law
on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently,
such regulations may deter broker-dealers from recommending or selling the Common Stock, which may further affect its liquidity.
This would also make it more difficult for us to raise additional capital.
Until
our Common Stock is listed on the NASDAQ or another stock exchange, of which there can be no assurance,we expect that our Common
Stock will continue to be eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system, or on the “pink
sheets,” where our stockholders may find it more difficult to dispose of shares or obtain accurate quotations as to the
market value of our Common Stock.
Our
Common stock is subject to the “Penny Stock” rules of the SEC and the trading market in our stock is limited, which
makes transactions in our stock cumbersome and may reduce the value of an investment.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for
the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price
of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules
require:
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That
a broker or dealer approve a person’s account for transactions in penny stocks; and
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The
broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity
of the penny stock to be purchased.
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In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
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Obtain
financial information and investment experience objectives of the person; and
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Make
a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
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The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission
relating to the penny stock market, which, in highlight form:
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Sets
forth the basis on which the broker or dealer made the suitability determination; and
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That
the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make
it more difficult for investors to dispose of our Common stock and cause a decline in the market value of our stock.
Disclosure
also must be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements must be
sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny
stocks.
Financial
Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability
to buy and sell our Common Stock.
In
addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other
information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced
securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend
that their customers buy our Common stock, which may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.
Our
stock is thinly traded, sale of your holding may take a considerable amount of time.
The
shares of our Common Stock are thinly-traded on the OTCQB Market, meaning that the number of persons interested in purchasing
our Common Stock at or near bid prices at any given time may be relatively small or non-existent. Consequently, there may be periods
of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which
has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share
price. We cannot give you any assurance that a broader or more active public trading market for our Common Stock will develop
or be sustained, or that current trading levels will be sustained. Due to these conditions, we can give you no assurance that
you will be able to sell your shares at or near bid prices or at all if you need money or otherwise desire to liquidate your shares.
Shares
eligible for future sale may adversely affect the market.
From
time to time, certain of our stockholders may be eligible to sell all or some of their shares of Common Stock by means of ordinary
brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations.
In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current
public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity
securities), current public information and notice requirements. Any substantial sales of our Common Stock pursuant to Rule 144
may have a material adverse effect on the market price of our Common Stock.
If
we fail to maintain effective internal controls over financial reporting, the price of our Common Stock may be adversely affected.
Our
internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the
disclosure of which may have an adverse impact on the price of our Common Stock. We are required to establish and maintain appropriate
internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established,
could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations.
In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions
that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors.
Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or
disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the
price of our Common Stock.
Our
share price could be volatile and our trading volume may fluctuate substantially.
The
price of our common shares has been and may in the future continue to be extremely volatile, with the sale price fluctuating from
a low of $0.01 to a high of $4.00 since trading began in 2016. Many factors could have a significant impact on the future price
of our common shares, including:
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our
inability to raise additional capital to fund our operations;
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our
failure to successfully implement our business objectives and strategic growth plans;
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compliance
with ongoing regulatory requirements;
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market
acceptance of our product;
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changes
in government regulations;
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general
economic conditions and other external factors; and
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actual
or anticipated fluctuations in our quarterly financial and operating results; and the degree of trading liquidity in our common
shares.
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Our
annual and quarterly results may fluctuate, which may cause substantial fluctuations in our Common Stock price.
Our
annual and quarterly operating results may in the future fluctuate significantly depending on factors including the timing of
purchase orders, new product releases by us and other companies, gain or loss of significant customers, price discounting of our
product, the timing of expenditures, product delivery requirements and economic conditions. Revenues related to our product are
required to be recognized upon satisfaction of all applicable revenue recognition criteria. The recognition of revenues from our
product is dependent on several factors, including, but not limited to, the terms of any license agreement and the timing of implementation
of our products by our customers.
Any
unfavorable change in these or other factors could have a material adverse effect on our operating results for a particular quarter
or year, which may cause downward pressure on our Common stock price. We expect quarterly and annual fluctuations to continue
for the foreseeable future.
We
are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.
We
have offered and sold our Common Stock to investors pursuant to certain exemptions from the registration requirements of the Securities
Act of 1933, as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is,
the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making
the offering. We have not received a legal opinion to the effect that any of our prior offerings were exempt from registration
under any federal or state law. Instead, we have relied upon the operative facts as the basis for such exemptions, including information
provided by investors themselves.
If
any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities
if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A comparable situation
prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption
from the registration or qualification provisions of such state statutes. If investors were successful in seeking rescission,
we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in
fact qualify for the exemptions upon which it has relied, we may become subject to significant fines and penalties imposed by
the SEC and state securities agencies.
The
availability of a large number of authorized but unissued shares of Common Stock may, upon their issuance, lead to dilution of
existing stockholders
.
We
are authorized to issue 400,000,000 shares of Common Stock, $0.001 par value per share, of which, as of July 20, 2018, 167,684,971
shares of Common stock were issued and outstanding. Additional shares may be issued by our board of directors without further
stockholder approval. The issuance of large numbers of shares, possibly at below market prices, is likely to result in substantial
dilution to the interests of other stockholders. In addition, issuances of large numbers of shares may adversely affect the market
price of our Common stock.
Our
Articles of Incorporation authorizes 20,000,000 shares of preferred stock, $0.001 par value per share of which 0 are outstanding.
The Board of Directors is authorized to provide for the issuance of unissued shares of preferred stock in one or more series,
and to fix the number of shares and to determine the rights, preferences and privileges thereof. Accordingly, the board of directors
may issue preferred stock which may convert into large numbers of shares of Common Stock and consequently lead to further dilution
of other shareholders.
We
have never paid cash dividends and do not anticipate doing so in the foreseeable future.
We
have never declared or paid cash dividends on our common shares. We currently plan to retain any earnings to finance the growth
of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition,
results of operations and capital requirements, as well as other factors deemed relevant by our board of directors.
The
Nevada Revised Statute contains provisions that could discourage, delay or prevent a change in control of our company, prevent
attempts to replace or remove current management and reduce the market price of our stock.
Provisions
in our articles of incorporation and bylaws may discourage, delay or prevent a merger or acquisition involving us that our stockholders
may consider favorable. For example, our certificate of incorporation authorizes our board of directors to issue up to ten million
shares of “blank check” preferred stock. As a result, without further stockholder approval, the board of directors
has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights,
preferred stockholders could make it more difficult for a third party to acquire us.
We
are also subject to the anti-takeover provisions of the NRS. Depending on the number of residents in the state of Nevada who own
our shares, we could be subject to the provisions of Sections 78.378 et seq. of the Nevada Revised Statutes which, unless otherwise
provided in the Company’s articles of incorporation or by-laws, restricts the ability of an acquiring person to obtain a
controlling interest of 20% or more of our voting shares. Our articles of incorporation and by-laws do not contain any provision
which would currently keep the change of control restrictions of Section 78.378 from applying to us.
We
are subject to the provisions of Sections 78.411 et seq. of the Nevada Revised Statutes. In general, this statute prohibits a
publicly held Nevada corporation from engaging in a “combination” with an “interested stockholder” for
a period of three years after the date of the transaction in which the person became an interested stockholder, unless the combination
or the transaction by which the person became an interested stockholder is approved by the corporation’s board of directors
before the person becomes an interested stockholder. After the expiration of the three-year period, the corporation may engage
in a combination with an interested stockholder under certain circumstances, including if the combination is approved by the board
of directors and/or stockholders in a prescribed manner, or if specified requirements are met regarding consideration. The term
“combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with affiliates
and associates, owns, or within three years did own, 10% or more of the corporation’s voting stock. A Nevada corporation
may “opt out” from the application of Section 78.411 et seq. through a provision in its articles of incorporation
or by-laws. We have not “opted out” from the application of this section.
Our
stock price and ability to finance may be adversely affected by our outstanding convertible securities and warrants.
Sales
of the shares of our Common Stock issuable upon exercise of warrants and upon conversion of our convertible securities, would
likely have a depressive effect on the market price of our Common Stock. Further, the existence of, and/or potential exercise
or conversion of all or a portion of these securities, create a negative and potentially depressive effect on our stock price
because investors recognize that they “over hang” the market at this time. As a result, the terms on which we may
obtain additional financing during the period any of these warrants or convertible securities remain outstanding may be adversely
affected by the existence of such warrants and convertible securities.
Our
publicly filed reports are subject to review by the SEC, and any significant changes or amendments required as a result of any
such review may result in material liability to us and may have a material adverse impact on the trading price of the Company’s
Common Stock.
The
reports of publicly traded companies are subject to review by the SEC from time to time for the purpose of assisting companies
in complying with applicable disclosure requirements, and the SEC is required to undertake a comprehensive review of a company’s
reports at least once every three years under the Sarbanes-Oxley Act of 2002. SEC reviews may be initiated at any time. We could
be required to modify, amend or reformulate information contained in prior filings as a result of an SEC review. Any modification,
amendment or reformulation of information contained in such reports could be significant and result in material liability to us
and have a material adverse impact on the trading price of the Company’s Common Stock.
USE
OF PROCEEDS
We
will not receive any proceeds from the sale of shares of our Common Stock by the Selling Stockholder. However, we will receive
proceeds from the sale of Capital Call Shares to Triton Funds LP. We will use these proceeds for general corporate and working
capital purposes and acquisitions or assets, businesses or operations or for other purposes that our board of directors, in its
good faith, deems to be in the best interest of the Company.
We
will pay for expenses of this offering, except that the Selling Stockholder will pay any broker discounts or commissions or equivalent
expenses and expenses of its legal counsel applicable to the sale of its shares.
DETERMINATION
OF OFFERING PRICE
The
Selling Shareholders may sell their shares in the over-the-counter market or otherwise, at market prices prevailing at the time
of sale, at prices related to the prevailing market price, or at negotiated prices. We will not receive any proceeds from the
sale of Common Stock by the Selling Shareholders.
DILUTION
The
sale of our Common Stock to Triton in accordance with the Equity Agreement dated June 21, 2018 will have a dilutive impact on
our stockholders. As a result, our net loss per share could decrease in future periods and the market price of our Common Stock
could decline. In addition, the lower our stock price is at the time we exercise our put option, the more shares of our Common
Stock we will have to issue to Triton pursuant to the Equity Agreement. If our stock price decreases during the pricing period,
then our existing stockholders would experience greater dilution.
Equity
Agreement with Triton Funds LP
On
June 21, 2018, we entered into an Equity Agreement with Triton. Pursuant to the terms of the Equity Agreement, Triton, an institutional
investor, committed to purchase up to $1,500,000 of our Common Stock until December 31, 2018 or until $1,500,000 of Capital Call
Shares have been sold to Triton. We may deliver a Capital Call Notice to Triton which states the number of shares of Common Stock
that we intend to sell to Triton on a date specified in such notice. The purchase price per share to be paid by Triton will be
the 75% of the of lowest trading prices of the Common Stock during the 5 trading days prior to the date on which the Capital Call
Notice was delivered to Triton.
The
number of shares of Common Stock subject to any Capital Call Notice, plus any shares of Common Stock then owned by the Investor,
shall not exceed the Beneficial Ownership Limitation of 9.99% outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable pursuant to a Capital Call Notice.
In
connection with the Equity Agreement with Triton, we also entered into a registration rights agreement with Triton, pursuant to
which we agreed to use our best efforts to file with the Securities and Exchange Commission a registration statement, covering
the resale of 16,569,000 shares of our Common Stock underlying the Equity Agreement with Triton.
The
16,569,000 shares being offered pursuant to this Prospectus represent 9.95% of the shares issued and outstanding, assuming that
the Selling Stockholders will sell all of the shares offered for sale, Triton has agreed to refrain from holding a number of shares
that would result in Triton owning more than 9.96 % of the then-outstanding shares of our Common Stock at any one time.
The
Equity Agreement with Triton is non-transferable and any benefits attached thereto may not be assigned.
At
an assumed purchase price of $0.06 (equal to 75% of the closing price of our Common Stock of $0.08 on July 20, 2018), we will
receive $994,140 in net proceeds, assuming the sale of all 16,569,000 shares of our Common Stock pursuant to the Equity Agreement
with Triton.
There
are substantial risks to investors as a result of the issuance of shares of our Common Stock under the Equity Agreement with Triton.
These risks include dilution of stockholders’ percentage ownership, significant decline in our stock price and our inability
to draw sufficient funds when needed.
Existing
stockholders of our Common Stock in the offering will experience an immediate increase in the net tangible book value per share
of our Common Stock. Our net tangible book value as of March 31, 2018, was ($3,276,967), or ($0.221) per share of our Common Stock
(based upon 148,447,813 shares of our Common Stock outstanding). Net tangible book value per share is equal to our total net tangible
book value, which is our total tangible assets less our total liabilities, divided by the number of shares of our outstanding
Common Stock. Increase per share equals the difference between the amount per share paid by purchasers of shares of Common Stock
in the rights offering and the net tangible book value per share of our Common Stock immediately after the rights offering.
Based
on the aggregate offering of a maximum of 16,569,000 shares and an assumed purchase price of $0.06 (equal to 75% of the closing
price of our Common Stock of $0.08 on July 20, 2018) and the application of the estimated $994,140 of net proceeds from the offering,
our pro forma net tangible book value as of March 31, 2018, would be approximately ($2,282,827) or ($0.127) per share. This represents
an immediate increase in pro forma net tangible book value to existing stockholders of $0.007 per share.
The
following table illustrates this per-share increase (assuming the offering of a maximum of 16,569,00 shares of Common Stock at
an assumed purchase price of $0.06 (equal to 75% of the closing price of our Common Stock of $0.08 on July 20, 2018):
Assumed
purchase price
|
|
$
|
0.06
|
|
Net
tangible book value per share prior to the rights offering
|
|
$
|
(0.019
|
)
|
Increase
per share attributable due to the rights offering
|
|
$
|
0.007
|
|
Pro
forma net tangible book value per share after the rights offering
|
|
$
|
(0.012
|
)
|
We
intend to sell Triton periodically our Common Stock under the Equity Agreement and Triton will, in turn, sell such shares to investors
in the market at the market price. This may cause our stock price to decline, which will require us to issue increasing numbers
of Common Shares to Triton to raise the same amount of funds, as our stock price declines.
The
proceeds received from any Capital Call Shares issued to Triton under the Equity Agreement will be used for general corporate
and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that our board of directors,
in its good faith deem to be in the best interest of the Company.
We
may have to increase the number of our authorized shares in order to issue the shares to Triton if we reach our current number
of authorized shares of Common Stock. Increasing the number of our authorized shares will require board and stockholder approval.
Accordingly, because our ability to draw down any amounts under the Equity Agreement with Triton is subject to a number of conditions,
there is no guarantee that we will be able to draw down any portion or all of the proceeds of $1,500,000 under the Equity Agreement
with Triton.
SELLING
SECURITY HOLDERS
This
Prospectus relates to the resale of up to 16,569,000 shares of the Common Shares, issuable to Triton, a Selling Stockholder pursuant
to our right to sell Capital Call Sharesto Triton under an Equity Agreement, dated June 21, 2018. The Equity Agreement permits
us to sellup to one million five hundred thousand dollars ($1,500,000) in shares of our Common Stock to Triton until December
31, 2018 or until $1,500,000 of Capital Call Shares have been called.
The
Selling Stockholder may offer and sell, from time to time, any or all of shares of our Common Stock to be sold to Triton under
the Equity Agreement dated June 21, 2018.
The
following table sets forth certain information regarding the beneficial ownership of shares of Common Stock by the Selling Stockholder
as of July 20, 2018 and the number of shares of our Common Stock being offered pursuant to this Prospectus. We believe that the
Selling Stockholder has sole voting and investment powers over its shares.
Because
the Selling Stockholder may offer and sell all or only some portion of the 16,569,000 shares of our Common Stock being offered
pursuant to this Prospectus, the numbers in the table below representing the amount and percentage of these shares of our Common
Stock that will be held by the Selling Stockholder upon termination of the offering are only estimates based on the assumption
that the Selling Stockholder will sell all of its shares of our Common Stock being offered in the offering.
The
Selling Stockholder has not had any position or office, or other material relationship with us or any of our affiliates over the
past three years.
To
our knowledge, the Selling Stockholder is not a broker-dealer or an affiliate of a broker-dealer. We may require the Selling Stockholder
to suspend the sales of the shares of our Common Stock being offered pursuant to this Prospectus upon the occurrence of any event
that makes any statement in this Prospectus or the related registration statement untrue in any material respect or that requires
the changing of statements in those documents in order to make statements in those documents not misleading.
Name
of Selling Stockholder
|
|
Shares
Owned by Selling Stockholder before the Offering
(1)
|
|
|
Total
Shares Offeredin the Offering
|
|
|
Number
of Shares to Be Owned by Selling Stockholder After the Offering and Percent of Total Issued and Outstanding Shares
(1)
|
|
|
|
|
|
|
|
|
|
#
of Shares
(2)
|
|
|
%
of Class
(2)
|
|
Triton
Funds LP
(3)(4)
|
|
|
0
|
|
|
|
16,569,000
|
|
|
|
0
|
|
|
|
*
|
|
*
Less than 1%
(1)
Beneficial ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or
investment power with respect to shares of Common Stock. Shares of Common Stock subject to options and warrants currently exercisable,
or exercisable within 60 days, are counted as outstanding for computing the percentage of the person holding such options or warrants
but are not counted as outstanding for computing the percentage of any other person.
(2)
We have assumed that the Selling Stockholder will sell all of the shares being offered in this offering.
(3)
Tyler Hoffman has the voting and dispositive power over the shares owned by Triton Funds LP.
(4)
As of July 20, 2018, Triton held 0 shares of our Common Stock pursuant to the Equity Agreement.
PLAN
OF DISTRIBUTION
This
Prospectus relates to the resale of up to 16,569,000 shares of the Common Shares, issuable to Triton, a Selling Stockholder pursuant
to our right to sell Capital Call Shares to Triton under an Equity Agreement, dated June 21, 2018, that we entered into with Triton.
The Equity Agreement permits us to sell up to one million five hundred thousand dollars ($1,500,000) in shares of our Common Stock
to Triton until December 31, 2018 or until $1,500,000 of Capital Call Shares have been called.
The
Equity Agreement with Triton is non-transferable.
At
an assumed purchase price under the Equity Agreement of $0.06 (equal to 75% of the closing price of our Common Stock of $0.08
on July 20, 2018), we will be able to receive up to $994,140 in net proceeds, assuming the sale of the entire 16,569,000Capital
Call Shares being registered hereunder pursuant to the Equity Agreement. At an assumed purchase price of $0.06 (equal to 75% of
the closing price of our Common Stock of $0.08 on July 20, 2018) under the Equity Agreement, we would be required to register
8,431,000 additional shares to obtain the balance of $1,500,000 under the Equity Agreement. Due to the floating offering price,
we are not able to determine the exact number of shares that we will issue under the Equity Agreement.
The
Selling Shareholders may, from time to time sell any or all of their shares of Common Stock on any market or trading facility
on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Shareholders
may use any one or more of the following methods when selling shares:
●
|
ordinary
brokerage transactions and transactions in which the broker-dealer solicits the purchaser;
|
●
|
block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal;
|
●
|
facilitate
the transaction;
|
●
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
|
●
|
an
exchange distribution in accordance with the rules of the applicable exchange;
|
●
|
privately
negotiated transactions;
|
●
|
broker-dealers
may agree with the Selling Shareholders to sell a specified number of such shares at a stipulated price per share;
|
●
|
a
combination of any such methods of sale; and
|
●
|
any
other method permitted pursuant to applicable law.
|
The
Selling Stockholder may also sell securities under Rule 144 under the Securities Act of 1933, if available, rather than under
this Prospectus.
Broker-dealers
engaged by the Selling Stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser)
in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction
not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction
a markup or markdown in compliance with FINRA IM-2440.
Triton
is an underwriter within the meaning of the Securities Act of 1933 and any broker-dealers or agents that are involved in selling
the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933 in connection with
such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933. We are required
to pay certain fees and expenses incurred by us incident to the registration of the securities.
The
Selling Stockholder will be subject to the Prospectus delivery requirements of the Securities Act of 1933 including Rule 172 thereunder.
The
resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities
laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and
is complied with.
Under
applicable rules and regulations under the Securities Exchange Act of 1934, any person engaged in the distribution of the resale
securities may not simultaneously engage in market making activities with respect to the Common Stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholder will be
subject to applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations thereunder, including Regulation
M, which may limit the timing of purchases and sales of securities of the Common Stock by the Selling Stockholder or any other
person. We will make copies of this Prospectus available to the Selling Stockholder and will inform it of the need to deliver
a copy of this Prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the
Securities Act of 1933).
DESCRIPTION
OF SECURITIES TO BE REGISTERED
General
We
are authorized to issue an aggregate number of 420,000,000 shares of capital stock, $0.001 par value per share, consisting of
20,000,000 shares of Preferred Stock and 400,000,000 shares of Common Stock.
Preferred
Stock
We
are authorized to issue 20,000,000 shares of Preferred Stock, $0.001 par value per share. As of July 16, 2018, none are issued
and outstanding.
Common
Stock
We
are authorized to issue 400,000,000 shares of Common Stock, $0.001 par value per share. As of July20, 2018, we had 167,684,971
shares of Common Stock issued and outstanding.
Each
share of Common Stock shall have one (1) vote per share for all purpose. Our Common Stock does not provide a preemptive, subscription
or conversion rights and there are no redemption or sinking fund provisions or rights. Our Common Stock holders are not entitled
to cumulative voting for election of Board of Directors.
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, our general economic
conditions, 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.
Warrants
As
of March 31, 2018, the Company had 8,753,179 warrants outstanding with a weighted average exercise price of $0.21.
Options
As
of March 31, 2018, the Company had 20,000,000 options outstanding with a weighted average exercise price of $0.26.
Transfer
Agent and Registrar
The
transfer agent of our Common Stock is VStock Transfer LLC, 18 Lafayette Place, Woodmere, NY 11598, (212) 828-8436.
INTEREST
OF NAMED EXPERTS AND COUNSEL
No
expert or counsel named in this Prospectus as having prepared or certified any part of this Prospectus or having given an opinion
upon the validity of the securities being registered or upon other legal matters in connection with the registration or Offering
of the Common Stock was employed on a contingency basis, or had, or is to receive, in connection with the Offering, a substantial
interest, direct or indirect, in the registrant. Nor was any such person connected with the registrant as a promoter, managing
or principal underwriter, voting trustee, director, officer, or employee.
Thomas
J. Craft, Jr., Esq., P.O. Box 4143, Tequesta FL 33469, will pass on the validity of the Common Stock being offered pursuant to
this Registration Statement.
The
audited financial statements for the years ended December 31, 2017 and 2016 included in this Prospectus and the Registration Statement
have been audited by Haynie & Company, an independent registered public accounting firm, to the extent and for the periods
set forth in their report appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such
report given upon the authority of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
filed this Registration Statement on Form S-1 with the SEC under the Act with respect to the Common Stock offered by Selling Shareholders
in this Prospectus. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement or the exhibits and schedules filed therewith. For further information with respect to
us and our Common Stock, please see the Registration Statement and the exhibits and schedules filed with the Registration Statement.
Statements contained in this Prospectus regarding the contents of any contract or any other document that is filed as an exhibit
to the Registration Statement are not necessarily complete, and each such statement is qualified in all respects by reference
to the full text of such contract or other document filed as an exhibit to the Registration Statement. The Registration Statement,
including its exhibits and schedules, may be inspected without charge at the public reference room maintained by the SEC, located
at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, and copies of all or any part of the Registration Statement may be obtained
from such offices upon the payment of the fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further information
about the public reference room. The SEC also maintains an Internet website that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the SEC. The address of the site is
www.sec.gov
.
DESCRIPTION
OF BUSINESS
This
Prospectus contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking
statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings,
revenue or other financial items; any statements of the plans, strategies and objections of management for future operations;
any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance;
any statements of belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking
statements may include the words “may,” “could,” “estimate,” “intend,” “continue,”
“believe,” “expect” or “anticipate” or other similar words. These forward-looking statements
present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the dates on which they are made.
Throughout
this Prospectus references to “we”, “our”, “us”, “eWellness”, “the Company”,
and similar terms refer to eWellness Healthcare Corporation and its wholly owned subsidiary.
Corporate
Background
eWellness
Healthcare Corporation (f/k/a Dignyte, Inc.), (the “eWellness”, “Company”, “we”, “us”,
“our”) was incorporated in the State of Nevada on April 7, 2011.
Recent
Developments
On
April 1, 2015, we entered into an Operating Agreement with Evolution Physical Therapy (“EPT”), a company owned by
our CEO, pursuant to which EPT operate our Platform and offers it to selected physical therapy patients of EPT. We will advance
capital requested by EPT for costs specifically associated with operating the Platform and associated physical therapy treatments.
On May 7, 2015, EPT inducted the first patient using our platform. The total (insurance reimbursed) monitored PHZIO visits in
2015 and 2016 was 1,928 visits that include: 2015: 699 patient visits (239 insurance reimbursed patient visits generating approximately
$13,500 in gross revenue) and in 2016: 1,229 patient visits generating $1,496 (approximately 26 insurance reimbursed visits).
These gross revenue figures were not sufficient to generate any gross sales for us. The average insurance reimbursement per PHZIO
session in 2015 and 2016 was $56 (excluding co-payments). The wellness goals of our program are to graduate at least 80% of inducted
patients through our 6-month program. Patients should expect to experience an average of a 20% reduction in BMI, a 4-inch reduction
in waist size, weight loss of at least 20 pounds, significant overall improvement in balance, coordination, flexibility, strength,
and lumbopelvic stability. Patients also should score better on Functional Outcomes Scales (Oswestry and LEFS), which indicates
improved functional activity levels due to reduced low back, knee and hip pain.
On
November 12, 2016, the Company entered into a Services Agreement with Bistromatics, Inc. (the “Bistromatics Agreement”),
a Company incorporated under the laws of Canada (“Bistromatics”). Pursuant to the Bistromatics Agreement, Bistromatics
will provide operational oversight of the Company’s PHZIO System including development, content editing, client on boarding,
clinic training, support & maintenance, billing, hosting and oversight and support of CRM and helpdesk system. The Company
has agreed to pay a monthly base fee of $50,000 monthly until Bistromatics has successfully signed and collected the first monthly
service fee for 100 Physical Therapy Clinics to start using our Platform. If and when Bistromatics provides the Company with evidence
of the 100 Physical Therapy Clinics, the monthly service fee will extend to $100,000. Bistromatics will have the ability to convert
any outstanding amounts that fall in arrears for 60 days into shares of our Common Stock at the same terms as the next round of
financing or the Company’s Common Stock market price, whichever is higher.
Investment
Agreement with Tangiers Global, LLC
On
February 10, 2017, we entered into an Investment Agreement with Tangiers Global, LLC (“Tangiers”). Pursuant to the
terms of the Investment Agreement, Tangiers committed to purchase up to $5,000,000 of our Common Stock over a period of up to
36 months. From time to time during the 36-month period commencing from the effectiveness of the registration statement, we may
deliver a put notice to Tangiers which states the number of shares of Common Stock that we intend to sell to Tangiers on a date
specified in the put notice. The maximum share number amount per notice must be no more than 200% of the average daily trading
volume of our Common Stock for the ten (10) consecutive trading days immediately prior to date of the applicable put notice and
such amount must not exceed an accumulative amount of $250,000. The minimum put amount is $5,000. The purchase price per share
to be paid by Tangiers will be the 80% of the of lowest trading prices of the Common Stock during the 5 trading days including
and immediately following the date on which put notice is delivered to Tangiers.
The
Company also issued fixed convertible promissory notes to Tangiers as follows: (i) a fixed convertible promissory note for the
principal sum of $100,000 convertible at $0.20 per share bearing an interest rate of 8% per annum maturing on September 10, 2017,
which convertible note was not funded; (ii) a fixed convertible promissory note for the principal sum of $275,000 convertible
at $0.20 per share bearing an interest rate of 8% per annum maturing on September 10, 2017, of which $137,500 was funded and which
convertible note and accrued interest as of the date of the Prospectus was fully converted; (iii) a fixed convertible promissory
note for the principal sum of $308,000 convertible at $0.20 per share bearing an interest rate of 8% per annum maturing on November
11, 2018 and 68,750 warrants exercisable at $0.25 and expiring in 2022. As of the date of this Prospectus, the above-referenced
convertible notesissued to Tangiers have been converted almost in their entirety, with only $6,160 in principal amount on one
note still outstanding as of the date of this Prospectus. The Company issued a total of 11,015,168shares of Common Stock to Tangiers
in connection with their conversion of $488,091 on convertible notes and accrued interest during the period from October 6, 2017
to July 6, 2018.
In
connection with the Investment Agreement with Tangiers, we filed a registration statement with the Securities and Exchange Commission,
covering the resale of 10,359,160 shares of our Common Stock.
The
registration statement was declared effective on June 7, 2017. To date, the Company has not “put” any shares to Tangiers
under the Investment Agreement.
The
Company and Nature of Business
eWellness
plans to generate revenue from Third Party Healthcare Administrators (“TPA”) employees, PTs and corporate wellness
licensees on a contractually recurring PHZIO session fee basis. Our PHZIO Platform is anticipated to transform the access, cost
and quality dynamics of PT delivery for the market participants. eWellness further believes any patient, employer, health plan
or healthcare professional interested in a better approach to PT is a potential PHZIO Platform user.
Our
PHZIO Platform completely disrupts the current in-clinic business model of the $30 billion PT industry. Innovators in other industries
have solved access, cost and quality inefficiencies through the implementation of technology platforms and business models that
deliver products and services on-demand and create new economies by connecting and empowering both consumers and businesses. We
have taken the same approach to solving the pervasive access, cost and quality challenges facing the current access to PT clinics.
eWellness’ underlying technology platform is complex, deeply integrated and purpose-built over the past four years for the
evolving PT marketplace. eWellness’ PHZIO Platform is highly scalable and can support substantial growth of third party
licensees. eWellness’ PHZIO Platform provides for broad interconnectivity between PT practitioners and their patients, uniquely
positioning the Company as a focal point in the rapidly evolving PT industry to introduce innovative, technology-based solutions,
such as remote patient monitoring, post-discharge treatment plan adherence and in-home care.
The
Company’s 5-Year Agreement with Endeavor Plus.
On October 19, 2017 eWellness executed a 5-year Comprehensive Physical
Therapy Services Agreement with Endeavor Plus Services, Inc. (“EPS”), a fast-growing healthcare plan administrator.
EPS projects having approximately 100,000 healthcare members in 2018. This level of sales will allow the Company to gain cash
flow positive operations during the second half of 2018. Additionally, if EPS is able to continue on their projected growth rate
over the next 12-18 months an additional 500,000 new members would be added. Endeavor Plus, Inc. (“EPI”), the parent
company of EPS, has taken the lead in a movement to assist small group employers to leave fully insured health plans and use partially
self-funded ERISA qualified health insurance plans that are new and innovative and embrace a new era of Consumer-Driven Health
Care Planning (CDHC). EPI’s mission is to bring about innovative changes using existing law and regulations to change the
traditional health insurance models to drive down healthcare costs while offering significantly better benefits to both small
and midsize group employers and their employees. This is accomplished further by having these employers and their employees to
participate in the Endeavor Plus Plan, a CDHC program with technology-driven health care programs that are affordable, manageable
and responsive to the demand for higher quality care with cost transparency, integrated health information and better provider
access and communication and better outcomes.
EPS/PHZIO
Marketing Plans.
eWellness and EPS intend to immediately commence system, sales and marketing integration, to position eWellness
to begin onboarding and treating EPS members in April 2018. EPS is a third-party administrator (TPA), which is an organization
that processes insurance claims or certain aspects of employee benefit plans for small and medium sized companies. EPS is projecting
to grow rapidly in the small group health insurance market which has annual premiums of over $384 billion. Approximately 84% of
this market is traditional full insurance. EPS is expected to grow rapidly by offering these small employers the ability to self-
insure through excellent plan design and reinsurance. The Company is excited to be chosen as their PT gatekeeper as well as wellness
program supplier. Our comprehensive PT & wellness programs and consulting services are anticipated to provide EPS with new
products that will: (1) build new sales channels that increase their current health insurance business, and (2) create new revenue
sources through the introduction of such products.
The
Company Partnership with LifeWallet (“LW”)
On February 22, 2018, the Company signed a Partnership Agreement to
co-market the Company’s PHZIO Platform with LW (https://www.lifewallet.com) which provides employers, communities and healthcare
professionals with a simple, consumer centric, integrated platform to assess the health of their population and monitor their
progress towards better health. LifeWallet™ is transforming the delivery of care and revolutionizing the health care to
wellness process with a consumer centric health platform and modern digital assistants that promote better outcomes. LW’s
employees are dedicated to making the best products on earth. LWt™ is creating a one of a kind technology region in the
south and has brought in developers from leading technology companies including Apple.
Concierge
PT Medical Service.
The Company will be provisioning to EPS and/or LW insureds a new and highly unique patient treatment protocol
that includes “white glove” concierge in-home or in-office PT assessments and digital care treatments to enhance the
medical treatment and help improve patient treatment outcomes. The Company will become the exclusive provider of “white
glove” concierge in-home or in-office PT assessments, digital physical therapy and a wellness program to the individuals
covered by EPS and or LW. The Company has been selected to be the gatekeeper for all EPS and or LW PT treatments. As the PT treatment
gatekeeper, the Company will conduct an online consultation with each patient to assess the complexity involved with the patient
presentation. From the online consultation, an in-home or in-office evaluation of the patient may be prescribed. Through this
initial evaluation, a plan of care will be designed for each patient that in most cases is anticipated to include digital therapy
sessions.
PreHabPT.
Any individuals covered by EPS and/or LW, who are seeking non-emergency orthopedic surgery shall first receive a concierge
online consultation, in-home or in-office PT therapy evaluation and will be prescribed a four to eight-week prehabpt.com exercise
program prior to any surgery. Another in-home or in-office PT evaluation will be made following surgery and a treatment plan will
be initiated. PreHabPT is up to an eight-week physician to patient pre-surgical (Prehab) digital therapeutic exercise treatment
system for patients that anticipate having total join replacement (knee, hip and or shoulder) or back surgeries.
PurePT.
PurePT
is a patient and independent PT digital treatment platform for connecting new patients to PT’s that are seeking to be treated
with our PHZIO treatment system. Patient program assessments can be made in the privacy of a patient’s home or office. PurePT
connects new patients to PT’s, particularly in states that have direct access rules where patient’s insurance will
reimburse for treatment without requiring a physician’s prescription. PurePT puts the patient first.
PHZIO
Comprehensive Wellness Program
Any EPS and/or LW insureds may, after an in-home or in-office PT assessment, enroll in a 6-month
comprehensive wellness program. The top line wellness goals of our PHZIO wellness exercise program is to graduate at least 60%
of inducted patients through our 6-month program. Patients should expect to experience an average of a 20% reduction in BMI, a
two-inch reduction in waist size, weight loss of at least 10 pounds, significant overall improvement in balance, coordination,
flexibility, strength and lumbopelvic stability. Patients also should score better on Functional Outcomes Scales (Oswestry and
LEFS) which indicates improved functional activity levels due to reduced low back, knee and hip pain.
The
Company’s PHZIO home PT exercise platform has been designed to disrupt the $30 billion PT and the $8 billion corporate wellness
industries. PHZIO re-defines the way PT can be delivered. PHZIO is the first real-time remote monitored one-to-many PT platform
for home use. Due to the real-time patient monitoring feature, the PHZIO Platform is insurance reimbursable by payers such as
Anthem Blue Cross and Blue Shield.
The
PHZIO Solution: A New PT Delivery System
●
|
SaaS
technology platform solution for providers bundling rehabilitation services and employer wellness programs: PTs are able to
evaluate and screen patients and calculate joint angles using drawing tool
|
●
|
First
real-time remote monitored one-to-many PT treatment platform for home use;
|
●
|
Ability
for PTs to observe multiple patients simultaneously in real-time;
|
●
|
Solves
what has been a structural problem and limitation in post-acute care practice growth.
|
●
|
PT
practices can experience 20% higher adherence and compliance rates versus industry standards; and
|
●
|
Tracking
to 30% increase in net income for a PT practice.
|
PHZIO
Evaluation
The
PT provider is able to connect in real time with a patient or employee to gather a history, observe posture, perform movement
and functional tests, assess joint range of motion, and instruct the patient on special tests. The provider is then able to educate
the patient on his/her condition using a screen sharing feature and develop a plan of care based on clinical findings and decisions.
A therapeutic exercise plan can be prescribed using PHZIO’s extensive exercise video library.
PHZIO
Treatment Session
The
image below illustrates a typical PHZIO treatment session from a patient’s point of view. There is communication between
patients and PTs conducted via audio, text and or video messaging. The patient is also able to examine form during the exercise
sessions. The monitoring PT is remotely monitoring the patient real-time from the PT office.
Patient
program adherence in 2016 and 2017 was nearly 85 percent due the real-time patient monitoring and the at-home use of the platform.
Now PT practices have a way to scale profitably using a technology platform that can help them grow beyond the limits of the typical
brick and mortar PT clinic.
The
Company’s initial PHZIO application is a 6-month exercise program for patients with back, knee or hip pain. The next two
platforms, released in the third quarter of 2016, include a total knee and hip replacement exercise program. These hip and knee
programs have been designed to be integrated into any hospital or medical group’s Medicare CMS bundled payment model for
post-acute care PT.
Our
PHZIO Platform enables patients to engage with live or on-demand video-based PT telemedicine treatments from their home or office.
Following a physician’s exam and prescription for PT to treat back, knee or hip pain, a patient can be examined by a PT
and, if found appropriate, inducted into the Company’s PHZIO program that includes a progressive 6-month telemedicine exercise
program (including monthly in-clinic check-ups). All PHZIO treatments are monitored by a licensed therapist that sees everything
the patient is doing while providing professional guidance and feedback in real-time. This ensures treatment compliance by the
patient, maintains the safety and integrity of the prescribed exercises, tracks patient metrics and captures pre-and post-treatment
evaluation data. PHZIO unlocks a host of potential for revolutionizing patient treatment models and directly links back to the
established brick and mortar PT clinic. This unique model enables any PT practice to be able to execute more patient care while
utilizing their same resources and creates more value than was ever before possible.
Our
PHZIO Platform, including design, testing, exercise intervention, follow-up, and exercise demonstration, has been developed by
accomplished Los Angeles based PT, Darwin Fogt, who currently serves as the Company’s CEO. Mr. Fogt has extensive experience
and education working with diverse populations from professional athletes to morbidly obese. He understands the most beneficial
exercise prescription to achieve optimal results and has had enormous success in motivating all patient types to stay consistent
in working toward their goals. Additionally, his methods have proven effective and safe as he demonstrates exercises with attention
to proper form to avoid injury. Mr. Fogt has established himself as a national leader in his field and has successfully implemented
progressive solutions to delivering PT. He has consulted with and been published by numerous national publications including
Runner’s
World
,
Men’s Health
,
Men’s Journal
, and various PT specific magazines. He has 13 plus years of
experience rehabilitating the general population, as well as professional athletes, Olympic gold medalists and celebrities. He
has bridged the gap between PT and fitness by opening Evolution Fitness, which uses licensed PTs to teach high intensity circuit
training fitness classes. He also founded one of the first exclusive prenatal and postnatal PT clinic in the country. Mr. Fogt
is a leader in advancing the profession to incorporate research-based methods and focus on not only rehabilitation but also wellness,
functional fitness, performance, and prevention. He can recognize that the national healthcare structure (federal and private
insurance) is moving toward a model of prevention and that the PT profession will take a larger role in providing wellness services
to patients.
Our
underlying technology platform is complex, deeply integrated and purpose-built for the evolving PT marketplace. Our PHZIO Platform
is highly scalable and can support substantial growth of third party licensees. Our PHZIO Platform provides for broad interconnectivity
between PT practitioners and their patients and, we believe, uniquely positions us as a focal point in the rapidly evolving PT
industry to introduce innovative, technology-based solutions, such as remote patient monitoring, post-discharge treatment plan
adherence and in-home care.
Background
on our PHZIO Technology
The
Company’s Chief Technology Officer (“CTO”), Curtis Hollister, a program developer and a content manager support
our PHZIO system. They are located in Ottawa Canada. The below noted chart contains information on our PHZIO System.
IP
and Licensing
We
have licensed our telemedicine platform from Bistromatics Inc., a company owned by our CTO, for perpetuity for any telemedicine
application in any market worldwide. The below noted chart highlights what we have built to date.
Our
PHZIO Platform
Our
PHZIO platform completely disrupts the current in-clinic business model of the $30 billion PT industry. Innovators in other industries
have solved access, cost and quality inefficiencies through the implementation of technology platforms and business models that
deliver products and services on-demand and create new economies by connecting and empowering both consumers and businesses. We
have taken the same approach to solving the pervasive access, cost and quality challenges facing the current access to PT clinics.
eWellness’ underlying technology platform is complex, deeply integrated and purpose-built over the past four years for the
evolving PT marketplace. eWellness’ PHZIO platform is highly scalable and can support substantial growth of third party
licensees. eWellness’ PHZIO platform provides for broad interconnectivity between PT practitioners and their patients, uniquely
positioning the Company as a focal point in the rapidly evolving PT industry to introduce innovative, technology-based solutions,
such as remote patient monitoring, post-discharge treatment plan adherence and in-home care.
The
PZHIO.COM Exercise Program
A
Monitored In-office & Telemedicine Exercise Program
: Our initial 6-month PHZIO exercise program has been designed to
provide patients, who are accepted into the program, with traditional one-on-one PT evaluations, re-evaluations (one to four weeks
throughout the PHZIO program depending on type of insurance), and after the conclusion of the program a Physical Performance Test.
These PTs are known as Induction & Evaluation PTs (“IEPTs”). All patient medical data, information and records
are retained in the files of the IEPT. The IEPT will also evaluate the progress of the patient’s participation in our PHZIO
program.
●
|
Physician
Diagnosis:
Following a physician’s diagnosis of a patient with non-acute back pain, who is also likely overweight
and pre-diabetic, a physician may prescribe the patient to participate in the eWellness PHZIO exercise program.
|
|
|
●
|
Enrollment
Process:
The accepted patients are assessed by a PT, located at a PT Licensee clinic and then enrolled in our PHZIO program
by going online to our PHZIO program virtual private network (“VPN”) and creating a login name and password. The
patient will then populate their calendar with planned times when they anticipate exercising. They will also be provided with
a free exercise ball, resistance stretch bands, stretch strap and yoga mat at induction.
|
|
|
●
|
Exercising
Begins:
The day after the patient receives the equipment, the patient will log on to our VPN at least 3 times per week,
to watch and follow the prescribed 40-minute on-line exercise program. The PHZIO Platform also allows two-way communication
(videoconferencing) with one of our licensee’s On-line PTs (“OLPT’s”), who is responsible for monitoring
on-line patients. The OLPT’s are also available to answer patient’s questions. When available the patients exercise
sessions are recorded and stored in our system as proof that they completed the prescribed exercises. There are 250 various
40-minute exercise videos that are viewed by our patients in successive order.
|
|
|
●
|
Driving
Patients to work out between 6:00am-9:30am 5 days per week:
Our PHZIO system has a calendar function so that patients
can schedule when they will login to our PHZIO system. This calendar enables a PT Licensee to better spread the load of patients
participating in any forty-minute on-line exercise program during our 15 hours of weekly operations, 6am through 9:30am Monday
through Friday are to most optimal hours for patient engagement. Also, if the patient is not on-line at the planned exercise
time, our system can send them an automated reminder, via text, voicemail and or e-mail messaging.
|
Trackable
Physical Therapy
.
The exercise PHZIO prescription and instruction will be delivered with a series of on-line videos
easily accessed by each patient on the internet. Each video will be approximately 40 minutes in length with exercises, which will
specifically address the common impairments associated with diabetes and/or obesity. Exercise programs will be able to be performed
within each patient’s own home or work location without requiring standard gym equipment. Each patient will be required
to log in to the system which will monitor performance automatically to ensure their compliance. Each patient will be required
to follow up with their referring physician and PT at designated intervals and metrics such as blood pressure, blood sugars, BMI,
etc. will be recorded to ensure success of the program.
Patient
Program Goals
.
Our initial PHZIO program was designed so that the average patient is targeted to lose 2 pounds
per week, totaling up to 48 pounds over the duration of the program to progress toward healthier defined BMI, reduction body fat
percentage by at least 8%, reduced reliance on medication for blood glucose regulation and dosage or frequency and a goal of at
least a 50% adherence to continuing the PHZIO program independently at conclusion of program.
Trackable
Video Exercise Program
. The On-Line PHZIO video content includes all aspects of wellness preventative care to ensure the
best results: cardiovascular training, resistance training, flexibility, and balance and stabilization; research studies on all
such distinct impairments have shown to provide effective treatment results. Each video integrates each of the four components
to guarantee a comprehensive approach to the wellness program, but each video will specifically highlight one of the four components.
All PHZIO video content can be viewed on all desktops, tablets, PC’s and MAC computers.
Specific
Video Programs
.
Each patient will receive a prescription for six months (26 week) of physical therapy and exercise that
is provided by viewing on-line programs produced by eWellness where the patient can do these exercises and stretching on their
own at least 3 days per week for at least 40 minutes. The PHZIO videos can be watched on a laptop or desktop computer and on IOS
and Android smart phones since the second quarter of 2017. To view the videos, the patient would log onto the PHZIO web-site and
would be directed to watch the appropriate video in sequence. As the patient is logged-in, the monitoring PT will be able to monitor
how often and if the entire video session was viewed. This data would be captured and sent weekly to the prescribing physician
and the monitoring PT for review. At all times, a licensed OLPT/PTA will have access to each patient utilizing the videos and
will be able to communicate with a patient via video-conferencing and/or instant messaging. This will help improve adherence to
the program as well as the success and safety of the patients’ treatments. A patient will also be instructed to walk or
ride a bike at least 30 minutes three days per week in addition to participating in our program.
If
the patient is not viewing the videos, then the prescribing physician and/or the monitoring PT would reach out to the patient
by telephone and/or e-mail to encourage the patient to keep up their physical fitness regime. After each series, the patient returns
for an office visit to the prescribing physician for blood tests, blood pressure and a weight management check- up as well as
a follow-up visit with the PT for assessment of the patient’s progress toward established goals.
Exercise
Patient Kits.
Most patients will receive a home exercise tool kit, which will include: an inflatable exercise ball, a
hand pump, a yoga mat, a yoga strap, and varying levels of resistance bands. Each of the PHZIO exercise videos will include exercises
that incorporate the items in the tool kit. By using a bare minimum of equipment, patients should be able to participate more
easily at home or at their workplace. Our estimated cost of the kit is $49, which we pay and factored into aPT licensees’
revenue stream and internal projections. The cost of the exercise kits may also be billed to the patients account.
Our
Cloud-based PHZIO System Design
.
Our CTO is currently a principal shareholder and operator of two video content
platform based businesses in Ottawa Canada that have built and own the intellectual property for various global corporate and
governmental projects having similar requirements as ours. Not only will his experience stand to significantly shorten our path
to service activation of our own program, but his industry contacts will provide immediate access to valuable resources. Because
of this access, initially all system maintenance, updates and upgrades of our PHZIO Platform will be made by him and a readily
available team of independent freelance consultants in Ottawa. Additionally, through his ownership in these video content platform
businesses, the Company did enter into an agreement with one of them to secure the rights to intellectual property completing
approximately 100% of the Company’s systems requirements at a total cost of $20,000. Our platform was built based on the
Zendesk® highly-scalable customer service application platform. Currently, all system maintenance, updates and upgrades will
be made by our CTO’s team in Ottawa.
Insurance/Reimbursement
Thus
far in the state of California our initial licensee has successfully gained reimbursement from Blue Cross, Blue Shield and CIGNA
insurance companies. The licensee receiver reimbursements that are equivalent to in-clinic patient reimbursements. For PT licensee
patients, whose insurance companies provide little or no reimbursement for Physical Therapy Telemedicine Reimbursement, they may
have higher co-payments for participating in the PHZIO program or be responsible to pay the full cost of such services.
Expansion
into other markets where telemedicine has high support.
On December 20, 2013, we executed a 25-year licensing agreement with
a London, Ontario based telemedicine company Physical Relief Telemedicine Health Care Services (“PRTHCS”), pursuant
to which we granted PRTHCS a limited, transferable right to use and promote our PHZIO Program within the province of Ontario;
additional Canadian territories may be added at the parties’ mutual discretion. PRTHCS has a known track-record in the telemedicine
industry in Canada. To date PRTHCS has been unsuccessful in licensing our PHZIO Platform to any Canadian based PT clinics.
Our
Planned Expansion into other States where Telemedicine has high support
.
The most common path being taken by states is
to cover telemedicine services in their Medicaid program. 42 states now provide some form of Medicaid reimbursement for telemedicine
services (mostly physician to physician consultations). More importantly 16 states have now expanded their definition of telemedicine
to include physical therapy and have also required that state and private insurance plans cover telemedicine services. Those 16
states with the broadest telemedicine policies include: Alaska, Georgia, Hawaii, Louisiana, Maine, Maryland, Michigan, Mississippi,
Missouri, Montana, New Mexico, Oklahoma, Oregon, Texas, Virginia and Vermont.
Company
Development Costs.
As of the date of this Report, we have spent approximately 40 months developing our unique business
model and our design for the Company’s automated website and systems for our PHZIO program. Over the course of the 40-month
development phase we expended approximately $2,831,284 in travel expenses, legal, consulting services and miscellaneous expenses.
Intellectual
Property
With
adequate funding, we anticipate the development of various Application and Pioneering Methods patent protect and Trademark protection
associated with our technology platform and unique physical therapy treatments.
REGULATIONS
AND HEALTHCARE REFORM
Numerous
federal, state and local regulations regulate healthcare services and those who provide them. Some states into which we may expand
have laws requiring facilities employing health professionals and providing health-related services to be licensed and, in some
cases, to obtain a certificate of need (that is, demonstrating to a state regulatory authority the need for, and financial feasibility
of, new facilities or the commencement of new healthcare services). Only one of the states in which we intend to roll out our
services requires a certificate of need for the operation of our physical therapy business functions. Our therapists however,
are required to be licensed, as determined by the state in which they provide services. Failure to obtain or maintain any required
certificates, approvals or licenses could have a material adverse effect on our business, financial condition and results of operations.
State
Legislation
Insurance
reimbursement for our PHZIO services is likely to improve in 2018 and beyond based upon current draft legislation in Congress
that seeks to significantly expand Medicare’s reimbursement for telemedicine services including for physical therapy. If
passed, this legislation would drive private healthcare insurers to also reimburse for physical therapy associated with telemedicine.
We have received authorization from the California State Board of Physical Therapy (“CSBPT”) that we could operate
our PHZIO Platform and bill patients’ insurance within the Association’s rules in the state of California.
On
July 21, 2017, bill SB 291 (now P.L.2017, c.117 ) became effective in New Jersey. The law establishes coverage of telemedicine
and telehealth services, both under New Jersey Medicaid and commercial health insurance plans. The law does not explicitly impose
a payment parity requirement (i.e., mandating that reimbursement for telemedicine and telehealth services be equal to reimbursement
rates for identical in-person services). Instead the law sets the in-person reimbursement rate as the maximum ceiling for telemedicine
and telehealth reimbursement rates.
On
January 17, 2018 an amendment (“SB 1315”) to the New Jersey Physical Therapy Licensing Act of 1983 (“PT Licensing
Act”), became effective. This law expands the scope of practice of PTs to include: identification of balance disorders;
wound debridement and care; utilization review; screening, examination, evaluation, and application of interventions for the promotion,
improvement, and maintenance of fitness, health, wellness, and prevention services in populations of all ages exclusively related
to physical therapy practice.
Stark
Law
Provisions
of the Omnibus Budget Reconciliation Act of 1993 (42 U.S.C. § 1395nn) (the “Stark Law”) prohibit referrals by
a physician of “designated health services” which are payable, in whole or in part, by Medicare or Medicaid, to an
entity in which the physician or the physician’s immediate family member has an investment interest or other financial relationship,
subject to several exceptions. Unlike the Fraud and Abuse Law, the Stark Law is a strict liability statute. Proof of intent to
violate the Stark Law is not required. Physical therapy services are among the “designated health services”. Further,
the Stark Law has application to the Company’s management contracts with individual physicians and physician groups, as
well as, any other financial relationship between us and referring physicians, including any financial transaction resulting from
a clinic acquisition. The Stark Law also prohibits billing for services rendered pursuant to a prohibited referral. Several states
have enacted laws like the Stark Law. These state laws may cover all (not just Medicare and Medicaid) patients. Many federal healthcare
reform proposals in the past few years have attempted to expand the Stark Law to cover all patients as well. As with the Fraud
and Abuse Law, we consider the Stark Law in planning our clinics, marketing and other activities, and believe that our operations
are in compliance with the Stark Law. If we violate the Stark Law, our financial results and operations could be adversely affected.
Penalties for violations include denial of payment for the services, significant civil monetary penalties, and exclusion from
the Medicare and Medicaid programs.
HIPAA
To
further combat healthcare fraud and protect patient confidentially, Congress included several anti-fraud measures in the Health
Insurance Portability and Accountability Act of 1996 (“HIPAA”). HIPAA created a source of funding for fraud control
to coordinate federal, state and local healthcare law enforcement programs, conduct investigations, provide guidance to the healthcare
industry concerning fraudulent healthcare practices, and establish a national data bank to receive and report final adverse actions.
HIPAA also criminalized certain forms of health fraud against all public and private insurers. Additionally, HIPAA mandates the
adoption of standards regarding the exchange of healthcare information to ensure the privacy and electronic security of patient
information and standards relating to the privacy of health information. Sanctions for failing to comply with HIPAA include criminal
penalties and civil sanctions. In February of 2009, the American Recovery and Reinvestment Act of 2009 (“ARRA”) was
signed into law. Title XIII of ARRA, the Health Information Technology for Economic and Clinical Health Act (“HITECH”),
provided for substantial Medicare and Medicaid incentives for providers to adopt electronic health records (“EHRs”)
and grants for the development of health information exchange (“HIE”). Recognizing that HIE and EHR systems will not
be implemented unless the public can be assured that the privacy and security of patient information in such systems is protected,
HITECH also significantly expanded the scope of the privacy and security requirements under HIPAA. Most notable are the new mandatory
breach notification requirements and a heightened enforcement scheme that includes increased penalties, and which now apply to
business associates as well as to covered entities. In addition to HIPAA, many states have adopted laws and/or regulations applicable
in the use and disclosure of individually identifiable health information that can be more stringent than comparable provisions
under HIPAA.
We
believe that our current business operations are fully compliant with applicable standards for privacy and security of protected
healthcare information. We cannot predict what negative effect, if any, HIPAA/HITECH or any applicable state law or regulation
will have on our business.
Other
Regulatory Factors
Political,
economic and regulatory influences are fundamentally changing the healthcare industry in the United States. Congress, state legislatures
and the private sector continue to review and assess alternative healthcare delivery and payment systems. Based upon newly finalized
FDA rules, we believe that our PHZIO Platform is exempt from Federal Drug Administration (“FDA”) regulation. Yet,
in the unlikely event that these rules change in the future, the FDA could then require us to seek 510K approvals for our on-line
services that could create delays in provisioning our PHZIO services. (See FDA ruling noted below) Also, potential alternative
approaches could include mandated basic healthcare benefits, controls on healthcare spending through limitations on the growth
of private health insurance premiums, the creation of large insurance purchasing groups, and price controls. Legislative debate
is expected to continue in the future and market forces are expected to demand only modest increases or reduced costs. For instance,
managed care entities are demanding lower reimbursement rates from healthcare providers and, in some cases, are requiring or encouraging
providers to accept capitated payments that may not allow providers to cover their full costs or realize traditional levels of
profitability. We cannot reasonably predict what impact the adoption of any federal or state healthcare reform measures or future
private sector reform may have on our business.
On
September 25, 2013, the FDA issued Finalized Guidance of medical mobile applications (“Apps”). The FDA has issued
a ruling on Apps that may meet the definition of a medical device, but they have determined that they will not exercise enforcement
on these Apps. The Guidance contains an appendix that provides examples of mobile apps that MAY meet the definition of medical
device but for which FDA intends to exercise enforcement discretion. These mobile apps may be intended for use in the diagnosis
of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease. Even though these mobile apps
may meet the definition of medical device, the FDA intends to exercise enforcement discretion for these mobile apps because they
pose lower risk to the public. The FDA understands that there may be other unique and innovative mobile apps that may not be covered
in this list that may also constitute healthcare related mobile apps. This list is not exhaustive; it is only intended to provide
clarity and assistance in identifying the mobile apps that will not be subject to regulatory requirements at this time. Based
on our understanding of the Guidance, although there can be no guarantee, we believe our PHZIO Platform will not be subject to
regulatory requirements because such services seem to fall within the statutory examples.
FDA
Ruling: Examples of Mobile App’s which it Intends to Exclude from Regulation
On
September 25, 2013, the FDA issued Finalized Guidance of medical mobile applications (“Apps”). The FDA has issued
a ruling on Apps that may meet the definition of a medical device, but they have determined that they will not exercise enforcement
on these Apps. The Guidance contains an appendix that provides examples of mobile apps that MAY meet the definition of medical
device but for which FDA intends to exercise enforcement discretion. These mobile apps may be intended for use in the diagnosis
of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease. Even though these mobile apps
may meet the definition of medical device, the FDA intends to exercise enforcement discretion for these mobile apps because they
pose lower risk to the public. The FDA understands that there may be other unique and innovative mobile apps that may not be covered
in this list that may also constitute healthcare related mobile apps. This list is not exhaustive; it is only intended to provide
clarity and assistance in identifying the mobile apps that will not be subject to regulatory requirements at this time. Based
on our understanding of the Guidance, although there can be no guarantee, we believe our PHZIO platform will not be subject to
regulatory requirements because such services seem to fall within the statutory examples.
Employees
As
of December 31, 2017, we had 4 employees and various consultants. We utilize the services of consultants for safety testing, regulatory
and legal compliance, and other services.
Legal
Proceedings
On
February 14, 2017, eWellness Healthcare Corporation, a Nevada corporation with offices located in California (the “Registrant”)
was served by a complaint filed by Rodney Schoemann (“Schoemann”) in the State of Louisiana. The lawsuit alleges that
the Registrant is indebted to Schoemann under a promissory note (the “Schoemann Note”) stemming from four loans to
the Registrant in the last 20 months amounting to $75,500 in total original principal bearing interest at 12% per annum, of which
$45,202 has been repaid. Nevertheless, Schoemann claims in his lawsuit that, because of alleged defaults and extensions of the
Schoemann Note, the Registrant is now indebted in the amount of $253,677 inclusive of interest and penalties at an effective rate
exceeding 70% per annum, far in excess of the maximum rate allowable in California or Louisiana. The Registrant and its counsel
have determined that: (i) Schoemann is not a licensed lender in the State of California, where the loan was made and the $75,500
was deposited and therefore was not permitted under California law to make loans in the State; (ii) the interest rate Schoemann
is seeking to collect is usurious and therefore interest claimed in the lawsuit is neither collectible nor enforceable. The Registrant
and counsel are of the opinion that the Schoemann suit is wholly without merit and the rules of diversity of jurisdiction apply.
Furthermore, we believe that the action should be removed from Louisiana state court to the United States Federal District Court
in Baton Rouge, LA, where California law should be applied.
On
October 19, 2017 Schoemann and his counsel motioned the United States District Court, State of Louisiana, to dismiss the unlicensed
lender assertion by the Company.
On
January 19, 2018 the U.S. District Court, Louisiana ruled in favor of the Company that the unlicensed lender assertion made by
the Company and counsel was to proceed in a matter brought before the court by note holder Rodney Schoeman on January 24, 2017.
The Registrant and counsel continue to be of the opinion that the Schoemann suit is wholly without merit.
On
June 20, 2018, the Company and Schoemann executed a settlement agreement in which the Company agreed to issue 4,000,000 shares
of common stock for the cancellation of the debt and accrued interest and all warrants issued with the debt.
Additionally,
from time to time, we may become a party to litigation matters involving claims against us. Although we have not received any
other notice that any proceeding or enforcement action has been instituted as of the date of this filing, as further explained
elsewhere in this filing, the final comment received from the SEC regarding the Form 8-K that we initially filed on May 6, 2014,
was that they were terminating their review of that filing because they continued to have concerns about certain of the issues
raised, specifically a Rule 419 violation, that they could not resolve and were going to take further steps they deem appropriate.
Please refer to the related discussion in Risk Factors
“We may be subject to liability for failure to comply with
Rule 419 under the Securities Act”
and Management’s Discussion and Analysis of Financial Condition and Results
of Operations, “Contingencies.”
Transfer
Agent
The
transfer agent of the Company’s stock is VStock Transfer LLC, 18 Lafayette Place, Woodmere, NY 11598, (212) 828-8436.
DESCRIPTION
OF PROPERTY
Our
corporate office is located in Culver City, California. We lease 150 square feet for $500 per month from Evolution Physical Therapy,
a company owned by our CEO and we believe that these facilities will be sufficient for the next twelve months. (See “Related
Party Transactions” below).
LEGAL
PROCEEDINGS
Additionally,
from time to time, we may become a party to litigation matters involving claims against us. Although we have not received any
other notice that any proceeding or enforcement action has been instituted as of the date of this filing, as further explained
elsewhere in this filing, the final comment received from the SEC regarding the Form 8-K that we initially filed on May 6, 2014,
was that they were terminating their review of that filing because they continued to have concerns about certain of the issues
raised, specifically a Rule 419 violation, that they could not resolve and were going to take further steps they deem appropriate.
Please refer to the related discussion in Risk Factors
“We may be subject to liability for failure to comply with
Rule 419 under the Securities Act”
and Management’s Discussion and Analysis of Financial Condition and Results
of Operations, “Contingencies.”
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
Our
Common Stock became subject to quotation on the OTCQB Market under the symbol EWLL in 2016, an inter-dealer automated quotation
system for equity securities not included on The Nasdaq Stock Market. Quotation of the Company’s securities on the OTCQB
Market limits the liquidity and price of the Company’s Common Stock more than if the Company’s shares of Common Stock
were listed on The Nasdaq Stock Market or a national exchange. For the periods indicated, the following table sets forth the high
and low bid prices per share of Common Stock. The below prices represent inter-dealer quotations without retail markup, markdown,
or commission and may not necessarily represent actual transactions.
|
|
Price
Range
|
|
Period
|
|
High
|
|
|
Low
|
|
Year Ended December 31, 2017:
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.16
|
|
|
$
|
0.09
|
|
Second Quarter
|
|
$
|
0.12
|
|
|
$
|
0.06
|
|
Third Quarter
|
|
$
|
0.19
|
|
|
$
|
0.06
|
|
Fourth Quarter
|
|
$
|
0.18
|
|
|
$
|
0.09
|
|
Year Ending December 31, 2018:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
0.14
|
|
|
$
|
0.08
|
|
Second Quarter
|
|
$
|
0.10
|
|
|
$
|
0.07
|
|
Third Quarter (through July 20, 2018)
|
|
$
|
0.08
|
|
|
|
0.07
|
|
Record
Holders.
As of July 20, 2018, there were approximately 144 record holders of our Common Stock.
As
of March 31, 2018, there are 28,753,179 outstanding options or warrants to purchase or other instruments convertible into common
equity of the Company.
Dividend
Policy.
We have neither declared nor paid any cash dividends on either preferred or Common Stock. For the foreseeable future,
we intend to retain any earnings to finance the development and expansion of our business and do not anticipate paying any cash
dividends on our preferred or Common Stock. Any future determination to pay dividends will be at the discretion of the Board of
Directors and will be dependent upon then existing conditions, including its financial condition, results of operations, capital
requirements, contractual restrictions, business prospects, and other factors that the Board of Directors considers relevant.
Securities
Authorized for Issuance under Equity Compensation Plans
:
On
July 31, 2015, our Board of Directors approved the
2015 Stock Option Plan
. The following is a brief description of certain
key features of the 2015 Plan, the full text of which is attached as Exhibit 10.7. This summary is qualified in its entirety by
reference to Exhibit 10.7.
General
.
The 2015 Plan provides for any option, stock appreciation right, restricted stock, restricted stock unit, performance award, dividend
equivalent, or other stock-based award to employees, officers, directors and consultants of the Company and its affiliates.
Administration
.
The 2015 Plan shall be administered and interpreted by the Board of Directors or by a Committee appointed by the Board of Directors.
If the Board of Directors administers the 2015 Plan, references to the “Committee” shall be deemed to refer to the
Board of Directors. To the extent permitted by applicable law, the Committee may at any time delegate to one or more officers
or directors of the Company some or all of its authority over the administration of the 2015 plan. Such delegation may be revoked
at any time.
The
Committee has the authority to administer and interpret the 2015 Plan, to determine the employees to whom awards will be made
under the 2015 Plan and, subject to the terms of the 2015 Plan, the type and size of each award, the terms and conditions for
vesting, cancellation and forfeiture of awards and the other features applicable to each award or type of award. The Committee
may accelerate or defer the vesting or payment of awards, cancel or modify outstanding awards, waive any conditions or restrictions
imposed with respect to awards of the stock issued pursuant to awards and make any and all other determinations that it deems
appropriate with respect to the administration of the 2015 Plan, subject to the minimum vesting requirements of the 2015 Plan,
the provisions of Sections 162(m) of the Internal Revenue Code and any applicable laws or exchange rules.
Eligibility
.
All employees, officers, directors and consultants are eligible to receive awards under the 2015 Plan. The definition of “employee”
means any person including officers and directors of the Company or a parent or subsidiary of the Company. Neither service as
a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the
Company. Participation is discretionary — awards are subject to approval by the Committee. Pursuant to the 2015 Plan, the
Company is permitted to grant non-statutory stock options, restricted stock, stock appreciation rights, performance shares, restricted
stock units and other stock-based awards to the employees, directors and consultants. Incentive stock options are not issuable
under the 2015 Plan.
Shares
Subject to the Plan
. On December 9, 2016, the Board of Directors agreed to increase the number of Shares available for granting
awards under the 2015 Plan to 20,000,000.
Types
of Awards
. The following types of awards may be made under the 2015 Plan. All of the awards described below are subject to
the conditions, limitations, restrictions, vesting and forfeiture provisions determined by the Committee, in its sole discretion,
subject to such limitations as are provided in the plan. The number of shares subject to any award is also determined by the Committee,
in its discretion.
Fair
Market Value
. Fair Market Value shall mean, with respect to any property (including, without limitation, any shares or other
securities), the fair market value of such property determined by such methods or procedures as shall be established from time
to time by the Board or the Committee.
Option
. Option shall mean a non-qualified stock option.
Stock
Appreciation Rights
. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive,
upon exercise thereof, the excess of (1) the Fair Market Value of one Share on the date of exercise or, if the Board or the Committee
shall so determine in the case of any such right other than one related to any Incentive Stock Option, at any time during a specified
period before or after the date of exercise over (2) the grant price of the right as specified by the Board or the Committee.
Subject to the terms of the Plan, the grant price, term, methods of exercise, methods of settlement, and any other terms and conditions
of any Stock Appreciation Right shall be as determined by the Board or the Committee. The Board and the Committee may impose such
conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.
Restricted
Stock
. A restricted stock award is an award of outstanding shares of Company Common Stock that does not vest until after a
specified period of time, or satisfaction of other vesting conditions as determined by the Committee, and which may be forfeited
if conditions to vesting are not met. Participants generally receive dividend payments on the shares subject to their award during
the vesting period (unless the awards are subject to performance-vesting criteria) and are also generally entitled to indicate
a voting preference with respect to the shares underlying their awards. All shares underlying outstanding restricted stock awards
are voted proportionately to the restricted shares for which voting instructions are received.
Restricted
Stock Units
. Restricted Stock Units shall consist of a Restricted Stock, Performance Share or Performance Unit Award that
the Administrator in its sole discretion permits to be paid out in installments or on a deferred basis, in accordance with rules
and procedures established by the Administrator.
Performance
Awards
. Performance Awards may be granted to Employees, directors and consultants at any time and from time to time, as will
be determined by the Administrator. The Administrator may set performance objectives based upon the achievement of Company-wide,
divisional or individual goals, applicable federal or state laws, or any other basis determined by the Administrator in its discretion.
Dividend
Equivalents
. The Board and the Committee are hereby authorized to grant Awards under which the holders thereof shall be entitled
to receive payments equivalent to dividends or interest with respect to a number of Shares determined by the Board or the Committee,
and the Board and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares
or otherwise reinvested. Subject to the terms of the 2015 Plan, such Awards may have such terms and conditions as the Board or
the Committee shall determine.
Other
Stock-based Awards
. The Board and the Committee are authorized to grant such other Awards that are denominated or payable
in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities
convertible into Shares), as are deemed by the Board or the Committee to be consistent with the purposes of the Plan, provided,
however, that such grants must comply with applicable law. Subject to the terms of the 2015 Plan, the Board or the Committee shall
determine the terms and conditions of such Awards.
Duration.
The Board may amend, alter, suspend, discontinue, or terminate the Plan, including, without limitation, any amendment, alteration,
suspension, discontinuation, or termination that would impair the rights of any Participant, or any other holder or beneficiary
of any Award theretofore granted, without the consent of any share owner, participant of the 2015 Plan, another holder or beneficiary
of an Award, or other Person. No Award shall be granted under the Plan more than 10 years after August 1, 2015. However, unless
otherwise expressly provided in an applicable Award Agreement, any Award theretofore granted may extend beyond such date, and
the authority of the Board and the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award, or to
waive any conditions or rights under any such Award, and the authority of the Board to amend the Plan, shall extend beyond such
date.
As
of March 31, 2018, the Company granted a total of 20,000,000 stock options at an average exercise price of $0.26.
Issuance
of Unregistered Securities During the Last Three Years
Sales
of Unregistered Securities in 2015:
On
January 24, 2015, we extended the term of an outstanding consulting and service agreement, pursuant to which we issued 400,000
shares valued at $40,000 and 400,000 callable Common Stock purchase warrants at a strike price of $0.35 per share.
On
February 23, 2015, we entered into a one-year agreement with a consultant in connection with certain corporate finance, investor
relations and related business matters and issued 60,000 shares valued at $6,000.
On
April 9, 2015, we issued $270,080 Notes (including an aggregate of $123,980 that was converted from certain other outstanding
notes, including accrued interest, and future contractual cash consulting fees) that are initially convertible into 771,657 shares
of our Common Stock, pursuant to a private financing; we sold that same amount of Series A Senior Convertible Redeemable Notes
convertible into shares of the Company’s Common Stock, at $0.35 per share and Series A Warrants, all pursuant to separate
Securities Purchase Agreements entered into with each investor. The Warrants are exercisable to purchase up to 771,657 shares
of Common Stock.
On
May 30, 2015, the Company received $25,000 in exchange for a 90-day promissory note at an interest rate of 5% per annum. As an
inducement for this promissory note, the Company issued 150,000 warrants to purchase Company Common Stock at $.35 per share.
On
May 20, 2015, the Company issued 250,000 warrants to purchase Common Stock at $.35 per share in connection with a financial advisory
services agreement.
On
May 20, 2015, the Company signed an strategic advisory services agreement pursuant to which the Company issued 250,000 warrants
to purchase Common Stock at $.35 per share.
On
July 14, 2015, the Company issued 250,000 shares of Common Stock valued at $.35 per share for conversion of $87,500 of convertible
debt.
On
July 15, 2015, the Company received $18,000 in exchange for a 90-day promissory note at an interest rate of 5% per annum. As an
inducement for this promissory note, the Company issued 150,000 warrants to purchase Company Common Stock at $.80 per share.
On
August 19, 2015, the Company issuance 96,000 shares valued at $.35 per share for the conversion of $33,600 of convertible debt.
On
August 26, 2015, the Company extended the term of the $25,000 promissory note issued on May 30, 2015 that was originally due on
August 28, 2015 to October 23, 2015. As consideration for the extension the Company agreed to an annual interest rate of 12% retroactive
to the original date of the note and issued 150,000 warrants to purchase Company Common Stock at $.80 per share.
On
September 10, 2015, the Company authorized the issuance of 663,277 shares valued at $.35 per share for the conversion of $232,147
of convertible debt.
On
September 16, 2015, the Company received $2,500 in exchange for a 90-day promissory note at an interest rate of 12% per annum
and a risky loan fee of $625. As an inducement for this promissory note, the Company issued 50,000 warrants to purchase Company
Common Stock at $.80 per share.
On
September 16, 2015, the Company received $12,500 in exchange for a 90-day promissory note at an interest rate of 12% per annum
and a risky loan fee of $3,125. As an inducement for this promissory note, the Company issued 250,000 warrants to purchase Company
Common Stock at $.80 per share.
On
September 16, 2015, the Company received $22,500 in exchange for a 90-day promissory note at an interest rate of 12% per annum
and a risky loan fee of $5,625. As an inducement for this promissory note, the Company issued 450,000 warrants to purchase Company
Common Stock at $.80 per share.
On
October 1, 2015, the Company authorized the issuance of 50,273 shares of Common Stock for the accrued interest on the debt conversions
on July 14, 2015, August 19, 2015, and September 10, 2015. The shares were issued at $.35 per share.
On
October 5, 2015, the Company extended the term of an $18,000 promissory note originally issued on May 15, 2015 that was originally
due on October 13, 2015 to December 14, 2015; however, as consideration for the extension, the Company agreed to repay the note,
plus interest and the Loan Fee (as hereinafter defined), upon receipt of additional financing. Interest on the note accrues at
the rate of 12% per annum. Unless paid sooner as previously explained, the Company shall pay $4,500 on the maturity date of the
note. As additional inducement for the extension, the Company also agreed to issue the lender five-year warrants to purchase up
to 150,000 shares of the Company’s Common Stock at $0.80 per share.
On
October 11, 2015, the Company extended the term of an $25,000 promissory note issued on July 15, 2015 that was due on October
23, 2015 to December 14, 2015; however, as a consideration for the extension, the Company agreed to repay the note, plus interest
and a risk loan fee of $6,250. As additional inducement for the extension, the Company also agreed to issue the lender five-year
warrants to purchase up to 150,000 shares of Common Stock at $0.80 per share.
On
October 11, 2015, the Company received $10,000 in exchange for a 60-day promissory note at an interest rate of 12% per annum and
a risky loan fee of $2,500. As an inducement for the promissory note, the Company issued 200,000 warrants to purchase Company
Common Stock at $.80 per share. The note, accrued interest and risky loan fee is due on December 14, 2015.
On
November 11, 2015, the Company authorized the issuance of 179,988 shares of Common Stock for the conversion of $57,670 of principal
and $5,326 of accrued interest. These shares were issued at $.35 per share.
On
December 6, 2015, the Company entered into a 90-day Promissory Note for $70,000 at an interest rate of 12% per annum plus a risky
loan fee of $17,500 which is being amortized over the term of the loan. As an inducement the Company issued 1,400,000 warrants
to purchase Company Common Stock at $.80 per share. The Company further agreed to repay the loan within three days of the Company
receiving $500,000 or more in the current private placement of up to $2,500,000 convertible note with warrants. This Promissory
Note resulted from the principal payment to the note holder of $28,222 and the holder cancelling the notes originally signed on
May 27, 2015 plus extensions, July 15, 2015 plus extensions, September 16, 2015 and October 11, 2015.
On
December 11, 2015, the Company entered into a securities purchase agreement with an accredited investor for (i) a note in the
principal amount of $275,000 at a 10% original issue discount, (ii) a warrant to purchase 250,000 shares of the Company’s
Common Stock with an exercise price of $0.80 per share and (iii) 50,000 shares as an additional fee for a value of $5,000.
Sales
of Unregistered Securities in 2016:
On
January 20, 2016, the Company authorized the issuance of 50,000 shares for consulting services for a value of $5,000 that is being
amortized over twelve months.
On
February 29, 2016, the Company authorized the issuance of 227,232 shares for conversion of convertible debt of $69,500 and accrued
interest of $10,031.
On
March 3, 2016, the Company authorized the issuance of 100,000 shares for consulting services for a value of $10,100 that is being
amortized over six months.
On
March 11, 2016, the Company authorized the issuance of 150,000 shares for consulting services for a value of $15,000 that is being
amortized over twelve months.
On
June 2, 2016, the Company sold 120,000 shares of common stock upon receipt of $120,000 cash.
On
July 13, 2016, the Company issued 172,958 shares of common stock because of warrants being exercised through a cashless exercise.
On
December 14, 2016, the Company issued 90,364 shares of common stock because of warrants being exercised through a cashless exercise.
During
the year ended December 31, 2016, the Company issued a total of 31,419,215 shares of common stock because of debt conversion.
The total debt conversion was $191,731.
During
the year ended December 31, 2016, the Company issued 935,000 shares of common stock for consulting services. The weighted average
price of these shares was $1.44. The value of the shares is being amortized over the life of the contracts ranging from six to
twelve months.
Sales
of Unregistered Securities in 2017:
In
January 2017, 1,363,277 warrants were exercised under a cashless exercise and 1,336,075 shares of common stock were issued.
On
January 19, 2017, the Company issued 1,400,000 shares of common stock for extinguishment of accounts payable for a value of $49,000.
On
March 29, 2017, the Company issued 1,000,000 shares of common stock to a related party for extinguishment of accounts payable
for a value of $35,000.
On
April 1, 2017, the Company issued 25,280,899 shares of common stock to a related party for extinguishment of accounts payable
for a value of $225,000. These shares relate to a contract leasing the telemedicine platform from Bistromatics, a company owned
by our CTO.
During
the year ended December 31, 2017, the Company issued 3,340,577 shares of common stock for consulting services for a value of $355,880.
During
the year ended December 31, 2017, the Company issued 5,025,000 shares of common stock for consulting services. The weighted average
price of these shares was $.08. The value of these shares is being amortized over the life of the contracts ranging from six to
twelve months.
During
the year ended December 31,2017, the Company issued 53,534,548 shares of common stock for debt conversion. The total debt conversion
was $797,913 principal and $45,192 of accrued interest.
The
securities issued have not been registered under the Securities Act and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements.
The
Registrant’s issuance of the above restricted securities was in reliance upon the exemption from registration pursuant to
Section 4(2) and Regulation S promulgated by the SEC under the Act. Unless stated otherwise: (i) the securities were offered and
sold only to accredited investors; (ii) there was no general solicitation or general advertising related to the offerings; (iii)
each of the persons who received these unregistered securities had knowledge and experience in financial and business matters
which allowed them to evaluate the merits and risk of the receipt of these securities, and that they were knowledgeable about
our operations and financial condition; (iv) no underwriter participated in, nor did we pay any commissions or fees to any underwriter
in connection with the transactions; and, (v) each certificate issued for these unregistered securities contained a legend stating
that the securities have not been registered under the Securities Act and setting forth the restrictions on the transferability
and the sale of the securities.
Penny
Stock Considerations
Our
Common Stock will be deemed to be “penny stock” as that term is generally defined in the Securities Exchange Act of
1934 to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice
and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
Under
the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited
investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written
consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net
worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is
considered an accredited investor. In addition, the broker-dealer is required to:
●
Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock
market, unless the broker-dealer or the transaction is otherwise exempt;
●
Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for
the securities;
●
Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account,
the account’s value and information regarding the limited market in penny stocks; and
●
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, prior to conducting any penny stock transaction in the customer’s account.
Because
of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our Common Stock, which
may affect the ability of Selling Shareholders or other holders to sell their shares in the secondary market and have the effect
of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements
could impede the sale of our Common Stock even if our Common Stock becomes publicly traded. In addition, the liquidity for our
Common Stock may be decreased, with a corresponding decrease in the price of our Common Stock. Our shares are likely to be subject
to such penny stock rules for the foreseeable future.
INDEX
TO FINANCIAL STATEMENTS
eWELLNESS
HEALTHCARE CORPORATION
CONDENSED
BALANCE SHEETS
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
125,098
|
|
|
$
|
6,882
|
|
Prepaid expenses
|
|
|
178,147
|
|
|
|
179,827
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
303,245
|
|
|
|
186,709
|
|
|
|
|
|
|
|
|
|
|
Property & equipment, net
|
|
|
9,237
|
|
|
|
5,021
|
|
Intangible assets,
net
|
|
|
13,216
|
|
|
|
13,954
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
325,698
|
|
|
$
|
205,684
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
384,587
|
|
|
$
|
345,956
|
|
Accounts payable - related party
|
|
|
442,691
|
|
|
|
351,511
|
|
Accrued expenses - related party
|
|
|
215,388
|
|
|
|
210,828
|
|
Accrued compensation
|
|
|
1,107,005
|
|
|
|
1,071,369
|
|
Contingent liability
|
|
|
90,000
|
|
|
|
90,000
|
|
Convertible debt, net of discount
|
|
|
667,143
|
|
|
|
444,680
|
|
Derivative liability
|
|
|
502,584
|
|
|
|
1,140,578
|
|
Short term notes
and liabilities
|
|
|
180,051
|
|
|
|
180,051
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
3,589,449
|
|
|
|
3,834,973
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
3,589,449
|
|
|
|
3,834,973
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
Preferred stock,
authorized, 20,000,000 shares, $.001 par value, 0 shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, authorized
400,000,000 shares, $.001 par value, 148,447,813 and 142,352,406 issued and outstanding, respectively
|
|
|
148,447
|
|
|
|
142,352
|
|
Additional paid in capital
|
|
|
14,011,547
|
|
|
|
13,178,131
|
|
Accumulated deficit
|
|
|
(17,423,745
|
)
|
|
|
(16,949,772
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders’
Deficit
|
|
|
(3,263,751
|
)
|
|
|
(3,629,289
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
325,698
|
|
|
$
|
205,684
|
|
The
accompanying notes are an integral part of these condensed financial statements
eWELLNESS
HEALTHCARE CORPORATION
CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
|
|
For
The Three Months Ended
|
|
|
|
March
31, 2018
|
|
|
March
31, 2017
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Executive compensation
|
|
$
|
102,000
|
|
|
$
|
102,000
|
|
General and administrative
|
|
|
196,690
|
|
|
|
183,337
|
|
Professional
fees
|
|
|
512,525
|
|
|
|
704,011
|
|
|
|
|
|
|
|
|
|
|
Total Operating
Expenses
|
|
|
811,215
|
|
|
|
989,348
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(811,215
|
)
|
|
|
(989,348
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Gain on derivative liability
|
|
|
509,752
|
|
|
|
5,242,634
|
|
Foreign exchange rate
|
|
|
7,399
|
|
|
|
12,712
|
|
Interest expense
|
|
|
(179,909
|
)
|
|
|
(103,353
|
)
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) before Income Taxes
|
|
|
(473,973
|
)
|
|
|
4,162,645
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
-
|
|
|
|
(800
|
)
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(473,973
|
)
|
|
$
|
4,161,845
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(0.00
|
)
|
|
$
|
0.07
|
|
Diluted earnings (loss) per share
|
|
$
|
(0.00
|
)
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
145,882,450
|
|
|
|
60,043,059
|
|
Diluted average shares outstanding
|
|
|
145,882,450
|
|
|
|
89,107,951
|
|
The
accompanying notes are an integral part of these condensed financial statements
eWELLNESS
HEALTHCARE CORPORATION
CONDENSED
STATEMENTS OF CASH FLOWS
(unaudited)
|
|
For
The Three Months Ended
|
|
|
|
March
31, 2018
|
|
|
March
31, 2017
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(473,973
|
)
|
|
$
|
4,161,845
|
|
Adjustments to reconcile net (loss)
to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
1,459
|
|
|
|
1,207
|
|
Contributed services
|
|
|
55,500
|
|
|
|
55,500
|
|
Shares issued for
consulting services
|
|
|
138,600
|
|
|
|
25,750
|
|
Options expense
|
|
|
108,594
|
|
|
|
108,594
|
|
Amortization of
debt discount
|
|
|
155,033
|
|
|
|
82,443
|
|
Foreign currency
exchange
|
|
|
7,399
|
|
|
|
-
|
|
Gain on derivative
liability
|
|
|
(509,752
|
)
|
|
|
(5,242,634
|
)
|
Amortization of prepaids
|
|
|
126,992
|
|
|
|
462,439
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
Prepaid expense
|
|
|
(21,312
|
)
|
|
|
(27,562
|
)
|
Accounts payable
and accrued expenses
|
|
|
36,242
|
|
|
|
55,991
|
|
Accounts payable
- related party
|
|
|
91,180
|
|
|
|
(90,761
|
)
|
Accrued expenses
- related party
|
|
|
4,560
|
|
|
|
73,713
|
|
Accrued
compensation
|
|
|
35,636
|
|
|
|
24,000
|
|
|
|
|
|
|
|
|
|
|
Net cash used
in operating activities
|
|
|
(243,842
|
)
|
|
|
(309,475
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
(4,937
|
)
|
|
|
(2,910
|
)
|
Net cash used
in investing activities
|
|
|
(4,937
|
)
|
|
|
(2,910
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of convertible debt
|
|
|
414,550
|
|
|
|
350,000
|
|
Original issue discount
and debt issuance costs
|
|
|
(46,550
|
)
|
|
|
(29,525
|
)
|
Payments
on debt
|
|
|
(1,005
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash provided
by financing activities
|
|
|
366,995
|
|
|
|
320,475
|
|
|
|
|
|
|
|
|
|
|
Net increase
in cash
|
|
|
118,216
|
|
|
|
8,090
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
6,882
|
|
|
|
13,995
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
125,098
|
|
|
$
|
22,085
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
-
|
|
|
$
|
800
|
|
Non-cash items:
|
|
|
|
|
|
|
|
|
Derivative liability and debt discount
issued with new notes
|
|
$
|
219,526
|
|
|
$
|
-
|
|
Shares issued for debt conversion
|
|
$
|
213,292
|
|
|
$
|
-
|
|
Shares issued for prepaids
|
|
$
|
104,000
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed financial statements
eWellness
Healthcare Corporation
Notes
to Condensed Financial Statements
March
31, 2018
(unaudited)
Note
1. The Company
The
Company and Nature of Business
eWellness
Healthcare Corporation (the “eWellness”, “Company”, “we”, “us”, “our”)
was incorporated in the State of Nevada on April 7, 2011. The Company has generated no revenues to date.
eWellness
is the first physical therapy telehealth company to offer insurance reimbursable real-time distance monitored treatments. Our
business model is to license our PHZIO (“PHZIO”) platform to any physical therapy (“PT”) clinic in the
U.S. and or have large-scale employers use our PHZIO Platform as a fully PT monitored corporate wellness program. The Company’s
PHZIO home physical therapy exercise platform has been designed to disrupt the $30 billion physical therapy and the $8 billion
corporate wellness industries. PHZIO re-defines the way physical therapy can be delivered. PHZIO is the first real-time remote
monitored 1-to-many physical therapy platform for home use. Due to the real-time patient monitoring feature, the PHZIO Platform
is insurance reimbursable by payers such as: Anthem Blue Cross and Blue Shield.
Note
2. Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles
for interim financial statements. Accordingly, they omit or condense notes and certain other information normally included in
financial statements prepared in accordance with U.S. generally accepted accounting principles. The accounting policies followed
for quarterly financial reporting conform with the accounting policies disclosed in Note 2 to the Notes to Financial Statements
included in our Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, all adjustments
necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments
are of a normal recurring nature. The results of operations for the three months ended March 31, 2018 are not necessarily indicative
of the results that can be expected for the fiscal year ending December 31, 2018. The unaudited condensed financial statements
should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for
the year ended December 31, 2017.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ
materially from these good faith estimates and judgments.
Going
Concern
For
the three months ended March 31, 2018, the Company had no revenues. The Company has an accumulated loss of $17,423,745. In view
of these matters, there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s
ability to continue operations is dependent upon the Company’s ability to raise additional capital and to ultimately achieve
sustainable revenues and profitable operations, of which there can be no guarantee. The Company intends to finance its future
development activities and its working capital needs largely from the sale of public equity securities with some additional funding
from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient
to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability
and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company
be unable to continue as a going concern.
Fair
Value of Financial Instruments
As
of March 31, 2018, the Company had the following assets and liabilities measured at fair value on a recurring basis.
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Derivative
Liability
|
|
$
|
502,584
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
502,584
|
|
Total Liabilities
measured at fair value
|
|
$
|
502,584
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
502,584
|
|
As
of December 31, 2017, the Company had the following assets and liabilities measured at fair value on a recurring basis.
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Derivative
Liability
|
|
$
|
1,140,578
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,140,578
|
|
Total Liabilities
measured at fair value
|
|
$
|
1,140,578
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,140,578
|
|
Note
3. Related Party Transactions
During
the three months ended March 31, 2018, a company for which the Company’s former Secretary-Treasurer and CFO is also serving
as CFO, invoiced the Company $5,800 for accounting services. The amount outstanding as of March 31, 2018 and December 31, 2017
was $1,880 and $700, respectively.
In
April 2015, the Company entered into an operating agreement with a physical therapy company (“EPT”) which is owned
by the Company’s President and Chief Executive Officer. Through the agreement, the Company agrees to provide operating capital
advances for EPT to offer the Company’s PHZIO Platform to physical therapy patients. For accounting and tax purposes, the
net profits or losses generated by EPT shall be allocated monthly. The Company will receive 75% of the net patient insurance reimbursements
associated with the operation of the PHZIO platform.
In
November 2016, the Company signed an agreement with a programming company (“PC”) within which one of the Company’s
directors and Chief Technical Officer is the Chief Marketing Officer. The agreement is for additional features to be programmed
for the launch of the PHZIO platform. The Company is to pay a monthly base fee of $100,000 for the development and compensation
for the Company’s CEO and CTO. Following payment of the initial $100,000, the Company is obligated to only pay $50,000 monthly
until the PC has successfully signed and collected the first monthly service fee for 100 physical therapy clinics to use the PHZIO
platform. The agreement establishes that the Company is indebted to the PC for $225,000 for past programming services. For this
amount, the Company issued 25,280,899 common shares at a value of $0.0089 per share on April 1, 2017. The PC will also have the
right to appoint 40% of the directors. At the end of March 31, 2018, the Company had a payable of $440,810 due to this company.
The
Company rents its Culver City, CA office space from a company owned by our CEO. The imputed rent expense of $500 per month is
recorded in the Statement of Operations and Additional Paid in Capital in the Balance Sheet.
Throughout
the period ended March 31, 2018, the officers and directors of the Company incurred business expenses on behalf of the Company.
The amounts payable to the officers as of March 31, 2018 and December 31, 2017 were $3,388 and $5,828, respectively. There were
no expenses due to the board members, but the Company has accrued directors’ fees of $212,000 and $205,000 at March 31,
2018 and December 31, 2017, respectively. Because the Company is not yet profitable the officers have agreed to defer compensation.
The Company had accrued executive compensation of $1,107,005 and $1,071,369 at March 31, 2018 and December 31, 2017 respectively.
Note
4. Convertible Notes Payable
In
February 2017, the Company was served by a complaint filed by the holder of a note payable. The action was removed from Louisiana
state court to the United States Federal District Court in Baton Rouge, LA. The lawsuit alleges that the Company is indebted to
the note holder a promissory note stemming from four loans to the Company during the 20 months prior to February 2017 amounting
to $75,500 in total original principal bearing interest at 12% per annum, of which $45,202 has been repaid. Further, the note
holder claims that, because of alleged defaults and extensions of the notes, the Company is now indebted in the amount of $253,877
inclusive of interest and penalties at an effective rate exceeding 70% per annum, far more than the maximum rate allowable in
California or Louisiana. The Company and its counsel have determined that: (i) the note holder is not a licensed lender in the
State of California, where the loan was made and the $75,500 was deposited and therefore was not permitted under California law
to make loans in the State; and (ii) the interest rate the note holder is seeking to collect is usurious and therefore interest
claimed in the lawsuit is neither collectible nor enforceable. In October 2017 the complainant and his counsel motioned to dismiss
the unlicensed lender assertion. In January 2018 the U.S. District Court, Louisiana ruled that the unlicensed lender assertion
was to proceed. The Company and counsel believe that the suit is wholly without merit and the company will prevail.
At
March 31, 2018, the Company had indebtedness to this holder of the note payable of $180,051 plus $49,625 of accrued interest.
During the three months ended March 31, 2018 and 2017, the Company accrued interest expense totaling $7,991 and $7,991, respectively.
Note
5. Convertible Notes Payable
In
January 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $110,000. The note, which is due on October 12, 2018 has an original issue discount of $10,000. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) $0.20 or (ii)
65% of the lowest per share trading price for the fifteen (15) trading days immediately following the 180
th
calendar
day after the Original Issue Date. During the three months ended March 31, 2018, the Company recognized interest expense of $1,905.
In
January 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $91,300. The note, which is due on October 30, 2018 has an original issue discount of $8,300. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion
price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180
th
calendar day after the Original Issue Date. During the three months ended March 31, 2018, the Company recognized interest
expense of $2,341.
In
February 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $63,800. The note, which is due on November 30, 2018 has an original issue discount of $5,800. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion
price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180
th
calendar day after the Original Issue Date. During the three months ended March 31, 2018, the Company recognized interest
expense of $944.
In
March 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $77,000. The note, which is due on December 5, 2018 has an original issue discount of $7,000. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion
price of $0.20 or (ii) 75% of the average of the three daily VWAPs for the trading price for the twenty (20) trading days before
the 181
st
calendar date of the note or the ten (10) trading days if after the 181
st
calendar day of the
note. During the three months ended March 31, 2018, the Company recognized interest expense of $439.
In
March 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $72,450. The note, which is due on December 30, 2018 has an original issue discount of $9,450. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion
price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180
th
calendar day after the Original Issue Date. During the three months ended March 31, 2018, the Company recognized interest
expense of $286.
Note
6. Equity Transactions
Common
Stock
In
January 2018, the Board of Directors approved the extension of an Advisory Agreement dated February 15, 2015 for one year. The
Company issued 800,000 shares of common stock as compensation with a value of $104,000. This value is being amortized over the
life of the contract.
During
the three months ended March 31, 2018, the Company issued a total of 3,945,407 shares of common stock per debt conversion of convertible
notes dated April, July and September 2017. The total of the debt conversion was $213,292 which includes $5,010 of accrued interest.
During
the three months ended March 31, 2018, the Company issued 1,350,000 shares of common stock for marketing and consulting services
valued at $138,600.
In
January 2018, the Board of Directors agreed to form an eWellness Healthcare Corporation 2018 Equity Incentive Plan (“Plan”).
The Plan shall be for 20,000,000 shares of common stock that will be placed in a 10b5-1 Sales Plan that will be registered under
an S-8 Registration Statement. Under the sales plan, each recipient will open an account with Garden State Securities (“GSS”)
for management of all sales of shares issued under the Plan. Quarterly limitations are placed on the number of shares that can
be sold. The Company initially allocated 17,400,000 shares to officers, directors and consultants. As of March 31, 2018, no shares
have been issued.
Stock
Options
The
following is a summary of the status of all Company’s stock options as of March 31, 2018 and changes during the three months
ended on that date:
|
|
Number
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Average
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Exercise
Price
|
|
|
Life
(yrs)
|
|
|
Value
|
|
Outstanding at December 31, 2017
|
|
|
20,000,000
|
|
|
$
|
0.26
|
|
|
|
1.9
|
|
|
$
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2018
|
|
|
20,000,000
|
|
|
|
0.26
|
|
|
|
1.8
|
|
|
$
|
-
|
|
Options exercisable at March 31,
2018
|
|
|
14,208,333
|
|
|
$
|
0.30
|
|
|
|
1.8
|
|
|
$
|
-
|
|
The
Company recognized stock option expense of $108,594 and $108,594 for the three months ended March 31, 2018 and 2017.
Warrants
In
March 2018, the Board of Directors, at the request and with the approval of the investors, determined that it was in the best
interests of the Company and the Investors, based upon market price and relatively limited liquidity of the shares of common stock
that the Company revised the expiration date and exercise price for 417,429 unexercised warrants granted on April 9, 2015. The
original expiration date of April 9, 2018 is extended to April 9, 2019. The original exercise price of $.35 is reduced to $.05.
In
February 2017, the Company authorized the issuance of 68,750 warrants that were issued as part of a convertible note. At March
31, 2018 the fair value of the warrants is $4,529.
In
April 2017, the Company authorized the issuance of 1,232,000 warrants that were issued as part of a convertible note. At March
31, 2018 the fair value of the warrants is $81,417.
The
following is a summary of the status of the Company’s warrants as of March 31, 2018 and changes during the three months
ended on that date:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
Average
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Life
(yrs.)
|
|
|
Value
|
|
Outstanding
at December 31, 2017
|
|
|
8,753,179
|
|
|
$
|
0.21
|
|
|
|
2.4
|
|
|
$
|
0.038
|
|
Granted
|
|
|
417,429
|
|
|
$
|
0.05
|
|
|
|
1.0
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
417,429
|
|
|
$
|
0.35
|
|
|
|
1.0
|
|
|
|
-
|
|
Outstanding
at March 31, 2018
|
|
|
8,753,179
|
|
|
$
|
0.21
|
|
|
|
2.4
|
|
|
$
|
0.038
|
|
Warrants
exercisable at March 31, 2018
|
|
|
8,753,179
|
|
|
$
|
0.21
|
|
|
|
2.4
|
|
|
$
|
0.038
|
|
For
purpose of determining the fair market value of the warrants and options issued during the three months ended March 31, 2018,
we used the Black Scholes option valuation model. These valuations were done throughout the period at the date of issuance and
not necessarily as of the reporting date. The assumptions used in the Black Scholes valuation of the date of issuance are as follows:
Stock
price on the valuation date
|
|
$
|
.0673
|
|
Exercise price
of warrants
|
|
$
|
.004
and .25
|
|
Dividend
yield
|
|
|
0.00
|
%
|
Years
to maturity
|
|
|
3-4
|
|
Risk
free rate
|
|
|
2.33%
- 2.475
|
%
|
Expected
volatility
|
|
|
257.35%-257.75
|
%
|
Note
7. Commitments, Contingencies
The
Company may be subject to lawsuits, administrative proceedings, regulatory reviews or investigations associated with its business
and other matters arising in the normal conduct of its business. The following is a description of an uncertainty that is considered
other than ordinary, routine and incidental to the business.
The
closing of the Initial Exchange Agreement with Private Co. was conditioned upon certain, limited customary representations and
warranties, as well as, among other things, our compliance with Rule 419 (“Rule 419”) of Regulation C under the Securities
Act of 1933, as amended (the “Securities Act”) and the consent of our shareholders as required under Rule 419. Accordingly,
we conducted a “Blank Check” offering subject to Rule 419 (the “Rule 419 Offering”) and filed a Registration
Statement on Form S-1 to register the shares of such offering; the Registration Statement was declared effective on September
14, 2012. We used 10% of the subscription proceeds as permitted under Rule 419 and the amount remaining in the escrow trust as
of the date of the closing of the Share Exchange was $90,000 (the “Trust Account Balance”).
Rule
419 required that the Share Exchange occur on or before March 18, 2014, but due to normal negotiations regarding the transactions
and the parties’ efforts to satisfy all the closing conditions, the Share Exchange did not close on such date. Accordingly,
after numerous discussions with management of both parties, they entered into an Amended and Restated Share Exchange Agreement
(the “Share Exchange Agreement”) to reflect a revised business combination structure, pursuant to which we would:
(i) file a registration statement on Form 8-A (“Form 8A”) to register our common stock pursuant to Section 12(g) of
the Exchange Act, which we did on May 1, 2014 and (ii) seek to convert the participants of the Rule 419 Offering into participants
of a similarly termed private offering (the “Converted Offering”), to be conducted pursuant to Regulation D, as promulgated
under the Securities Act.
Fifty-two
persons participated in the Rule 419 Offering and each of them gave the Company his/her/its consent to use his/her/its escrowed
funds to purchase shares of the Company’s restricted common stock in the Converted Offering (the “Consent”)
rather than have their funds returned. To avoid further administrative work for the investors, we believe that we took reasonable
steps to inform investors of the situation and provided them with an appropriate opportunity to maintain their investment in the
Company, if they so choose, or have their funds physically returned. Management believed the steps it took constituted a constructive
return of the funds and therefore met the requirements of Rule 419.
However,
pursuant to Rule 419(e)(2)(iv), “funds held in the escrow or trust account shall be returned by first class mail or equally
prompt means to the purchaser within five business days [if the related acquisition transaction does not occur by a date that
is 18 months after the effective date of the related registration statement].” As set forth above, rather than physically
return the funds, we sought consent from the investors of the Rule 419 Offering to direct their escrowed funds to the Company
to instead purchase shares in the Converted Offering. The consent document (which was essentially a form of rescission) was given
to the investors along with a private placement memorandum describing the Converted Offering and stated that any investor who
elected not to participate in the Converted Offering would get 90% of their funds physically returned. Pursuant to Rule 419(b)(2)(vi),
a blank check company is entitled to use 10% of the proceed/escrowed funds; therefore, if a return of funds is required, only
90% of the proceed/escrowed funds need be returned. The Company received $100,000 proceeds and used $10,000 as per Rule 419(b)(2)(vi);
therefore, only $90,000 was subject to possible return.
As
disclosed therein, we filed the amendments to the initial Form 8-K in response to comments from the SEC regarding the Form 8-K
and many of those comments pertain to an alleged violation of Rule 419. The Company continued to provide the SEC with information
and analysis as to why it believes it did not violate Rule 419 but was unable to satisfy the SEC’s concerns. Comments and
communications indicate that Rule 419 requires a physical return of funds if a 419 offering cannot be completed because a business
combination was not consummated within the required time frame; constructive return is not permitted.
Because
of these communications and past comments, we are disclosing that we did not comply with the requirements of Rule 419, which required
us to physically return the funds previously submitted to escrow pursuant to the Rule 419 Offering. Because of our failure to
comply with Rule 419, the SEC may bring an enforcement action or commence litigation against us for failure to strictly comply
with Rule 419. If any claims or actions were to be brought against us relating to our lack of compliance with Rule 419, we could
be subject to penalties (including criminal penalties), required to pay fines, make damages payments or settlement payments. In
addition, any claims or actions could force us to expend significant financial resources to defend ourselves, could divert the
attention of our management from our core business and could harm our reputation.
Ultimately,
the SEC determined to terminate its review of the Initial Form 8-K and related amendments, rather than provide us with additional
opportunities to address their concerns and therefore, we did not clear their comments. It is not possible at this time to predict
whether or when the SEC may initiate any proceedings, when this issue may be resolved or what, if any, penalties or other remedies
may be imposed, and whether any such penalties or remedies would have a material adverse effect on our consolidated financial
position, results of operations, or cash flows. Litigation and enforcement actions are inherently unpredictable, the outcome of
any potential lawsuit or action is subject to significant uncertainties and, therefore, determining currently the likelihood of
a loss, any SEC enforcement action and/or the measurement of the amount of any loss is complex. Consequently, we are unable to
estimate the range of reasonably possible loss. Our assessment is based on an estimate and assumption that has been deemed reasonable
by management, but the assessment process relies heavily on an estimate and assumption that may prove to be incomplete or inaccurate,
and unanticipated events and circumstances may occur that might cause us to change that estimate and assumption. Considering the
uncertainty of this issue and while Management evaluates the best and most appropriate way to resolve same, management determined
to create a reserve on the Company’s Balance Sheet for the $90,000 that was subject to the Consent.
From
time to time the Company may become a party to litigation matters involving claims against the Company. Except as may be outlined
above, the Company believes that there are no current matters that would have a material effect on the Company’s financial
position or results of operations.
Note
8. Derivative Valuation
The
Company evaluated the convertible debentures and associated warrants in accordance with ASC Topic 815, “Derivatives and
Hedging,” and determined that the conversion feature of the convertible promissory notes was not afforded the exemption
for conventional convertible instruments due to their variable conversion rates. The notes have no explicit limit on the number
of shares issuable, so they did not meet the conditions set forth in current accounting standards for equity classification. In
addition, the warrants have a Most Favored Nations clause resulting in the exercise price of the warrants also not being fixed.
Therefore, these have been characterized as derivative instruments. We elected to recognize the notes under ASU paragraph 815-15-25-4,
whereby there would be a separation into a host contract and derivative instrument. We elected to initially and subsequently measure
the notes and warrants in their entirety at fair value, with changes in fair value recognized in earnings.
The
debt discount is amortized over the life of the note and recognized as interest expense. For the three months ended March 31,
2018 and 2017, the Company amortized the debt discount of $155,033 and $82,443, respectively. The derivative liability is adjusted
periodically according to stock price fluctuations and other inputs and was $502,584 and $1,140,578 at March 31, 2018 and December
31, 2017, respectively.
During
the three months ended March 31, 2018, the Company had the following activity in the derivative liability account:
|
|
Total
|
|
Derivative
liability at December 31, 2017
|
|
$
|
1,140,578
|
|
Addition
of new conversion option derivatives
|
|
|
91,284
|
|
Extinguishment
due to note conversions
|
|
|
(219,526
|
)
|
Changes
in fair value
|
|
|
(509,752
|
)
|
Derivative
liability at March 31, 2018
|
|
$
|
502,584
|
|
For
purposes of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model.
The significant assumptions used in the Black Scholes valuation of the derivative are as follows:
Stock
price at valuation date
|
|
$
|
.06-.135
|
|
Exercise price
of warrants
|
|
$
|
.004
- .25
|
|
Conversion
rate of convertible debt
|
|
$
|
.0495
– 0.2000
|
%
|
Risk
free interest rate
|
|
|
1.27%-2.62
|
|
Stock
volatility factor
|
|
|
61%-257.75
|
%
|
Years
to Maturity
|
|
|
.01
– 4.0
|
|
Expected
dividend yield
|
|
|
None
|
|
Note
9. Subsequent Events
During
the month of April and to the date of the filing of this report, the Company has issued 400,000 shares of common stock for consulting
services for a value of $34,475.
During
the month of April and to the date of the filing of this report, the Company has issued 6,615,385 shares of common stock for conversion
of convertible debt totaling $215,000.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
eWellness
Healthcare Corporation
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of eWellness Healthcare Corporation (the Company) as of December 31, 2017 and 2016,
and the related statements of income, stockholders’ equity and cash flows for each of the years in the two-year period ended
December 31, 2017 and the related notes (collectively referred to as the financial statements). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and
the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity
with accounting principles generally accepted in the United States of America.
Consideration
of the Company’s Ability to Continue as a Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company has yet to earn revenue, has a deficit in stockholders’ equity, and has
sustained recurring losses from operations. This raises substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans with regard to these matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s 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 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 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.
Haynie
& Company
Salt
Lake City, Utah
March
28, 2018
We
have served as the Company’s auditor since 2016
eWELLNESS
HEALTHCARE CORPORATION
BALANCE
SHEETS
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
6,882
|
|
|
$
|
13,995
|
|
Prepaid
expenses
|
|
|
179,827
|
|
|
|
723,046
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
186,709
|
|
|
|
737,041
|
|
|
|
|
|
|
|
|
|
|
Property
& equipment, net
|
|
|
5,021
|
|
|
|
4,279
|
|
Intangible
assets, net
|
|
|
13,954
|
|
|
|
16,908
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
205,684
|
|
|
$
|
758,228
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
345,956
|
|
|
$
|
340,793
|
|
Accounts
payable - related party
|
|
|
351,511
|
|
|
|
379,481
|
|
Accrued
expenses - related party
|
|
|
210,828
|
|
|
|
104,429
|
|
Accrued
compensation
|
|
|
1,071,369
|
|
|
|
940,000
|
|
Contingent
liability
|
|
|
90,000
|
|
|
|
90,000
|
|
Convertible
debt, net of discount
|
|
|
444,680
|
|
|
|
247,710
|
|
Derivative
liability
|
|
|
1,140,578
|
|
|
|
8,473,265
|
|
Short
term notes and liabilities
|
|
|
180,051
|
|
|
|
180,051
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
3,834,973
|
|
|
|
10,755,729
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
3,834,973
|
|
|
|
10,755,729
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
Preferred
stock, authorized, 20,000,000 shares, $.001 par value, 0 shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, authorized 400,000,000 shares, $.001 par value, 142,352,406 and 51,435,307 issued and outstanding, respectively
|
|
|
142,352
|
|
|
|
51,435
|
|
Shares
to be issued
|
|
|
-
|
|
|
|
110,740
|
|
Additional
paid in capital
|
|
|
13,178,131
|
|
|
|
5,757,205
|
|
Accumulated
deficit
|
|
|
(16,949,772
|
)
|
|
|
(15,916,881
|
)
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Deficit
|
|
|
(3,629,289
|
)
|
|
|
(9,997,501
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
205,684
|
|
|
$
|
758,228
|
|
The
accompanying notes are an integral part of these financial statements
eWELLNESS
HEALTHCARE CORPORATION
STATEMENTS
OF OPERATIONS
|
|
Year
Ended
|
|
|
|
December
31, 2017
|
|
|
December
31 2016
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Executive
compensation
|
|
$
|
408,000
|
|
|
$
|
576,000
|
|
General
and administrative
|
|
|
801,308
|
|
|
|
309,805
|
|
Professional
fees
|
|
|
2,139,473
|
|
|
|
2,485,655
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
3,348,781
|
|
|
|
3,371,460
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(3,348,781
|
)
|
|
|
(3,371,460
|
)
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
|
2,216,266
|
|
Gain
(loss) on derivative liability
|
|
|
2,771,778
|
|
|
|
(10,318,969
|
)
|
Foreign
exchange rate
|
|
|
60,972
|
|
|
|
-
|
|
Interest
expense, related parties
|
|
|
-
|
|
|
|
(4,156
|
)
|
Interest
expense
|
|
|
(516,060
|
)
|
|
|
(981,574
|
)
|
|
|
|
|
|
|
|
|
|
Net
Loss before Income Taxes
|
|
|
(1,032,091
|
)
|
|
|
(12,459,894
|
)
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
(800
|
)
|
|
|
(800
|
)
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(1,032,891
|
)
|
|
$
|
(12,460,694
|
)
|
|
|
|
|
|
|
|
|
|
Basic
(loss) per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.51
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
108,864,680
|
|
|
|
24,267,074
|
|
The
accompanying notes are an integral part of these financial statements
eWELLNESS
HEALTHCARE CORPORATION
STATEMENT
OF STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Preferred Shares
|
|
|
Common Shares
|
|
|
Shares to
|
|
|
Paid
in
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
be
issued
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
18,170,538
|
|
|
$
|
18,171
|
|
|
$
|
-
|
|
|
$
|
2,033,383
|
|
|
$
|
(3,456,187
|
)
|
|
$
|
(1,404,633
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed
interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,156
|
|
|
|
-
|
|
|
|
4,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
306,000
|
|
|
|
-
|
|
|
|
306,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
544,591
|
|
|
|
-
|
|
|
|
544,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued with debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
510,967
|
|
|
|
-
|
|
|
|
510,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash received
|
|
|
-
|
|
|
|
-
|
|
|
|
120,000
|
|
|
|
120
|
|
|
|
-
|
|
|
|
119,880
|
|
|
|
-
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
31,646,447
|
|
|
|
31,646
|
|
|
|
92,240
|
|
|
|
231,376
|
|
|
|
-
|
|
|
|
355,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
985,000
|
|
|
|
985
|
|
|
|
18,500
|
|
|
|
1,957,365
|
|
|
|
-
|
|
|
|
1,976,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
|
|
250
|
|
|
|
-
|
|
|
|
49,750
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
263,322
|
|
|
|
263
|
|
|
|
-
|
|
|
|
(263
|
)
|
|
|
-
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,460,694
|
)
|
|
|
(12,460,694
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
51,435,307
|
|
|
$
|
51,435
|
|
|
$
|
110,740
|
|
|
$
|
5,757,205
|
|
|
$
|
(15,916,881
|
)
|
|
$
|
(9,997,501
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
222,000
|
|
|
|
-
|
|
|
|
222,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
434,376
|
|
|
|
-
|
|
|
|
434,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued with debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89,890
|
|
|
|
-
|
|
|
|
89,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for AP conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
27,680,899
|
|
|
|
27,681
|
|
|
|
(84,000
|
)
|
|
|
281,319
|
|
|
|
-
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
53,534,548
|
|
|
|
53,534
|
|
|
|
(8,240
|
)
|
|
|
5,529,185
|
|
|
|
-
|
|
|
|
5,574,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
5,025,000
|
|
|
|
5,025
|
|
|
|
(18,500
|
)
|
|
|
402,975
|
|
|
|
-
|
|
|
|
389,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
3,340,577
|
|
|
|
3,341
|
|
|
|
-
|
|
|
|
352,539
|
|
|
|
-
|
|
|
|
355,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
1,336,075
|
|
|
|
1,336
|
|
|
|
-
|
|
|
|
108,642
|
|
|
|
-
|
|
|
|
109,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,032,891
|
)
|
|
|
(1,032,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
142,352,406
|
|
|
$
|
142,352
|
|
|
$
|
-
|
|
|
$
|
13,178,131
|
|
|
$
|
(16,949,772
|
)
|
|
$
|
(3,629,289
|
)
|
The
accompanying notes are an integral part of these financial statements
eWELLNESS
HEALTHCARE CORPORATION
STATEMENT
OF CASH FLOWS
|
|
Year
Ended
|
|
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,032,891
|
)
|
|
$
|
(12,460,694
|
)
|
Adjustments
to reconcile net loss to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
5,123
|
|
|
|
4,639
|
|
Contributed
services
|
|
|
222,000
|
|
|
|
306,000
|
|
Shares
issued for consulting services
|
|
|
355,880
|
|
|
|
50,000
|
|
Imputed
interest - related party
|
|
|
-
|
|
|
|
4,156
|
|
Options
expense
|
|
|
434,376
|
|
|
|
544,591
|
|
Amortization
of debt discount and prepaids
|
|
|
1,400,782
|
|
|
|
2,068,243
|
|
Foreign
currency exchange
|
|
|
(60,972
|
)
|
|
|
-
|
|
Gain
on derivative liability
|
|
|
(2,771,778
|
)
|
|
|
10,318,969
|
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
|
(2,216,266
|
)
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Prepaid
expense
|
|
|
(49,752
|
)
|
|
|
(16,670
|
)
|
Accounts
payable and accrued expenses
|
|
|
111,332
|
|
|
|
242,177
|
|
Accounts
payable - related party
|
|
|
197,029
|
|
|
|
455,764
|
|
Accrued
expenses - related party
|
|
|
106,399
|
|
|
|
71,339
|
|
Accrued
compensation
|
|
|
131,369
|
|
|
|
263,000
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(951,103
|
)
|
|
|
(364,752
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase
of equipment
|
|
|
(2,910
|
)
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(2,910
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
-
|
|
|
|
120,000
|
|
Proceeds
from issuance of convertible debt
|
|
|
1,107,500
|
|
|
|
250,000
|
|
Original
issue discount and debt issuance costs
|
|
|
(160,600
|
)
|
|
|
-
|
|
Payments
on debt
|
|
|
-
|
|
|
|
(33,204
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
946,900
|
|
|
|
336,796
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(7,113
|
)
|
|
|
(27,956
|
)
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
|
13,995
|
|
|
|
41,951
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
6,882
|
|
|
$
|
13,995
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
800
|
|
|
$
|
-
|
|
Interest
Expense
|
|
$
|
-
|
|
|
$
|
25,000
|
|
Non-cash
items:
|
|
|
|
|
|
|
|
|
Warrants
issued with debt
|
|
$
|
89,890
|
|
|
$
|
358,932
|
|
Derivative
liability and debt discount issued with new notes
|
|
$
|
428,250
|
|
|
$
|
-
|
|
Shares
issued for debt conversion
|
|
$
|
5,528,421
|
|
|
$
|
263,022
|
|
Exercise of
warrants
|
|
$
|
109,979
|
|
|
$
|
263
|
|
Shares
issued for extinguishment of accounts payable
|
|
$
|
225,000
|
|
|
$
|
-
|
|
Shares
issued for prepaids
|
|
$
|
389,500
|
|
|
$
|
1,958,350
|
|
The
accompanying notes are an integral part of these financial statements
eWELLNESS
HEALTHCARE CORPORATION
Notes
to Financial Statements
Note
1. The Company
The
Company and Nature of Business
eWellness
Healthcare Corporation (f/k/a Dignyte, Inc.), (the “eWellness”, “Company”, “we”, “us”,
“our”) was incorporated in the State of Nevada on April 7, 2011. The Company has generated no revenues to date.
eWellness
is the first physical therapy telehealth company to offer insurance reimbursable real-time distance monitored treatments. Our
business model is to license our PHZIO (“PHZIO”) platform to any physical therapy (“PT”) clinic in the
U.S. and or have large-scale employers use our PHZIO platform as a fully PT monitored corporate wellness program. The Company’s
PHZIO home physical therapy exercise platform has been designed to disrupt the $30 billion physical therapy and the $8 billion
corporate wellness industries. PHZIO re-defines the way physical therapy can be delivered. PHZIO is the first real-time remote
monitored 1-to-many physical therapy platform for home use. Due to the real-time patient monitoring feature, the PHZIO platform
is insurance reimbursable by payers such as: Anthem Blue Cross and Blue Shield.
Concierge
PT Medical Services
: EWLL provides a new and highly unique patient treatment protocol, that includes “white glove”
concierge in-home or in-office physical therapy assessments and digital care treatments, in order to enhance medical treatments
and help improve patient treatment outcomes.
PreHabPT
:
Any patient can now receive a (non-emergency) orthopedic surgery consultation, in-home or in-office physical therapy evaluation
and may be prescribed a 4-8 week prehabpt.com exercise program prior to any surgery. Another in-home or in-office physical therapy
evaluation will be made following surgery and a treatment plan will be initiated. PreHabPT is up to an 8-week physician to patient
pre-surgical (Prehab) digital therapeutic exercise treatment system for patients that anticipate having total joint replacement
(knee, hip and or shoulder) or back surgeries. Patients may complete these digital therapeutic exercises either monitored or unmonitored.
PurePT
:
PurePT is a patient & independent PT digital treatment platform for connecting new patients to PT’s that are seeking
to be treated with our PHZIO treatment system. Patient program assessments can be made in the privacy of a patient home or office.
PurePT connects new patients to PT’s, particularly in states that have direct access rules where patient’s insurance
will reimburse for treatment without requiring a physician’s prescription.
Our
PHZIO Solution: A New Physical Therapy Delivery System:
|
●
|
SaaS
technology platform solution for providers bundling rehabilitation services and employer wellness programs; PTs are able to
evaluation and screen patients and calculate joint angles using drawing tool
|
|
●
|
First
real-time remote monitored 1-to-many physical therapy treatment platform for home use
|
|
●
|
Ability
for PTs to observe multiple patients simultaneously in real-time
|
|
●
|
Solves
what has been a structural problem and limitation in post-acute care practice growth
|
|
●
|
Allows
PT practices to generate increased revenues due to higher adherence and compliance rates
|
Note
2. Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying financial statements have been prepared to reflect the financial position, results of operations and cash flows of
the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America
(“GAAP”).
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ
materially from these good faith estimates and judgments.
Going
Concern
For
the year ended December 31, 2017, the Company had no revenues. The Company has an accumulated deficit of $16,949,772 and a working
capital deficit of $3,648,264. In view of these matters, there is substantial doubt about the Company’s ability to continue
as a going concern. The Company’s ability to continue operations is dependent upon the Company’s ability to raise
additional capital and to ultimately achieve sustainable revenues and profitable operations, of which there can be no guarantee.
The Company intends to finance its future development activities and its working capital needs largely from the sale of public
equity securities with some additional funding from other traditional financing sources, including term notes, until such time
that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company
do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications
of liabilities that might be necessary should the Company be unable to continue as a going concern.
Fair
Value of Financial Instruments
The
Company complies with the accounting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 820-10,
Fair Value Measurements,
as well as certain related FASB staff positions. This
guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities
required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact
business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent
risk, transfer restrictions, and risk of nonperformance.
The
guidance also establishes a fair value hierarchy for measurements of fair value as follows:
Level
1 – quoted market 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 in active markets
for similar assets or liabilities, quoted prices for identical or similar assets or liabilities 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.
As
of December 31, 2017, the Company had the following assets and liabilities measured at fair value on a recurring basis.
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Derivative
Liability
|
|
$
|
1,140,578
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,140,578
|
|
Total
Liabilities measured at fair value
|
|
$
|
1,140,578
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,140,578
|
|
As
of December 31, 2016, the Company had the following assets and liabilities measured at fair value on a recurring basis.
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Derivative
Liability
|
|
$
|
8,473,265
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,473,265
|
|
Total
Liabilities measured at fair value
|
|
$
|
8,473,265
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,473,265
|
|
Property
and Equipment
Property
and equipment are recorded at historical cost. Minor additions and renewals are expensed in the year incurred. Major additions
and renewals are capitalized and depreciated over their estimated useful lives. Depreciation is recorded over the estimated useful
lives of the related assets using the straight-line method for financial statement purposes. The estimated useful lives for significant
property and equipment categories are as follows:
|
Furniture
and Fixtures
|
5-7
Years
|
|
Computer
Equipment
|
5-7
Years
|
|
Software
|
3
Years
|
The
Company regularly evaluates whether events or circumstances have occurred that indicate the carrying value of long-lived assets
may not be recoverable. If factors indicate the asset may not be recoverable, we compare the related undiscounted future net cash
flows to the carrying value of the asset to determine if impairment exists. If the expected future net cash flows are less than
the carrying value, an impairment charge is recognized based on the fair value of the asset. For the years ended December 31,
2017 and 2016, there was no impairment recognized.
Intangible
Assets
The
Company accounts for assets that are not physical in nature as intangible assets. Intangible assets have either an identifiable
or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their
economic or legal life, whichever is shorter. Intangible assets with indefinite useful lives are reassessed each year for impairment.
If an impairment has occurred, then a loss is recognized. An impairment loss is determined by subtracting the asset’s fair
value from the asset’s book/carrying value. For the years ended December 31, 2017 and 2016, there was no impairment recognized.
Income
Taxes
The
Company accounts for income taxes under FASB ASC 740-10-30. Deferred income tax assets and liabilities are determined based upon
differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of
a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all the benefits
of deferred tax assets will not be realized.
Debt
Issuance Costs
The
Company accounts for debt issuance costs in accordance with ASU 2015-03. This guidance requires direct and incremental costs associated
with the issuance of debt instruments such as legal fees, printing costs and underwriters’ fees, among others, paid to parties
other than creditors, are reported and presented as a reduction of debt on the consolidated balance sheets.
Debt
issuance costs and premiums or discounts are amortized over the term of the respective financing arrangement using the effective
interest method. Amortization of these amounts is included as a component of interest expense net, in the consolidated statements
of operations.
Cash
and Cash Equivalents
Cash
and cash equivalents includes all cash deposits and highly liquid financial instruments with an original maturity to the Company
of three months or less.
Loss
per Common Share
The
Company follows ASC Topic 260 to account for the loss per share. Basic loss per common share calculations are determined by dividing
net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per common share
calculations are determined by dividing net loss by the weighted average number of common shares and dilutive common share equivalents
outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
As the Company has incurred losses for the periods ended December 31, 2017 and 2016, no dilutive shares are added into the loss
per share calculations. While currently antidilutive, the following instruments could potentially dilute EPS in the future resulting
in the following common stock equivalents
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Options
|
|
|
12,064,583
|
|
|
|
15,586,494
|
|
Warrants
|
|
|
8,753,179
|
|
|
|
7,401,556
|
|
Convertible
Notes
|
|
|
14,579,595
|
|
|
|
43,025,637
|
|
|
|
|
35,397,357
|
|
|
|
66,013,687
|
|
Recent
Accounting Pronouncements
The
Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any,
on its results of operations, financial position or cash flows. Based on that review, the Company believes that none of these
pronouncements will have a significant effect on its financial statements.
Note
3. Property and Equipment
Property
and equipment consists of computer equipment that is stated at cost $11,331 and $8,421 less accumulated depreciation of $6,310
and $4,142 for the years ended December 31, 2017 and 2016, respectively. Depreciation expense was $2,169 and $1,685 for the years
ended December 31, 2017 and 2016, respectively.
Note
4. Intangible Assets
The
Company recognizes the cost of a software license and a license for use of a programming code as intangible assets. The stated
cost of these assets was $24,770 and $24,770 less accumulated amortization of $10,816 and $7,862 for the years ended December
31, 2017 and 2016, respectively. For the years ended December 31, 2017 and 2016, the amortization expense recorded was $2,954
and $2,954, respectively.
Note
5. Income Taxes
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
The
Tax Cuts and Jobs Act, enacted on December 22, 2017, reduced the U.S. corporate statutory tax rate from 35% to 21% beginning on
January 1, 2018. We used 26% as an effective tax rate.
Net
deferred tax liabilities consist of the following components as of December 31, 2017 and 2016:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
NOL
Carryover
|
|
$
|
1,058,800
|
|
|
$
|
1,490,500
|
|
Accrued
Payroll
|
|
|
278,600
|
|
|
|
329,000
|
|
Deferred
Rent
|
|
|
300
|
|
|
|
-
|
|
Deferred
tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(300
|
)
|
|
|
(1,100
|
)
|
Valuation
allowance
|
|
|
(1,337,400
|
)
|
|
|
(1,818,400
|
)
|
Net
deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income
from continuing operations for the years ended December 31, 2017 and 2016 due to the following:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Book
Loss
|
|
$
|
(268,600
|
)
|
|
$
|
(4,361,200
|
)
|
Depreciation
|
|
|
(100
|
)
|
|
|
300
|
|
Contributed
Services
|
|
|
57,700
|
|
|
|
107,100
|
|
Meals
& Entertainment
|
|
|
3,600
|
|
|
|
6,100
|
|
Stock
for Expense Accounts
|
|
|
255,400
|
|
|
|
14,300
|
|
Contributed
Interest Expense
|
|
|
92,500
|
|
|
|
1,500
|
|
Gain/Loss
on settlement of debt through equity
|
|
|
112,900
|
|
|
|
(775,700
|
)
|
Amortization
of debt discount
|
|
|
108,800
|
|
|
|
277,800
|
|
Accrued
Payroll
|
|
|
34,200
|
|
|
|
92,100
|
|
Loss
on derivative
|
|
|
(720,700
|
)
|
|
|
3,611,600
|
|
Related
Party Interest
|
|
|
92,500
|
|
|
|
1,500
|
|
Valuation
allowance
|
|
|
231,800
|
|
|
|
1,024,600,
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
At
December 31, 2017, the Company had net operating loss carryforwards of approximately $4,072,000 that may be offset against future
taxable income from the year 2018 through 2037. No tax benefit has been reported in the December 31, 2017 financial statements
since the potential tax benefit is offset by a valuation allowance of the same amount.
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for federal income tax reporting
purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited
as to use in future years.
The
Company’s policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income
tax expense. For the years ended December 31, 2017 and 2016, the Company did not recognize any interest or penalties, nor did
we have any interest or penalties accrued related to unrecognized benefits.
The
tax years ended December 31, 2016, 2015 and 2014 are open for examination for federal income tax purposes and by other major taxing
jurisdictions to which we are subject.
Note
6. Related Party Transactions
During
the year ended December 31, 2017, a related party, a company for which the Company’s former Secretary-Treasurer and CFO
is also serving as CFO, invoiced the Company $22,850 for accounting services. The amounts outstanding as of December 31, 2017
and December 31, 2016 was $700 and $10,481, respectively. During the years ended December 31, 2017 and December 31, 2016, the
Company recorded $0 and $4,156 imputed interest, respectively, on the amount owed to the related party based on an interest rate
of 8%. Because the amount due to the related party is now being paid on a regular basis, the Company is no longer accruing imputed
interest.
On
April 1, 2015, the Company entered into an operating agreement with a Evolution Physical Therapy(“EPT”) which is owned
by the Company’s President and Chief Executive Officer. Through the agreement, the Company agrees to provide operating capital
advances for EPT to offer the Company’s PHZIO platform to physical therapy patients. For accounting and tax purposes, the
net profits or losses generated by EPT shall be allocated on a monthly basis. The Company will receive 75% of the net patient
insurance reimbursements associated with the operation of the PHZIO platform.
On
November 11, 2016, the Company signed an agreement with a programming company (“PC”) within which one of the Company’s
directors and Chief Technical Officer is the Chief Marketing Officer. The agreement is for additional features to be programmed
for the launch of the PHZIO platform. The contract specifies that the Company’s CEO and CTO will retain their officer and
director positions and retain their past due accrued compensation through June 30, 2016. The Company is to pay a monthly base
fee of $100,000 for the development and compensation for the Company’s CEO and CTO. Following payment of the initial $100,000,
the Company is obligated to only pay $50,000 monthly until the PC has successfully signed and collected the first monthly service
fee for 100 physical therapy clinics to use the PHZIO platform. The agreement establishes that the Company is indebted to the
PC for $225,000 for past programming services. For this amount, the Company issued 25,280,899 common shares at a value of $0.0089
per share on April 1, 2017. The PC will also have the right to appoint 40% of the directors. At the end of December 31, 2017,
the Company had a payable of $350,810 due to this company.
The
Company rents its Culver City, CA office space from a company owned by our CEO. The imputed rent expense of $500 per month is
recorded in the Statement of Operations and Additional Paid in Capital in the Balance Sheet.
Throughout
the year ended December 31, 2017, the officers and directors of the Company incurred business expenses on behalf of the Company.
The amounts payable to the officers as of December 31, 2017 and December 31, 2016 were $5,828 and $44,429, respectively. There
were no expenses due to the board members, but the Company has accrued directors’ fees of $205,000 and $60,000 at December
31, 2017 and December 31, 2016, respectively. Because the Company is not yet profitable the officers have agreed to defer compensation.
The Company had accrued executive compensation of $1,071,369 and $940,000 at December 31, 2017 and December 31, 2016 respectively.
Note
7. Non-Convertible Notes Payable
In
February 2017, the Company was served by a complaint filed by the holder of a note payable. The action was removed from Louisiana
state court to the United States Federal District Court in Baton Rouge, LA. The lawsuit alleges that the Company is indebted to
the note holder a promissory note stemming from four loans to the Company during the 20 months prior to February 2017 amounting
to $75,500 in total original principal bearing interest at 12% per annum, of which $45,202 has been repaid. Further, the note
holder claims that, because of alleged defaults and extensions of the notes, the Company is now indebted in the amount of $253,877
inclusive of interest and penalties at an effective rate exceeding 70% per annum, far more than the maximum rate allowable in
California or Louisiana. The Company and its counsel have determined that: (i) the note holder is not a licensed lender in the
State of California, where the loan was made and the $75,500 was deposited and therefore was not permitted under California law
to make loans in the State; and (ii) the interest rate the note holder is seeking to collect is usurious and therefore interest
claimed in the lawsuit is neither collectible nor enforceable. On October 19, 2017 Schoemann and his counsel motioned to dismiss
the unlicensed lender assertion. On January 19, 2018 the U.S. District Court, Louisiana ruled that the unlicensed lender assertion
was to proceed. The Company and counsel are of the opinion that the Schoemann suit is wholly without merit and the company will
prevail.
At
December 31, 2017, the Company had indebtedness to this holder of the note payable of $180,051 plus $41,634 of accrued interest.
During the years ended December 31, 2017 and 2016, the Company recognized interest expense totaling $32,409 and $19,711, respectively.
Note
8. Convertible Notes Payable
On
November 14, 2016, the Company signed a convertible note in which the note holder agreed to pay for the cancellation of $125,000
of the remaining balance of the convertible note payable dated December 7, 2015. The Company recorded $125,000 in debt discount
for this note. The terms of the convertible note were the same as the original note which are that interest is payable at 8% per
annum. During the year ended December 31, 2017, the Company recorded $2,184 of interest expense. During the year ended of December
31, 2017, the holder of the note converted $106,000 of principal and $3,490 of accrued interest into 27,422,445 shares of common
stock. As of the year ended December 31, 2017, this convertible note and accrued interest is fully converted.
On
November 14, 2016, the Company entered into a securities purchase agreement with an accredited investor for a note in the principal
amount of $275,000 at a 10% original issue. The note had a provision for 8% interest to be accrued until paid or converted into
shares of common stock. During the year ended December 31, 2017, the Company recorded $12,263 of interest expense. During the
year ended of December 31, 2017, the holder of the note converted $275,000 of principal and $15,135 of accrued interest into 17,373,343
shares of common stock. As of the year ended December 31, 2017, this convertible note and accrued interest is fully converted.
On
January 11, January 23 and February 14, 2017, the Company authorized three convertible notes $55,000 each for a total of $165,000.
These notes mature six months from the grant date. The convertible notes convert into common stock of the Company at conversion
price into which any principal amount and interest (including any default interest) under the notes shall be convertible into
shares of common stock shall be equal to the lesser of: (i) $0.20 or (ii) 75% of the average of the volume-weighted average prices
for the five (5) Trading Days immediately following the 180th calendar day after the Original Issue Date, whichever is lower.
There is only one pricing lookback event. The notes have a 10% original issue discount and an interest rate of 8%. During the
year ended December 31, 2017, the Company recognized interest expense totaling $7,594. In April 2017, the Company and the note
holder authorized amendments to these three notes in which the maturity dates of the notes were extended to February 6, 2018,
February 22, 2018, and March 31, 2018, respectively. All three of these notes plus accrued interest were converted during the
year ended December 31, 2017 and 2,436,381 shares of common stock were issued.
On
February 9, 2017, the Company entered into a Securities Purchase Agreement with a third party which required the Company to issue
two 5.5% convertible notes in the aggregate principal amount of $165,000, each at $82,500. Each of the notes contain a 10% Original
Issue Discount and an interest rate of 5.5%. The due date of the notes is November 7, 2017 for the first and May 1, 2018 for the
second. These notes were funded in two tranches, one on February 9, 2017 and the other one on July 31, 2017. During the year ended
December 31, 2017, all but $2 principal of the note funded on February 9, 2017 was converted and 1,737,000 shares of common stock
were issued. After the conversions there was a principal balance of $2 and an accrued interest balance of $52. These remaining
balances of the principal and interest was paid directly to the investor in January 2018. During the year ended December 31, 2017,
the Company recognized interest expense of $5,435.
On
February 15, 2017, the Company and an institutional investor entered into an agreement in which: (a) the investor agreed to fund
up to $5,000,000 in reliance upon an exception provided under Rule 506 of Regulation D promulgated by the SEC under the Securities
act of 1933, as amended; (b) the Company filed a registration statement on Form S-1 with the SEC within 15 days after the Company
filed its annual 10K report for the year ended December 31, 2016 (The S-1 was filed on April 11, 2017); (c) the Company issued
a convertible note in the principal amount of $100,000, bearing interest at 8% (This note has not yet been funded); and (d) the
Company issued a second convertible note in the principal amount of $275,000 bearing interest at 8% of which $137,500 has been
funded. With the $275,000 convertible note, the Company also issued 68,750 warrants exercisable at $.25 per share on a cashless
basis. During the year ended December 31, 2017, the principal of the amount funded plus accrued interest was converted and 1,805,379
shares of common stock was issued. During the year ended December 31, 2017, the Company recognized interest expense of $12,592.
On
April 11, 2017, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $308,000. The note, which is due on November 6, 2018 was funded in the sum of $280,000 with $28,000 being retained by
the investor through an original issue discount for due diligence and legal expense related to this transaction. The note is convertible
into shares of common stock, par value $0.001, at a conversion price of $0.20 per Share. On April 11, 2017, the Company filed
a registration statement on Form S-1 to provide for the resale of up to 9,519,229 shares of common stock issuable to the investor,
as a Selling Stockholder, pursuant to a “put right” under an investment agreement dated February 10, 2017, that permits
the Company to “put” up to five million dollars ($5,000,000) in shares of common stock to the investor over a period
of up to thirty-six (36) months or until $5,000,000 of such shares have been “put.” With issuance of this note, the
Company also issued 1,232,000 warrants exercisable at $.25 per share. During the year ended December 31, 2017, the Company recognized
interest expense of $17,687.
On
April 24, 2017, the Company entered into a Securities Purchase Agreement with a third party which required the Company to issue
two 5.5% convertible notes in the aggregate principal amount of $167,000, each at $83,500. One of the notes was funded in May
2017 for $83,500. The other note was funded in December 2017 for $83,500. Each of the notes contain an Original Issue Discount
of $8,500 and an interest rate of 5.5%. The due date of the notes is January 24, 2018 and September 12, 2018. During the year
ended December 31, 2017, the investor converted $34,640 of principal and accrued interest and 700,000 shares of common stock were
issued. During the year ended December 31, 2017, the Company recognized interest expense of $3,302. The note that was due January
24, 2018 was fully converted subsequent to year end.
On
July 24, 2017, the Company agreed to amend the two convertible notes dated April 24, 2017 and the convertible note dated February
9, 2017 relative to the conversion provision in Section 4(a) by inserting the following provision: “In addition to all the
other Conversion Price formulas set forth in the Note, the Holder may choose to elect from the following two Conversion Price
formulas, if they result in a lower Conversion Price: (i) 75% of the average of the 5 daily VWAPS of the Common Stock as reported
on an Exchange for the 20 trading days immediately preceding the 180th daily anniversary of the Note or (ii) 75% of the average
of the 5 VWAPS of the Common Stock as reported on an Exchange for the 20 trading days immediately preceding the delivery day of
the first Notice of Conversion from the Holder”.
On
September 5, 2017, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $55,000. The note, which is due on March 5, 2018 has an original issue discount of $5,000. The convertible notes convert
into common stock of the Company at conversion price into which any principal amount and interest (including any default interest)
under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) $0.20 or (ii) 75% of the
average of the VWAPs for the ten (10) Trading Days immediately following the 180th calendar. During the year ended December 31,
2017, the Company recognized interest expense of $1,389. On March 3, 2018, the holder of the note converted $55,000 of principal
and $2,200 of accrued interest into 853,731 shares of common stock. As of March 3, 2018, the convertible note and accrued interest
is fully converted.
On
October 12, 2017, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $110,000. The note, which is due on April 12, 2018 has an original issue discount of $10,000. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) $0.20 or (ii)
65% of the average of the VWAPs for the fifteen (15) Trading Days immediately following the 180th calendar. During the year ended
December 31, 2017, the Company recognized interest expense of $1,977.
Note
9. Equity Transactions
In
February 2017, the Board of Directors of unanimously approved an amendment to the Company’s Articles of Incorporation to:
(A) increase its authorized capital stock from 110,000,000 shares of capital stock, par value $0.001, consisting of: (i) 100,000,000
shares of common stock, par value $0.001; and (ii) 10,000,000 shares of preferred stock, par value $0.001, to 420,000,000 shares
of capital stock, par value $0.001, consisting of: (iii) 400,000,000 shares of common stock, par value $0.001; and (iv) 20,000,000
shares of preferred stock, par value $0.001; and (B) implement a reverse split of the issued and outstanding shares of common
stock, including shares of common stock reserved for issuance, in a ratio to be determined by the Company’s Board of Directors,
not to exceed a one-for-twenty (1:20) basis. The Certificate of Amendment was authorized and approved by the Joint Written Consent
of the Board of Directors and Majority Consenting Stockholders of the Company.
On
March 1, 2017, the Company had filed a Definitive Information Statement with the SEC (the “Information Statement”)
pursuant to which the Company, based upon the Joint Written Consent of our Board of Directors and Majority Consenting Stockholders,
authorized the Reverse Split on a ratio not to exceed a one-for-twenty (1:20) basis, which Reverse Split was to be initiated within
180 days from March 1, 2017. On August 8, 2017, our Board of Directors approved the one-for-twelve (1:12) Reverse Split and filed
the requisite application with FINRA.
The
initial reason for ratifying and approving the Reverse Split was based upon the Company’s determination that it would best
position the Company for possible up listing from the OTCQB to the NASDAQ. After due deliberation, the Company’s Board of
Directors determined on November 10, 2017, not to proceed with the Reverse Split. Based upon recent and anticipated business developments,
it is the Board of Directors belief that up listing to the NASDAQ may be achieved after the fiscal year ending December 31, 2017
without implementation of the Reverse Split. While there can be no assurance that up listing on the NASDAQ will be achieved, the
Company has informed FINRA that it was withdrawing the application and are canceling the pending 1:12 Reverse Split.
Preferred
Stock
The
total number of shares of preferred stock which the Company shall have authority to issue is 20,000,000 shares with a par value
of $0.001 per share. There have been no preferred shares issued as of December 31, 2017.
Common
Stock
The
total number of shares of common stock which the Company shall have authority to issue is 400,000,000 shares with a par value
of $0.001 per share.
Debt
Conversion Shares
During
the year ended December 31, 2017, the Company issued a total of 53,534,548 shares of common stock per debt conversion of various
convertible notes (See Note 8). The total of the debt conversion was $797,913 principal plus $45,192 accrued interest.
Warrant
Conversion Shares
In
January 2017, 1,363,277 warrants were exercised under a cashless exercise and 1,336,075 shares of common stock were issued.
Consultant
Issued Shares
During
the year ended December 31, 2017, the Company issued 8,190,577 shares of common stock for marketing and consulting services valued
at $731,380.
In
January 2017, the Company entered into an agreement with a consultant for a six-month period to provide services which will include:
(i) introductions to brokers; (ii) assist with research coverage; (iii) introductions to over 100 funds, investment banking firms
and market makers; and (iv) a presentation speaking slot with a Gold sponsorship at the 2017 Wall Street Conference. In consideration
for the services, the Company issued 75,000 shares of common stock for a value of $6,000.
On
June 6, 2017, the Board of Directors approved the issuance of 100,000 shares of common stock to the Company’s attorneys
for legal services. These shares were issued in August 2017 for a value of $8,000.
Accounts
Payable Reduction Issued Shares
In
January and March 2017, the Company issued 2,400,000 shares of common stock per the extinguishment of debt agreements dated December
1, 2016 totaling $120,000
On
April 1, 2017, the Company issued 25,280,899 shares of common stock per the contract with a related party per the Definitive Services
Agreement signed on January 24, 2017. This agreement is discussed in Note 6 above. This issuance resulted in a reduction of accounts
payable by $225,000.
Stock
Options
On
August 6, 2015, the Board of Directors approved the 2015 Stock Option Plan, pursuant to which certain directors, officers, employees
and consultants will be eligible for certain stock options and grants. The Plan is effective as of August 1, 2015 and the maximum
number of shares reserved and available for granting awards under the Plan shall be an aggregate of 3,000,000 shares of common
stock, provided however that on each January 1, starting with January 1, 2016, an additional number of shares equal to the lesser
of (A) 2% of the outstanding number of shares (on a fully-diluted basis) on the immediately preceding December 31 and (B) such
lower number of shares as may be determined by the Board or committee charged with administering the plan. This plan may be amended
at any time by the Board or appointed plan Committee.
During
the year ended December 31, 2017, the options authorized by the Board of Directors to be issued to a consultant on April 15, 2016
expired because of the one-year exercise date.
The
following is a summary of the status of all Company’s stock options as of December 31, 2017 and changes during the periods
ended on December 31, 2017 and 2016, respectively:
|
|
Number
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
of
Stock
|
|
|
Average
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Exercise
Price
|
|
|
Life
(yrs)
|
|
|
Value
|
|
Outstanding
at January 1, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
20,250,000
|
|
|
|
0.27
|
|
|
|
3.2
|
|
|
|
0.011
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Outstanding
at December 31, 2016
|
|
|
20,250,000
|
|
|
$
|
0.27
|
|
|
|
2.3
|
|
|
$
|
0.011
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
250,000
|
|
|
|
1.00
|
|
|
|
-
|
|
|
|
|
|
Outstanding
at December 31, 2017
|
|
|
20,000,000
|
|
|
|
0.26
|
|
|
|
1.9
|
|
|
$
|
-
|
|
Options
exercisable at December 31, 2017
|
|
|
12,139,583
|
|
|
$
|
0.32
|
|
|
|
1.9
|
|
|
$
|
-
|
|
The
Company recognized stock option expense of $434,376 and $40,829 for the years ended December 31, 2017 and 2016, respectively.
For
purpose of determining the fair market value of the and options issued during the year ended December 31, 2016, we used the Black
Scholes option valuation model. These valuations were done throughout the period at the date of issuance and not necessarily as
of the reporting date. The assumptions used in the Black Scholes valuation of the date of issuance are as follows:
Stock
price on the valuation date
|
|
$
|
.110
|
|
Exercise
price of options
|
|
$
|
.80
– 1.00
|
|
Dividend
yield
|
|
|
0.00
|
%
|
Years
to maturity
|
|
|
1-5
|
|
Risk
free rate
|
|
|
.53
- .84
|
%
|
Expected
volatility
|
|
|
57.2
-61.4
|
%
|
Warrants
In
February 2017, the Company authorized the issuance of 68,750 warrants that were issued as part of a convertible note. At December
31, 2017 the fair value of the warrants is $8,486.
In
April 2017, the Company authorized the issuance of 1,232,000 warrants that were issued as part of a convertible note. At December
31, 2017 the fair value of the warrants is $151,771.
The
following is a summary of the status of the Company’s warrants as of December 31, 2017 and changes on during the periods
ended on December 31, 2017 and 2016, respectively:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
Average
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Life
(yrs.)
|
|
|
Value
|
|
Outstanding
at January 1, 2016
|
|
|
5,631,191
|
|
|
$
|
0.11
|
|
|
|
2.1
|
|
|
$
|
0.103
|
|
Granted
|
|
|
3.835.000
|
|
|
|
0.40
|
|
|
|
5.0
|
|
|
|
-
|
|
Exercised
|
|
|
350,000
|
|
|
|
0.86
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at December 31, 2016
|
|
|
9,116,190
|
|
|
$
|
0.21
|
|
|
|
2.9
|
|
|
$
|
0.103
|
|
Granted
|
|
|
1,300,750
|
|
|
|
0.25
|
|
|
|
5.0
|
|
|
|
0
|
|
Exercised
|
|
|
(1,363,277
|
)
|
|
|
0.01
|
|
|
|
-
|
|
|
|
0.178
|
|
Cancelled
|
|
|
(316,189
|
)
|
|
|
0.059
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at December 31, 2017
|
|
|
8,737,474
|
|
|
$
|
0.21
|
|
|
|
2.4
|
|
|
$
|
0.038
|
|
Warrants
exercisable at December 31, 2017
|
|
|
8,737,474
|
|
|
$
|
0.21
|
|
|
|
2.4
|
|
|
$
|
0.038
|
|
For
purpose of determining the fair market value of the warrants and options issued during the year ended December 31, 2017, we used
the Black Scholes option valuation model. These valuations were done throughout the period at the date of issuance and not necessarily
as of the reporting date. The assumptions used in the Black Scholes valuation of the date of issuance are as follows:
Stock
price on the valuation date
|
|
$
|
.10
|
|
Exercise
price of warrants
|
|
$
|
.25
|
|
Dividend
yield
|
|
|
0.00
|
%
|
Years
to maturity
|
|
|
5
|
|
Risk
free rate
|
|
|
1.84-1.89
|
%
|
Expected
volatility
|
|
|
80.249-242,111
|
%
|
Note
10. Commitments, Contingencies
The
Company may be subject to lawsuits, administrative proceedings, regulatory reviews or investigations associated with its business
and other matters arising in the normal conduct of its business. The following is a description of an uncertainty that is considered
other than ordinary, routine and incidental to the business.
The
closing of the Initial Exchange Agreement with Private Co. was conditioned upon certain, limited customary representations and
warranties, as well as, among other things, our compliance with Rule 419 (“Rule 419”) of Regulation C under the Securities
Act of 1933, as amended (the “Securities Act”) and the consent of our shareholders as required under Rule 419. Accordingly,
we conducted a “Blank Check” offering subject to Rule 419 (the “Rule 419 Offering”) and filed a Registration
Statement on Form S-1 to register the shares of such offering; the Registration Statement was declared effective on September
14, 2012. We used 10% of the subscription proceeds as permitted under Rule 419 and the amount remaining in the escrow trust as
of the date of the closing of the Share Exchange was $90,000 (the “Trust Account Balance”).
Rule
419 required that the Share Exchange occur on or before March 18, 2014, but due to normal negotiations regarding the transactions
and the parties’ efforts to satisfy all the closing conditions, the Share Exchange did not close on such date. Accordingly,
after numerous discussions with management of both parties, they entered into an Amended ,and Restated Share Exchange Agreement
(the “Share Exchange Agreement”) to reflect a revised business combination structure, pursuant to which we would:
(i) file a registration statement on Form 8-A (“Form 8A”) to register our common stock pursuant to Section 12(g) of
the Exchange Act, which we did on May 1, 2014 and (ii) seek to convert the participants of the Rule 419 Offering into participants
of a similarly termed private offering (the “Converted Offering”), to be conducted pursuant to Regulation D, as promulgated
under the Securities Act
Fifty-two
persons participated in the Rule 419 Offering and each of them gave the Company his/her/its consent to use his/her/its escrowed
funds to purchase shares of the Company’s restricted common stock in the Converted Offering (the “Consent”)
rather than have their funds returned. To avoid further administrative work for the investors, we believe that we took reasonable
steps to inform investors of the situation and provided them with an appropriate opportunity to maintain their investment in the
Company, if they so choose, or have their funds physically returned. Management believed the steps it took constituted a constructive
return of the funds and therefore met the requirements of Rule 419.
However,
pursuant to Rule 419(e)(2)(iv), “funds held in the escrow or trust account shall be returned by first class mail or equally
prompt means to the purchaser within five business days [ if the related acquisition transaction does not occur by a date that
is 18 months after the effective date of the related registration statement].” As set forth above, rather than physically
return the funds, we sought consent from the investors of the Rule 419 Offering to direct their escrowed funds to the Company
to instead purchase shares in the Converted Offering. The consent document (which was essentially a form of rescission) was given
to the investors along with a private placement memorandum describing the Converted Offering and stated that any investor who
elected not to participate in the Converted Offering would get 90% of their funds physically returned. Pursuant to Rule 419(b)(2)(vi),
a blank check company is entitled to use 10% of the proceed/escrowed funds; therefore, if a return of funds is required, only
90% of the proceed/escrowed funds need be returned. The Company received $100,000 proceeds and used $10,000 as per Rule 419(b)(2)(vi);
therefore, only $90,000 was subject to possible return.
As
disclosed therein, we filed the amendments to the initial Form 8-K in response to comments from the SEC regarding the Form 8-K
and many of those comments pertain to an alleged violation of Rule 419. The Company continued to provide the SEC with information
and analysis as to why it believes it did not violate Rule 419 but was unable to satisfy the SEC’s concerns. Comments and
communications indicate that Rule 419 requires a physical return of funds if a 419 offering cannot be completed because a business
combination was not consummated within the required time frame; constructive return is not permitted.
Because
of these communications and past comments, we are disclosing that we did not comply with the requirements of Rule 419, which required
us to physically return the funds previously submitted to escrow pursuant to the Rule 419 Offering. Because of our failure to
comply with Rule 419, the SEC may bring an enforcement action or commence litigation against us for failure to strictly comply
with Rule 419. If any claims or actions were to be brought against us relating to our lack of compliance with Rule 419, we could
be subject to penalties (including criminal penalties), required to pay fines, make damages payments or settlement payments. In
addition, any claims or actions could force us to expend significant financial resources to defend ourselves, could divert the
attention of our management from our core business and could harm our reputation.
Ultimately,
the SEC determined to terminate its review of the Initial Form 8-K and related amendments, rather than provide us with additional
opportunities to address their concerns and therefore, we did not clear their comments. It is not possible at this time to predict
whether or when the SEC may initiate any proceedings, when this issue may be resolved or what, if any, penalties or other remedies
may be imposed, and whether any such penalties or remedies would have a material adverse effect on our consolidated financial
position, results of operations, or cash flows. Litigation and enforcement actions are inherently unpredictable, the outcome of
any potential lawsuit or action is subject to significant uncertainties and, therefore, determining currently the likelihood of
a loss, any SEC enforcement action and/or the measurement of the amount of any loss is complex. Consequently, we are unable to
estimate the range of reasonably possible loss. Our assessment is based on an estimate and assumption that has been deemed reasonable
by management, but the assessment process relies heavily on an estimate and assumption that may prove to be incomplete or inaccurate,
and unanticipated events and circumstances may occur that might cause us to change that estimate and assumption. Considering the
uncertainty of this issue and while Management evaluates the best and most appropriate way to resolve same, management determined
to create a reserve on the Company’s Balance Sheet for the $90,000 that was subject to the Consent.
On
January 24, 2017, the Registrant entered into a Definitive Service Agreement (“DSA”) with Bistromatics, a company
for which the Company’s officer serves as an officer, affirming that, at the time, the Company did not have enough authorized
shares of common stock, based upon the number of issued and outstanding shares together with shares reserved for issuance, to
issue Bistromatics 25,280,899 shares of common stock. In connection with the Company’s obligations under the DSA, the Company
filed a Certificate of Amendment to its Articles of Incorporation with the State of Nevada for the purposes of: (A) increasing
its authorized capital stock from 110,000,000 shares of capital stock, par value $0.001, consisting of: (i) 100,000,000 shares
of common stock, par value $0.001; and (ii) 10,000,000 shares of preferred stock, par value $0.001, to 420,000,000 shares of capital
stock, par value $0.001, consisting of: (iii) 400,000,000 shares of common stock, par value $0.001; and (iv) 20,000,000 shares
of preferred stock, par value $0.001. The Certificate of Amendment has been filed with the State of Nevada and the Company has
filed an Information Statement on Schedule 14C, based upon the Joint Written Consent of the Company’s Board of Directors
and the Majority Consenting Stockholders and implementing a reverse split of the issued and outstanding shares of common stock,
including shares of common stock reserved for issuance, in a ratio to be determined by the Company’s Board of Directors,
not to exceed a one-for-twenty (1:20) basis (the “Reverse Split”). On April 1, 2017, the Company issued 25,280,899
shares of common stock.
In
February 2017, the Company was served by a complaint filed by the holder of a note payable. The action was removed from Louisiana
state court to the United States Federal District Court in Baton Rouge, LA. The lawsuit alleges that the Company is indebted to
the note holder a promissory note stemming from four loans to the Company during the 20 months prior to February 2017 amounting
to $75,500 in total original principal bearing interest at 12% per annum, of which $45,202 has been repaid. Further, the note
holder claims that, because of alleged defaults and extensions of the notes, the Company is now indebted in the amount of $253,877
inclusive of interest and penalties at an effective rate exceeding 70% per annum, far more than the maximum rate allowable in
California or Louisiana. The Company and its counsel have determined that: (i) the note holder is not a licensed lender in the
State of California, where the loan was made and the $75,500 was deposited and therefore was not permitted under California law
to make loans in the State; and (ii) the interest rate the note holder is seeking to collect is usurious and therefore interest
claimed in the lawsuit is neither collectible nor enforceable. On October 19, 2017 Schoemann and his counsel motioned to dismiss
the unlicensed lender assertion. On January 19, 2018 the U.S. District Court, Louisiana ruled that the unlicensed lender assertion
was to proceed. The Company and counsel are of the opinion that the Schoemann suit is wholly without merit and the company will
prevail.
From
time to time the Company may become a party to litigation matters involving claims against the Company. Except as may be outlined
above, the Company believes that there are no current matters that would have a material effect on the Company’s financial
position or results of operations.
Note
11. Derivative Valuation
The
Company evaluated the convertible debentures and associated warrants in accordance with ASC Topic 815, “Derivatives and
Hedging,” and determined that the conversion feature of the convertible promissory notes was not afforded the exemption
for conventional convertible instruments due to their variable conversion rates. The notes have no explicit limit on the number
of shares issuable, so they did not meet the conditions set forth in current accounting standards for equity classification. In
addition, the warrants have a Most Favored Nations clause resulting in the exercise price of the warrants also not being fixed.
Therefore, these have been characterized as derivative instruments. We elected to recognize the notes under ASU paragraph 815-15-25-4,
whereby there would be a separation into a host contract and derivative instrument. We elected to initially and subsequently measure
the notes and warrants in their entirety at fair value, with changes in fair value recognized in earnings.
The
debt discount is amortized over the life of the note and recognized as interest expense. For the years ended December 31, 2017
and 2016, the Company amortized the debt discount of $417,546 and $8,473,265, respectively, to interest expense.
During
the years ended December 31, 2017 and 2016, the Company had the following activity in the derivative liability account:
|
|
Notes
|
|
|
Warrants
|
|
|
Total
|
|
Derivative
liability at January 1, 2016
|
|
$
|
-
|
|
|
$
|
2,802
|
|
|
$
|
2,802
|
|
Addition
of new conversion option derivatives
|
|
|
773,019
|
|
|
|
1,278,645
|
|
|
|
2,051,664
|
|
Change
in fair value
|
|
|
8,693,964
|
|
|
|
(172,009
|
)
|
|
|
8,521,955
|
|
Reclassification
of derivative to gain on extinguishment of debt
|
|
|
(2,103,156
|
)
|
|
|
-
|
|
|
|
(2,103,156
|
)
|
Derivative
liability at December 31, 2016
|
|
$
|
7,363,827
|
|
|
$
|
1,109,438
|
|
|
$
|
8,473,265
|
|
Addition
of new conversion option derivatives
|
|
|
304,289
|
|
|
|
123,961
|
|
|
|
428,250
|
|
Conversion
of note derivatives
|
|
|
(4,793,036
|
)
|
|
|
-
|
|
|
|
(4,793,036
|
)
|
Changes
in warrant derivatives
|
|
|
-
|
|
|
|
(109,985
|
)
|
|
|
(109,985
|
)
|
Change
in fair value
|
|
|
(2,509,489
|
)
|
|
|
(348,828
|
)
|
|
|
(2,857,917
|
)
|
Reclassification
of derivative to gain on extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Derivative
liability at December 31, 2017
|
|
$
|
365,591
|
|
|
$
|
774,986
|
|
|
$
|
1,140,577
|
|
For
purposes of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model.
The significant assumptions used in the Black Scholes valuation of the derivative are as follow:
Stock
price at valuation date
|
|
$
|
.066-.175
|
|
Exercise
price of warrants
|
|
$
|
.004
-.25
|
|
Conversion
rate of convertible debt
|
|
$
|
.003
– 0.2000
|
|
Risk
free interest rate
|
|
|
.59%-2.09
|
%
|
Stock
volatility factor
|
|
|
62%-289
|
%
|
Years
to Maturity
|
|
|
.08
– 4.3
|
|
Expected
dividend yield
|
|
|
None
|
|
Note
12. Supplemental Cash Flow Information
During
the year ended December 31, 2016 the Company had the following non-cash investing and financing activities:
|
●
|
Accrued
interest of $125,755 and $12,931 was rolled into short-term notes and convertible debt, respectively.
|
|
●
|
Increased
derivative liability by $346,812 for convertible debt
|
|
●
|
Issued
3,835,000 warrants valued at $510,167 as incentive for lenders to enter debt agreements.
|
|
●
|
Increased
derivative liability and debt discount by $152,035 for warrant issued debt.
|
|
●
|
Increased
debt discount by $35,000 for an Original Issue Discount on debt.
|
|
●
|
Authorized
2,400,000 shares of stock to be issued for payables conversion totaling $120,000
|
|
●
|
Authorized
issuance of 450,000 shares of stock to be issued for prepaid
|
|
●
|
Issued
31,646,447 shares of common stock for the extinguishment of $261,231 worth of debt and
$10,031 worth of accrued interest. There are to be an additional 2,060,000 shares to
be issued for the debt conversion
|
|
●
|
Issued
985,000 shares of common stock valued at $1,958,350 which was recorded as a prepaid
|
During
the year ended December 31, 2017 the Company had the following non-cash investing and financing activities:
|
●
|
Issued
1,300,750 warrants valued at $160,257 as incentive for lenders to enter debt agreements.
|
|
●
|
Issued
27,680,899 shares of common stock for payables conversion totaling $345,000.
|
|
●
|
Issued
1,336,075 shares of common stock for cashless exercise of warrants.
|
|
●
|
Issued
5,025,000 shares of common stock valued at $389,500 which was recorded as a prepaid.
|
|
●
|
Issued
3,340,577 shares of common stock valued at $355,880 for services
|
|
●
|
Issued
53,534,548 shares of common stock for the extinguishment of $797,913 worth of debt and
$45,192 worth of accrued interest.
|
Note
13. Subsequent Events
On
January 2, 2018, the Board of Directors approved the extension of an Advisory Agreement dated February 15, 2015 for one year.
The Company issued 800,000 shares of common stock as compensation for this agreement on January 2, 2018.
On
January 2, 2018, the Board of Directors approved, retroactively to October 1, 2017, to provide monthly reimbursements for medical
insurance up to $1,000 per month for the Company’s executive officers.
On
January 2, 2018, the Board of Directors agreed to form a new eWellness Healthcare Corporation 2018 Equity Incentive Plan (“Plan”).
The Plan shall be for 20,000,000 shares of common stock that will be placed in a 10b5-1 Sales Plan that will be registered under
an S-8 Registration Statement. Under the sales plan, each recipient will open an account with Garden State Securities (“GSS”)
for management of all sales of shares issued under the Plan. Quarterly limitations are placed on the number of shares that can
be sold. The Company initially allocated 17,400,000 shares to officers, directors and consultants.
On
January 11, 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $110,000. The note, which is due on October 12, 2018 has an original issue discount of $10,000. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) $0.20 or (ii)
65% of the lowest per share trading price for the fifteen (15) trading days immediately following the 180
th
calendar
day after the Original Issue Date.
On
January 12, 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $91,300. The note, which is due on October 30, 2018 has an original issue discount of $8,300. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion
price or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180
th
calendar
day after the Original Issue Date.
On
January 19, 2018 the U.S. District Court, Louisiana ruled in favor of the Company that the unlicensed lender assertion made by
the Company and counsel was to proceed in a matter brought before the court by note holder Rodney Schoeman on January 24, 2017.
On June 20, 2018, the Company and lender executed a settlement agreement in which the Company agreed to issue 4,000,000 shares
of common stock for the cancellation of the debt, accrued interest and all warrants issued with the debt instruments.
On
February 14, 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $63,800. The note, which is due on November 30, 2018 has an original issue discount of $5,800. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion
price or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180
th
calendar
day after the Original Issue Date.
On
March 5, 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $77,000. The note, which is due on December 5, 2018 has an original issue discount of $7,000. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion
price or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180
th
calendar
day after the Original Issue Date.
On
March 19, 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal
amount of $72,450. The note, which is due on December 30, 2018 has an original issue discount of $9,450. The convertible notes
convert into common stock of the Company at conversion price into which any principal amount and interest (including any default
interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion
price or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180
th
calendar
day after the Original Issue Date.
On
March 21, 2018, the Board of Directors, at the request and with the approval of the investors, determined that it was in the best
interests of the Company and the Investors, based upon market price and relatively limited liquidity of the shares of common stock
that the Company revised the expiration date and exercise price for 417,429 unexercised warrants granted on April 9, 2015. The
original expiration date of April 9, 2018 is extended to April 9, 2019. The original exercise price of $.35 is reduced to $.05.
During
the 1
st
Quarter of 2018, the Company issued 1,200,000 shares of common stock to consultants for services rendered
in accordance to consulting agreements.
During
the 1
st
Quarter of 2018, the Company issued 3,945,407 shares of common stock for debt conversion totaling $213,292
which includes $208,282 principal and $5,010 accrued interest.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
The
following plan of operation 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 refer to future events. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially from our predictions.
Overview
eWellness
has developed a unique telemedicine platform that offers Distance Monitored Physical Therapy Program (“PHZIO program”)
to pre-diabetic, cardiac and health challenged patients, through contracted physician practices and healthcare systems specifically
designed to help prevent patients that are pre-diabetic from becoming diabetic.
Recent
Developments
On
November 12, 2016, the Company entered into a Services Agreement with Bistromatics, Inc. (the “Bistromatics Agreement”),
a Company incorporated under the laws of Canada (“Bistromatics”). Pursuant to the Bistromatics Agreement, Bistromatics
will provide operational oversight of the Company’s Phzio System including development, content editing, client on boarding,
clinic training, support & maintenance, billing, hosting and oversight and support of CRM and helpdesk system. The Company
has agreed to pay a monthly base fee of $50,000 monthly until Bistromatics has successfully signed and collected the first monthly
service fee for 100 Physical Therapy Clinics to start using our Platform. If and when Bistromatics provides the Company with evidence
of the 100 Physical Therapy Clinics, the monthly service fee will extend to $100,000.
Investment
Agreement with Tangiers Global, LLC
On
February 10, 2017, the Company entered into an Investment Agreement with Tangiers. Pursuant to the terms of the Investment Agreement,
Tangiers committed to purchase up to $5,000,000 of the Company’s common stock over a period of up to 36 months. From time
to time during the 36-month period commencing from the effectiveness of the registration statement, we may deliver a put notice
to Triton which states the dollar amount that we intend to sell to Triton on a date specified in the put notice. The maximum investment
amount per notice must be no more than 200% of the average daily trading dollar volume of our Common stock for the ten (10) consecutive
trading days immediately prior to date of the applicable put notice and such amount must not exceed an accumulative amount of
$250,000. The minimum put amount is $5,000. The purchase price per share to be paid by Triton will be the 80% of the of lowest
trading prices of the Common stock during the 5 trading days including and immediately following the date on which put notice
is delivered to Triton.
In
connection with the Investment Agreement with Tangiers, we filed a registration statement with the Securities and Exchange Commission,
covering the resale of 10,359,160 shares of our Common Stock. The registration statement was declared effective on June 7, 2017.
To date, the Company has not “put” any shares to Tangiers under the Investment Agreementand has not determined whether
it will “put” any shares to Tangiers under the Investment Agreement for the foreseeable future.
Plan
of Operations
Our
business model is to license our PHZIO Platform to any PT”) clinic in the U.S. and or have large-scale employers use our
PHZIO Platform as a fully PT monitored corporate wellness program.
The
Company’s 5-Year Agreement with Endeavor Plus:
In October 2017 eWellness executed a 5-year Comprehensive Physical Therapy
Services Agreement with Endeavor Plus Services, Inc. (“EPS”), a fast-growing healthcare plan administrator. EPS projects
having approximately 100,000 healthcare members in 2018. This level of sales will allow the Company to gain cash flow positive
operations during the second half of 2018. Additionally, if EPS can continue their projected growth rate over the next 12-18 months
an additional 500,000 new members would be added. Endeavor Plus, Inc. (“EPI”), the parent company of EPS, has taken
the lead in a movement to assist small group employers to leave fully insured health plans and use partially self-funded ERISA
qualified health insurance plans that are new and innovative and embrace a new era of Consumer-Driven Health Care Planning (CDHC).
EPI’s mission is to bring about innovative changes using existing law and regulations to change the traditional health insurance
models to drive down healthcare costs while offering significantly better benefits to both small and midsize group employers and
their employees. This is accomplished further by having these employers and their employees to participate in the Endeavor Plus
Plan, a CDHC program with technology-driven health care programs that are affordable, manageable and responsive to the demand
for higher quality care with cost transparency, integrated health information and better provider access and communication and
better outcomes.
EPS/PHZIO
Marketing Plans:
eWellness and EPS intend to immediately commence system, sales and marketing integration, to position eWellness
to begin onboarding and treating EPS members in the second quarter of 2018. EPS is a third-party administrator (TPA), which is
an organization that processes insurance claims or certain aspects of employee benefit plans for small and medium sized companies.
EPS is projecting to grow rapidly in the small group health insurance market which has annual premiums of over $384 billion. Approximately
84% of this market is traditional full insurance. EPS is expected to grow rapidly by offering these small employers the ability
to self- insure through excellent plan design and reinsurance. The Company is excited to be chosen as their PT gatekeeper as well
as wellness program supplier. Our comprehensive PT & wellness programs and consulting services are anticipated to provide
EPS with new products that will: (1) build new sales channels that increase their current health insurance business, and (2) create
new revenue sources through the introduction of such products.
The
Company Partnership with LifeWallet (“LW”):
In February 2018 the Company signed a Partnership Agreement to co-market
the Company’s PHZIO platform with LW (https://www.lifewallet.com) which provides employers, communities and healthcare professionals
with a simple, consumer centric, integrated platform to assess the health of their population and monitor their progress towards
better health. LifeWallet™ is transforming the delivery of care and revolutionizing the health care to wellness process
with a consumer centric health platform and modern digital assistants that promote better outcomes. LW’s employees are dedicated
to making the best products on earth. LWt™ is creating a one of a kind technology region in the south and has brought in
developers from leading technology companies including Apple.
Concierge
PT Medical Service:
The Company will be provisioning to EPS and/or LW insureds a new and highly unique patient treatment protocol
that includes “white glove” concierge in-home or in-office PT assessments and digital care treatments to enhance the
medical treatment and help improve patient treatment outcomes. The Company will become the exclusive provider of “white
glove” concierge in-home or in-office PT assessments, digital physical therapy and a wellness program to the individuals
covered by EPS and or LW. The Company has been selected to be the gatekeeper for all EPS and or LW PT treatments. As the PT treatment
gatekeeper, the Company will conduct an online consultation with each patient to assess the complexity involved with the patient
presentation. From the online consultation, an in-home or in-office evaluation of the patient may be prescribed. Through this
initial evaluation, a plan of care will be designed for each patient that in most cases is anticipated to include digital therapy
sessions.
PreHabPT:
Any individuals covered by EPS and/or LW, who are seeking non-emergency orthopedic surgery shall first receive a concierge
online consultation, in-home or in-office PT therapy evaluation and will be prescribed a four to eight-week prehabpt.com exercise
program prior to any surgery. Another in-home or in-office PT evaluation will be made following surgery and a treatment plan will
be initiated. PreHabPT is up to an eight-week physician to patient pre-surgical (Prehab) digital therapeutic exercise treatment
system for patients that anticipate having total join replacement (knee, hip and or shoulder) or back surgeries.
PurePT:
PurePT
is a patient and independent PT digital treatment platform for connecting new patients to PT’s that are seeking to be treated
with our PHZIO treatment system. Patient program assessments can be made in the privacy of a patient’s home or office. PurePT
connects new patients to PT’s, particularly in states that have direct access rules where patient’s insurance will
reimburse for treatment without requiring a physician’s prescription. PurePT puts the patient first.
PHZIO
Comprehensive Wellness Program:
Any EPS and/or LW insureds may, after an in-home or in-office PT assessment, enroll in a 6-month
comprehensive wellness program. The top line wellness goals of our PHZIO wellness exercise program is to graduate at least 60%
of inducted patients through our 6-month program. Patients should expect to experience an average of a 20% reduction in BMI, a
two-inch reduction in waist size, weight loss of at least 10 pounds, significant overall improvement in balance, coordination,
flexibility, strength and lumbopelvic stability. Patients also should score better on Functional Outcomes Scales (Oswestry and
LEFS) which indicates improved functional activity levels due to reduced low back, knee and hip pain.
The
Company’s PHZIO home physical therapy exercise platform has been designed to disrupt the $30 billion physical therapy and
the $8 billion corporate wellness industries. PHZIO re-defines the way physical therapy can be delivered. PHZIO is the first real-time
remote monitored 1-to-many physical therapy platform for home use. Due to the real-time patient monitoring feature, the PHZIO
platform is insurance reimbursable by payers such as: Anthem Blue Cross, AETNA and Blue Shield.
The
PHZIO Solution: A New Physical Therapy Delivery System
●
|
SaaS
technology platform solution for providers bundling rehabilitation services and employer wellness programs;
|
●
|
First
real-time remote monitored 1-to-many physical therapy treatment platform for home use;
|
●
|
Ability
for physical therapists to observe multiple patients simultaneously in real-time;
|
●
|
Solves
what has been a structural problem and limitation in post-acute care practice growth.
|
●
|
PT
practices can experience 20% higher adherence & compliance rates versus industry standards; and
|
●
|
Tracking
to 30% increase in net income for a PT practice.
|
Our
initial PHZIO platform enables employees or patients to engage with live or on-demand video based physical therapy telemedicine
treatments from their home or office. Following a physician’s exam and prescription for physical therapy to treat back,
knee or hip pain, a patient can be examined by a physical therapist and if found appropriate inducted in the Company’s PHZIO
program that includes a progressive 6-month telemedicine exercise program (including monthly in-clinic checkups). All PHZIO treatments
are monitored by a licensed therapist that sees everything the patient is doing while providing their professional guidance and
feedback in real-time. This ensures treatment compliance by the patient, maintains the safety and integrity of the prescribed
exercises, tracks patient metrics and captures pre-and post-treatment evaluation data. PHZIO unlocks a host of potential for revolutionizing
patient treatment models and directly links back to the established brick and mortar physical therapy clinic. This unique model
enables any physical therapy practice to be able to execute more patient care while utilizing their same resources and creates
more value than was ever before possible.
Our
PHZIO platform, including: design, testing, exercise intervention, follow-up, and exercise demonstration, has been developed by
accomplished Los Angeles based physical therapist Darwin Fogt. Mr. Fogt has extensive experience and education working with diverse
populations from professional athletes to morbidly obese. He understands the most beneficial exercise prescription to achieve
optimal results and has had enormous success in motivating all patient types to stay consistent in working toward their goals.
Additionally, his methods have proven effective and safe as he demonstrates exercises with attention to proper form to avoid injury.
Mr. Fogt has established himself as a national leader in his field and has successfully implemented progressive solutions to delivering
physical therapy: he has consulted with and been published by numerous national publications including Runner’s World, Men’s
Health, Men’s Journal, and various Physical Therapy specific magazines; his 13 plus years of experience include rehabilitating
the general population, as well as professional athletes, Olympic gold medalists, and celebrities. He has bridged the gap between
physical therapy and fitness by opening Evolution Fitness, which uses licensed physical therapists to teach high intensity circuit
training fitness classes. He also founded one of the first exclusive prenatal and postnatal physical therapy clinic in the country.
Mr. Fogt is a leader in advancing the profession to incorporate research-based methods and focus on, not only rehabilitation but
also wellness, functional fitness, performance, and prevention. He can recognize that the national healthcare structure (federal
and private insurance) is moving toward a model of prevention and that the physical therapy profession will take a larger role
in providing wellness services to patients.
Innovators
in other industries have solved access, cost and quality inefficiencies through the implementation of technology platforms and
business models that deliver products and services on-demand and create new economies by connecting and empowering both consumers
and businesses. We have taken the same approach to solving the pervasive access, cost and quality challenges facing the current
access to physical therapy clinics.
Our
underlying technology platform is complex, deeply integrated and purpose-built over the three years for the evolving physical
therapy marketplace. Our PHZIO platform is highly scalable and can support substantial growth of third party licensees. Our PHZIO
platform provides for broad interconnectivity between PT practitioners and their patients and, we believe, uniquely positions
us as a focal point in the rapidly evolving PT industry to introduce innovative, technology-based solutions, such as remote patient
monitoring, post-discharge treatment plan adherence and in-home care.
We
plan to generate revenue from third-party PT and corporate wellness licensees on a contractually recurring per PHZIO session fee
basis. Our PHZIO platform is anticipated to transform the access, cost and quality dynamics of physical therapy delivery for all
the market participants. We further believe any patient, employer, health plan or healthcare professional interested in a better
approach to physical therapy is a potential PHZIO platform user.
Before
even launching, we have received a high indication of interest in our service. We think the demand is warranted but recognize
that in the preliminary stages of our services, we may experience bottlenecks in our ability to meet the demand for same. Under
this type of environment, it is critical to maintain awareness of the Company’s operational budget goals and how they are
being met in our attempts to address demand. Regardless of our growth pace, it is critical to shareholder value that we are mindful
of our operational spending.
Results
of Operations during the three months ended March 31, 2018 and 2017
REVENUE:
We
did not generate revenues during the three months ended March 31, 2018 and 2017. We expect to generate revenues during the third
quarter of 2018.
OPERATING
EXPENSES
: Our total operating expenses decreased to $811,214 for the three months ended March 31, 2018 from $989,348 for the
three months ended March31, 2017. The decrease resulted from a reduction in consultant expense.
NET
LOSS:
The Company incurred a net loss of $473,973 for the three months ended March 31, 2018, compared with a net income of
$4,161,845 for the three months ended March 31, 2017. The significant decrease from income to loss was the result of the revaluation
of the derivative liabilities for the convertible debt and warrants totaling $4,732,882 offset by decreases in consulting expense
as noted above.
Results
of Operations during the Twelve-month Period Ended December 31, 2017 vs. 2016
REVENUES
:
We did not generate revenues from operations during the years ended December 31, 2017 and December 31, 2016. We anticipate that
we will begin to commence generating revenuesduring the third quarter of 2018.
OPERATING
EXPENSES
: Total operating expenses decreased to $3,348,781 for the year ended December 31, 2017 from $3,371,460 for the year
ended December 31, 2016. The decrease is primarily a result of a reduction in accounting services and consulting fees of $346,182
offset by an increase in general and administration expenses of $491,502 primarily from an increase in stock option expense of
$393,547.
NET
LOSS
: The Company incurred a net loss of $1,032,891 for the year ended December 31, 2017, compared with a net loss of $12,460,694
for the year ended December 31, 2016, which reflects a decrease of $11,427,803. The decrease is a result of reduction in accounting
services and consulting fees of $346,182, an increase of $13,090,747 in the gain of derivative expense from the issuance and conversion
of derivative instruments and a reduction of the amortization of $376,170 for debt discount on debt instruments issued.
Liquidity
and Capital Resources
As
of March 31, 2018, we had negative working capital of $3,286,204 compared to negative working capital of $3,648,264 as of December
31, 2017. The decrease resulted from a decrease in the derivative liability offset by increases in accounts payable and convertible
debt. Cash used in operations was $243,842 and $309,475 for the three months ended March 31, 2018 and 2017, respectively. The
decrease in cash used in operations was because of relative changes in the assets and liabilities. Cash used in investing activities
was $4,937 and $2,910 for the three months ended March 31, 2018 and 2017, respectively. Cash flows provided by financing activities
were $366,995 and $320,475 for the three months ended March 31, 2018 and March 31, 2017, respectively. The increase in cash flows
from financing activities was the issuance of convertible debt for cash. The cash balance as of March 31, 2018 was $125,098.
We
believe that anticipated cash flows from operations will be insufficient to satisfy our ongoing capital requirements. We are seeking
financing in the form of equity capital to provide the necessary working capital. Our ability to meet our obligations and continue
to operate as a going concern is highly dependent on our ability to obtain additional financing. We cannot predict whether this
additional financing will be in the form of equity or debt or be in another form. We may not be able to obtain the necessary additional
capital on a timely basis, on acceptable terms, or at all. In any of these events, we may be unable to implement our current plans
which circumstances would have a material adverse effect on our business, prospects, financial conditions
As
of December 31, 2017, we had negative working capital of $3,648,264 compared to negative working capital of $10,018,688 as of
December 31, 2016. The main portion of the negative working capital decrease is because of the derivative liability reduction.
Cash flows provided by financing activities were $946,900 and $336,796 for the years ended December 31, 2017 and December 31,
2016, respectively. The increase in cash flows from financing activities was from the issuance of convertible debt for cash. The
cash balance as of December 31, 2017 was $6,882.
For
the year ended December 31, 2017, there was a negative cash flows from operations of $951,103 compared to a negative cash flows
from operations of $364,752 for the year ended December 31, 2016. This is primarily due to reductions in accounts payable and
accrued expenses. We are seeking financing in the form of equity capital to provide the necessary working capital. Our ability
to meet our obligations and continue to operate as a going concern is highly dependent on our ability to obtain additional financing.
We cannot predict whether this additional financing will be in the form of equity or debt or be in another form. We may not be
able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, we
may be unable to implement our current plans which circumstances would have a material adverse effect on our business, prospects,
financial conditions and results of operations.
Contingencies
The
Company may be subject to lawsuits, administrative proceedings, regulatory reviews or investigations associated with its business
and other matters arising in the normal conduct of its business. The following is a description of an uncertainty that is considered
other than ordinary, routine and incidental to the business.
The
closing of the Initial Exchange Agreement with Private Co. was conditioned upon certain, limited customary representations and
warranties, as well as, among other things, our compliance with Rule 419 (“Rule 419”) of Regulation C under the Securities
Act of 1933, as amended (the “Securities Act”) and the consent of our shareholders as required under Rule 419. Accordingly,
we conducted a “Blank Check” offering subject to Rule 419 (the “Rule 419 Offering”) and filed a Registration
Statement on Form S-1 to register the shares of such offering; the Registration Statement was declared effective on September
14, 2012. We used 10% of the subscription proceeds as permitted under Rule 419 and the amount remaining in the escrow trust as
of the date of the closing of the Share Exchange was $90,000 (the “Trust Account Balance”).
Rule
419 required that the Share Exchange occur on or before March 18, 2014, but due to normal negotiations regarding the transactions
and the parties’ efforts to satisfy all the closing conditions, the Share Exchange did not close on such date. Accordingly,
after numerous discussions with management of both parties, they entered into an Amended and Restated Share Exchange Agreement
(the “Share Exchange Agreement”) to reflect a revised business combination structure, pursuant to which we would:
(i) file a registration statement on Form 8-A (“Form 8A”) to register our common stock pursuant to Section 12(g) of
the Exchange Act, which we did on May 1, 2014 and (ii) seek to convert the participants of the Rule 419 Offering into participants
of a similarly termed private offering (the “Converted Offering”), to be conducted pursuant to Regulation D, as promulgated
under the Securities Act.
Fifty-two
persons participated in the Rule 419 Offering and each of them gave the Company his/her/its consent to use his/her/its escrowed
funds to purchase shares of the Company’s restricted common stock in the Converted Offering (the “Consent”)
rather than have their funds returned. To avoid further administrative work for the investors, we believe that we took reasonable
steps to inform investors of the situation and provided them with an appropriate opportunity to maintain their investment in the
Company, if they so choose, or have their funds physically returned. Management believed the steps it took constituted a constructive
return of the funds and therefore met the requirements of Rule 419.
However,
pursuant to Rule 419(e)(2)(iv), “funds held in the escrow or trust account shall be returned by first class mail or equally
prompt means to the purchaser within five business days [if the related acquisition transaction does not occur by a date that
is 18 months after the effective date of the related registration statement].” As set forth above, rather than physically
return the funds, we sought consent from the investors of the Rule 419 Offering to direct their escrowed funds to the Company
to instead purchase shares in the Converted Offering. The consent document was given to the investors along with a private placement
memorandum describing the Converted Offering and stated that any investor who elected not to participate in the Converted Offering
would get 90% of their funds physically returned. Pursuant to Rule 419(b)(2)(vi), a blank check company is entitled to use 10%
of the proceed/escrowed funds; therefore, if a return of funds is required, only 90% of the proceed/escrowed funds need be returned.
The Company received $100,000 proceeds and used $10,000 as per Rule 419(b)(2)(vi); therefore, only $90,000 was subject to possible
return.
As
disclosed in the prior amendments to the Initial Form 8-K, we have filed the prior amendments in response to comments from the
SEC regarding the Form 8-K and many of those comments pertain to the Company’s potential violation of Rule 419. Although
the Company has continued to provide the SEC with information and analysis as to why it believes it did not violate Rule 419,
based upon latest communications with the persons reviewing the Form 8-K, they do not agree with the assessments the Company presented
to them. Comments and communications indicate that Rule 419 requires a physical return of funds if a 419 offering cannot be completed
because a business combination was not consummated within the required time frame; constructive return is not permitted.
Because
of these communications and past comments, we are disclosing that we did not comply with the requirements of Rule 419, which required
us to physically return the funds previously submitted to escrow pursuant to the Rule 419 Offering. Because of our failure to
comply with Rule 419, the SEC may bring an enforcement action or commence litigation against us for failure to strictly comply
with Rule 419. If any claims or actions were to be brought against us relating to our lack of compliance with Rule 419, we could
be subject to penalties (including criminal penalties), required to pay fines, make damages payments or settlement payments. In
addition, any claims or actions could force us to expend significant financial resources to defend ourselves, could divert the
attention of our management from our core business and could harm our reputation.
Ultimately,
the SEC determined to terminate its review of the Initial Form 8-K and related amendments, rather than provide us with additional
opportunities to address their concerns and therefore, we did not clear their comments. It is not possible now to predict whether
or when the SEC may initiate any proceedings, when this issue may be resolved or what, if any, penalties or other remedies may
be imposed, and whether any such penalties or remedies would have a material adverse effect on our consolidated financial position,
results of operations, or cash flows. Litigation and enforcement actions are inherently unpredictable, the outcome of any potential
lawsuit or action is subject to significant uncertainties and, therefore, determining now the likelihood of a loss, any SEC enforcement
action and/or the measurement of the amount of any loss is complex. Consequently, we are unable to estimate the range of reasonably
possible loss. Our assessment is based on an estimate and assumption that has been deemed reasonable by management, but the assessment
process relies heavily on an estimate and assumption that may prove to be incomplete or inaccurate, and unanticipated events and
circumstances may occur that might cause us to change that estimate and assumption. Considering the uncertainty of this issue
and while Management evaluates the best and most appropriate way to resolve same, management determined to create a reserve on
the Company’s Balance Sheet for the $90,000 that was subject to the Consent.
Capital
Expenditure Plan During the Next Twelve Months
During
the three months ended March 31, 2018 and during the year ended December 31, 2017, we raised $414,550, less $46,550 for debt issuance
costs, and $1,107,506 less $160,600 for debt issuance costs, respectively, in debt capital and we may be expected to require up
to an additional $1.6 million in capital during the next 12 months to fully implement our business plan and fund our operations.
Our plan is to utilize the equity and debt capital that we raise, together with anticipated cash flow from operations, to fund
a very significant investment in sales and marketing, concentration principally on advertising and incentivizing existing customers
for the introduction of new customers, among other strategies. However, there can be no assurance that: (i) we will continue to
be successful in raising equity capital in sufficient amounts and/or at terms and conditions satisfactory to the Company; or (ii)
we will generate sufficient revenues from operations, to fulfill our plan of operations. Our revenues are expected to come from
our PHZIO platform services. As a result, we will continue to incur operating losses unless and until we are able to generate
sufficient cash flow to meet our operating expenses and fund our planned sales and market efforts. There can be no assurance that
the market will adopt our portal or that we will generate sufficient cash flow to fund our enhanced sales and marketing plan.
In the event that we are not able to successfully: (i) raise equity capital and/or debt financing; or (ii) market and significantly
increase the number of portal users and revenues from such users, our financial condition and results of operations will be materially
and adversely affected, and we will either have to delay or curtail our plan for funding our sales and marketing efforts.”
Going
Concern Consideration
Our
registered independent auditors have issued an opinion on our financial statements which includes a statement describing our going
concern status. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months
unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated
any revenues and no revenues are anticipated until we begin marketing the product. Accordingly, we must raise capital from sources
other than the actual sale of the product. We must raise capital to implement our project and stay in business.
Off-Balance
Sheet Arrangements
As
of March 31, 2018, December 31, 2017 and 2016, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii)
of Regulation S-K promulgated under the Securities Act of 1934.
Critical
Accounting Policies
Our
significant accounting policies are disclosed in Note 2 of our Financial Statements included elsewhere in this Prospectus.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There
have been no changes in or disagreements with accountants on accounting or financial disclosure matters.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our
directors were elected to serve until the next annual meeting of shareholders and until his respective successors will have been
elected and will have qualified. The following table sets forth the name, age and position held with respect to our present executive
officers and directors:
Name
|
|
Age
|
|
Position(s)
|
Darwin
Fogt
|
|
43
|
|
President,
Chief Executive Officer and Member of the Board of Directors
|
David
Markowski
|
|
57
|
|
Chief
Financial Officer and Member of the Board of Directors
|
Douglas
MacLellan
|
|
62
|
|
Chairman
and Secretary
|
Curtis
Hollister
|
|
44
|
|
Chief
Technology Officer and Member of the Board of Directors
|
Douglas
Cole
|
|
61
|
|
Member
of the Board of Directors
|
Brandon
Rowberry
|
|
44
|
|
Member
of the Board of Directors
|
Rochelle
Pleskow
|
|
57
|
|
Member
of the Board of Directors
|
Darwin
Fogt, President, CEO &Director
. Mr. Fogt has been CEO of eWellness Corporation since May 2013. Since 2001, he has
been founder, President and practicing therapist of Evolution Physical Therapy, Inc., a privately held company in Los Angeles,
CA providing sports and orthopedic physical therapy services. From 2008 to present, Mr. Fogt has also been a founder and President
of Bebe PT, a physical therapy practice specializing in perinatal rehabilitation and wellness. Additionally, from 2012 to present
Mr. Fogt has been founder and President of Evolution Fitness, a primarily cash-based fitness and rehabilitation center serving
high level athletes and clients in Culver City, CA. Mr. Fogt has consulted with and been published by numerous national publications
including Runner’s World, Men’s Health, Men’s Journal, and various Physical Therapy specific magazines; his
13 plus years of experience include rehabilitating the general population, as well as professional athletes, Olympic gold medalists,
and celebrities. Mr. Fogt earned his B.S. in Exercise Science from the University of Southern California in 1996 and his MPT (Master
of Physical Therapy) from California State University: Long Beach in 2001. He is currently working toward earning his DPT (Doctor
of Physical Therapy) degree.
David
Markowski, Chief Financial Officer & Director.
Mr. Markowski has been CFO of eWellness Corporation since May 2013.
From October 1997 to October 2002 he was CEO and Co-Founder of GFNN, Inc. From 2002 to 2013 Mr. Markowski has maintained various
active roles within GFNN’s subsidiaries including Founder, Director and CEO positions. From October 2009 to December 2011,
he was the Director of Corporate Development for Visualant, Inc. From June 2003 to 2010 he was President of Angel Systems, Inc.
an independent consulting firm with competencies in strategic marketing and business development. From January 1998 to October
1998, Mr. Markowski served as the Vice President of Finance for Medcom USA, a NASDAQ listed company. Prior to that, he had a decade
of investment banking experience on Wall Street involved in financing start-ups and public offerings. He is a business development
specialist with accolades in INC Magazine and others. Mr. Markowski obtained a BA degree in Marketing from Florida State University
in 1982.
Curtis
Hollister, Chief Technology Officer & Director.
Mr. Hollister has been a founder and CTO of eWellness since May 2013.
From November 2008 to present he has been the founder and President of Social Pixels, a privately held Canadian company focused
on helping companies apply online media and digital campaigning. From November 2008 to present he has been the founder and President
of Ripplefire, a privately held Canadian company also specializing in the digital campaigning space. He is a global entrepreneur
and innovator known for his ability to identify and capitalize on industry trends. His high-profile projects include such clients
as Government of Canada, AT&T, Bell Canada, Microsoft, Nokia, Conversant IP and TD Bank. From 1998 to 2002 Mr. Hollister founded
and operated TeamCast.com, a technology spin-off focusing on peer-to-peer networking. From 1997 to 2002 Mr. Hollister founded
and operated Intrasoft Technologies, a technology start-up to capitalize on the emerging Intranet application market. From 1995
to 1997 Mr. Hollister founded and operated Intranet Technologies, the first successful Internet service provider in Ottawa, Canada’s
capital city. Mr. Hollister graduated from Center Hastings Secondary in 1991 and from 1991 to 1995 attended Carleton University
with a special focus on Economics.
Douglas
MacLellan, Chairman of the Board
. Mr. MacLellan currently serves as Chairman of the Board of eWellness Corporation since
May 2013. From November 2009 to present Mr. MacLellan has been an independent director of ChinaNet Online Holdings, Inc. (NASDAQ:
CNET) a media development, advertising and communications company. From June 2011 to present Mr. MacLellan has been Chairman of
Innovare Products, Inc., a privately held company that develops innovative consumer products. In May 2014, Mr. MacLellan join
the Board as an independent director of Jameson Stanford Resources Corporation (OTCBB: JMSN) an early stage mining company. Until
April 2014, Mr. MacLellan was Chairman and chief executive officer at Radient Pharmaceuticals Corporation. (OTCQB: RXPC.PK), a
vertically integrated specialty pharmaceutical company. He also continues to serve as president and chief executive officer for
the MacLellan Group, an international financial advisory firm since 1992. From August 2005 to May 2009, Mr. MacLellan was co-founder
and vice chairman at Ocean Smart, Inc., a Canadian based aquaculture company. From February 2002 to September 2006, Mr. MacLellan
served as chairman and cofounder at Broadband Access MarketSpace, Ltd., a China based IT advisory firm, and was also co-founder
at Datalex Corp., a software and IT company specializing in mainframe applications, from February 1997 to May 2002. Mr. MacLellan
was educated at the University of Southern California in economics and international relations.
Douglas
Cole, Director.
Mr. Cole has been a Director of the company since May 2014. From 2005 to the present Mr. Cole has been
a Partner overseeing all ongoing deal activities with Objective Equity LLC, a boutique investment bank focused on the clean tech,
mining and mineral sectors. From 2002 to 2005 Mr. Cole has played various executive roles as Executive Vice Chairman, Chief Executive
Officer and President of TWL Corporation (TWLP.OB). From May 2000 to September 2005, he was also the Director of Lair of the Bear,
The University of California Family Camp located in Pinecrest, California. During the period between 1991 and 1998 he was the
CEO of HealthSoft and he also founded and operated Great Bear Technology, which acquired Sony Image Soft and Starpress, then went
public and eventually sold to Graphix Zone. In 1995 Mr. Cole was honored by NEA, a leading venture capital firm, as CEO of the
year for his work in the Starpress integration. Since 1982 he has been very active with the University of California, Berkeley
mentoring early-stage technology companies. Mr. Cole obtained his BA in Social Sciences from UC Berkeley in 1978.
Brandon
Rowberry, Director.
Mr. Rowberry has been a Director since June 2014. He is a well-known healthcare innovation executive.
From 2010 to 2014 he drove enterprise-wide Innovation/Venturing for United Health Group where in 2012 they were awarded the prestigious
PDMA Outstanding Corporate Innovation Award. From 2012 to present he has also been Managing Director of 7R Ventures an investment
and advisory firm. From 2005 to 2009, he was Director of Strategy & Innovation at Circuit City. From 2001 to 2005, he was
a Sr. Corporate Consultant focusing on Organizational Development and Innovation at Hallmark. From 2000 to 2001, he was a Manager
of Organizational Development & Innovation at Honeywell. Mr. Rowberry has also been a frequent corporate innovation guest
speaker on NBC, FOX, ABC. Mr. Rowberry obtained his Master of Organizational Behavior from Marriott School of Business, BYU in
2000.
Rochelle
Pleskow, Director
. From 2010 through 2014, Ms. Pleskow served as the Chief Healthcare Information Officer for Hewlett
Packard. She developed the framework of healthcare analytics platform, which encompasses quality improvement, outcomes analysis,
patient safety, operational analytics, clinical informatics, physician performance, and regulatory compliance monitoring for health
plans, hospitals and physicians. From 2008 through 2010, she acted as a senior consultant to various companies on healthcare policy
and procedures including acting as an advisor for ASP model start-up, whose business included a HIPAA/HL7 and PCI compliant processing
tool, which verifies a patient’s insurance coverage, accurately calculates out-of-pocket costs, and processes payments in
one system and at the time of service. This model improves revenue cycle management as it accelerates the collection of patient
payments. From 2007 through 2008, she was Director of business Architecture for Blue Shield of California, where she developed
the business framework and core elements of a large-scale IT systems implementation to increase competitive advantage for Blue
Shield of California. Re-engineered core business processes in Health Services Division to modernize the technology.
Director
Qualifications
We
seek directors with established strong professional reputations and experience in areas relevant to the strategy and operations
of our businesses. We also seek directors who possess the qualities of integrity and candor, who have strong analytical skills
and who are willing to engage management and each other in a constructive and collaborative fashion, in addition to the ability
and commitment to devote time and energy to service on the Board and its committees, as necessary. We believe that all our directors
meet the foregoing qualifications.
The
Board believes that the leadership skills and other experience of the Board members described below, in addition to each person’s
experience set forth above in their respective biographies, provide the Company with a range of perspectives and judgment necessary
to guide our strategies and monitor our executives’ business execution.
Darwin
Fogt
. Mr. Fogt is a co-founder of the Company and has been serving as a PT for over 12 years and has built three successful
physical therapy practices. Mr. Fogt has contributed to the Board’s strong leadership and vision for the development of
the Company’s innovative business model.
Douglas
MacLellan
. Mr. MacLellan is a co-founder of the Company and has been serving as an officer and/or director of various advance
technology and high growth companies over the past 20 years. Mr. MacLellan has contributed to the Board’s strong leadership
and vision for the development of the Company’s innovative business model.
Curtis
Hollister
. Mr. Hollister is a co-founder of the Company and has been serving in senior management positions in various advance
technology, software and video content business over the past 20 years. He holds a wealth of experience in software development,
video content management and network technology.
David
Markowski
. Mr. Markowski is a co-founder of the Company and has been serving in senior management positions in various companies
over the past 20 years, with an emphasis on corporate finance, accounting, audit, financial modeling and marketing. He holds a
wealth of experience in company management skills.
Doug
Cole
. Mr. Cole is an international business executive with over 20 years of active management and board roles in various software,
educational and technology public and private companies.
Brandon
Rowberry
. Mr. Rowberry has held over 15 years in senior management positions as an innovation expert in various advance technology
and healthcare industries. He is anticipated to greatly expand our industry relationships within healthcare insurers and the telemedicine
industry.
Rochelle
Pleskow
. Ms. Pleskow holds a vast knowledge base on healthcare informatics and the scaling of various technology implementations
at selected large-scale technology and healthcare companies and is anticipated to be a good addition to its board of directors
as the Company implements its anticipated white label program to physical therapy clinics through the U.S. marketplace.
Involvement
in Certain Legal Proceedings
To
the best of the Company’s knowledge, none of the following events occurred during the past ten years that are material to
an evaluation of the ability or integrity of any of our executive officers, directors or promoters:
(1)
A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent
or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a
general partner at or within two years before the time of such filing, or any corporation or business association of which he
was an executive officer at or within two years before the time of such filing;
(2)
Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses);
(3)
Subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
(i)
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person
of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such activity;
(ii)
Engaging in any type of business practice; or
(iii)
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation
of Federal or State securities laws or Federal commodities laws;
(4)
Subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring,
suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph
(3)(i) above, or to be associated with persons engaged in any such activity;
(5)
Found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities
law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
(6)
Found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any
Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not
been subsequently reversed, suspended or vacated;
(7)
Subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of:
(i)
Any Federal or State securities or commodities law or regulation; or
(ii)
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal
or prohibition order; or
(iii)
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(8)
Subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization,
any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange,
association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Promoters
and Certain Control Persons
In
light of the efforts and services they provided to the Private Co. prior to the Share Exchange, we believe that Douglas MacLellan
and Darwin Fogt may be deemed “promoters” (within the meaning of Rule 405 under the Securities Act), since they took
the initiative in the formation of our business and received 10% of our equity securities in exchange for the contribution of
property or services, during the last five years. In addition, Gregg C. E. Johnson may be deemed a “promoter” of the
Company as a result of his receipt of shares of our common stock at the time of completion of the Share Exchange.
Corporate
Governance and Director Independence
Presently,
we are not currently listed on a national securities exchange or in an inter-dealer quotation system and therefore are not required
to comply with the director independence requirements of any securities exchange. In determining whether our directors are independent,
however, we intend to comply with the rules of NASDAQ. The board of directors will also consult with counsel to ensure that the
boards of director’s determinations are consistent with those rules and all relevant securities and other laws and regulations
regarding the independence of directors, including those adopted under the Sarbanes-Oxley Act of 2002 with respect to the independence
of audit committee members. Nasdaq Listing Rule 5605(a)(2) defines an “independent director” generally as a person
other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion
of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. Our Board of Directors has determined that Douglas Cole, Mr. Rowberry and Ms. Pleskow would qualify as “independent”
as that term is defined by Nasdaq Listing Rule 5605(a)(2). Further, Mr. Cole qualifies as “independent” under Nasdaq
Listing Rules applicable to board committees.
Due
to our lack of operations and size prior to the Share Exchange, we did not have an Audit Committee. For these same reasons, we
did not have any other separate committees prior to the Share Exchange; all functions of a nominating committee, audit committee
and compensation committee were performed by our sole director. Although, as stated above, we are not the subject of any listing
requirements, in connection with the Share Exchange, our Board of Directors established several committees to assist it in carrying
out its duties. In particular, committees shall work on key issues in greater detail than would be practical at a meeting of all
the members of the Board of Directors; each committee reviews the results of its deliberations with the full Board of Directors.
The
standing committees of the Board of Directors currently consist of the Audit Committee, the Compensation Committee and the Nominating
and Corporate Governance Committee. Current copies of the charters for the Audit Committee, the Compensation Committee, and the
Nominating and Corporate Governance Committee, as well as our Corporate Governance Guidelines, Code of Ethics and Business Conduct,
may be found on our website at
www.ewellnesshealth.com
under the heading “Corporate Information—Governance
Documents.” Printed versions also are available to any stockholder who requests them by writing to our corporate Secretary
at our corporate address. Our Board of Directors may, from time to time, establish certain other committees to facilitate our
management.
The
Board will consider appointing members to each of the Committees when enough independent directors are appointed to the Board
or as otherwise determined by the Board. Until such time, the full board of directors will undertake the duties of the audit committee,
compensation committee and nominating committee.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Exchange Act, as amended, requires that our directors, executive officers and persons who own more than 10% of a
class of our equity securities that are registered under the Exchange Act to file with the SEC initial reports of ownership and
reports of changes of ownership of such registered securities.
Based
solely upon a review of information furnished to the Company, to the Company’s knowledge, during the fiscal year ended December
31, 2017, all such forms were filed.
EXECUTIVE
COMPENSATION
For
the two fiscal years ended December 31, 2017 and 2016, we did not pay any compensation to our executive officers, nor did any
other person receive a total annual salary and bonus exceeding $100,000. Prior to the Share Exchange, which closed in April 2014,
we did not pay our sole officer any compensation nor did we have an employment agreement.
Following
the Share Exchange, we do not currently have any formal employment salary arrangement with any of our new officers. However, the
Board determined that the following salaries shall be recorded
and accrued
on a monthly basis as contributed capital and
compensation for the following individuals for the services they provide to us:
After
1-1-14, but before profitability
Monthly
|
|
Recognized
|
|
|
Contributed
|
|
|
Compensated
|
|
Douglas
MacLellan, Chairman
|
|
$
|
20,000
|
|
|
$
|
11,000
|
|
|
$
|
9,000
|
|
Darwin
Fogt, CEO/President
|
|
$
|
14,000
|
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
David
Markowski, CFO
|
|
$
|
14,000
|
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
Curtis
Hollister, CTO
|
|
$
|
14,000
|
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
At
profitability and after
Monthly
|
|
Recognized
|
|
|
Contributed
|
|
|
Compensated
|
|
Douglas
MacLellan, Chairman
|
|
$
|
20,000
|
|
|
$
|
0
|
|
|
$
|
20,000
|
|
Darwin
Fogt, CEO/President
|
|
$
|
14,000
|
|
|
$
|
0
|
|
|
$
|
14,000
|
|
David
Markowski, CFO
|
|
$
|
14,000
|
|
|
$
|
0
|
|
|
$
|
14,000
|
|
Curtis
Hollister, CTO
|
|
$
|
14,000
|
|
|
$
|
0
|
|
|
$
|
14,000
|
|
All
of our current officers have agreed to defer their compensation until such time as we are cash flow positive; therefore, none
of our officers have received any compensation as of the date of this Report. No retirement, pension, profit sharing or insurance
programs or other similar programs have been adopted by the Company for the benefit of the Company’s employees. The Company
has adopted a stock option plan for officers, directors and consultants.
Director’s
Compensation
There
is no formal or informal arrangements or agreements to compensate employee directors for service provided as a director; however,
compensation for new non-employee directors is determined on an ad hoc basis by the existing members of the board of directors
at the time a director is elected.
Our
non-employee directors have agreed to defer payment of any accrued directors’ fees until the Company is profitable. Currently
the Company is accruing $2,000 per month for the non-employee directors. They are entitled to receive reimbursement of out-of-pocket
expenses.
Upon
the appointment of Ms. Pleskow (a non-employee director) in August 2015, we agreed to pay her $2,000 per month, which shall accrue
as of July 1, 2015 and be paid upon the first closing of our next financing, plus 250,000 5-year stock options at a price of $0.80
per share. She shall also be eligible to receive any other benefits that are offered to other directors.
Compensation
Policies and Practices as They Relate to the Company’s Risk Management
We
believe that our compensation policies and practices for all employees, including executive officers, do not create risks that
are reasonably likely to have a material adverse effect on us.
Employment
Contracts
We
do not have any formal employment agreement with any of the officers. Any future compensation will be determined by the Board
of Directors, and, as appropriate, an employment agreement will be executed. We do not currently have plans to pay any compensation
until the Company maintains a positive cash flow.
Outstanding
Equity Awards
There
were no equity awards outstanding as of the end the year ended December 31, 2017.
Option
Grants
During
the year ended December 31, 2017, there were no options granted.
Aggregated
Option Exercises and Fiscal Year-End Option Value
There
were no stock options exercised during the year ending December 31, 2017 and 2016 by our executive officers. During the year ending
December 31, 2017, 250,000 options granted in 2016 expired.
Long-Term
Incentive Plan (“LTIP”) Awards
There
were no awards made to any named executive officers in the last completed fiscal year under any LTIP.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding beneficial ownership of our common stock as of July __, 2018 by (i) each
person (or group of affiliated persons) who is known by us to own more than five percent (5%) of the outstanding shares of our
common stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and
director nominees as a group.
Beneficial
ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities.
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of
common stock that such person has the right to acquire within 60 days of the date of the respective table. For purposes of computing
the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that
such person or persons has the right to acquire within 60 days of the date of the respective table is deemed to be outstanding
for such person but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.
The
business address of each beneficial owner listed is in care of 11825 Major Street, Culver City, California, 90230 unless otherwise
noted. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares
of our common stock owned by them, except to the extent that power may be shared with a spouse.
As
of July 20, 2018, we had 167,872,971 shares of common stock issued and outstanding.
Name
of Beneficial Owner
|
|
Number
of Stock Beneficially Owned
|
|
|
Percentage
of Stock Owned (1)
|
|
Darwin
Fogt, CEO, President and Director
|
|
|
3,750,000
|
(2)
|
|
|
2.23
|
%
|
|
|
|
|
|
|
|
|
|
Douglas
MacLellan, Chairman
|
|
|
3,750,000
|
|
|
|
2.23
|
%
|
|
|
|
|
|
|
|
|
|
David
Markowski, CFO and Director
|
|
|
1,100,000
|
|
|
|
0.06
|
%
|
|
|
|
|
|
|
|
|
|
Curtis
Hollister, CTO and Director
|
|
|
1,950,000
|
|
|
|
1.16
|
%
|
|
|
|
|
|
|
|
|
|
Douglas
Cole, Director
|
|
|
200,000
|
|
|
|
0.12
|
%
|
|
|
|
|
|
|
|
|
|
Brandon
Rowberry, Director
|
|
|
200,000
|
|
|
|
0.12
|
%
|
|
|
|
|
|
|
|
|
|
Rochelle
Pleskow, Director
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
Bistromatics,
Inc. (3)
|
|
|
22,797,921
|
|
|
|
13.58
|
%
|
57
Fireside Crescent
|
|
|
|
|
|
|
|
|
Ottawa
ON K1T 1Z3, Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
and Officer (7 people)
|
|
|
10,950,000
|
|
|
|
6.52
|
%
|
(1)
Applicable percentage ownership as of July 20, 2018 is based on 167,872,971 shares of Common Stock outstanding.
(2) This includes 1,000,000 shares held by Evolution Physical Therapy, Inc., which is owned by Mr.
Fogt.
(3) Bistromatics, Inc. is controlled by Curtis Hollister, our CTO and directors.
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
Certain
Related Party Transactions
Other
than the relationships and transactions discussed below, we are not a party to, nor are we proposed to be a party, to any transaction
during the last fiscal year involving an amount exceeding $120,000 and in which a related person, as such term is defined by Item
404 of Regulation S-K, had or will have a direct or indirect material interest.
Related
Party Debt:
During the year ended December 31, 2017, a related party, a company for which the Company’s former Secretary-Treasurer
and CFO is also serving as CFO, invoiced the Company $22,850 for accounting services. The amounts outstanding as of December 31,
2017 and December 31, 2016 was $700 and $10,481, respectively. During the years ended December 31, 2017 and December 31, 2016,
the Company recorded $0 and $4,156 imputed interest, respectively, on the amount owed to the related party based on an interest
rate of 8%. Because the amount due to the related party is now being paid on a regular basis, the Company is no longer accruing
imputed interest.
Programming
Agreement:
On November 11, 2016, the Company signed an agreement with a programming company (“PC”) within which
the one of the Company’s directors and Chief Technical Officer is the Chief Marketing Officer. The agreement is for additional
features to be programmed for the launch of the PHZIO platform. The contract specifies that the Company’s CEO and CTO will
retain their officer and director positions and retain their past due accrued compensation through June 30, 2016. The Company
is to pay a monthly base fee of $100,000 for the development and compensation for the Company’s CEO and CTO. Following payment
of the initial $100,000, the Company is obligated to only pay $50,000 monthly until the PC has successfully signed and collected
the first monthly service fee for 100 physical therapy clinics to use the PHZIO platform. The agreement establishes that the Company
is indebted to the PC for $225,000 for past programming services. On April 1, 2017, the PC was issued 25,280,899 common shares
at a cost value of $0.1068. The PC will also have the right to appoint 40% of the directors. At the end of December 31, 2017,
the Company had a payable of $350,810 due to this company.
Operating
Agreement:
On April 1, 2015, the Company entered into an Operating Agreement with Evolution Physical Therapy (“EPT”),
a company owned by our CEO, pursuant to which EPT operate our Platform and offers it to selected physical therapy patients of
EPT. The Company will advance capital requested by EPT for costs specifically associated with operating the www.phzio,com platform
and associated physical therapy treatments. On May 7, 2015, EPT inducted the first patient using our platform. The total (insurance
reimbursed) monitored PHZIO visits in 2015 and 2016 was 1,928 total patient visits that include: 2015: 699 patient visits (239
insurance reimbursed patient visits generating approximately $13,500.00 in gross revenue) and in 2016: 1,229 patient visits generating
$1,496.55 (approximately 26 insurance reimbursed visits). These gross revenue figures were not sufficient to generate any gross
sales for the Company. The average insurance reimbursement per PHZIO session in 2015 and 2016 was $56.87 (excluding co-payments).
Respectively. The top line wellness goals of our program are to graduate at least 80% of inducted patients through our 6-month
program. Patients should expect to experience an average of a 20% reduction in BMI, a 4-inch reduction in waist size, weight loss
of at least 20 pounds, significant overall improvement in balance, coordination, flexibility, strength, and lumbopelvic stability.
Patients also should score better on Functional Outcomes Scales (Oswestry and LEFS), which indicates improved functional activity
levels due to reduced low back, knee and hip pain.
Office
Space:
The Company rents its Culver City, CA office space from Evolution Physical Therapy (“Evolution”), a company
owned by our CEO. Evolution has agreed contribute the annual rent for the year ended December 31, 2017 towards founding eWellness
and its operations; the market value of such rent is $500 per month. During the year ended December 31, 2017, the Company recorded
rent expense in the Consolidated Statement of Operations and Additional Paid in Capital in the Balance Sheet.
Indebtedness
of Management
No
officer, director or security holder known to us to own of record or beneficially more than 5% of our Common stock or any member
of the immediate family or sharing the household (other than a tenant or employee) of any of the foregoing persons is indebted
to us in the years 2017 and 2016.
Review,
Approval and Ratification of Related Party Transactions
Our
Board of Directors conducts an appropriate review of and oversees all related-party transactions. We have not yet adopted formal
standards in respect of the review and approval or ratification of related-party transactions; however, our board has conformed
to the following standards: (i) all related-party transactions must be fair and reasonable to us and on terms comparable to those
reasonably expected to be agreed to with independent third parties for the same goods and/or services at the time authorized by
the board; and (ii) all related-party transactions must be authorized, approved or ratified by the affirmative vote of a majority
of the directors who have no interest, either directly or indirectly, in any such related party transaction.
eWELLNESS
HEALTHCARE CORPORATION
16,569,000
SHARES OF COMMON STOCK
PROSPECTUS
YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING
AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Until
_____________, all dealers that effect transactions in these securities whether or not participating in this Offering may be required
to deliver a Prospectus. This is in addition to the dealer’s obligation to deliver a Prospectus when acting as underwriters.
The
Date of This Prospectus is July __, 2018
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
Securities
and Exchange Commission registration fee
|
|
$
|
165
|
|
Accounting
fees and expenses
|
|
$
|
1,000
|
|
Legal
fees and expense
|
|
$
|
30,000
|
|
Total
|
|
$
|
31,165
|
|
All
amounts are estimates other than the Commission’s registration fee. We are paying all expenses of the Offering listed above.
No portion of these expenses will be borne by the Selling Shareholders. The Selling Shareholders, however, will pay any other
expenses incurred in selling their Common Stock, including any brokerage commissions or costs of sale.
Item
14. Indemnification of Directors and Officers
Our
articles of incorporation, by-laws and director indemnification agreements provide that each person who was or is made a party
or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any action, suit
or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was a director
or an officer of Brenham or, in the case of a director, is or was serving at our request as a director, officer, or trustee of
another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee
benefit plan, whether the basis of such proceeding is alleged action in an official capacity as a director, officer or trustee
or in any other capacity while serving as a director, officer or trustee, shall be indemnified and held harmless by us to the
fullest extent authorized by the Nevada General Corporation Law against all expense, liability and loss reasonably incurred or
suffered by such.
Section
145 of the Nevada General Corporation Law permits a corporation to indemnify any director or officer of the corporation against
expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in
connection with any action, suit or proceeding brought by reason of the fact that such person is or was a director or officer
of the corporation, if such person acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed
to, the best interests of the corporation, and, with respect to any criminal action or proceeding, if he or she had no reason
to believe his or her conduct was unlawful. In a derivative action, ( i.e ., one brought by or on behalf of the corporation),
indemnification may be provided only for expenses actually and reasonably incurred by any director or officer in connection with
the defense or settlement of such an action or suit if such person acted in good faith and in a manner that he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification shall be provided
if such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine that the defendant is fairly and reasonably entitled to indemnity for such expenses
despite such adjudication of liability.
Pursuant
to Section 102(b)(7) of the Nevada General Corporation Law, Article Seven of our articles of incorporation eliminates the liability
of a director to us for monetary damages for such a breach of fiduciary duty as a director, except for liabilities arising:
●
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from
any breach of the director’s duty of loyalty to us;
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●
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from
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
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●
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under
Section 174 of the Nevada General Corporation Law; and
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●
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from
any transaction from which the director derived an improper personal benefit.
|
Item
15. Recent Sales of Unregistered Securities
Sales
of Unregistered Securities in 2015:
On
January 24, 2015, we extended the term of an outstanding consulting and service agreement, pursuant to which we issued 400,000
shares valued at $40,000 and 400,000 callable Common Stock purchase warrants at a strike price of $0.35 per share.
On
February 23, 2015, we entered into a one-year agreement with a consultant in connection with certain corporate finance, investor
relations and related business matters and issued 60,000 shares valued at $6,000.
On
April 9, 2015, we issued $270,080 Notes (including an aggregate of $123,980 that was converted from certain other outstanding
notes, including accrued interest, and future contractual cash consulting fees) that are initially convertible into 771,657 shares
of our Common Stock, pursuant to a private financing; we sold that same amount of Series A Senior Convertible Redeemable Notes
convertible into shares of the Company’s Common Stock, at $0.35 per share and Series A Warrants, all pursuant to separate
Securities Purchase Agreements entered into with each investor. The Warrants are exercisable to purchase up to 771,657 shares
of Common Stock.
On
May 30, 2015, the Company received $25,000 in exchange for a 90-day promissory note at an interest rate of 5% per annum. As an
inducement for this promissory note, the Company issued 150,000 warrants to purchase Company Common Stock at $.35 per share.
On
May 20, 2015, the Company issued 250,000 warrants to purchase Common Stock at $.35 per share in connection with a financial advisory
services agreement.
On
May 20, 2015, the Company signed an strategic advisory services agreement pursuant to which the Company issued 250,000 warrants
to purchase Common Stock at $.35 per share.
On
July 14, 2015, the Company issued 250,000 shares of Common Stock valued at $.35 per share for conversion of $87,500 of convertible
debt.
On
July 15, 2015, the Company received $18,000 in exchange for a 90-day promissory note at an interest rate of 5% per annum. As an
inducement for this promissory note, the Company issued 150,000 warrants to purchase Company Common Stock at $.80 per share.
On
August 19, 2015, the Company issuance 96,000 shares valued at $.35 per share for the conversion of $33,600 of convertible debt.
On
August 26, 2015, the Company extended the term of the $25,000 promissory note issued on May 30, 2015 that was originally due on
August 28, 2015 to October 23, 2015. As consideration for the extension the Company agreed to an annual interest rate of 12% retroactive
to the original date of the note and issued 150,000 warrants to purchase Company Common Stock at $.80 per share.
On
September 10, 2015, the Company authorized the issuance of 663,277 shares valued at $.35
per share for the conversion of $232,147 of convertible debt.
On
September 16, 2015, the Company received $2,500 in exchange for a 90-day promissory note at an interest rate of 12% per annum
and a risky loan fee of $625. As an inducement for this promissory note, the Company issued 50,000 warrants to purchase Company
Common Stock at $.80 per share.
On
September 16, 2015, the Company received $12,500 in exchange for a 90-day promissory note at an interest rate of 12% per annum
and a risky loan fee of $3,125. As an inducement for this promissory note, the Company issued 250,000 warrants to purchase Company
Common Stock at $.80 per share.
On
September 16, 2015, the Company received $22,500 in exchange for a 90-day promissory note at an interest rate of 12% per annum
and a risky loan fee of $5,625. As an inducement for this promissory note, the Company issued 450,000 warrants to purchase Company
Common Stock at $.80 per share.
On
October 1, 2015, the Company authorized the issuance of 50,273 shares of Common Stock for the accrued interest on the debt conversions
on July 14, 2015, August 19, 2015, and September 10, 2015. The shares were issued at $.35 per share.
On
October 5, 2015, the Company extended the term of an $18,000 promissory note originally issued on May 15, 2015 that was originally
due on October 13, 2015 to December 14, 2015; however, as consideration for the extension, the Company agreed to repay the note,
plus interest and the Loan Fee (as hereinafter defined), upon receipt of additional financing. Interest on the note accrues at
the rate of 12% per annum. Unless paid sooner as previously explained, the Company shall pay $4,500 on the maturity date of the
note. As additional inducement for the extension, the Company also agreed to issue the lender five-year warrants to purchase up
to 150,000 shares of the Company’s Common Stock at $0.80 per share.
On
October 11, 2015, the Company extended the term of an $25,000 promissory note issued on July 15, 2015 that was due on October
23, 2015 to December 14, 2015; however, as a consideration for the extension, the Company agreed to repay the note, plus interest
and a risk loan fee of $6,250. As additional inducement for the extension, the Company also agreed to issue the lender five-year
warrants to purchase up to 150,000 shares of Common Stock at $0.80 per share.
On
October 11, 2015, the Company received $10,000 in exchange for a 60-day promissory note at an interest rate of 12% per annum and
a risky loan fee of $2,500. As an inducement for the promissory note, the Company issued 200,000 warrants to purchase Company
Common Stock at $.80 per share. The note, accrued interest and risky loan fee is due on December 14, 2015.
On
November 11, 2015, the Company authorized the issuance of 179,988 shares of Common Stock for the conversion of $57,670 of principal
and $5,326 of accrued interest. These shares were issued at $.35 per share.
On
December 6, 2015, the Company entered into a 90-day Promissory Note for $70,000 at an interest rate of 12% per annum plus a risky
loan fee of $17,500 which is being amortized over the term of the loan. As an inducement the Company issued 1,400,000 warrants
to purchase Company Common Stock at $.80 per share. The Company further agreed to repay the loan within three days of the Company
receiving $500,000 or more in the current private placement of up to $2,500,000 convertible note with warrants. This Promissory
Note resulted from the principal payment to the note holder of $28,222 and the holder cancelling the notes originally signed on
May 27, 2015 plus extensions, July 15, 2015 plus extensions, September 16, 2015 and October 11, 2015.
On
December 11, 2015, the Company entered into a securities purchase agreement with an accredited investor for (i) a note in the
principal amount of $275,000 at a 10% original issue discount, (ii) a warrant to purchase 250,000 shares of the Company’s
Common Stock with an exercise price of $0.80 per share and (iii) 50,000 shares as an additional fee for a value of $5,000.
Sales
of Unregistered Securities in 2016:
On
January 20, 2016, the Company authorized the issuance of 50,000 shares for consulting services for a value of $5,000 that is being
amortized over twelve months.
On
February 29, 2016, the Company authorized the issuance of 227,232 shares for conversion of convertible debt of $69,500 and accrued
interest of $10,031.
On
March 3, 2016, the Company authorized the issuance of 100,000 shares for consulting services for a value of $10,100 that is being
amortized over six months.
On
March 11, 2016, the Company authorized the issuance of 150,000 shares for consulting services for a value of $15,000 that is being
amortized over twelve months.
On
June 2, 2016, the Company sold 120,000 shares of common stock upon receipt of $120,000 cash.
On
July 13, 2016, the Company issued 172,958 shares of common stock because of warrants being exercised through a cashless exercise.
On
December 14, 2016, the Company issued 90,364 shares of common stock because of warrants being exercised through a cashless exercise.
During
the year ended December 31, 2016, the Company issued a total of 31,419,215 shares of common stock because of debt conversion.
The total debt conversion was $191,731.
During
the year ended December 31, 2016, the Company issued 935,000 shares of common stock for consulting services. The weighted average
price of these shares was $1.44. The value of the shares is being amortized over the life of the contracts ranging from six to
twelve months.
Sales
of Unregistered Securities in 2017:
In
January 2017, 1,363,277 warrants were exercised under a cashless exercise and 1,336,075 shares of common stock were issued.
On
January 19, 2017, the Company issued 1,400,000 shares of common stock for extinguishment of accounts payable for a value of $49,000.
On
March 29, 2017, the Company issued 1,000,000 shares of common stock to a related party for extinguishment of accounts payable
for a value of $35,000.
On
April 1, 2017, the Company issued 25,280,899 shares of common stock to a related party for extinguishment of accounts payable
for a value of $225,000. These shares relate to a contract leasing the telemedicine platform from Bistromatics, a company owned
by our CTO.
During
the year ended December 31, 2017, the Company issued 3,340,577 shares of common stock for consulting services for a value of $355,880.
During
the year ended December 31, 2017, the Company issued 5,025,000 shares of common stock for consulting services. The weighted average
price of these shares was $.08. The value of these shares is being amortized over the life of the contracts ranging from six to
twelve months.
During
the year ended December 31,2017, the Company issued 53,534,548 shares of common stock for debt conversion. The total debt conversion
was $797,913 principal and $45,192 of accrued interest.
The
securities issued have not been registered under the Securities Act and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements.
The
Registrant’s issuance of the above restricted securities was in reliance upon the exemption from registration pursuant to
Section 4(2) and Regulation S promulgated by the SEC under the Act. Unless stated otherwise: (i) the securities were offered and
sold only to accredited investors; (ii) there was no general solicitation or general advertising related to the offerings; (iii)
each of the persons who received these unregistered securities had knowledge and experience in financial and business matters
which allowed them to evaluate the merits and risk of the receipt of these securities, and that they were knowledgeable about
our operations and financial condition; (iv) no underwriter participated in, nor did we pay any commissions or fees to any underwriter
in connection with the transactions; and, (v) each certificate issued for these unregistered securities contained a legend stating
that the securities have not been registered under the Securities Act and setting forth the restrictions on the transferability
and the sale of the securities.
Item
16. Exhibits and Financial Statement Schedules
(a)
The following documents are filed as exhibits to this report on Form 8-K or incorporated by reference herein. Any document incorporated
by reference is identified by a parenthetical reference to the SEC filing that included such document.
Exhibit
No.
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Description
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3.1
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Amended & Restated Certificate of Incorporation of Registrant. (Incorporated by reference to Exhibit 4.1 to the Form 8-K/A filed on August 6, 2014)
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3.2
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Bylaws of the Company. (Incorporated by reference to Exhibit 3(b) to the Registration Statement on Form S-1 filed on May 15, 2012)
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5.1
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Opinion of Thomas J. Craft, Jr., Esq., filed herewith.
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10.22
|
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Equity Purchase Agreement between the Company and Triton Funds LP, (Incorporated by reference to Exhibit 10.22 to the Company’s Current Report on Form 8-K filed on July 3, 2018)
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10.23
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Registration Rights Agreement between the Company and Triton Funds LP, (Incorporated by reference to Exhibit 10.23 to the Company’s Current Report on Form 8-K filed on July 3, 2018)
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14.1
|
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Code of Ethics Conduct (Incorporated by reference to Exhibit 14.1 to the Form 8-K filed on May 6, 2014)
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23
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Consent of Independent Registered Public Accounting Firm, filed herewith.
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Item
17. Undertakings
(a)
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any Prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii)
To reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each Prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule
430B or other than Prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or Prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or Prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or Prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.
(b) Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(5)
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities
to such purchaser:
(i) Any preliminary Prospectus or Prospectus of the
undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (Section 230.424 of this chapter);
(ii) Any free writing Prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing Prospectus
relating to the offering containing material information about the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
SIGNATURES
Pursuant
to the requirement of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Culver City, California, on July 24,
2018.
eWELLNESS
HEALTH CORPORATION
By:
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/s/
Darwin Fogt
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Darwin
Fogt
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Chief
Executive Officer (Principal Executive Officer)
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By:
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/s/
David Markowski
|
|
David
Markowski
|
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Chief
Financial Officer (Principal Financial and Accounting Officer)
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Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
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Title
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Date
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|
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/s/
Douglas MacLellan
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Chairman
of the Board
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July
24, 2018
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Douglas
MacLellan
|
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|
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/s/
Darwin Fogt
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|
Chief
Executive Officer (Principal Executive Officer) and
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July
24, 2018
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Darwin
Fogt
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Director
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|
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/s/
David Markowski
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Chief
Financial Officer (Principal Financial and Principal
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July
24, 2018
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David
Markowski
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Accounting
Officer) and Director
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/s/
Curtis Hollister
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Chief
Technology Officer and Director
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July
24, 2018
|
Curtis
Hollister
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