CONSOLIDATED
CONDENSED BALANCE SHEETS
(unaudited)
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
781,060
|
|
|
$
|
383,335
|
|
Prepaid Expenses
|
|
|
380,862
|
|
|
|
95,508
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,161,922
|
|
|
|
478,843
|
|
|
|
|
|
|
|
|
|
|
Property & equipment, net
|
|
|
24,172
|
|
|
|
14,092
|
|
Intangible assets, net
|
|
|
9,500
|
|
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
1,195,594
|
|
|
$
|
503,935
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
305,825
|
|
|
$
|
236,741
|
|
Accounts payable - related party
|
|
|
630,532
|
|
|
|
684,173
|
|
Accrued expenses - related party
|
|
|
198,241
|
|
|
|
214,076
|
|
Accrued compensation
|
|
|
776,464
|
|
|
|
1,113,470
|
|
Contingent liability
|
|
|
90,000
|
|
|
|
90,000
|
|
Convertible debt, net of discount
|
|
|
2,423,293
|
|
|
|
562,362
|
|
Derivative liability
|
|
|
1,358,964
|
|
|
|
1,584,102
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
5,783,319
|
|
|
|
4,484,924
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
5,783,319
|
|
|
|
4,484,924
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Preferred stock, authorized, 20,000,000 shares, $.001 par value, 125,000 and
0 shares issued and outstanding, respectively
|
|
|
125
|
|
|
|
-
|
|
Common stock, authorized 1,900,000,000 shares, $.05 par value, 4,888,611 and 4,128,139 issued and outstanding, respectively outstanding, respectively
|
|
|
244,431
|
|
|
|
206,407
|
|
Shares to be issued
|
|
|
19,150
|
|
|
|
-
|
|
Additional paid in capital
|
|
|
21,173,934
|
|
|
|
17,213,838
|
|
Accumulated deficit
|
|
|
(26,025,365
|
)
|
|
|
(21,401,234
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit
|
|
|
(4,587,725
|
)
|
|
|
(3,980,989
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
1,195,594
|
|
|
$
|
503,935
|
|
The
accompanying notes are an integral part of these consolidated condensed financial statements
eWELLNESS
HEALTHCARE CORPORATION
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
For
the Three and Nine Months ended September 30, 2019 and 2018
(unaudited)
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2019
|
|
|
September 30, 2018
|
|
|
September 30, 2019
|
|
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive compensation
|
|
|
102,000
|
|
|
|
102,000
|
|
|
|
306,000
|
|
|
|
306,000
|
|
General and administrative
|
|
|
709,205
|
|
|
|
322,266
|
|
|
|
1,284,556
|
|
|
|
809,704
|
|
Professional fees
|
|
|
669,261
|
|
|
|
407,355
|
|
|
|
1,918,402
|
|
|
|
1,360,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
1,480,466
|
|
|
|
831,621
|
|
|
|
3,508,958
|
|
|
|
2,475,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(1,480,466
|
)
|
|
|
(831,621
|
)
|
|
|
(3,508,958
|
)
|
|
|
(2,475,910
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
13
|
|
|
|
-
|
|
|
|
29
|
|
|
|
-
|
|
Foreign exchange rate
|
|
|
-
|
|
|
|
4,507
|
|
|
|
-
|
|
|
|
12,598
|
|
Gain (loss) on derivative liability
|
|
|
1,331,213
|
|
|
|
(89,579
|
)
|
|
|
1,949,180
|
|
|
|
303,898
|
|
Gain (loss) on extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(43,131
|
)
|
Disposal of fixed asset
|
|
|
-
|
|
|
|
(2,134
|
)
|
|
|
-
|
|
|
|
(2,134
|
)
|
Interest expense
|
|
|
(1,369,150
|
)
|
|
|
(173,306
|
)
|
|
|
(3,062,782
|
)
|
|
|
(493,106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss before Income Taxes
|
|
|
(1,518,750
|
)
|
|
|
(1,092,133
|
)
|
|
|
(4,622,531
|
)
|
|
|
(2,697,785
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(1,600
|
)
|
|
|
(29
|
)
|
|
|
(1,600
|
)
|
|
|
(1,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(1,520,350
|
)
|
|
$
|
(1,092,162
|
)
|
|
$
|
(4,624,131
|
)
|
|
$
|
(2,699,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.33
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(1.05
|
)
|
|
$
|
(0.85
|
)
|
Diluted
|
|
$
|
(0.33
|
)
|
|
$
|
(032
|
)
|
|
$
|
(1.05
|
)
|
|
$
|
(0.85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,629,093
|
|
|
|
3,487,397
|
|
|
|
4,418,337
|
|
|
|
3,178,543
|
|
Diluted
|
|
|
4,629,093
|
|
|
|
3,487,397
|
|
|
|
4,418,337
|
|
|
|
3,178,543
|
|
The
accompanying notes are an integral part of these consolidated condensed financial statements
eWELLNESS
HEALTHCARE CORPORATION
RECONCILIATION
OF STOCKHOLDERS’ DEFICIT
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(unaudited)
|
|
Preferred Shares
|
|
|
Common Shares
|
|
|
Shares
to be
|
|
|
Additional
Paid in
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Issued
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
4,128,139
|
|
|
$
|
206,407
|
|
|
$
|
-
|
|
|
$
|
17,213,838
|
|
|
$
|
(21,401,234
|
)
|
|
$
|
(3,980,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
101,945
|
|
|
|
5,098
|
|
|
|
-
|
|
|
|
342,389
|
|
|
|
-
|
|
|
|
347,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for financing costs
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
114,000
|
|
|
|
-
|
|
|
|
115,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
70,217
|
|
|
|
3,511
|
|
|
|
-
|
|
|
|
402,239
|
|
|
|
-
|
|
|
|
405,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
26,491
|
|
|
|
1,325
|
|
|
|
-
|
|
|
|
180,224
|
|
|
|
-
|
|
|
|
181,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
492,340
|
|
|
|
-
|
|
|
|
492,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,338,471
|
)
|
|
|
(1,338,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
4,346,792
|
|
|
$
|
217,341
|
|
|
$
|
-
|
|
|
$
|
18,799,030
|
|
|
$
|
(22,739,705
|
)
|
|
$
|
(3,723,334
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
23,629
|
|
|
|
1,181
|
|
|
|
-
|
|
|
|
52,574
|
|
|
|
-
|
|
|
|
53,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
16,000
|
|
|
|
800
|
|
|
|
-
|
|
|
|
58,300
|
|
|
|
-
|
|
|
|
59,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
500
|
|
|
|
-
|
|
|
|
52,500
|
|
|
|
-
|
|
|
|
53,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
33,009
|
|
|
|
1,650
|
|
|
|
-
|
|
|
|
156,434
|
|
|
|
-
|
|
|
|
158,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70,987
|
|
|
|
-
|
|
|
|
70,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,765,310
|
)
|
|
|
(1,765,310
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
4,429,430
|
|
|
$
|
221,472
|
|
|
$
|
-
|
|
|
$
|
19,243,825
|
|
|
$
|
(24,505,015
|
)
|
|
$
|
(5,039,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to officers, directors and consultants
|
|
|
125,000
|
|
|
|
125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
374,875
|
|
|
|
-
|
|
|
|
375,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
279,835
|
|
|
|
13,992
|
|
|
|
-
|
|
|
|
517,433
|
|
|
|
-
|
|
|
|
531,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
133,846
|
|
|
|
6,692
|
|
|
|
-
|
|
|
|
440,769
|
|
|
|
-
|
|
|
|
447,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
45,500
|
|
|
|
2,275
|
|
|
|
-
|
|
|
|
150,297
|
|
|
|
-
|
|
|
|
152,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to be issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,150
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
392,735
|
|
|
|
-
|
|
|
|
392,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,520,350
|
)
|
|
|
(1,520,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019
|
|
|
125,000
|
|
|
$
|
125
|
|
|
|
4,888,611
|
|
|
$
|
244,431
|
|
|
$
|
19,150
|
|
|
$
|
21,173,934
|
|
|
$
|
(26,025,365
|
)
|
|
$
|
(4,587,725
|
)
|
|
|
Preferred Shares
|
|
|
Common Shares
|
|
|
Shares
to be
|
|
|
Additional
Paid in
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Issued
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
2,847,048
|
|
|
$
|
142,352
|
|
|
$
|
-
|
|
|
$
|
13,178,131
|
|
|
$
|
(16,949,772
|
)
|
|
$
|
(3,629,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,500
|
|
|
|
-
|
|
|
|
55,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
108,594
|
|
|
|
-
|
|
|
|
108,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
78,908
|
|
|
|
3,945
|
|
|
|
-
|
|
|
|
209,347
|
|
|
|
-
|
|
|
|
213,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
16,000
|
|
|
|
800
|
|
|
|
-
|
|
|
|
103,200
|
|
|
|
-
|
|
|
|
104,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,525
|
|
|
|
|
|
|
|
219,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
27,000
|
|
|
|
1,350
|
|
|
|
-
|
|
|
|
137,250
|
|
|
|
-
|
|
|
|
138,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(473,973
|
)
|
|
|
(473,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
2,968,956
|
|
|
$
|
148,447
|
|
|
$
|
-
|
|
|
$
|
14,011,547
|
|
|
$
|
(17,423,745
|
)
|
|
$
|
(3,263,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
55,500
|
|
|
|
-
|
|
|
|
55,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
108,594
|
|
|
|
-
|
|
|
|
108,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
274,179
|
|
|
|
13,710
|
|
|
|
|
|
|
|
622,996
|
|
|
|
-
|
|
|
|
636,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
1,500
|
|
|
|
|
|
|
|
103,500
|
|
|
|
-
|
|
|
|
105,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for contributions
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
1,000
|
|
|
|
|
|
|
|
69,000
|
|
|
|
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,388
|
|
|
|
|
|
|
|
154,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
24,000
|
|
|
|
1,200
|
|
|
|
14,800
|
|
|
|
96,100
|
|
|
|
-
|
|
|
|
112,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,133,306
|
)
|
|
|
(1,133,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
3,317,135
|
|
|
$
|
165,857
|
|
|
$
|
14,800
|
|
|
$
|
15,221,625
|
|
|
$
|
(18,557,051
|
)
|
|
$
|
(3,151,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
55,500
|
|
|
|
-
|
|
|
|
55,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
142,057
|
|
|
|
-
|
|
|
|
142,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
258,878
|
|
|
|
12,944
|
|
|
|
|
|
|
|
607,546
|
|
|
|
-
|
|
|
|
620,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for financing costs
|
|
|
-
|
|
|
|
-
|
|
|
|
31,807
|
|
|
|
1,590
|
|
|
|
|
|
|
|
70,410
|
|
|
|
-
|
|
|
|
72,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,741
|
)
|
|
|
|
|
|
|
(49,741
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
26,500
|
|
|
|
1,325
|
|
|
|
(14,800
|
)
|
|
|
92,340
|
|
|
|
-
|
|
|
|
78,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,092,162
|
)
|
|
|
(1,092,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
3,634,320
|
|
|
$
|
181,716
|
|
|
$
|
-
|
|
|
$
|
16,139,737
|
|
|
$
|
(19,649,213
|
)
|
|
$
|
(3,327,760
|
)
|
The
accompanying notes are an integral part of these consolidated condensed financial statements
eWELLNESS
HEALTHCARE CORPORATION
CONSOLIDATED
CONDENSED STATEMENT OF CASH FLOWS
For
the Nine Months Ended September 30, 2019 and 2018
(unaudited)
|
|
For
Nine Months Ended
|
|
|
|
September
30, 2019
|
|
|
September
30, 2018
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(4,624,131
|
)
|
|
$
|
(2,699,441
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
4,794
|
|
|
|
2,863
|
|
Contributed
services
|
|
|
162,000
|
|
|
|
166,500
|
|
Shares
issued for consulting services
|
|
|
511,355
|
|
|
|
329,565
|
|
Shares
issued for financing costs
|
|
|
115,000
|
|
|
|
72,000
|
|
Shares
issued to officers, directors and consultants
|
|
|
86,250
|
|
|
|
-
|
|
Shares
issued for contribution
|
|
|
-
|
|
|
|
70,000
|
|
Options
expense
|
|
|
-
|
|
|
|
359,245
|
|
Amortization
of debt discount to interest expense
|
|
|
2,690,435
|
|
|
|
284,392
|
|
Amortization
of prepaids
|
|
|
678,805
|
|
|
|
301,140
|
|
Foreign
currency exchange
|
|
|
-
|
|
|
|
12,598
|
|
Loss
on disposal of fixed asset
|
|
|
-
|
|
|
|
(2,134
|
)
|
Gain
on derivative liability
|
|
|
(1,949,180
|
)
|
|
|
(303,898
|
)
|
Loss
on settlement of debt
|
|
|
-
|
|
|
|
43,131
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Prepaid
expense
|
|
|
(57,948
|
)
|
|
|
(18,055
|
)
|
Accounts
payable and accrued expenses
|
|
|
111,801
|
|
|
|
194,332
|
|
Accounts
payable - related party
|
|
|
(19,891
|
)
|
|
|
287,161
|
|
Accrued
expenses - related party
|
|
|
(15,835
|
)
|
|
|
7,386
|
|
Accrued
compensation
|
|
|
(82,006
|
)
|
|
|
72,901
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(2,388,551
|
)
|
|
|
(820,315
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase
of equipment
|
|
|
(13,374
|
)
|
|
|
(2,037
|
)
|
Net
cash used in investing activities
|
|
|
(13,374
|
)
|
|
|
(2,037
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
59,100
|
|
|
|
-
|
|
Issuance
of convertible debt
|
|
|
4,400,500
|
|
|
|
969,300
|
|
Payment
on debt
|
|
|
(1,102,450
|
)
|
|
|
(1,005
|
)
|
Debt
issuance costs
|
|
|
(577,500
|
)
|
|
|
(125,150
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
2,799,650
|
|
|
|
843,145
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
397,725
|
|
|
|
20,793
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
|
383,335
|
|
|
|
6,882
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
781,060
|
|
|
$
|
27,675
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
1,856
|
|
|
$
|
1,267
|
|
Interest
Expense
|
|
$
|
475,519
|
|
|
$
|
-
|
|
Non
cash items:
|
|
|
|
|
|
|
|
|
Derivative
liability and debt discount issued with new notes
|
|
$
|
2,831,539
|
|
|
$
|
359,732
|
|
Shares
issued for debt conversion
|
|
$
|
932,667
|
|
|
$
|
1,190,489
|
|
Shares
issued for prepaids
|
|
$
|
906,211
|
|
|
$
|
209,000
|
|
The
accompanying notes are an integral part of these consolidated condensed financial statements
eWellness
Healthcare Corporation
Notes
to Consolidated Condensed Financial Statements
September
30, 2019
(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
Healthcare Corporation is the first physical therapy telehealth company to offer real-time distance monitored assessments and
treatments. Our business model is to have large-scale employers use our PHZIO platform as a fully PT monitored corporate musculoskeletal
treatment (“MSK”) wellness program. The Company’s PHZIO home physical therapy assessment and exercise platform
has been designed to disrupt the $30 billion physical therapy market, the $4 billion MSK market and the $8 billion corporate wellness
industry. PHZIO re-defines the way MSK physical therapy can be delivered. PHZIO is the first real-time remote monitored 1-to-many
MSK physical therapy platforms for home use.
We
have commenced treating patients on various commercial contracts and anticipate generating
initial revenues during the 4th quarter of 2019. Despite the lack of revenues,
we continue to train physical therapist on how to use our PHZIO treatment platform, with
many of these therapists treating various patients on our system on a complimentary basis.
Our PHZIO system has delivered over 4,000 telerehab treatments to date.
Our
latest challenges in the Workers Compensation space has been patient adoption of PHZIO, related to a patients’ choice to
choose if they are treated in-clinic or digitally. They are nearly all choosing in-clinic care. Our pivot to address this issue
was to develop and sell MSK 360 a pre-injury fitness exam and custom exercise platform that is just rolling out now. Next, we
finally are getting traction for our Per-Hab product with several large TPA’s. Lastly, multiple clients are requesting a
Rheumatoid Arthritis Exercise product (RA 360) that is currently being developed with a launch date of mid-January. With the
success of MSK 360 we expect that more Workers Comp patients will choose digital care over in-clinic care.
We
have now developed four key products with large scale users that need to turn on utilization in 2020. We have a large list of
corporate self-insured, TPA and insurance company sales book that we are actively focused on selling to them our MSK-360 and Pre-Hab
platforms. We expect good traction from many of these firms in 2020. These products are:
+ PHZIO:
Realtime PT monitored Digital PT Treatments (post-injury)
+ MSK
360: Digital “PHZIOFIT” fitness exam and customer exercise plans for employees, (pre-injury)
+ Pre-Hab:
Digital pre-surgery (non-monitored) for Total Knee, Hip and Shoulder surgery (post injury and pre-surgery)
+ RA
360: (Available January 2020) Rheumatoid Arthritis Exercise Plan
Note
2. Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited 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, 2018. 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 nine months ended September 30, 2019 are not necessarily indicative
of the results that can be expected for the fiscal year ending December 31, 2019. 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, 2018.
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 nine months ended September 30, 2019, the Company had no revenues. The Company has an accumulated loss of $26,025,365.
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 September 30, 2019, 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
|
|
$
|
1,358,964
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,358,964
|
|
Total Liabilities measured at fair value
|
|
$
|
1,358,964
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,358,964
|
|
As
of December 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
|
|
$
|
1,584,102
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,584,102
|
|
Total Liabilities measured at fair value
|
|
$
|
1,584,102
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,584,102
|
|
Note
3. Related Party Transactions
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 505,618 common shares at a value of $0.445 per share on April 1, 2017. The PC will also have the
right to appoint 40% of the directors. At the end of September 30, 2019, the Company had a payable of $627,832 due to this company.
Throughout
the nine months ended September 30, 2019, the officers and directors of the Company incurred business expenses on behalf of the
Company. The amounts payable to the officers as of September 30, 2019 and December 31, 2018 were $44,991 and $3,076, respectively.
There were no expenses due to the board members, but the Company has accrued directors’ fees of $153,250 and $211,000 at
September 30, 2019 and December 31, 2018, respectively. Because the Company is not yet profitable the officers have agreed to
defer compensation. The Company had accrued executive compensation of $776,464 and $1,113,470 at September 30, 2019 and December
31, 2018 respectively.
Note
4. Convertible Notes Payable
Nine
Months Ended September 30, 2019
On
January 29, 2019, the Company received the third tranche of $60,000 relating to a note executed on July 13, 2018. During the nine
months ending September 30, 2019, the Company accrued interest expense of $1,350. On July 12, 2019, the Company prepaid this note
of $60,000 plus accrued interest and a prepayment penalty of $30,000. At September 30, 2019, this note is fully paid.
On
January 8, 2019, the Company executed an 8% Convertible Promissory Notes payable to an institutional investor in the principal
amount of $308,000. The note, which is due on January 8, 2020, has an original issue discount of $28,000 and transaction costs
of $10,000. The convertible note converts into common stock of the Company at a conversion price that shall be equal to the 70%
of the average of the two lowest per share trading prices for the twenty (20) trading days prior to the conversion date. During
the nine months ended September 30, 2019, the Company accrued interest expense of $17,547. During the nine months ended September
30, 2019, the investor converted $30,000 of principal and $1,687 of accrued interest for 18,107 shares of common stock
at a price of $1.75. At September 30, 2019, there is $278,000 principal outstanding.
On
January 8, 2019, the Company executed an 8% Convertible Promissory Notes payable to an institutional investor in the principal
amount of $308,000 each. The note, which is due on January 8, 2020, has an original issue discount of $28,000 and transaction
costs of $10,000. The convertible note converts into common stock of the Company at a conversion price that shall be equal to
the 70% of the average of the two lowest per share trading prices for the twenty (20) trading days prior to the conversion date.
During the nine months ended September 30, 2019, the Company accrued interest expense of $17,029. During the nine months ended
September 30, 2019, the investor converted $162,000 of principal for 88,488 shares of common stock for prices ranging from
$1.75 to $2.10. At September 30, 2019, there is $146,000 principal outstanding.
On
January 9, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal
amount of $114,000. The note, which is due on October 30, 2019, has an original issue discount of $11,000 and transaction costs
of $3,000. The convertible note converts into common stock of the Company at a conversion price that shall be equal to the 70%
average of the two lowest per share trading prices for the ten (10) trading days prior to the conversion date. During the nine
months ended September 30, 2019, the Company accrued interest expense of $6,028. On July 12, 2019, the Company prepaid this note
of $114,000 plus accrued interest and a prepayment penalty of $42,010. At September 30, 2019, this note is fully paid.
On
January 29, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal
amount of $58,300. The note, which is due on November 15, 2019, has an original issue discount of $5,300 and transaction costs
of $3,000. The convertible note converts into common stock of the Company at a conversion price that shall be equal to the 70%
average of the two lowest per share trading prices for the ten (10) trading days prior to the conversion date. During the nine
months ended September 30, 2019, the Company accrued interest of $2,753. On July 12, 2019, the Company prepaid this note of $58,300
plus accrued interest and a prepayment penalty of $21,369. At September 30, 2019, this note is fully paid.
On
February 22, 2019, the Company received the fourth tranche of $30,000 relating to a note executed on July 13, 2018. During the
nine months ending September 30, 2019, the Company accrued interest of $534. On September 17, 2019, the convertible debt holder
converted $9,700 of principal for 6,800 shares of common stock at a price of $1.50. At September 30, 2019, there
is $20,300 principal outstanding.
On
March 18, 2019, the Company executed a Securities Purchase Agreement for Convertible Debentures to an institutional investor in
the principal amount of $365,000 to be funded in six tranches: $65,000 at signing, $100,000 forty-five (45) days after the signing
date and $200,000 forty-five (45) days after the second closing date. The debentures, which are payable on March 18, 2022, have
a 10% original issue discount and a commitment fee of $5,000 payable with the signing debenture. The debentures convert into common
stock of the Company at a conversion price equal to the lesser of (i) $.12 or (ii) seventy percent (70%) of the lowest traded
price (as reported by Bloomberg LP) of the common stock for the ten (10) trading days prior to the conversion date. The first
tranche of $65,000 was received on March 21, 2019. On September 12, 2019, the Company prepaid this note of $65,000 and a prepayment
penalty of $19,500. At September 30, 2019, this note is fully paid.
On
March 18, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $47,300. The note, which is payable on January 30, 2020, has an original issue discount of $4,300 and transaction costs of
$3,000. The convertible note converts into common stock of the Company at a conversion price equal to 70% of the average of the
lowest two (2) trading prices during the ten (10) trading day period ending on the last complete trading day prior to the conversion
date. During the nine months ended September 30, 2019, the Company accrued interest expense of $3,226. On September 12, 2019,
the Company prepaid this note of $47,300 plus accrued interest and a prepayment penalty of $16,555. At September 30, 2019, this
note is fully paid.
On
March 21, 2019, the Company executed a 3% Convertible Promissory Note payable to an institutional investor in the principal amount
of $360,000. The note, which is payable twelve (12) months after each tranche is funded, has an original issue discount of $60,000.
The original issue discount will be prorated with each tranche paid. The first tranche of $60,000 is due at signing date. The
convertible note converts into common stock of the Company at a conversion price that shall be equal to 65% of the lesser of (i)
lowest trading price or (ii) the lowest closing bid price on the OTCQB during the twenty-five (25) trading day period ending on
the last complete trading day prior to the conversion date. The first tranche was received on March 29, 2019. The second tranche
of $37,500 was received on July 19, 2019. During the nine months ended September 30, 2019, the Company accrued interest expense
of $2,925. On September 30, 2019, the Company prepaid the first tranche of $60,000 plus accrued interest and a prepayment penalty
of $30,000. At September 30, 2019, only the second tranche of $37,500 is outstanding.
On
March 21, 2019, the Company executed a 12% Convertible Promissory Note to an institutional investor in the principal amount of
$1,500,000 to be funded over separate tranches; the first tranche to be funded on signing. The note, which is due and payable
six (6) months after the funding date of each tranche, has an original issue discount of 10%. The Company issued 65,217
shares of restricted common stock on the closing date. These are deemed returnable shares which the investor must return if the
Company repays the note prior to the maturity date. In addition, the Company issued 20,000 shares of restricted common
stock as a commitment fee. The convertible note converts into common stock of the Company at a conversion price that shall be
equal to 65% of the lowest trading price during the thirty (30) day trading period ending on the last complete trading day prior
to the conversion date. The first tranche of $750,000 was received on March 25, 2019. The second tranche of $350,000 was received
on July 12, 2019 and the Company issued 53,846 shares of restricted common stock. These shares are redeemable if the Company
pays the note prior to the maturity date of January 20, 2020. The third and final tranche was received on September 9, 2019 and
the Company issued 80,000 shares of restricted common stock. These shares are redeemable if the Company pays the note prior
to the maturity date of March 12, 2020. During the nine months ended September 30, 2019, the Company accrued interest expense
of $57,337.
On
April 1, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $58,300. The note, which is payable on February 15, 2020, has an original issue discount of $5,300 and transaction costs of
$3,000. The convertible note converts into common stock of the Company at a conversion price equal to 70% of the average of the
lowest two (2) trading prices during the ten (10) trading day period ending on the last complete trading day prior to the conversion
date. During the nine months ended September 30, 2019, the Company accrued interest of $3,811. On September 12, 2019, the Company
prepaid this note of $58,300 plus accrued interest and a prepayment penalty of $20,405. At September 30, 2019, this note is fully
paid.
On
May 6, 2019, the Company executed a convertible note conversion period extension agreement on a note dated October 28, 2018, within
which the period of conversion by note holder was extended to May 27, 2019. The Company paid $16,031 to note holder for this extension
agreement. On May 28, 2019, the Company executed a second extension agreement on this note within which the period of conversion
by note holder was extended to June 11, 2019. The Company paid $16,105 to note holder for this extension agreement. During the
nine months ended September 30, 2019, the note holder converted the $308,000 note and accrued interest of $16,337 into 179,745
shares of common shares at prices ranging from $1.75 to $2.25. At September 30, 2019, this note has been fully converted.
On
May 13, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $110,000. The note, which is due on February 13, 2020, has an original issue discount of $10,000 and transactions costs of
$3,000. The convertible note converts into common stock of the Company at conversion price that shall be equal to the 65% of the
lowest closing price for the twenty (20) trading days prior to the conversion date. During the nine months ended September 30,
2019, the Company accrued interest expense of $5,063.
On
July 2, 2019, two Back-End notes executed in October 2018 with an institutional investor was funded for $154,000 each. Each note,
which is due on October 29, 2019, has an original issue discount of $16,500. The convertible notes convert into common stock of
the Company at conversion price that shall be equal to the 70% of the average of the two (2) lowest per share trading prices for
the prior twenty (20) trading days including the conversion date. During the nine months ended September 30, 2019, the Company
accrued interest expense of $3,038 for each note.
On
July 5, 2019, the Company signed an amendment to a convertible note issued on March 21, 2019 revising the conversion price from
75% to 65% of the lowest trading price during the thirty (30) trading days prior to the conversion date.
On
July 8, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $140,800. The note, which is payable on April 30, 2020, has an original issue discount of $12,800 and transaction costs of
$3,000. The convertible note converts into common stock of the Company at a conversion price equal to 70% of the average of the
lowest two (2) trading prices during the ten (10) trading day period ending on the last complete trading day prior to the conversion
date. During the nine months ended September 30, 2019, the Company accrued interest of $3,379.
On
July 8, 2019, the Company executed a convertible note conversion period extension agreement on a note dated January 8, 2019 within
which the period of conversion by note holder was extended to August 9, 2019. The Company paid $21,560 to note holder for this
extension agreement.
On
July 9, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $113,000. The note, which is due on July 9, 2020, has an original issue discount of $10,000 and transaction costs of $3,000.
The convertible note converts into common stock of the Company at a conversion price that shall be equal to the 65% average of
the lowest per share trading prices for the twenty (20) trading days prior to the conversion date. During the nine months ended
September 30, 2019, the Company accrued interest expense of $2,712.
On
July 9, 2019, the Company executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount
of $235,000. The note, which is due on July 11, 2020, has an original issue discount of $25,200 and transaction costs of $10,000.
The convertible note converts into common stock of the Company at a conversion price that shall be equal to the 65% average of
the lowest per share trading prices for the prior twenty (20) trading days including the conversion date. During the nine
months ended September 30, 2019, the Company accrued interest expense of $3,605.
On
July 10, 2019, the Company executed a convertible note conversion period extension agreement on a note dated January 8, 2019 within
which the period of conversion by note holder was extended to August 9, 2019. The Company paid $22,410 to note holder for this
extension agreement.
On
July 11, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $250,000. The note, which is due on April 19, 2020, has an original issue discount of $37,500 and transaction costs of $5,000.
The convertible note converts into common stock of the Company at a conversion price that shall be equal to 65% of the
average of the lowest per share trading prices for the twenty-five (25) trading days prior to the conversion date. During the
nine months ended September 30, 2019, the Company accrued interest expense of $5,425.
On
July 30, 2019, the Company executed two 12% Convertible Promissory Notes payable to two institutional investors in the principal
amount of $38,500 each. Each note, which is due on April 30, 2020, has an original issue discount of $3,500 and transaction costs
of $1,500. The convertible notes convert into common stock of the Company at a conversion price that shall be equal to the 65%
of the lowest per share trading prices for the twenty (20) trading days prior to the conversion date. During the nine months ended
September 30, 2019, the Company accrued interest expense of $1,380 for the two notes.
On
September 4, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal
amount of $58,300. The note, which is payable on July 15, 2020, has an original issue discount of $5,300 and transaction costs
of $3,000. The convertible note converts into common stock of the Company at a conversion price equal to 70% of the average of
the lowest two (2) trading prices during the ten (10) trading day period ending on the last complete trading day prior to the
conversion date. During the nine months ended September 30, 2019, the Company accrued interest of $364.
On
September 9, 2019, a Back-End note executed in January 2019 with an institutional investor was funded for $154,000. The note,
which is due on January 9, 2020, has an original issue discount of $14,000 and transaction costs of $5,000. The convertible note
converts into common stock of the Company at conversion price that shall be equal to the 70% of the average of the two (2) lowest
per share trading prices for the twenty (20) trading days prior to the conversion date. During the nine months ended September
30, 2019, the Company accrued interest expense of $641.
On
September 19, 2019, two Back-End notes executed in January 2019 with an institutional investor was funded for $154,000 each. Each
note, which is due on January 8, 2020, has an original issue discount of $14,000 and transactions costs of $5,000. The convertible
notes convert into common stock of the Company at conversion price that shall be equal to the 70% of the average of the two (2)
lowest per share trading prices for the prior twenty (20) trading days including the conversion date. During the nine months ended
September 30, 2019, the Company accrued interest expense of $371 for each note.
Year
Ended December 31, 2018
In
January 2018, the Company executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount
of $110,000. During the year ended December 31, 2018, the note, which was due on October 12, 2018, and accrued interest totaling
$4,489 was fully converted into 48,257 shares of common stock at a price of $2.3725 per share.
In
January 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $91,300. During the year ended December 31, 2018, the note, which was due on October 30, 2018, and accrued interest totaling
$4,980 was fully converted into 32,616 shares of common stock at prices ranging from $2.915 to $3.015.
In
February 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $63,800. During year ended December 31, 2018, the note, which was due on November 30, 2018, and accrued interest totaling $3,480
was fully converted into 26,196 shares of common stock at prices ranging from $2.435 to $2.66.
In
March 2018, the Company executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount
of $77,000. As of September 30, 2018, the institutional investor exercised its MFN provision in Paragraph 4a increasing the OID
from the stated in the note from 10% to 15% thus increasing the amount owed to $80,500. During the year ended December 31, 2018,
the note, which was due on December 5, 2018, and accrued interest totaling $5,928 was fully converted into 48,049 shares
of common stock at a price of $1.80.
In March 2018, the Company
executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $72,450. During the
year ended December 31, 2018, the note, which was due on December 30, 2018, and accrued interest totaling $3,780 was fully converted
into 37,556 shares of common stock at prices ranging from $1.965 to $2.185.
In May 2018, the Company
executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount of $125,000. During the
year ended December 31, 2018, the note, which is due on May 10, 2019, and accrued interest totaling $415 was fully converted into
32,525 shares of common stock at prices ranging from $3.14 to $5.16. At the year ended December 31, 2018,
the Company is still liable for $5,288 of accrued interest that has not yet been converted.
In May 2018, the Company
executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $51,750. During the
year ended December 31, 2018, the note, which is due on March 1, 2019, and accrued interest of $2,700 was fully converted into
13,174 shares of common stock at prices ranging from $4.05 and $4.25.
In July 2018, the Company
executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $56,500. The note,
which is due on April 17, 2019, has an original issue discount of $6,500. The convertible notes convert into common stock of the
Company at conversion price that shall be equal to the lesser of: (i) $10.50 or (ii) 75% of the lowest per share trading
price for the thirty (30) trading days before the issued date of this note. The Company issued 2,000 shares of common stock
valued at $8,000 upon the execution of this note. During the year ended December 31, 2018, the Company recognized interest expense
of $2,991.
In
July 2018, the Company executed an 3% Convertible Promissory Note payable to an institutional investor in the principal amount
of $180,000 for funding in six tranches. The note, which is due twelve months from the date of each individual tranche, has an
original issue discount of $10,000 per tranche. The convertible notes convert into common stock of the Company at conversion price
that shall be equal to 75% of the market price which is lowest trading price during the twenty (20) trading day period ending
on the last complete trading day prior to the conversion date. The trading price is the lesser of: (i) lowest traded price or
(ii) the lowest closing bid price on the OTCQB. The first tranche of $60,000 was received in the month of July and second tranche
of $30,000 was received in the month of August. During the year ended December 31, 2018, the Company recognized interest expense
of $1,102.
In
July 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $28,250. The note, which is due on April 17, 2019, has an original issue discount of $3,250. The convertible notes convert
into common stock of the Company at conversion price that shall be equal to the lesser of: (i) $10.50 or (ii) 75% of the
lowest per share trading price for the thirty (30) trading days before the issued date of this note. The Company issued 1,000
shares of common stock valued at $4,000 upon the execution of this note. During the year ended December 31, 2018, the Company
recognized interest expense of $1,495.
In
July 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $77,000. As of September 30, 2018, the institutional investor exercised its MFN provision in Paragraph 4a increasing the OID
from the stated in the note from 10% to 15% thus increasing the amount owed to $80,500. The note, which is due on April 5, 2019,
has an original issue discount of $7,000. The convertible notes convert into common stock of the Company at conversion price that
shall be equal to the lesser of: (i) $3.00 or (ii) 75% of the lowest per share trading price for the ten (10) trading days
before the conversion date. During the year ended December 31, 2018, the Company recognized interest expense of $4,870.
In
July 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $60,950. The note, which is due on April 30, 2019, has an original issue discount of $7,950. The convertible notes convert
into common stock of the Company at conversion price that shall be equal to the lesser of: (i) $10.00 or (ii) variable
conversion price which is 75% of the average of the lowest (2) VWAP for the ten (10) trading day period ending on the latest compete
trading day prior to the conversion date. During the year ended December 31, 2018, the Company recognized interest expense of
$3,647.
In
August 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $58,300. The note, which is due on June 15, 2019, has an original issue discount of $5,300. The convertible notes convert into
common stock of the Company at conversion price that shall be equal to the lesser of: (i) $10.00 or (ii) variable conversion
price which is 75% of the average of the two (2) lowest VWAP for the ten (10) trading day period ending on the latest compete
trading day prior to the conversion date. During the year ended December 31, 2018, the Company recognized interest expense of
$2,338.
In
October 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $47,300. The note, which is due on July 15, 2019, has an original issue discount of $7,300. The convertible notes convert into
common stock of the Company at conversion price that shall be equal to the variable conversion price which is 70% of the average
of the two (2) lowest VWAP for the ten(10) trading day period ending on the latest compete trading day prior to the conversion
date. During the year ended December 31, 2018, the Company recognized interest expense of $1,291.
In
October 2018, the Company executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount
of $165,000. The note, which is due on October 12, 2019, has an original issue discount of $15,000. The convertible notes convert
into common stock of the Company at conversion price that shall be equal to 65% of the lowest per share closing price during the
fifteen (15) trading days immediately preceding the date of the notice of conversion. The first tranche of $110,000 was received
in the month of October and the second tranche of $55,000 was received in the month of November. During the year ended December
31, 2018, the Company recognized interest expense of $2,594.
In
October 2018, the Company executed two 8% Convertible Promissory Notes payable to two institutional investors, each in the principal
amount of $308,000. Each note, which is due on October 29, 2019, has an original issue discount of $33,000. The convertible notes
convert into common stock of the Company at conversion price that shall be equal to the 70% of the average of the two (2) lowest
per share trading prices for the twenty (20) trading days prior to the conversion date. During the year ended December 31, 2018,
the Company recognized interest expense of $4,118 for each note.
In
November 2018, a Back-End note executed in May 2018 with an institutional investor was funded. The Back-End note is an 8% Convertible
Promissory Note payable in the principal amount of $125,000. The note, which is due on May 10, 2019, has an original issue discount
of $10,000. The convertible notes convert into common stock of the Company at conversion price that shall be equal to 72% of the
lowest VWAP for the ten (10) trading days prior to and including the conversion date. Conversion into shares of common stock can
commence following the 180thcalendar day after the Original Issue Date. During the year ended December 31, 2018, the
Company recognized interest expense of $1,123.
Note
5. Equity Transactions
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. During the nine months ended September 30, 2019, the Company authorized the issuance of 1,000,000 shares
of preferred stock to officers, directors and consultants as deferred compensation and/or expense. The shares are eligible for
conversion after 24 months into 40 shares of common stock per each preferred share. The value of the issued shares was calculated
on the basis of 40 shares per preferred share at the common share value on the date of issuance. The deferred compensation value
of the shares will vest monthly at 1/24th of the calculated value of $3,000,000 and requisite expense or reduction
of accrued compensation and/or accrued directors fees will be recorded. At the recording of the requisite vested share value,
the corresponding number of preferred shares will be recorded as being issued. At the end of September 30, 2019, there were 125,000
vested preferred shares and $255,000 was recorded to reduce accrued compensation; $33,750 was recorded to reduce accrued directors’
fees, and $86,250 was recorded as expense for a total of $375,000.
Common
Stock
On
July 9, 2019, the Company filed a Definitive Information Statement on Schedule 14C for the purpose of authorizing the increase
in the number of authorized shares of Common Stock from four hundred million (400,000,000) shares of Common Stock to nine hundred
million (900,000,000) shares of Common Stock (the “Authorized Common Stock Share Increase”). On July 9, 2019, the
Company filed Articles of Amendment to the Company’s Articles of Incorporation to implement the Authorized Common Stock
Share Increase with the State of Nevada.
On October 10, 2019,
the Company filed a Definitive Information Statement on Schedule 14C for the purpose of authorizing the increase in the number
of authorized shares of Common Stock from nine hundred million (900,000,000) shares of Common Stock to one billion nine hundred
million (1,900,000,000) shares of Common Stock (the “Authorized Common Stock Share Increase”). On October 15, 2019,
the Company filed Articles of Amendment to the Company’s Articles of Incorporation to implement the Authorized Common Stock
Share Increase with the State of Nevada.
Nine
Months Ended September 30, 2019
On
February 7, 2019, the Company executed an amendment to a contract executed on April 8, 2018 for twelve months for consulting services.
The Company issued 5,000 shares of common stock at the signing of the contract valued at $30,500 that is being amortized
over the life of the contract.
On
March 22, 2019, the Company issued 65,217 shares of common stock to an institutional investor as part of a promissory note
for the first tranche payment. These shares are returnable if the Company repays the promissory note before the maturity date.
The value of these shares is $375,000 which was recorded as prepaid until the six-month maturity has passed. The Company also
issued 20,000 shares of common stock to the institutional investor as a commitment fee. The value of these shares is $115,000.
On
April 2, 2019, the Company issued 16,000 shares of common stock pursuant to a capital call notice in relation to an Equity
Purchase Agreement dated June 18, 2018. The capital call totaled $59,100.
On
May 17, 2019, the Company executed a contract for three months for consulting services. The Company issued 10,000 shares
of common stock at the signing of the contract valued at $53,000 that is being amortized over the life of the contract. The contract
further indicated that another 10,000 shares were to be issued at the end of three months. The Company issued the second
10,000 shares of common stock on August 20, 2019. The value of the shares is $31,200 and was expensed.
On
July 10, 2019, the Company issued 53,846 shares of common stock to an institutional investor as part of a promissory note
for the second tranche payment. These shares are returnable if the Company repays the promissory note before the maturity date.
The value of these shares is $167,462 which was recorded as prepaid until the six-month maturity has passed.
On
September 30, 2019, the Company issued 80,000 shares of common stock to an institutional investor as part of a promissory
note for the third and final tranche payment. These shares are returnable if the Company repays the promissory note before the
maturity date. The value of these shares is $280,000 which was recorded as prepaid until the six-month maturity has passed.
On
September 25, 2019, the Company executed a contract for six months for consulting services. The contract included the issuance
of 5,000 shares of common stock. The value of these shares is $13,750. The shares had not yet been issued at the nine months
ended September 30,2019, so the value was recorded as Shares to be Issued.
During
the nine months ended September 30, 2019, the Company issued 95,000 shares of common stock to consultants for services
rendered in accordance to consulting agreements. The value of these shares is $466,403
During
the nine months ended September 30, 2019, the Company issued 405,409 shares of common stock for debt conversion totaling
$932,667 which includes $889,950 principal, $40,217 accrued interest and $2,500 due diligence fee.
Nine
Months Ended September 30, 2018
In
January 2018, the Board of Directors approved the extension of an Advisory Agreement dated February 15, 2015 for one year. The
Company issued 16,000 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 nine months ended September 30, 2018, the Company issued a total of 531,965 shares of common stock per debt conversion
of convertible notes. The total of the debt conversion was $1,190,189 which includes $163,157 of accrued interest.
During
the nine months ended September 30, 2018, the Company issued 77,500 shares of common stock for marketing and consulting
services valued at $329,565.
During
the nine months ended September 30, 2018, the Company issued 80,000 shares of common stock for settlement of a complaint
filed in the United States Federal District Count (see Footnote 4). The debt settled totaled $236,868 which includes $56,817 of
accrued interest.
During
the nine months ended September 30, 2018, the Company issued 31,807 shares of common stock for financing fees for convertible
debt issued. These shares were valued at $72,000.
In
June 2018, the Company entered into a consulting agreement within which the Company agreed to issue 2,500 shares of common
stock per month beginning in July 2018 and 30,000 shares of common stock upon signing of the agreement. The 30,000
shares of common stock were issued with a value of $105,000 which is being amortized over the life of the contract.
In
June 2018, the Company executed an Equity Purchase Agreement with an institutional investor within which the investor agrees to
purchase up to $1,500,000 of the Company’s common stock, par value $0.05. As an inducement to the investor to enter
into the agreement, the Company issued 20,000 restricted shares of common stock to the investor valued at $70,000.
In
January 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 348,000 shares to officers, directors and consultants. As of September 30, 2018,
no shares were issued.
Stock
Options
The
following is a summary of the status of all Company’s stock options as of September 30, 2019 and changes during the nine
months ended on that date:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Number
of Stock
|
|
|
Average
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Life (yrs)
|
|
|
Value
|
|
Outstanding at December 31, 2018
|
|
|
57,000
|
|
|
$
|
40.00
|
|
|
|
2.2
|
|
|
$
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2019
|
|
|
57,000
|
|
|
|
40.00
|
|
|
|
1.4
|
|
|
$
|
-
|
|
Options exercisable at September 30, 2019
|
|
|
57,000
|
|
|
$
|
40.00
|
|
|
|
1.4
|
|
|
$
|
-
|
|
The
Company recognized stock option expense of $0 and $217,188 for the nine months ended September 30, 2019 and 2018, respectively.
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 8,349 unexercised warrants granted on April 9, 2015.
The original expiration date of April 9, 2018 was extended to April 9, 2019. During the nine months ended September 30, 2019,
these warrants expired.
The
following is a summary of the status of the Company’s warrants as of September 30, 2019 and changes during the nine months
ended on that date:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Average
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Life (yrs.)
|
|
|
Value
|
|
Outstanding at December 31, 2018
|
|
|
75,564
|
|
|
$
|
24.00
|
|
|
|
1.4
|
|
|
$
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
(9,549
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at September 30, 2019
|
|
|
66,015
|
|
|
$
|
26.00
|
|
|
|
1.1
|
|
|
$
|
22.240
|
|
Warrants exercisable at September 30, 2019
|
|
|
66,015
|
|
|
$
|
26.00
|
|
|
|
1.1
|
|
|
$
|
22,240
|
|
Note
6. 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
7. 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. 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 nine months ended September 30,
2019 and 2018, the Company amortized the debt discount of $2,690,435 and $284,390, respectively.
During
the nine months ended September 30, 2019, the Company had the following activity in the derivative liability account:
|
|
Notes
|
|
|
Warrants
|
|
|
Total
|
|
Derivative liability at December 31, 2018
|
|
$
|
1,402,721
|
|
|
$
|
181,381
|
|
|
$
|
1,584,102
|
|
Addition of new conversion option derivatives
|
|
|
3,631,177
|
|
|
|
-
|
|
|
|
3,631,177
|
|
Conversion of note derivatives
|
|
|
(1,107,498
|
)
|
|
|
-
|
|
|
|
(1,107,498
|
)
|
Change in fair value
|
|
|
(2,582,681
|
)
|
|
|
(166,137
|
)
|
|
|
(2,748,818
|
)
|
Derivative liability at September 30, 2019
|
|
$
|
1,343,719
|
|
|
$
|
15,244
|
|
|
$
|
1,358,963
|
|
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
|
|
$
|
1.50-500.00
|
|
Exercise
price of warrants
|
|
$
|
12.50
|
|
Conversion
rate of convertible debt
|
|
$
|
22.25
|
|
Risk
free interest rate
|
|
|
1.6%-2.42
|
%
|
Stock
volatility factor
|
|
|
102.5%-190
|
%
|
Years
to Maturity
|
|
|
.06
– 2.72
|
|
Expected
dividend yield
|
|
|
None
|
|
Note
8. Subsequent Events
On
October 2, 2019, the Company executed a 10% Convertible Promissory Note payable to an institutional investor in the principal
amount of $57,750. The note, which is payable on October 2, 2020, has an original issue discount of $5,250 and transaction costs
of $2,500. The convertible note converts into common stock of the Company at a conversion price equal to 65% of the lowest trading
prices during the twenty (20) trading day period ending on the last complete trading day prior to the conversion date.
On
October 10, 2019, the Company filed a Definitive Information Statement on Schedule 14C for the purpose of authorizing the increase
in the number of authorized shares of Common Stock from nine hundred million (900,000,000) shares of Common Stock to one billion
nine hundred million (1,900,000,000) shares of Common Stock (the “Authorized Common Stock Share Increase”). On October
15, 2019, the Company filed Articles of Amendment to the Company’s Articles of Incorporation to implement the Authorized
Common Stock Share Increase with the State of Nevada.
From
October 1 until the filing of this report, the Company issued 7,500 shares of common stock per consulting agreements valued
at $12,150.
From
October 1 until the filing of this report, the Company issued 910,042 shares of common stock for convertible debt conversion
totaling $508,655 which includes $436,906 principal, $69,199 accrued interest and $2,550 financing costs
From
October 1 until the filing of this report, the Company issued 21,000 shares of common stock for prepaid services valued
at $39,750 which is being amortized over the life of the contracts.
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2018 AND 2017
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, 2018 and
2017, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the
two-year period ended December 31, 2018, 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, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period
ended December 31, 2018, 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 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
27, 2019
We
have served as the Company’s auditor since 2016
eWELLNESS
HEALTHCARE CORPORATION
BALANCE
SHEETS
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
383,335
|
|
|
$
|
6,882
|
|
Prepaid expenses
|
|
|
95,508
|
|
|
|
179,827
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
478,843
|
|
|
|
186,709
|
|
|
|
|
|
|
|
|
|
|
Property & equipment, net
|
|
|
14,092
|
|
|
|
5,021
|
|
Intangible assets, net
|
|
|
11,000
|
|
|
|
13,954
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
503,935
|
|
|
$
|
205,684
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
236,741
|
|
|
$
|
345,956
|
|
Accounts payable - related party
|
|
|
684,173
|
|
|
|
351,511
|
|
Accrued expenses - related party
|
|
|
214,076
|
|
|
|
210,828
|
|
Accrued compensation
|
|
|
1,113,470
|
|
|
|
1,071,369
|
|
Contingent liability
|
|
|
90,000
|
|
|
|
90,000
|
|
Convertible debt, net of discount
|
|
|
562,362
|
|
|
|
444,680
|
|
Derivative liability
|
|
|
1,584,102
|
|
|
|
1,140,578
|
|
Short term notes and liabilities
|
|
|
-
|
|
|
|
180,051
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4,484,924
|
|
|
|
3,834,973
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
4,484,924
|
|
|
|
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, 4,128,139
and 2,847,048 issued and outstanding, respectively
|
|
|
206,407
|
|
|
|
142,352
|
|
Additional paid in capital
|
|
|
17,213,838
|
|
|
|
13,178,131
|
|
Accumulated deficit
|
|
|
(21,401,234
|
)
|
|
|
(16,949,772
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit
|
|
|
(3,980,989
|
)
|
|
|
(3,629,289
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
503,935
|
|
|
$
|
205,684
|
|
The
accompanying notes are an integral part of these financial statements
eWELLNESS
HEALTHCARE CORPORATION
STATEMENTS
OF OPERATIONS
|
|
Year Ended
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Executive compensation
|
|
$
|
408,000
|
|
|
$
|
408,000
|
|
General and administrative
|
|
|
1,156,938
|
|
|
|
801,308
|
|
Professional fees
|
|
|
2,130,131
|
|
|
|
2,139,473
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
3,695,069
|
|
|
|
3,348,781
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(3,695,069
|
)
|
|
|
(3,348,781
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
|
159,479
|
|
|
|
-
|
|
Gain (loss) on derivative liability
|
|
|
(178,938
|
)
|
|
|
2,771,778
|
|
Foreign exchange rate
|
|
|
12,598
|
|
|
|
60,972
|
|
Loss on disposal of asset
|
|
|
(2,134
|
)
|
|
|
-
|
|
Interest expense
|
|
|
(745,542
|
)
|
|
|
(516,060
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss before Income Taxes
|
|
|
(4,449,606
|
)
|
|
|
(1,032,091
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(1,856
|
)
|
|
|
(800
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(4,451,462
|
)
|
|
$
|
(1,032,891
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss) per common share
|
|
$
|
(1.32
|
)
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
3,374,115
|
|
|
|
2,177,294
|
|
The
accompanying notes are an integral part of these financial statements
eWELLNESS
HEALTHCARE CORPORATION
STATEMENT
OF STOCKHOLDERS’ DEFICIT
|
|
Preferred
Shares
|
|
|
Common
Shares
|
|
|
Shares
to
|
|
|
Additional
Paid in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
be
issued
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,028,706
|
|
|
$
|
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 conversions
|
|
|
-
|
|
|
|
-
|
|
|
|
553,618
|
|
|
|
27,681
|
|
|
|
(84,000
|
)
|
|
|
281,319
|
|
|
|
-
|
|
|
|
225,000
|
|
Shares
issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
1,070,690
|
|
|
|
53,534
|
|
|
|
(8,240
|
)
|
|
|
5,529,185
|
|
|
|
-
|
|
|
|
5,574,479
|
|
Shares
issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
100,500
|
|
|
|
5,025
|
|
|
|
(18,500
|
)
|
|
|
402,975
|
|
|
|
-
|
|
|
|
389,500
|
|
Shares
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
66,812
|
|
|
|
3,341
|
|
|
|
-
|
|
|
|
352,539
|
|
|
|
-
|
|
|
|
355,880
|
|
Shares
issued for warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
26,722
|
|
|
|
1,336
|
|
|
|
-
|
|
|
|
108,642
|
|
|
|
-
|
|
|
|
109,978
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,032,891
|
)
|
|
|
(1,032,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
2,847,048
|
|
|
$
|
142,352
|
|
|
$
|
-
|
|
|
$
|
13,178,131
|
|
|
$
|
(16,949,772
|
)
|
|
$
|
(3,629,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
220,500
|
|
|
|
-
|
|
|
|
220,500
|
|
Option
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
467,938
|
|
|
|
-
|
|
|
|
467,938
|
|
Shares
issued to officers, directors and consultants
|
|
|
-
|
|
|
|
-
|
|
|
|
348,000
|
|
|
|
17,400
|
|
|
|
-
|
|
|
|
332,688
|
|
|
|
-
|
|
|
|
350,088
|
|
Shares
issued for contribution
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
69,000
|
|
|
|
-
|
|
|
|
70,000
|
|
Shares
issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
705,714
|
|
|
|
35,286
|
|
|
|
-
|
|
|
|
2,077,161
|
|
|
|
-
|
|
|
|
2,112,447
|
|
Shares
issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
52,000
|
|
|
|
2,600
|
|
|
|
-
|
|
|
|
236,700
|
|
|
|
-
|
|
|
|
239,300
|
|
Shares
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
106,000
|
|
|
|
5,300
|
|
|
|
-
|
|
|
|
506,815
|
|
|
|
-
|
|
|
|
512,115
|
|
Shares
issued for financing costs
|
|
|
-
|
|
|
|
-
|
|
|
|
49,377
|
|
|
|
2,469
|
|
|
|
-
|
|
|
|
124,905
|
|
|
|
-
|
|
|
|
127,374
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,451,462
|
)
|
|
|
(4,451,462
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
4,128,139
|
|
|
$
|
206,407
|
|
|
$
|
-
|
|
|
$
|
17,213,838
|
|
|
$
|
(21,401,234
|
)
|
|
$
|
(3,980,989
|
)
|
The
accompanying notes are an integral part of these financial statements
eWELLNESS
HEALTHCARE CORPORATION
STATEMENT
OF CASH FLOWS
|
|
Year Ended
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,451,462
|
)
|
|
$
|
(1,032,891
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
5,982
|
|
|
|
5,123
|
|
Contributed services
|
|
|
220,500
|
|
|
|
222,000
|
|
Shares issued for consulting services
|
|
|
512,115
|
|
|
|
355,880
|
|
Shares issued for contribution
|
|
|
70,000
|
|
|
|
-
|
|
Shares issued for financing costs
|
|
|
127,374
|
|
|
|
-
|
|
Shares issued to directors and consultants
|
|
|
350,088
|
|
|
|
-
|
|
Options expense
|
|
|
467,938
|
|
|
|
434,376
|
|
Amortization of debt discount and prepaids
|
|
|
812,499
|
|
|
|
1,400,782
|
|
Loss on disposal of fixed assets
|
|
|
2,134
|
|
|
|
-
|
|
(Gain) on settlement of debt
|
|
|
(159,479
|
)
|
|
|
-
|
|
Foreign currency exchange
|
|
|
(12,598
|
)
|
|
|
(60,972
|
)
|
(Gain) loss on derivative liability
|
|
|
178,938
|
|
|
|
(2,771,778
|
)
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Prepaid expense
|
|
|
22,479
|
|
|
|
(49,752
|
)
|
Accounts payable and accrued expenses
|
|
|
130,454
|
|
|
|
111,332
|
|
Accounts payable - related party
|
|
|
332,661
|
|
|
|
197,029
|
|
Accrued expenses - related party
|
|
|
60,067
|
|
|
|
106,399
|
|
Accrued compensation
|
|
|
42,101
|
|
|
|
131,369
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(1,288,209
|
)
|
|
|
(951,103
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
(14,233
|
)
|
|
|
(2,910
|
)
|
Net cash used in investing activities
|
|
|
(14,233
|
)
|
|
|
(2,910
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible debt
|
|
|
1,922,600
|
|
|
|
1,107,500
|
|
Original issue discount and debt issuance costs
|
|
|
(242,700
|
)
|
|
|
(160,600
|
)
|
Payments on debt
|
|
|
(1,005
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
1,678,895
|
|
|
|
946,900
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
376,453
|
|
|
|
(7,113
|
)
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
6,882
|
|
|
|
13,995
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
383,335
|
|
|
$
|
6,882
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
1,856
|
|
|
$
|
800
|
|
Interest Expense
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-cash items:
|
|
|
|
|
|
|
|
|
Warrants issued with debt
|
|
$
|
-
|
|
|
$
|
89,890
|
|
Derivative liability and debt discount issued with new notes
|
|
$
|
1,099,732
|
|
|
$
|
428,250
|
|
Shares issued for debt conversion
|
|
$
|
1,456,782
|
|
|
$
|
5,528,421
|
|
Exercise of warrants
|
|
$
|
-
|
|
|
$
|
109,979
|
|
Shares issued for extinguishment of accounts payable
|
|
$
|
-
|
|
|
$
|
225,000
|
|
Shares issued to officers recorded as reduction of contributed capital
|
|
$
|
1,215,912
|
|
|
|
-
|
|
Shares issued for prepaids
|
|
$
|
239,300
|
|
|
$
|
389,500
|
|
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 (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 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, 2018, the Company had no revenues. The Company has an accumulated deficit of $21,401,234 and a working
capital deficit of $4,006,081. 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, 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
|
|
$
|
1,584,102
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,584,102
|
|
Total Liabilities measured at fair value
|
|
$
|
1,584,102
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,584,102
|
|
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
|
|
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,
2018 and 2017, 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 21, 2018 and 2017, 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 include all cash deposits and highly liquid financial instruments with an original maturity to the Company
of three months or less. The Company maintains cash in bank deposit accounts which, at times, may exceed federally insured limits.
The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash
and cash equivalents.
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, 2018 and 2017, 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
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Options
|
|
|
57,000
|
|
|
|
241,292
|
|
Warrants
|
|
|
74,364
|
|
|
|
175,064
|
|
Convertible Notes
|
|
|
506,605
|
|
|
|
291,592
|
|
|
|
|
637,969
|
|
|
|
707,948
|
|
Recent
Accounting Pronouncements
In
July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic
480), Derivative and Hedging (Topic 815). The amendments in Part I of this update change the classification analysis of certain
equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial
instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification
when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial
instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value. For freestanding
equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with
Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as
a reduction of income available to common shareholders in basic EPS. The amendments in Part I of this update are effective for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted including
adoption in an interim period. The Company is currently assessing the impact of this guidance on its financial statements.
In
June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting”, which expands the scope of Topic 718 to include all share-based payment transactions for acquiring
goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in
which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards.
ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to
the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for
under ASC 606. The amendments in ASU 2018-07 are effective for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years. The Company is currently assessing the impact of this guidance on its financial statements.
The
Company has reviewed all other 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 consist of computer equipment that is stated at cost $22,654 and $11,331 less accumulated depreciation of $8,562
and $6,311 for the years ended December 31, 2018 and 2017, respectively. Depreciation expense was $3,028 and $2,169 for the years
ended December 31, 2018 and 2017, 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 $13,770 and $10,816 for the years ended December
31, 2018 and 2017, respectively. For the years ended December 31, 2018 and 2017, 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.
Net
deferred tax liabilities consist of the following components as of December 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
NOL carryover
|
|
$
|
1,204,500
|
|
|
$
|
1,058,800
|
|
Accrued payroll
|
|
|
233,800
|
|
|
|
278,600
|
|
Deferred rent
|
|
|
-
|
|
|
|
300
|
|
Related party accruals
|
|
|
143,700
|
|
|
|
-
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
300
|
|
|
|
(300
|
)
|
Valuation allowance
|
|
|
(1,582,300
|
)
|
|
|
(1,337,400
|
)
|
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, 2018 and 2017 due to the following:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Book loss
|
|
$
|
(934,800
|
)
|
|
$
|
(268,600
|
)
|
Depreciation
|
|
|
-
|
|
|
|
(100
|
)
|
Contributed services
|
|
|
46,300
|
|
|
|
57,700
|
|
Meals & entertainment
|
|
|
4,200
|
|
|
|
3,600
|
|
Stock for prepaids
|
|
|
63,200
|
|
|
|
255,400
|
|
Stock for consulting
|
|
|
222,500
|
|
|
|
92,500
|
|
Option expense
|
|
|
98,300
|
|
|
|
112,900
|
|
Amortization of debt discount
|
|
|
107,400
|
|
|
|
108,800
|
|
Accrued payroll
|
|
|
8,800
|
|
|
|
34,200
|
|
Loss on conversion of debt
|
|
|
(159,500
|
)
|
|
|
-
|
|
Loss on derivative
|
|
|
37,600
|
|
|
|
(720,700
|
|
Valuation allowance
|
|
|
506,000
|
|
|
|
324,300
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
At
December 31, 2018, the Company had net operating loss carryforwards of approximately $5,736,000 that may be offset against future
taxable income from the year 2019 through 2038. No tax benefit has been reported in the December 31, 2018 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, 2018 and 2017, 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, 2017, 2016 and 2015 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
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 (“CTO”) is the Chief Marketing Officer. The agreement is for additional features
to be programmed for the launch of the PHIZIO 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. Following an initial
payment of $100,000 to cover development and compensation for the CTO, the Company is obligated to 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 PHIZIO platform.
The agreement established that the Company as indebted to the PC for $225,000 for past programming services. For this amount,
the Company issued 505,618 common shares at a value of $0.445 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, 2018, the Company had a payable of $682,832 due to this
company.
For
the first nine months of the year ended December 31, 2018, the Company rented office space from a company formerly owned
by our CEO. The imputed rent expense of $500 per month for that nine months is recorded in the Statement of Operations
and Additional Paid in Capital in the Balance Sheet. At the end of September 2018, the Company rented other office space from
a third-party provider.
Throughout
the year ended December 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 December 31, 2018 and December 31, 2017 were $3,076 and $5,828, respectively. There
were no expenses due to the board members, but the Company has accrued directors’ fees of $211,000 and $205,000 at December
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 $1,113,470 and $1,071,369 at December 31, 2018 and December 31, 2017 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. 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.
On
June 20, 2018, a settlement agreement was signed between the Company and holder of the note payable with the following terms for
the cancellation of the note payable, accrued interest and all warrants issued relating to the note:
|
1.
|
The
Company will issue 54,189 shares of commons stock that is immediately tradeable under Securities and Exchange Commission
Rule 144, but subject to a daily trading limit of 25,000 shares per day;
|
|
2.
|
The
Company will issue 25,811 shares of common stock that shall be subject to a 180-day holding period and are also subject
to a daily trading limit of 25,000 shares per day;
|
|
3.
|
The holder of the
note payable shall bear all fees and expenses, including attorneys’ fees, associated with the transfer and trading of
the Company’s shares;
|
|
4.
|
Beyond issuing the
shares noted above, the Company shall not take any additional action that would cause the note holder to incur tax consequence
from the transfer or would affect the note holder’s tax consequences in any way.
|
The
Company issued the 80,000 shares of common stock on June 20, 2018. At December 31, 2018, the Company had no indebtedness
to this holder of the note payable principal or accrued interest.
During
the years ended December 31, 2018 and 2017, the Company recognized interest expense totaling $15,183 and $32,409, respectively.
Note
8. Convertible Notes Payable
In January 2018, the Company
executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount of $110,000. During the
year ended December 31, 2018, the note, which was due on October 12, 2018, and accrued interest totaling $4,489 was fully converted
into 48,257 shares of common stock at a price of $2.3725 per share.
In January 2018, the Company
executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $91,300. During the
year ended December 31, 2018, the note, which was due on October 30, 2018, and accrued interest totaling $4,980 was fully converted
into 32,616 shares of common stock at prices ranging from $2.915 to $3.015.
In February 2018, the
Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $63,800. During
year ended December 31, 2018, the note, which was due on November 30, 2018, and accrued interest totaling $3,480 was fully converted
into 26,196 shares of common stock at prices ranging from $2.435 to $2.66.
In March 2018, the Company
executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount of $77,000. As of June
30, 2018, the institutional investor exercised its MFN provision in Paragraph 4a increasing the OID from the stated in the note
from 10% to 15% thus increasing the amount owed to $80,500. During the year ended December 31, 2018, the note, which was due on
December 5, 2018, and accrued interest totaling $5,928 was fully converted into 48,049 shares of common stock at a price
of $1.80.
In March 2018, the Company
executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $72,450. During the
year ended December 31, 2018, the note, which was due on December 30, 2018, and accrued interest totaling $3,780 was fully converted
into 37,556 shares of common stock at prices ranging from $1.965 to $2.185.
In May 2018, the Company
executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount of $125,000. During the
year ended December 31, 2018, the note, which is due on May 10, 2019, and accrued interest totaling $415 was fully converted into
32,525 shares of common stock at prices ranging from $3.14 to $5.16. At the year ended December 31, 2018,
the Company is still liable for $5,288 of accrued interest that has not yet been converted.
In May 2018, the Company
executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $51,750. During the
year ended December 31, 2018, the note, which is due on March 1, 2019, and accrued interest of $2,700 was fully converted into
13,174 shares of common stock at prices ranging from $4.05 and $4.25.
In July 2018, the Company
executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $56,500. The note,
which is due on April 17, 2019 has an original issue discount of $6,500. The convertible notes convert into common stock of the
Company at conversion price that shall be equal to the lesser of: (i) $10.50 or (ii) 75% of the lowest per share trading
price for the thirty (30) trading days before the issued date of this note. The Company issued 2,000 shares of common stock
valued at $8,000 upon the execution of this note. During the year ended December 31, 2018, the Company recognized interest expense
of $2,991.
In
July 2018, the Company executed an 3% Convertible Promissory Note payable to an institutional investor in the principal amount
of $180,000 for funding in three tranches. The note, which is due twelve months from the date of each individual tranche, has
an original issue discount of $10,000 per tranche. The convertible notes convert into common stock of the Company at conversion
price that shall be equal to 75% of the market price which is lowest trading price during the twenty (20) trading day period ending
on the last complete trading day prior to the conversion date. The trading price is the lesser of: (i) lowest traded price or
(ii) the lowest closing bid price on the OTCQB. The first tranche of $60,000 was received in the month of July and second tranche
of $30,000 was received in the month of August. During the year ended December 31, 2018, the Company recognized interest expense
of $1,102.
In
July 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $28,250. The note, which is due on April 17, 2019 has an original issue discount of $3,250. The convertible notes convert into
common stock of the Company at conversion price that shall be equal to the lesser of: (i) $10.50 or (ii) 75% of the lowest
per share trading price for the thirty (30) trading days before the issued date of this note. The Company issued 1,000
shares of common stock valued at $4,000 upon the execution of this note. During the year ended December 31, 2018, the Company
recognized interest expense of $1,495.
In
July 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $77,000. As of September 30, 2018, the institutional investor exercised its MFN provision in Paragraph 4a increasing the OID
from the stated in the note from 10% to 15% thus increasing the amount owed to $80,500. The note, which is due on April 5, 2019,
has an original issue discount of $7,000. The convertible notes convert into common stock of the Company at conversion price that
shall be equal to the lesser of: (i) $3.00 or (ii) 75% of the lowest per share trading price for the ten (10) trading days
before the conversion date. During the year ended December 31, 2018, the Company recognized interest expense of $4,870.
In
July 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $60,950. The note, which is due on April 30, 2019 has an original issue discount of $7,950. The convertible notes convert into
common stock of the Company at conversion price that shall be equal to the lesser of: (i) $10.00 or (ii) variable conversion
price which is 75% of the average of the lowest (2) VWAP for the ten (10) trading day period ending on the latest compete trading
day prior to the conversion date. During the year ended December 31, 2018, the Company recognized interest expense of $3,647.
In
August 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $58,300. The note, which is due on June 15, 2019 has an original issue discount of $5,300. The convertible notes convert into
common stock of the Company at conversion price that shall be equal to the lesser of: (i) $10.00 or (ii) variable conversion
price which is 75% of the average of the two (2) lowest VWAP for the ten (10) trading day period ending on the latest compete
trading day prior to the conversion date. During the year ended December 31, 2018, the Company recognized interest expense of
$2,338.
In
October 2018, the Company executed an 12% Convertible Promissory Note payable to an institutional investor in the principal amount
of $47,300. The note, which is due on July 15, 2019 has an original issue discount of $7,300. The convertible notes convert into
common stock of the Company at conversion price that shall be equal to the variable conversion price which is 70% of the average
of the two (2) lowest VWAP for the ten(10) trading day period ending on the latest compete trading day prior to the conversion
date. During the year ended December 31, 2018, the Company recognized interest expense of $1,291.
In
October 2018, the Company executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount
of $165,000. The note, which is due on October 12, 2019 has an original issue discount of $15,000. The convertible notes convert
into common stock of the Company at conversion price that shall be equal to 65% of the lowest per share closing price during the
fifteen (15) trading days immediately preceding the date of the notice of conversion. The first tranche of $110,000 was received
in the month of October and the second tranche of $55,000 was received in the month of November. During the year ended December
31, 2018, the Company recognized interest expense of $2,594.
In
October 2018, the Company executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount
of $308,000. The note, which is due on October 29, 2019 has an original issue discount of $33,000. The convertible notes convert
into common stock of the Company at conversion price that shall be equal to the 70% of the average of the two (2) lowest per share
trading prices for the twenty (20) trading days prior to the conversion date. During the year ended December 31, 2018, the Company
recognized interest expense of $4,118.
In
October 2018, the Company executed an 8% Convertible Promissory Note payable to an institutional investor in the principal amount
of $308,000. The note, which is due on October 29, 2019 has an original issue discount of $33,000. The convertible notes convert
into common stock of the Company at conversion price that shall be equal to the 70% of the average of the two (2) lowest per share
trading prices for the twenty (20) trading days prior to the conversion date. During the year ended December 31, 2018, the Company
recognized interest expense of $4,118.
In
November 2018, a Back-End note executed in May 2018 with an institutional investor was funded. The Back-End note is an 8% Convertible
Promissory Note payable in the principal amount of $125,000. The note, which is due on May 10, 2019 has an original issue discount
of $10,000. The convertible notes convert into common stock of the Company at conversion price that shall be equal to 72% of the
lowest VWAP for the ten (10) trading days prior to and including the conversion date. Conversion into shares of common stock can
commence following the 180th calendar day after the Original Issue Date. During the year ended December 31, 2018, the
Company recognized interest expense of $1,123.
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. Since there can be no assurance that up listing on the NASDAQ will be achieved, the Company
informed FINRA that it was withdrawing the application and 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, 2018.
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 $0.05 per share.
Debt
Settlement Shares
During
the year ended December 31, 2018, the Company issued 80,000 shares of common stock for settlement of a complaint filed
in the United States Federal District Count (see Note 7). The debt settled totaled $236,869 which includes $56,817 of accrued
interest.
Debt
Conversion Shares
During
the year ended December 31, 2018, the Company issued a total of 625,714 shares of common stock per debt conversion of various
convertible notes (See Note 7). The total of the debt conversion was $1,284,582 principal plus $172,200 accrued interest.
During
the year ended December 31, 2018, the Company issued 49,377 shares of common stock for financing costs relating to convertible
debt. The value of the financing costs was $127,374.
Consultant
Issued Shares
During
the year ended December 31, 2018, the Company issued 158,000 shares of common stock for marketing and consulting services
valued at $751,415.
Institutional
Investor Shares
During
the year ended December 31, 2018, the Company issued 20,000 shares of common stock as an inducement per an Equity Purchase
Agreement with an institutional investor within which the investor agrees to purchase up to $1,500,000 of the Company’s
common stock, par value $0.05. The value of these shares is $70,000.
Officers,
Directors, and Consultants Shares
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 348,000 shares to officers, directors and consultants. These shares were issued
on November 1, 2018 valued at $1,566,000. Of that amount, $1,215,912 was recorded against previously contributed capital from
management and members of the Board of Directors.
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.
During
the year ended December 31, 2018, the options authorized by the Board of Directors in December 2016 to be issued to officers,
directors and certain consultants expired because of the two-year exercise date.
The
following is a summary of the status of all Company’s stock options as of December 31, 2018 and changes during the periods
ended on December 31, 2018 and 2017, respectively:
|
|
Number
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Average
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Life (yrs)
|
|
|
Value
|
|
Outstanding at January 1, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
405,000
|
|
|
|
13.50
|
|
|
|
3.2
|
|
|
|
.55
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(5,000
|
)
|
|
|
50.00
|
|
|
|
-
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
400,000
|
|
|
$
|
13.00
|
|
|
|
1.9
|
|
|
$
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(343,000
|
)
|
|
|
8.50
|
|
|
|
-
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
57,000
|
|
|
|
40.00
|
|
|
|
2.2
|
|
|
$
|
-
|
|
Options exercisable at December 31, 2018
|
|
|
57,000
|
|
|
$
|
40.00
|
|
|
|
2.2
|
|
|
$
|
-
|
|
The
Company recognized stock option expense of $467,938 and $434,376 for the years ended December 31, 2018 and 2017, respectively.
Warrants
During the year ended
December 31, 2017, the Company issued 26,015 warrants as part of a financing agreement at an exercise price of $12.50
and an expiration date of five years.
During the year ended
December 31, 2017, 27,266 warrants authorized by the Company as part of notes payable and financing agreements were exercised.
During the year ended
December 31, 2017, 6.010 warrants authorized by the Company as part of notes payable were expired because of the three-year
expiration 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 8,349 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 $17.50 is reduced to $2.50. The
Company recognized an incremental expense of $33,463 for the change.
During the year ended
December 31, 2018, 99,500 warrants authorized by the Company as part of a note payable were cancelled as part of the settlement
agreement with a holder of a note payable. (see Note 7)
The
following is a summary of the status of the Company’s warrants as of December 31, 2018 and changes during the periods ended
on December 31, 2018 and 2017, respectively:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Average
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Life (yrs.)
|
|
|
Value
|
|
Outstanding at January 1, 2017
|
|
|
182,324
|
|
|
$
|
10.50
|
|
|
|
2.9
|
|
|
$
|
5.15
|
|
Granted
|
|
|
26,015
|
|
|
|
12.50
|
|
|
|
5.0
|
|
|
|
-
|
|
Exercised
|
|
|
(27,266
|
)
|
|
|
.0.50
|
|
|
|
-
|
|
|
|
8.90
|
|
Cancelled
|
|
|
(6,010
|
)
|
|
|
17.50
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2017
|
|
|
175,063
|
|
|
$
|
11.00
|
|
|
|
2.9
|
|
|
$
|
5.15
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
(99,500
|
)
|
|
|
2.50
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2018
|
|
|
75,563
|
|
|
$
|
24.00
|
|
|
|
1.4
|
|
|
$
|
1.85
|
|
Warrants exercisable at December 31, 2018
|
|
|
75,563
|
|
|
$
|
24.00
|
|
|
|
1.4
|
|
|
$
|
1.85
|
|
For
purpose of determining the fair market value of the warrants and options issued during the year ended December 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
|
|
$
|
10.00
|
|
Exercise price of warrants
|
|
$
|
12.50
|
|
Dividend yield
|
|
|
0.00
|
%
|
Years to maturity
|
|
|
3
|
|
Risk free rate
|
|
|
2.46
|
%
|
Expected volatility
|
|
|
113.53-229.92
|
%
|
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 505,618
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 $0.05, consisting of: (i) 100,000,000 shares of common stock,
par value $0.05; and (ii) 10,000,000 shares of preferred stock, par value $0.001, to 420,000,000 shares of capital stock,
par value $0.05, consisting of: (iii) 400,000,000 shares of common stock, par value $0.05; 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 505,618
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. 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.
On
June 20, 2018, a settlement agreement was signed between the Company and holder of the note payable with the following terms for
the cancellation of the note payable, accrued interest and warrants:
|
1.
|
The
Company will issue 54,189 shares of commons stock that is immediately tradeable under Securities and Exchange Commission
Rule 144, but subject to a daily trading limit of 25,000 shares per day;
|
|
2.
|
The
Company will issue 25,811 shares of common stock that shall be subject to a 180-day holding period and are also subject
to a daily trading limit of 25,000 shares per day;
|
|
3.
|
The
holder of the note payable shall bear all fees and expenses, including attorneys’ fees, associated with the transfer
and trading of the Company’s shares;
|
|
4.
|
Beyond
issuing the shares noted above, the Company shall not take any additional action that would cause the note holder to incur
tax consequence from the transfer or would affect the note holder’s tax consequences in any way.
|
The
Company issued the 80,000 shares of common stock on June 20, 2018. At December 31, 2018, the Company had no indebtedness
to this holder of the note payable principal or accrued interest or warrants.
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, 2018
and 2017, the Company amortized the debt discount of $511,359 and $417,546, respectively, to interest expense.
During
the years ended December 31, 2018 and 2017, the Company had the following activity in the derivative liability account:
|
|
Notes
|
|
|
Warrants
|
|
|
Total
|
|
Derivative liability at January 1, 2017
|
|
$
|
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
|
|
Addition of new conversion option derivatives
|
|
|
1,243,333
|
|
|
|
-
|
|
|
|
1,243,333
|
|
Conversion of note derivatives
|
|
|
(429,927
|
)
|
|
|
-
|
|
|
|
(429,927
|
)
|
Extinguishment due to note cancellations
|
|
|
-
|
|
|
|
(202,610
|
)
|
|
|
(202,610
|
)
|
Changes in warrant derivatives
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Change in fair value
|
|
|
245,568
|
|
|
|
(412,839
|
)
|
|
|
(167,271
|
)
|
Reclassification of derivative to gain on extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Derivative liability at December 31, 2018
|
|
$
|
1,424,565
|
|
|
$
|
159,537
|
|
|
$
|
1,584,102
|
|
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
|
|
$
|
2.50-10.10
|
|
Exercise price of warrants
|
|
$
|
.20-12.50
|
|
Conversion rate of convertible debt
|
|
$
|
1.00-10.00
|
|
Risk free interest rate
|
|
|
1.91%-2.63
|
%
|
Stock volatility factor
|
|
|
101.5%-229.9
|
%
|
Years to Maturity
|
|
|
.08 – 3
|
|
Expected dividend yield
|
|
|
None
|
|
Note
12. Supplemental Cash Flow Information
During
the year ended December 31, 2017 the Company had the following non-cash investing and financing activities:
|
●
|
Issued
26,017 warrants valued at $160,257 as incentive for lenders to enter debt agreements
|
|
●
|
Issued
553,618 shares of common stock for payables conversion totaling $345,000
|
|
●
|
Issued
26,722 shares of common stock for cashless exercise of warrants
|
|
●
|
Issued
100,500 shares of common stock valued at $389,500 which was recorded as a prepaid
|
|
●
|
Issued
66,812 shares of common stock valued at $355,880 for services
|
|
●
|
Issued
1,070,691 shares of common stock for the extinguishment of $797,913 worth of debt and $45,192 worth of accrued interest
|
During
the year ended December 31, 2018 the Company had the following non-cash investing and financing activities:
|
●
|
Issued
49,377 shares of common stock for financing costs valued at $127,374.
|
|
●
|
Issued
20,000 shares of common stock as an inducement for an Equity Purchase Agreement valued at $70,000.
|
|
●
|
Issued
348,000 shares of common stock to officers, directors and certain consultants per the 2018 Equity Incentive plan valued
at $1,566,000.
|
|
●
|
Issued
80,000 shares of common stock for settlement of debt of $180,051 and accrued interest of $56,817 (see Note 7).
|
|
●
|
Issued
52,000 shares of common stock valued at $239,300 which was recorded as a prepaid.
|
|
●
|
Issued
106,000 shares of common stock valued at $512,115 for services
|
|
●
|
Issued
625,714 shares of common stock for the extinguishment of $1,284,582 worth of debt and $172,200 worth of accrued
interest.
|
Note
13. Subsequent Events
On
January 8, 2019, the Company executed an 8% Convertible Promissory Note payable to an institutional investor in the principal
amount of $308,000. The note, which is due on January 8, 2020, has an original issue discount of $28,000. The convertible
note converts into common stock of the Company at conversion price that shall be equal to the 70% of the average of the two lowest
per share trading prices for the twenty (20) trading days prior to the conversion date.
On
January 8, 2019, the Company executed an 8% Convertible Promissory Note payable to an institutional investor in the principal
amount of $308,000. The note, which is due on January 8, 2020, has an original issue discount of $28,000. The convertible
note converts into common stock of the Company at conversion price that shall be equal to the 70% of the average of the two lowest
per share trading prices for the twenty (20) trading days prior to the conversion date.
On
January 8, 2019, the Company executed a consulting services agreement for the development of physical therapy care delivery and
the recruitment, training and evaluation of PHZIO users. The Company is to issue 20,000 shares of common stock equally
over a two-year period. The Company will also pay the consultant a monthly fee of $5,000.
On
January 9, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal
amount of $114,000. The note, which is due on October 30, 2019, has an original issue discount of $11,000. The convertible
note converts into common stock of the Company at a conversion price that shall be equal to the 70% average of the two lowest
per share trading prices for the ten (10) trading days prior to the conversion date.
On
January 28, 2019, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal
amount of $58,300. The note, which is due on November 15, 2019, has an original issue discount of $5,300. The convertible
note converts into common stock of the Company at a conversion price that shall be equal to the 70% average of the two lowest
per share trading prices for the ten (10) trading days prior to the conversion date.
On
February 1, 2019, the Company executed a six-month advisory services agreement for $2,500 per month for investor relations.
On
February 7, 2019, the Company executed an amendment to a contract executed on April 8, 2018 for twelve months for consultant services.
The Company issued 5,000 shares of common stock at the signing of the contract valued at $30,500 that is being amortized
over the life of the contract. In addition, the Company is to issue an additional 20,000 shares of common stock equally
over the twelve months of the contract and pay the consultant a monthly fee of $5,000.
On
February 28, 2019, the Company executed advisory services agreement. The Company is to issue 1,000 shares of common stock
on the first of each month for six months. In addition, the Company will also pay the advisor a monthly fee of $3,000. The Company
will also pay the advisor 1.5% override on all gross revenue received by the company due to a direct introduction by the consultant
to the customer providing revenue or leading to the chain of revenue source.
On
February 28, 2019, the Company executed advisory services agreement. The Company is to issue 1,000 shares of common stock
on the first of each month for six months. In addition, the Company will also pay the advisor a monthly fee of $3,000. The Company
will also pay the advisor 1.5% override on all gross revenue received by the company due to a direct introduction by the consultant
to the customer providing revenue or leading to the chain of revenue source.
On
March 18, 2019, the Company executed a Securities Purchase Agreement for Convertible Debentures to an institutional investor in
the principal amount of $365,000 to be funded in three tranches: $65,000 at signing, $100,000 forty-five (45) days after the signing
date and $200,000 forty-five (45) days after the second closing date. The debentures, which are payable on March 18, 2022, have
a 10% original issue discount and a commitment fee of $5,000 payable with the signing debenture. The debentures convert into common
stock of the Company at a conversion price equal to the lesser of (i) $.12 or (ii) seventy percent (70%) of the lowest traded
price (as reported by Bloomberg LP) of the common stock for the ten (10) trading days prior to the conversion date.
On March 18, 2019,
the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $47,300.
The note, which is payable on January 20, 2020, has an original issue discount of 10%. The convertible note converts into common
stock of the Company at a conversion price equal to 70% of the average of the lowest two (2) trading prices during the ten (10)
trading day period ending on the last complete trading day prior to the conversion date.
On March 21, 2019,
the Company executed a 3% Convertible Promissory Note payable to an institutional investor in the principal amount of $360,000.
The note, which is payable twelve (12) months after each tranche is funded, has an original issue discount of $60,000. The original
issue discount will be prorated with each tranche paid. The first tranche of $60,000 is due at signing date. The convertible note
converts into common stock of the Company at a conversion price that shall be equal to 65% of the lesser of (i) lowest trading
price or (ii) the lowest closing bid price on the OTCQB during the twenty-five (25) trading day period ending on the last complete
trading day prior to the conversion date.
On March 21, 2019, the
Company executed a 12% Convertible Promissory Note to an institutional investor in the principal amount of $1,500,000 to be funded
over two tranches of $750,000 each; the first tranche to be funded on signing. The note, which is due and payable six (6) months
after the funding date of each tranche, has an original issue discount of 10%. The Company will issue 65,219 shares of
restricted common stock, deemed to be returnable, on the closing date. These shares will be returned if the Company repays the
note prior to the maturity date. The value of these shares is $375,012. In addition, the Company will issue 20,000 shares
of restricted common stock as a commitment fee valued at $115,000. The convertible note converts into common stock of the Company
at a conversion price that shall be equal to 75% of the lowest trading price during the thirty (30) day trading period ending
on the last complete trading day prior to the conversion date.
During
the 1st Quarter of 2019, the Company issued 23,491 shares of common stock to consultants for services rendered in
accordance to consulting agreements. The value of these shares is $164,533.
During
the 1st Quarter of 2019, the Company issued 5,000 shares of common stock to a consultant with a value of $30,750.
The value of these shares is being amortized over the life of the contract.
During
the 1st Quarter of 2019, the Company issued 101,945 shares of common stock for debt conversion totaling $347,487
which includes $329,290 principal and $17,197 accrued interest.
BUSINESS
eWellness
Healthcare Corporation (“eWellness”, the “Company”, “we”, “us”, “our”),
was incorporated in the State of Nevada on April 7, 2011.
The
Company has developed a new operating structure enabling it to operate in 48 states. The below noted chart illustrates the Company’s
new operational structure that provides for three individual professional operating companies in California, New Jersey and most
importantly Florida. With our Florida Professional Association (PA), we are able to provision our telehealth services in 46 states,
(excluding: California, Delaware, Kansas and New Jersey). Thus, we formed two additional professional companies in California
and New Jersey. Each professional company has executed a revocable operating agreement with the Company. These agreements are
required by each individual state and states that Darwin Fogt, MPT, the sole officer, director and shareholder of each of the
operating companies. All accounting services are supplied to these operating companies by the Company’s accounting team.
The
Company and Nature of Business
The
Company is a provider of the state of the art PHZIO platform for the physical therapy (“PT”)
and telehealth markets and believes it is the first digital telehealth physical therapy company (“dtPT Company”)
to offer real-time monitored physical therapy assessments and treatments to large-scale employers. The Company’s digital
telehealth assessment and treatment platform (the “dtPT Platform” or “Platform”) has been designed to
serve the $30 billion physical therapy market, the $4 billion musculoskeletal (“MSK”) market and the $8 billion corporate
wellness market. Our dtPT Platform redefines the way physical therapy (“PT”) can be delivered. We believe that our
Platform is able to transform the access, cost and quality dynamics of PT assessments and treatments.
We
designed our Platform to enable its usage for all PT assessments and treatments by means of computer, smart phone and/or similar
digital media devices (the “Access Devices”). This new approach will lower patient treatment costs, expand patient
treatment access and improve patient compliance. Our dtPT Platform allows patients to avoid the time-consuming clinical experience
to an immediate in-home PT experience. We believe that approximately 80% of all PT assessments and treatments can be performed
using our Platform accessible via the Access Devices in the privacy of once home.
We
believe that our innovative approach to solving the pervasive access, cost and quality challenges facing the current access to
PT clinics, will lead to highly scalable and substantial growth in our revenues. The Company
has signed 7 partnership and healthcare provider agreements to date and has begun to generate initial revenues during the fourth
quarter of 2019. We believe that we are well positioned to participate in the rapidly evolving PT treatment market by introducing
our innovative dtPT Platform enabling remote patient monitoring, post-discharge treatment plan adherence and in-home care. Our
Platform incorporates research-based methods and focuses on, not only rehabilitation but also wellness, functional fitness, performance,
and prevention.
Our
dtPT Platform recognizes that the national healthcare industry (federal and private insurance) is moving toward a model of prevention
and that physical therapy is expected to take a larger role in providing wellness services to patients. Due to the real-time patient
monitoring feature, we believe that our dtPT Platform is reimbursable by insurance companies such as Anthem Blue Cross and Blue
Shield.
Recent
Developments
During
June 2019 the Company signed a Provider Service Agreement with CareIQ, a division of CorVel Healthcare Corporation, one of the
largest Third-Party Insurance Administrators (“TPA”) in the U.S. with patients in all 50 states. https://www.corvel.com/about-us.
Initially, PHZIO will be used to treat patients in five (5) states including: California, New Jersey, Georgia, Tennessee and Arizona.
These initial states will be used to assess the effectiveness of the PHZIO digital physical therapy platform.
On
October 11, 2019 The Company signed a Direct to Consumer Marketing Agreement with Wosler Holdings, Inc., a Delaware Corporation
d/b/a/ Slingshot Health (“Slingshot”) (https://www.slingshothealth.com), Through this agreement, Slingshot
seeks to involve EWLL affiliated PT Providers, and EWLL seeks to gain their affiliated PT Providers access to the Slingshot consumer
healthcare patients through the Slingshot platform. The Parties anticipate commencing these new direct to consumer sales and marketing
efforts during the first quarter of 2020. The Company believes that Slingshot Healthcare is one of the leading on-line platforms
for digital healthcare to consumers. Slingshot Health is a healthcare marketplace connecting people to health and wellness providers,
placing control directly in the hands of those seeking and delivering care. By removing layers of bureaucracy surrounding our
healthcare system, Slingshot is achieving its mission of creating better access, more affordability and greater transparency in
healthcare. Through Slingshot’s proprietary platform, consumers enter the services they want, their location, availability
and the price they are willing to pay. Slingshot then matches them to a local provider who can deliver the service. Healthcare
consumers receive high-quality, affordable services and providers earn more overall.
On
October 22, 2019, EWLL’s PHZIO Canada (“PHZIO Canada”) signed a one-year Pilot Program Agreement with C&C
Insurance Consultants d/b/a/ StudentVIP.ca (“StudentVIP.ca”) (https://studentvip.ca/about-us/), Through this agreement,
StudentVIP.ca seeks to market PHZIO.com services to its student health insurance clients. StudentVIP.ca is one of Canada’s
largest student health insurance provider servicing over 100,000 college students. The Parties anticipate commencing these new
direct to consumer sales and marketing efforts during the first quarter of 2020.
Our
Principal Products and Services
The
principal features of our new digital telehealth physical therapy delivery system are as follows:
|
●
|
SaaS
technology platform solution for providers bundling rehabilitation services and employer wellness programs: PTs can 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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We
have commenced treating patients on various commercial contracts and started to generate revenues during the three months ended
December 31, 2019. We continue to train physical therapists on how to use our Platform, with many of these therapists treating
various patients on our system on a complimentary basis. To date, our dtPT Platform has delivered over 4,000 PT assessments and
treatments.
During
the 2nd half of 2019, we intensified our focus on PT assessments and treatments covered under the Workers’ Compensation
Insurance program which is a form of insurance providing wage replacement and medical benefits to employees injured in the course
of employment. Changes in regulations related Workers’ Compensation Insurance have provided us with an opportunity to offer
our MSK 360 Program as described below. Under the new regulation patients can choose to be treated in-clinic or through dtPT.
Until recently, patients nearly all choose in-clinic treatment. In response to this change we developed our MSK360 Program.
We
are in the final stage of developing a fourth program related to Rheumatoid Arthritis Exercises (“RA 360 Program”).
We expect to make the RA 360 Program available during the first quarter of 2020.
To
date, we have existing provider agreements with approximately 16 corporations based on which their employees can utilize our Platform.
Additionally, we are actively pursuing as clients for our services numerus large corporate self-insured companies, TPA’s
and insurance companies to sign provider agreements with us. We have historically had to devote up to one year in sales and marketing
and sales activities and efforts to sign new provider agreements and to date we have executed and existing 16 provider agreements
with the following companies that we expect to generate revenues during the first quarter of 2020 as follows:
Pepsi,
Corvel, Imperial, Rogers, Manulife, CanadaLife, Navy & Stage Benefits, Health and Dental Plan, Slingshot Health, BBD Benefits
By Design, Morneau Shapell, Green Shield Canada, Bruce Power.
Our
dtPT Platform under the domain name PHZIO.com currently offers three treatment programs (i) PHIZO Program; (ii) MSK 360 Program
and (iii) Pre-HabPT Program.
The
PHZIO Program:
Our
PHZIO treatment enables patients to engage with live or on-demand video based dtPT assessments and 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 our 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. This innovative assessment and treatment program enable any PT practice to be
able to treat more patients while utilizing the same resources.
A
Monitored In-office & Telemedicine Exercise Program : Our initial 6-month PHZIO 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.
The IEPT will also evaluate the progress of the patient’s participation in our PHZIO program.
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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 our PHZIO program.
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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 website phzio.com 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.
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Exercising
Begins: The day after the patient receives the equipment, the patient will log on to our website least 3 times per week,
to watch and follow the prescribed 40-minute on-line exercise program. Our 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.
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Driving
Patients to work out between 6:00am-9:30am 5 days per week: Our Platform has a calendar function so that patients can
schedule their exercise session. 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.
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Trackable
Physical Therapy. The exercise prescription and instruction will be delivered with a series of on-line videos easily
accessed by each patient via 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. 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 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 PHZIO Program video 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
Program videos can be viewed on the Access Devices.
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 us where the patient can do these exercises and stretching on their own at
least 3 days per week for at least 40 minutes. To view the videos, the patient would log onto the Platform 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 videoconferencing 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 commit to 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 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 Program exercise video 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 a PT licensees’
revenue stream and internal projections. The cost of the exercise kits may also be billed to the patients account.
MSK
360 Program
The
musculoskeletal (MSK) system, which consists of our bones, muscles and joints, experience strain as we move. MSK related issues
are a leading cause of absenteeism in the workplace and in many cases can lead to short- or long-term disability. These costs
are a significant factor in any workplace and have cascading effects on employee productivity. We believe that to accelerate physical
health, it is critical to prevent and address MSK timely to reduce future health costs.
Patients
can receive virtual care through the MSK 360 Program with the guidance of a registered PT via our Platform through their Access
Devices. As patients will not need to travel to their health appointments during the workday, telerehabilitation is a timesaver,
and therefore a cost saver.
The
employee will first be evaluated to determine the priority of patients’ treatments based on the severity of their condition
if they are suitable for our MSK 360 Program. If a patient has experienced a major injury (e.g. fracture), he/she will be instructed
to receive in-person PT care.
Any
EPS and/or LW insureds may, after an in-home or in-office PT assessment, enroll in a 6-month comprehensive treatment program.
The main treatment objective of our MSK360 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.
PreHabPT
Program
Any
individuals covered by EPS and/or LW who are seeking non-emergency orthopedic surgery shall first receive an online consultation,
in-home or in-office PT therapy evaluation and will be prescribed a four to eight-week pre-habilitation physical therapy (“PreHabPT”)
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. A PreHabPT Program is an eight-week physician to patient pre-surgical (Prehab) digital therapeutic exercise
treatment for patients that anticipate having total join replacement (knee, hip and or shoulder) or back surgeries.
PurePT
PurePT
is a patient and independent PT Program 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.
Our
Target Market
The
healthcare industry is constantly changing, with these changes creating new opportunities as well as new risks. The changes in
the healthcare industry have also a profound impact on the physical therapy market. While rapid consolidation in the PT market
continues to occur, the overall outpatient physical therapy market remains highly fragmented. We believe that the growth in the
physical therapy market is primarily driven by the aging U.S. population, as seniors are more likely to require physical therapy
services due to increased injuries, illnesses, and chronic conditions. Based on demographic trends, the number of Americans aged
65 years and older is projected to increase significantly over the next decades. This increased patient base, as well as the shift
in the healthcare industry towards care coordination and managing patient ailments prior the commencement of more acute symptoms,
has dramatically increased the need and opportunities for our dtPT Platform.
We
have commenced to offer our treatment programs within California, New Jersey, Georgia, Tennessee, Arizona and Canada, with plans
to expand nationally over the next twelve months. With our dtPT Platform will target the “At-Home” Physical Therapy
treatment market, a market were PT practitioners treat patients in their home instead of a clinic. The At-Home market when combined
with our dtPT Platform offers patients and practitioners a means to receive and deliver PT services without having to visit a
clinic and/or PT office during normal business hours. Patients can receive physical therapy services at almost any hour of the
day. A model that is not currently employed within traditional clinical and PT office settings.
Our
Marketing Strategy
We
focus our marketing efforts primarily on physical therapy clinic, physicians, occupational medicine physicians and general practitioners.
In marketing primarily to the physical therapist and clinic physician community, we emphasize our commitment to quality patient
care and regular communication with physical therapy clinic and physicians regarding patient progress. We assist physical therapy
clinic and clinic directors in developing and implementing marketing plans and assist in establishing relationships with health
maintenance organizations, preferred provider organizations, industry, case managers and insurance companies.
We
pivoted and intensified our focus on generating revenues from PT assessments and treatments covered under the Workers’ Compensation
Insurance program where changes in regulations related Workers’ Compensation Insurance have provided us with an opportunity
to offer our MSK 360 Program as described above. Under the new regulation patients can choose to be treated in-clinic or through
dtPT. Until recently, patients nearly all choose in-clinic treatment. In response to this change we developed our MSK360 Program.
Competition
The
healthcare industry, including the physical therapy business, is highly competitive. The physical therapy business is highly fragmented
with no company having a significant market share nationally. We believe that we are first dtPT Company to offer real-time monitored
physical therapy assessments and treatments to large-scale employers.
The
global Telehealth Market is likely to expand considerably with impetus from the ability of telehealth to serve rural populations.
According to a report published on August 1, 2019 by Fortune Business Insights, titled “Telehealth Market: Global Market
Analysis, Insights, and Forecast, 2019-2026,” the market was valued at US$ 49.8 Billion in 2018. Based on this report, the
telehealth market will reach US$ 266.8 Billion by 2026.
Competitive
factors affecting our business include quality of care, cost, treatment outcomes, convenience of treatment programs offered, and
relationships with, and ability to meet the needs of, referral and payor sources. We compete, directly or indirectly, with many
types of healthcare providers including the physical therapy departments of hospitals, private therapy clinics, physician-owned
therapy clinics, and chiropractors. We may face more intense competition if consolidation of the therapy industry continues. We
believe that our new approach to physical therapy will lower patient treatment costs, expand patient treatment access and improve
patient compliance. Our dtPT Platform allows patients to avoid the time-consuming clinical experience to an immediate in-home
PT experience. We believe that approximately 80% of all PT assessments and treatments can be performed using our Platform accessible
via the Access Devices in the privacy of once home.
We
believe that our business model based on digital telehealth physical therapy resulting in potential strategic competitive advantage
We also believe that our competitive position is enhanced by our strategy by making physical therapy more easily accessible to
patients. We offer convenient hours for the PT assessments and treatments. Our dtPT Platform allows patients to avoid the time-consuming
clinical experience to an immediate in-home PT experience. We believe that approximately 80% of all PT assessments and treatments
can be performed using our Platform accessible via the Access Devices in the privacy of once home. We have identified, as direct
competitors, a number of privately-held telemedicine and exercise platform companies as mentioned below:
Physera:
Physera provides direct access to world-class physical therapists with personalized exercises programs for convenient and low-cost
treatment of musculoskeletal pain. The Company has raised $10.8 million. Estimated revenues are less than $1 million in 2019.
Post money valuation is currently $50 million.
Reflexion
Health: Reflexion Health, Inc. develops and publishes a prescription software for medical professionals and their patients.
It offers a rehab measurement tool to track patient adherence for the prescribed rehab plan. The company was incorporated in 2012
and is based in San Diego, California. The Company has raised $29.8 million. Estimated revenues are just over $1.3 million in
2019. Post money valuation is currently $100 million.
Hinge
Health: Hinge Health focuses on musculoskeletal health. Hinge Health’s back and joint pain care pathways combine wearable
sensor-guided exercise therapy with behavioral change through 1-on-1 health coaching and education. The Company has raised $36.1
million. Estimated revenues are just over $1.6 million in 2019. Post money valuation is currently $500 million.
Peerwell:
PeerWell’s PreHab and ReHab app delivers customized daily lessons to those with scheduled surgery. The Company has raised
$9.1 million. Estimated revenues are under $2.5 million in 2019. Post money valuation is currently $50 million.
Force
Therapeutics: Force Therapeutics was founded in 2010 to transform the delivery of injury rehabilitation through web and mobile
applications. In addition to its smart platform for mobile and web content delivery, FORCE Therapeutics produces high definition,
evidenced based exercise videos for its applications. The Company has raised $25.7 million. Estimated revenues are under $1.6
million in 2019. Post money valuation is currently $100 million.
Respondwell:
Respondwell offers a tele-rehabilitation platform that enables healthcare service providers to connect, monitor, and collect data
about their patients. It provides its services for total joint replacement patients. Respondwell enables patients to access videos
of physical therapies that are conducted by virtual instructors. The platform offers in-product rewards to increase patient engagement.
It offers two online programs: Therapy@Home and Fitness@home. Estimated revenues are $5 million in 2019. The company is owned
by Zimmer Biomet NYSE: ZBH.
We
believe that none of the above direct competitors have real time patient monitoring, confirming patient adherence and compliance.
We also believe that none of these companies offers a MSK Program, nor the depth of video exercise content and or abilities to
monitor one-to-many-patient treatments as offered by our PHZIO Program.
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.
Intellectual
Property and Licensing
With
adequate funding, we anticipate the patent protection and trademark protection associated with our technology platform and unique
physical therapy treatments. 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.
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 2019 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.
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
At
the year ended December 31, 2019, we had 2 full-time employees and various consultants. We utilize the services of consultants
for safety testing, regulatory and legal compliance and other services.
Legal
Proceedings
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.
On
June 20, 2018, a settlement agreement was signed between the Company and holder of the note payable with the following terms for
the cancellation of the note payable, accrued interest and all warrants granted relating to the various notes:
1.
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The
Company will issue 54,189 shares of commons stock that is immediately tradeable under Securities and Exchange Commission
Rule 144, but subject to a daily trading limit of 25,000 shares per day;
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2.
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The
Company will issue 25,811 shares of common stock that shall be subject to a 180-day holding period and are also subject
to a daily trading limit of 25,000 shares per day;
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3.
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The
holder of the note payable shall bear all fees and expenses, including attorneys’ fees, associated with the transfer
and trading of the Company’s shares;
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4.
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Beyond
issuing the shares noted above, the Company shall not take any additional action that would cause the note holder to incur
tax consequence from the transfer or would affect the note holder’s tax consequences in any way.
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The
Company issued the 80,000 shares of common stock on June 20, 2018. At December 31, 2018, the Company had no indebtedness
to this holder of the note payable of principal or accrued interest or exercisable warrants relating to the note.