ITEM
1. FINANCIAL STATEMENTS
eWELLNESS
HEALTHCARE CORPORATION
CONDENSED
BALANCE SHEETS
(unaudited)
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
362,635
|
|
|
$
|
383,335
|
|
Prepaid
expenses
|
|
|
456,499
|
|
|
|
95,508
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
819,134
|
|
|
|
478,843
|
|
|
|
|
|
|
|
|
|
|
Property & equipment,
net
|
|
|
13,726
|
|
|
|
14,092
|
|
Intangible
assets, net
|
|
|
10,500
|
|
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
843,360
|
|
|
$
|
503,935
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses
|
|
$
|
267,687
|
|
|
$
|
236,741
|
|
Accounts payable
- related party
|
|
|
661,462
|
|
|
|
684,173
|
|
Accrued expenses
- related party
|
|
|
196,000
|
|
|
|
214,076
|
|
Accrued compensation
|
|
|
1,060,208
|
|
|
|
1,113,470
|
|
Contingent liability
|
|
|
90,000
|
|
|
|
90,000
|
|
Convertible debt,
net of discount
|
|
|
578,033
|
|
|
|
562,362
|
|
Derivative
liability
|
|
|
1,712,709
|
|
|
|
1,584,102
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4,566,099
|
|
|
|
4,484,924
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Convertible
debt, net of discount
|
|
|
595
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
long term liabilities
|
|
|
595
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
4,566,694
|
|
|
|
4,484,924
|
|
|
|
|
|
|
|
|
|
|
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, 217,339,636 and 206,406,951 issued and outstanding, respectively
|
|
|
217,341
|
|
|
|
206,407
|
|
Additional paid
in capital
|
|
|
18,799,030
|
|
|
|
17,213,838
|
|
Accumulated
deficit
|
|
|
(22,739,705
|
)
|
|
|
(21,401,234
|
)
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Deficit
|
|
|
(3,723,334
|
)
|
|
|
(3,980,989
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
843,360
|
|
|
$
|
503,935
|
|
The
accompanying notes are an integral part of these condensed financial statements
eWELLNESS
HEALTHCARE CORPORATION
CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
|
|
For
the Three Months Ended
|
|
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Executive
compensation
|
|
$
|
102,000
|
|
|
$
|
102,000
|
|
General and administrative
|
|
|
250,494
|
|
|
|
196,690
|
|
Professional
fees
|
|
|
714,161
|
|
|
|
512,525
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
1,066,655
|
|
|
|
811,215
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(1,066,655
|
)
|
|
|
(811,215
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
11
|
|
|
|
-
|
|
Gain on derivative
liability
|
|
|
679,398
|
|
|
|
509,752
|
|
Foreign exchange
rate
|
|
|
-
|
|
|
|
7,399
|
|
Interest
expense
|
|
|
(951,225
|
)
|
|
|
(179,909
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss before
Income Taxes
|
|
|
(1,338,471
|
)
|
|
|
(473,973
|
)
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(1,338,471
|
)
|
|
$
|
(473,973
|
)
|
|
|
|
|
|
|
|
|
|
Basic (loss)
per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
168,705,751
|
|
|
|
145,882,450
|
|
The
accompanying notes are an integral part of these condensed financial statements
eWELLNESS
HEALTHCARE CORPORATION
RECONCILIATION
OF STOCKHOLDERS’ DEFICIT
THREE
MONTHS ENDED MARCH 31, 2019 AND 2018
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Preferred
Shares
|
|
|
Common
Shares
|
|
|
Additional
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid in Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 1, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
206,406,951
|
|
|
$
|
206,407
|
|
|
$
|
17,213,838
|
|
|
$
|
(21,401,234
|
)
|
|
$
|
(3,980,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
5,097,255
|
|
|
|
5,098
|
|
|
|
342,389
|
|
|
|
-
|
|
|
|
347,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for financing costs
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
114,000
|
|
|
|
-
|
|
|
|
115,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
3,510,870
|
|
|
|
3,511
|
|
|
|
402,239
|
|
|
|
-
|
|
|
|
405,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
1,324,560
|
|
|
|
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
|
|
|
-
|
|
|
$
|
-
|
|
|
|
217,339,636
|
|
|
$
|
217,341
|
|
|
$
|
18,799,030
|
|
|
$
|
(22,739,705
|
)
|
|
$
|
(3,723,334
|
)
|
|
|
Preferred
Shares
|
|
|
Common
Shares
|
|
|
Additional
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid in Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 1, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
142,352,406
|
|
|
$
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
3,945,407
|
|
|
|
3,945
|
|
|
|
209,347
|
|
|
|
-
|
|
|
|
213,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for prepaid services
|
|
|
-
|
|
|
|
-
|
|
|
|
800,000
|
|
|
|
800
|
|
|
|
103,200
|
|
|
|
-
|
|
|
|
104,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,525
|
|
|
|
|
|
|
|
219,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
1,350,000
|
|
|
|
1,350
|
|
|
|
137,250
|
|
|
|
-
|
|
|
|
138,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(473,973
|
)
|
|
|
(473,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
148,447,813
|
|
|
$
|
148,447
|
|
|
$
|
14,011,547
|
|
|
$
|
(17,423,745
|
)
|
|
$
|
(3,263,752
|
)
|
The
accompanying notes are an integral part of these condensed financial statements
eWELLNESS
HEALTHCARE CORPORATION
STATEMENTS
OF CASH FLOWS
(unaudited)
|
|
For
the Three Months Ended
|
|
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,338,471
|
)
|
|
$
|
(473,973
|
)
|
Adjustments to reconcile net loss to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
1,407
|
|
|
|
1,459
|
|
Contributed services
|
|
|
54,000
|
|
|
|
55,500
|
|
Shares issued for
consulting services
|
|
|
181,549
|
|
|
|
138,600
|
|
Shares issued for
financing costs
|
|
|
115,000
|
|
|
|
-
|
|
Options expense
|
|
|
-
|
|
|
|
108,594
|
|
Amortization of
debt discount and prepaids
|
|
|
787,515
|
|
|
|
282,025
|
|
Foreign currency
exchange
|
|
|
-
|
|
|
|
7,399
|
|
Gain
on derivative liability
|
|
|
(679,398
|
)
|
|
|
(509,752
|
)
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Prepaid expense
|
|
|
(31,057
|
)
|
|
|
(21,312
|
)
|
Accounts payable
and accrued expenses
|
|
|
49,145
|
|
|
|
36,242
|
|
Accounts payable
- related party
|
|
|
(22,711
|
)
|
|
|
91,180
|
|
Accrued expenses
- related party
|
|
|
(18,076
|
)
|
|
|
4,560
|
|
Accrued
compensation
|
|
|
(53,262
|
)
|
|
|
35,636
|
|
|
|
|
|
|
|
|
|
|
Net cash used
in operating activities
|
|
|
(954,359
|
)
|
|
|
(243,842
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of
equipment
|
|
|
(541
|
)
|
|
|
(4,937
|
)
|
Net cash used
in investing activities
|
|
|
(541
|
)
|
|
|
(4,937
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of convertible debt
|
|
|
1,800,600
|
|
|
|
414,550
|
|
Payments on debt
|
|
|
(639,550
|
)
|
|
|
-
|
|
Debt Issuance Costs
|
|
|
(44,250
|
)
|
|
|
-
|
|
Original
issue discount
|
|
|
(182,600
|
)
|
|
|
(47,555
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided
by financing activities
|
|
|
934,200
|
|
|
|
366,995
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash
|
|
|
(20,700
|
)
|
|
|
118,216
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
383,335
|
|
|
|
6,882
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
362,635
|
|
|
$
|
125,098
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
1,856
|
|
|
$
|
-
|
|
Interest Expense
|
|
$
|
275,814
|
|
|
$
|
-
|
|
Non cash items:
|
|
|
|
|
|
|
|
|
Derivative liability
and debt discount issued with new notes
|
|
$
|
1,968,845
|
|
|
$
|
219,526
|
|
Shares issued for
debt conversion
|
|
$
|
1,456,782
|
|
|
$
|
213,292
|
|
Shares issued for
prepaids
|
|
$
|
239,300
|
|
|
$
|
104,000
|
|
The
accompanying notes are an integral part of these condensed financial statements
eWellness
Healthcare Corporation
Notes
to Condensed Financial Statements
March
31, 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
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 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 three months ended March 31, 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 three months ended March 31, 2019, the Company had no revenues. The Company has an accumulated loss of $22,739,705. 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.
eWellness
Healthcare Corporation
Notes
to Condensed Financial Statements
March
31, 2019
(unaudited)
Fair
Value of Financial Instruments
As
of March 31, 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
|
|
$
|
1,712,709
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,712,709
|
|
Total Liabilities
measured at fair value
|
|
$
|
1,712,709
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,712,709
|
|
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 PHIZIO 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 PHIZIO
platform. The agreement establishes that the Company is indebted to the PC for $225,000 for past programming services. For this
amount, the Company issued 25,280,899 common shares at a value of $0.0089 per share on April 1, 2017. The PC will also have the
right to appoint 40% of the directors. At the end of March 31, 2019, the Company had a payable of $652,832 due to this company.
Throughout
the period ended March 31, 2019, the officers and directors of the Company incurred business expenses on behalf of the Company.
The amounts payable to the officers as of March 31, 2019 and December 31, 2018 were $0 and $3,076, respectively. There were no
expenses due to the board members, but the Company has accrued directors’ fees of $196,000 and $211,000 at March 31, 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 $1,060,208 and $1,113,470 at March 31, 2019 and December 31, 2018 respectively.
Note
4. Convertible Notes Payable
Quarter
Ended March 31, 2019
On
January 29, 2019 and February 22, 2019, the Company received the third and fourth tranches of funds relating to a note executed
on July 13, 2018. The two tranches were $60,000 and $30,000 respectively.
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 and transactions costs
of $10,000. 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. During
the three months ended March 31, 2019, the Company accrued interest of $5,536.
eWellness
Healthcare Corporation
Notes
to Condensed Financial Statements
March
31, 2019
(unaudited)
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 and transaction costs
of $10,000. 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. During
the three months ended March 31, 2019, the Company accrued interest of $5,536.
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 three
months ended March 31, 2019, the Company accrued interest of $2,998.
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 three
months ended March 31, 2019, the Company accrued interest of $1,725.
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. The first
tranche was received on March 21, 2019.
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 $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 three months ended March 31, 2019, the Company accrued interest of $202.
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. During the three
months ended March 31, 2019, the Company accrued interest of $10.
eWellness
Healthcare Corporation
Notes
to Condensed Financial Statements
March
31, 2019
(unaudited)
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
3,260,870 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 will issue 1,000,000 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 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. The first tranche was received on March 25, 2019. During the three months ended March 31, 2019,
the Company accrued interest of $2,466.
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 2,412,827 shares of common stock at a price of $.04745 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 1,630,799 shares of common stock at prices ranging from $.0583 to $.0603.
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 1,309,799 shares of common stock at prices ranging from $.0487 to $.0532.
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 2,402,436 shares of common
stock at a price of $.036.
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 1,877,796 shares of common stock at prices ranging from $.0393 to $.0437.
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 1,626,268 shares of common stock at prices ranging from $.0628 to $.1032. 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 658,722 shares of common stock at prices ranging from $.081 and $.085.
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) $0.21 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 100,000 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) $0.21 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 50,000 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) $0.06 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) $.20 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) $.20 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 180
th
calendar 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
Common
Stock
Quarter
Ended March 31, 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 250,000 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 3,260,870 shares of common stock to an institutional investor as part of a promissory note.
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 past. The Company also issued 1,000,000 shares of common stock
to the institutional investor as a commitment fee. The value of these shares is $115,000.
During
the three months ended March 31, 2019, the Company issued 1,324,560 shares of common stock to consultants for services rendered
in accordance to consulting agreements. The value of these shares is $181,549.
During
the three months ended March 31, 2019, the Company issued 5,097,255 shares of common stock for debt conversion totaling
$347,487 which includes $329,290 principal, $17,197 accrued interest and $1,000 due diligence fee.
Quarter
Ended March 31, 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 800,000 shares of common stock as compensation with a value of $104,000. This value is being amortized over the
life of the contract.
During
the three months ended March 31, 2018, the Company issued a total of 3,945,407 shares of common stock per debt conversion of convertible
notes dated April, July and September 2017. The total of the debt conversion was $213,292 which includes $5,010 of accrued interest.
During
the three months ended March 31, 2018, the Company issued 1,350,000 shares of common stock for marketing and consulting services
valued at $138,600.
In
January 2018, the Board of Directors agreed to form a new eWellness Healthcare Corporation 2018 Equity Incentive Plan (“Plan”).
The Plan shall be for 20,000,000 shares of common stock that will be placed in a 10b5-1 Sales Plan that will be registered under
an S-8 Registration Statement. Under the sales plan, each recipient will open an account with Garden State Securities (“GSS”)
for management of all sales of shares issued under the Plan. Quarterly limitations are placed on the number of shares that can
be sold. The Company initially allocated 17,400,000 shares to officers, directors and consultants. As of March 31, 2018,
no shares were issued.
Stock
Options
The
following is a summary of the status of all Company’s stock options as of March 31, 2019 and changes during the three months
ended on that date:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Number
of Stock
|
|
|
Average
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Life
(yrs)
|
|
|
Value
|
|
Outstanding at December 31, 2018
|
|
|
2,850,000
|
|
|
$
|
0.80
|
|
|
|
2.2
|
|
|
$
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2019
|
|
|
2,850,000
|
|
|
|
0.80
|
|
|
|
1.9
|
|
|
$
|
-
|
|
Options exercisable at March 31,
2019
|
|
|
2,850,000
|
|
|
$
|
0.80
|
|
|
|
1.9
|
|
|
$
|
-
|
|
The
Company recognized stock option expense of $0 and $108,494 for the three months ended March 31, 2019 and 2018, respectively.
eWellness
Healthcare Corporation
Notes
to Condensed Financial Statements
March
31, 2019
(unaudited)
Warrants
In
March 2018, the Board of Directors, at the request and with the approval of the investors, determined that it was in the best
interests of the Company and the Investors, based upon market price and relatively limited liquidity of the shares of common stock
that the Company revised the expiration date and exercise price for 417,429 unexercised warrants granted on April 9, 2015. The
original expiration date of April 9, 2018 is extended to April 9, 2019. The original exercise price of $.35 is reduced to $.05.
The
following is a summary of the status of the Company’s warrants as of March 31, 2019 and changes during the three months
ended on that date:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Average
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Life
(yrs.)
|
|
|
Value
|
|
Outstanding at December 31, 2018
|
|
|
3,778,179
|
|
|
$
|
0.48
|
|
|
|
1.4
|
|
|
$
|
0.037
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at March 31, 2019
|
|
|
3,778,179
|
|
|
$
|
0.48
|
|
|
|
0.8
|
|
|
$
|
0.037
|
|
Warrants exercisable at March 31,
2019
|
|
|
3,778,179
|
|
|
$
|
0.48
|
|
|
|
0.8
|
|
|
$
|
0.037
|
|
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”).
eWellness
Healthcare Corporation
Notes
to Condensed Financial Statements
March
31, 2019
(unaudited)
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.
eWellness
Healthcare Corporation
Notes
to Condensed Financial Statements
March
31, 2019
(unaudited)
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 three months ended March 31,
2019 and 2018, the Company amortized the debt discount of $711,700 and $155,033, respectively.
During
the three months ended March 31, 2019, the Company had the following activity in the derivative liability account:
|
|
Notes
|
|
|
Warrants
|
|
|
Total
|
|
Derivative
liability at December 31, 2018
|
|
$
|
1,402,722
|
|
|
$
|
181,381
|
|
|
$
|
1,584,103
|
|
Addition
of new conversion option derivatives
|
|
|
1,668,842
|
|
|
|
-
|
|
|
|
1,668,842
|
|
Conversion
of note derivatives
|
|
|
(549,002
|
)
|
|
|
-
|
|
|
|
(549,002
|
)
|
Change
in fair value
|
|
|
(938,628
|
)
|
|
|
(52,606
|
)
|
|
|
(991,234
|
)
|
Derivative
liability at December 31, 2018
|
|
$
|
1,583,934
|
|
|
$
|
128,775
|
|
|
$
|
1,712,709
|
|
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:
eWellness
Healthcare Corporation
Notes
to Condensed Financial Statements
March
31, 2019
(unaudited)
Stock
price at valuation date
|
|
$
|
.114-.24
|
|
Exercise
price of warrants
|
|
$
|
.25
|
|
Conversion
rate of convertible debt
|
|
$
|
.445
– 0.126
|
|
Risk
free interest rate
|
|
|
2.40%-2.60
|
%
|
Stock
volatility factor
|
|
|
138.1%-240.3
|
%
|
Years
to Maturity
|
|
|
.24
– 3.0
|
|
Expected
dividend yield
|
|
|
None
|
|
Note
8. Subsequent Events
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.
From
April 1, 2019 until the filling of this report, the Company has issued 825,437 shares of common stock per consulting agreement
valued at $87,672.
On
April 2, 2019, the Company issued 800,000 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 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.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING
STATEMENTS
This
Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in Item 2 of Part I of this report include forward-looking statements. These forward-looking statements are
based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause
actual results to differ materially from expectations. In some cases, you can identify forward-looking statements by terminology
such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” “proposed,” “intended,” or “continue”
or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully,
because they discuss our expectations about our future operating results or our future financial condition or state other “forward-looking”
information. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements,
including but not limited to: variability of our future revenues and financial performance; risks associated with product development
and technological changes; the acceptance of our products in the marketplace by potential future customers; general economic conditions.
You should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business,
results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities
could decline. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of
the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.
The
following discussion and analysis of financial condition and results of operations relates to the operations and financial condition
reported in the financial statements of eWellness Healthcare Corporation for the three months ended March 31, 2019 and 2018 and
should be read in conjunction with such financial statements and related notes included in this report and the Company’s
Annual Report on Form 10-K for the year ended December 31, 2018.
THE
COMPANY
Overview
eWellness
is the first physical therapy telehealth company to offer insurance reimbursable real-time distance monitored treatments. eWellness
plans to generate revenue from Third Party Healthcare Administrators (“TPA”) employees, PTs and corporate wellness
licensees on a contractually recurring PHZIO session fee basis. Our PHZIO platform is anticipated to transform the access, cost
and quality dynamics of physical therapy (“PT”) delivery for the market participants. eWellness further believes any
patient, employer, health plan or healthcare professional interested in a better approach to PT is a potential PHZIO platform
user.
Our
PHZIO platform has been developed to significantly support us in becoming the leader in the new industry of digital telehealth
physical therapy (“dPT”). Our focus is to highlight that many of all future PT treatments can be accomplished with
a smart phone. This new digital adoption will lower patient treatment costs, expand patient treatment access and improve patient
compliance. Our PHZIO platform allows patients and PT’s to cut the cord from the old-school, wait in line, brick and mortar
clinical experience to an immediate response digital, in-home PT experience. 80% of all PT assessments and treatments can now
be done on a patient’s smart phone in the privacy of their own home. Digital PT is clearly the next upgrade the industry
needs to make.
Our
PHZIO platform completely disrupts the current in-clinic business model of the $30 billion PT industry and the $8 billion corporate
wellness industries. Innovators in other industries have solved access, cost and quality inefficiencies through the implementation
of technology platforms and business models that deliver products and services on-demand and create new economies by connecting
and empowering both consumers and businesses. We have taken the same approach to solving the pervasive access, cost and quality
challenges facing the current access to PT clinics. eWellness’ underlying technology platform is complex, deeply integrated
and purpose-built over the past four years for the evolving PT marketplace. eWellness’ PHZIO platform is highly scalable
and can support substantial growth of third-party licensees. eWellness’ PHZIO platform provides for broad interconnectivity
between PT practitioners and their patients, uniquely positioning the Company as a focal point in the rapidly evolving PT industry
to introduce innovative, technology- based solutions, such as remote patient monitoring, post-discharge treatment plan adherence
and in-home care.
PHZIO
re-defines the way PT can be delivered. PHZIO is the first real-time remote monitored one-to-many PT platform for home use. Due
to the real-time patient monitoring feature, the PHZIO platform is insurance reimbursable by payers such as Anthem Blue Cross
and Blue Shield.
Los
Angeles Sales & Marketing Office:
The Company opened its first sales and marketing office in Playa Vista, California in
May 2017 to accelerate the adoption of PHZIO and the other new digital telehealth tools to patients, physicians and PT’s
in California. The company has also hired sales and marketing professional consultants to manage the new silos of business development.
eWellness
will initially rollout these new telehealth solutions within California, New Jersey, Georgia, Tennessee, Arizona and Canada, with
plans to expand nationally over the next twelve months. With these new telehealth tools, eWellness will engage with the “At-Home”
Physical Therapy treatment market. This market involves physical therapy practitioners treating patients in their home instead
of a clinic. The “At-Home” market model when combined with PHZIO offers patients and practitioners a means to receive
and deliver PT services without having to leave work 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 settings.
The
Company has created a strong path to initial revenue generation and substantial sales growth through executing on our Workers
Compensation Sales Funnel. Our Workman’s Compensation Sales Funnel currently includes 101 companies. Starting in the Summer
of 2018 we pivoted our sales process to focus on the workman’s compensation PT industry. We are pitching to 12 separate
industry silos of potential business within the 101 workman’s compensation sales funnel prospects. Multiple agreements are
anticipated to be executed from our workman’s compensation sales funnel through 2019 and beyond.
Plan
of Operations
Based
upon a business marketing pivot during the summer of 2018, our current business model is to provision our PHZIO platform to any
customer of workers compensation third party administrators (TPA’s), physical therapy clinic in the U.S. and or have large-scale
employers use our digital PHZIO platform as a workers’ compensation physical therapy program. We have created a strong path
to lowering the spending on workman’s compensation claims through the utilization of our PHZIO digital PT treatment platform.
PreHabPT.
Any individuals covered by EPS and/or LW, who are seeking non-emergency orthopedic surgery shall first receive a concierge
online consultation, in-home or in-office PT therapy evaluation and will be prescribed a four to eight-week prehabpt.com exercise
program prior to any surgery. Another in-home or in-office PT evaluation will be made following surgery and a treatment plan will
be initiated. PreHabPT is up to an eight-week physician to patient pre-surgical (Prehab) digital therapeutic exercise treatment
system for patients that anticipate having total join replacement (knee, hip and or shoulder) or back surgeries.
PurePT.
PurePT is a patient and independent PT digital treatment platform for connecting new patients to PT’s that are seeking
to be treated with our PHZIO treatment system. Patient program assessments can be made in the privacy of a patient’s home
or office. PurePT connects new patients to PT’s, particularly in states that have direct access rules where patient’s
insurance will reimburse for treatment without requiring a physician’s prescription. PurePT puts the patient first.
PHZIO
Comprehensive Wellness Program
Any EPS and/or LW insureds may, after an in-home or in-office PT assessment, enroll in a 6-month
comprehensive wellness program. The top line wellness goals of our PHZIO wellness exercise program is to graduate at least 60%
of inducted patients through our 6-month program. Patients should expect to experience an average of a 20% reduction in BMI, a
two-inch reduction in waist size, weight loss of at least 10 pounds, significant overall improvement in balance, coordination,
flexibility, strength and lumbopelvic stability. Patients also should score better on Functional Outcomes Scales (Oswestry and
LEFS) which indicates improved functional activity levels due to reduced low back, knee and hip pain.
The
Company’s PHZIO home PT exercise platform has been designed to disrupt the $30 billion PT and the $8 billion corporate wellness
industries. PHZIO re-defines the way PT can be delivered. PHZIO is the first real-time remote monitored one-to-many PT platform
for home use. Due to the real-time patient monitoring feature, the PHZIO platform is insurance reimbursable by payers such as
Anthem Blue Cross and Blue Shield.
The
PHZIO Solution: A New PT Delivery System
|
●
|
SaaS
technology platform solution for providers bundling rehabilitation services and employer wellness programs: PTs can evaluate
and screen patients and calculate joint angles using drawing tool
|
|
|
|
|
●
|
First
real-time remote monitored one-to-many PT treatment platform for home use;
|
|
|
|
|
●
|
Ability
for PTs to observe multiple patients simultaneously in real-time;
|
|
|
|
|
●
|
Solves
what has been a structural problem and limitation in post-acute care practice growth.
|
|
|
|
|
●
|
PT
practices can experience 20% higher adherence and compliance rates versus industry standards; and
|
|
|
|
|
●
|
Tracking
to 30% increase in net income for a PT practice.
|
Our
initial PHZIO platform enables employees or patients to engage with live or on-demand video based physical therapy telemedicine
treatments from their home or office. Following a physician’s exam and prescription for physical therapy to treat back,
knee or hip pain, a patient can be examined by a physical therapist and if found appropriate inducted in the Company’s PHZIO
program that includes a progressive 6-month telemedicine exercise program (including monthly in-clinic checkups). All PHZIO treatments
are monitored by a licensed therapist that sees everything the patient is doing while providing their professional guidance and
feedback in real-time. This ensures treatment compliance by the patient, maintains the safety and integrity of the prescribed
exercises, tracks patient metrics and captures pre-and post-treatment evaluation data. PHZIO unlocks a host of potential for revolutionizing
patient treatment models and directly links back to the established brick and mortar physical therapy clinic. This unique model
enables any physical therapy practice to be able to execute more patient care while utilizing their same resources and creates
more value than was ever before possible.
Our
PHZIO platform, which includes design, testing, exercise intervention, follow-up, and exercise demonstration, has been developed
by accomplished Los Angeles based physical therapist Darwin Fogt. Mr. Fogt has extensive experience and education working with
diverse populations from professional athletes to morbidly obese. He understands the most beneficial exercise prescription to
achieve optimal results and has had enormous success in motivating all patient types to stay consistent in working toward their
goals. Additionally, his methods have proven effective and safe as he demonstrates exercises with attention to proper form to
avoid injury. Mr. Fogt has established himself as a national leader in his field and has successfully implemented progressive
solutions to delivering physical therapy: he has consulted with and been published by numerous national publications including
Runner’s World, Men’s Health, Men’s Journal, and various Physical Therapy specific magazines; his 13 plus years
of experience include rehabilitating the general population, as well as professional athletes, Olympic gold medalists, and celebrities.
He has bridged the gap between physical therapy and fitness by opening Evolution Fitness, which uses licensed physical therapists
to teach high intensity circuit training fitness classes. He also founded one of the first exclusive prenatal and postnatal physical
therapy clinic in the country. Mr. Fogt is a leader in advancing the profession to incorporate research-based methods and focus
on, not only rehabilitation but also wellness, functional fitness, performance, and prevention. He can recognize that the national
healthcare structure (federal and private insurance) is moving toward a model of prevention and that the physical therapy profession
will take a larger role in providing wellness services to patients.
Innovators
in other industries have solved access, cost and quality inefficiencies through the implementation of technology platforms and
business models that deliver products and services on-demand and create new economies by connecting and empowering both consumers
and businesses. We have taken the same approach to solving the pervasive access, cost and quality challenges facing the current
access to physical therapy clinics.
Our
underlying technology platform is complex, deeply integrated and purpose-built over the three years for the evolving physical
therapy marketplace. Our PHZIO platform is highly scalable and can support substantial growth of third-party licensees. Our PHZIO
platform provides for broad interconnectivity between PT practitioners and their patients and, we believe, uniquely positions
us as a focal point in the rapidly evolving PT industry to introduce innovative, technology-based solutions, such as remote patient
monitoring, post-discharge treatment plan adherence and in-home care.
We
plan to generate revenue from third-party PT and corporate wellness licensees on a contractually recurring per PHZIO session fee
basis. Our PHZIO platform is anticipated to transform the access, cost and quality dynamics of physical therapy delivery for all
the market participants. We further believe any patient, employer, health plan or healthcare professional interested in a better
approach to physical therapy is a potential PHZIO platform user.
Before
even launching, we have received a high indication of interest in our service. We think the demand is warranted but recognize,
that in the preliminary stages of our services, we may experience bottlenecks in our ability to meet the demand for the service.
Under this type of environment, it is critical to maintain awareness of the Company’s operational budget goals and how they
are being met in our attempts to address demand. Regardless of our growth pace, it is critical to shareholder value that we are
mindful of our operational spending.
Our
PHZIO platform enables patients to engage with live or on-demand video-based PT telemedicine treatments from their home or office.
Following a physician’s exam and prescription for PT to treat back, knee or hip pain, a patient can be examined by a PT
and, if found appropriate, inducted into the Company’s PHZIO program that includes a progressive 6-month telemedicine exercise
program (including monthly in-clinic check-ups). All PHZIO treatments are monitored by a licensed therapist that sees everything
the patient is doing while providing professional guidance and feedback in real-time. This ensures treatment compliance by the
patient, maintains the safety and integrity of the prescribed exercises, tracks patient metrics and captures pre-and post-treatment
evaluation data. PHZIO unlocks a host of potential for revolutionizing patient treatment models and directly links back to the
established brick and mortar PT clinic. This unique model enables any PT practice to be able to execute more patient care while
utilizing their same resources and creates more value than was ever before possible.
Our
underlying technology platform is complex, deeply integrated and purpose-built for the evolving PT marketplace. Our PHZIO platform
is highly scalable and can support substantial growth of third-party licensees. Our PHZIO platform provides for broad interconnectivity
between PT practitioners and their patients and, we believe, uniquely positions us as a focal point in the rapidly evolving PT
industry to introduce innovative, technology-based solutions, such as remote patient monitoring, post-discharge treatment plan
adherence and in-home care.
Background
on our PHZIO Technology
The
Company’s Chief Technology Officer (“CTO”), Curtis Hollister, oversees the operational aspects of the PHZIO
platform via a team located in Ottawa, Canada. The below noted chart contains information on our PHZIO System.
IP
and Licensing
We
have licensed our telemedicine platform from Bistromatics Inc., a company owned by our CTO, for perpetuity for any telemedicine
application in any market worldwide. The below noted chart highlights what we have built to date.
Results
of Operations of eWellness for the three months ended March 31, 2019 vs. 2018
REVENUES
:
eWellness has reported $0 revenues from operations for the three months ended March 31, 2019 and 2018. We anticipate the beginning
of revenue generation by the third quarter of 2019.
OPERATING
EXPENSES
: Total operating expenses increased to $1,066,655 for the three months ended March 31, 2019 from $811,215 for the
three months March 31, 2018. The increase is a result of increases in the value of stock issued to consultants and for financing
fees and an increase in advertising and marketing offset by a decrease in stock option expenses.
NET
LOSS
: The Company incurred a net loss of $1,338,471 for the three months ended March 31, 2019, compared with a net loss of
$473,973 for the three months ended March 31, 2018, which reflects an increase of $864,498. The increase is from increased operating
expenses (outlined above) of $255,440, increase in interest expense of $771,316 offset by an increase in gain on derivative liability
of $169,646.
Liquidity
and Capital Resources
As
of March 31, 2019, we had negative working capital of $3,746,965 compared to negative working capital of $4,006,081 as
of December 31, 2018. The negative working capital improvement is because of an increase in prepaid expenses. Cash used in operations
was $954,359 and $243,842 for the three months ended March 31, 2019 and 2018, respectively. The increase in cash used in operations
is a result of the increased net loss and changes in operating assets and liabilities. Cash used in investing activities was $541
and $4,937 for the three months ended March 31, 2019 and 2018, respectively. Cash flows provided by financing activities were
$934,200 and 366,995 for the three months ended March 31, 2019 and 2018, respectively. The increase resulted from issuance of
convertible debt of $1,573,750 reduced by $639,550 payment of debt. The cash balance as of March 31, 2019 was $362,635.
We
are seeking financing in the form of equity capital to provide the necessary working capital. Our ability to meet our obligations
and continue to operate as a going concern is highly dependent on our ability to obtain additional financing. We cannot predict
whether this additional financing will be in the form of equity or debt or be in another form. We may not be able to obtain the
necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, we may be unable to implement
our current plans which circumstances would have a material adverse effect on our business, prospects, financial conditions and
results of operations.
Contingencies
The
Company may be subject to lawsuits, administrative proceedings, regulatory reviews or investigations associated with its business
and other matters arising in the normal conduct of its business. The following is a description of an uncertainty that is considered
other than ordinary, routine and incidental to the business.
The
closing of the Initial Exchange Agreement with Private Co. was conditioned upon certain, limited customary representations and
warranties, as well as, among other things, our compliance with Rule 419 (“Rule 419”) of Regulation C under the Securities
Act of 1933, as amended (the “Securities Act”) and the consent of our shareholders as required under Rule 419. Accordingly,
we conducted a “Blank Check” offering subject to Rule 419 (the “Rule 419 Offering”) and filed a Registration
Statement on Form S-1 to register the shares of such offering; the Registration Statement was declared effective on September
14, 2012. We used 10% of the subscription proceeds as permitted under Rule 419 and the amount remaining in the escrow trust as
of the date of the closing of the Share Exchange was $90,000 (the “Trust Account Balance”).
Rule
419 required that the Share Exchange occur on or before March 18, 2014, but due to normal negotiations regarding the transactions
and the parties’ efforts to satisfy all the closing conditions, the Share Exchange did not close on such date. Accordingly,
after numerous discussions with management of both parties, they entered into an Amended and Restated Share Exchange Agreement
(the “Share Exchange Agreement”) to reflect a revised business combination structure, pursuant to which we would:
(i) file a registration statement on Form 8-A (“Form 8A”) to register our common stock pursuant to Section 12(g) of
the Exchange Act, which we did on May 1, 2014 and (ii) seek to convert the participants of the Rule 419 Offering into participants
of a similarly termed private offering (the “Converted Offering”), to be conducted pursuant to Regulation D, as promulgated
under the Securities Act.
Fifty-two
persons participated in the Rule 419 Offering and each of them gave the Company his/her/its consent to use his/her/its escrowed
funds to purchase shares of the Company’s restricted common stock in the Converted Offering (the “Consent”)
rather than have their funds returned. To avoid further administrative work for the investors, we believe that we took reasonable
steps to inform investors of the situation and provided them with an appropriate opportunity to maintain their investment in the
Company, if they so choose, or have their funds physically returned. Management believed the steps it took constituted a constructive
return of the funds and therefore met the requirements of Rule 419.
However,
pursuant to Rule 419(e)(2)(iv), “funds held in the escrow or trust account shall be returned by first class mail or equally
prompt means to the purchaser within five business days [if the related acquisition transaction does not occur by a date that
is 18 months after the effective date of the related registration statement].” As set forth above, rather than physically
return the funds, we sought consent from the investors of the Rule 419 Offering to direct their escrowed funds to the Company
to instead purchase shares in the Converted Offering. The consent document was given to the investors along with a private placement
memorandum describing the Converted Offering and stated that any investor who elected not to participate in the Converted Offering
would get 90% of their funds physically returned. Pursuant to Rule 419(b)(2)(vi), a blank check company is entitled to use 10%
of the proceed/escrowed funds; therefore, if a return of funds is required, only 90% of the proceed/escrowed funds need be returned.
The Company received $100,000 proceeds and used $10,000 as per Rule 419(b)(2)(vi); therefore, only $90,000 was subject to possible
return.
As
disclosed in the prior amendments to the Initial Form 8-K, we have filed the prior amendments in response to comments from the
SEC regarding the Form 8-K and many of those comments pertain to the Company’s potential violation of Rule 419. Although
the Company has continued to provide the SEC with information and analysis as to why it believes it did not violate Rule 419,
based upon latest communications with the persons reviewing the Form 8-K, they do not agree with the assessments the Company presented
to them. Comments and communications indicate that Rule 419 requires a physical return of funds if a 419 offering cannot be completed
because a business combination was not consummated within the required time frame; constructive return is not permitted.
Because
of these communications and past comments, we are disclosing that we did not comply with the requirements of Rule 419, which required
us to physically return the funds previously submitted to escrow pursuant to the Rule 419 Offering. Because of our failure to
comply with Rule 419, the SEC may bring an enforcement action or commence litigation against us for failure to strictly comply
with Rule 419. If any claims or actions were to be brought against us relating to our lack of compliance with Rule 419, we could
be subject to penalties (including criminal penalties), required to pay fines, make damages payments or settlement payments. In
addition, any claims or actions could force us to expend significant financial resources to defend ourselves, could divert the
attention of our management from our core business and could harm our reputation.
Ultimately,
the SEC determined to terminate its review of the Initial Form 8-K and related amendments, rather than provide us with additional
opportunities to address their concerns and therefore, we did not clear their comments. It is not possible now to predict whether
or when the SEC may initiate any proceedings, when this issue may be resolved or what, if any, penalties or other remedies may
be imposed, and whether any such penalties or remedies would have a material adverse effect on our consolidated financial position,
results of operations, or cash flows. Litigation and enforcement actions are inherently unpredictable, the outcome of any potential
lawsuit or action is subject to significant uncertainties and, therefore, determining now the likelihood of a loss, any SEC enforcement
action and/or the measurement of the amount of any loss is complex. Consequently, we are unable to estimate the range of reasonably
possible loss. Our assessment is based on an estimate and assumption that has been deemed reasonable by management, but the assessment
process relies heavily on an estimate and assumption that may prove to be incomplete or inaccurate, and unanticipated events and
circumstances may occur that might cause us to change that estimate and assumption. Considering the uncertainty of this issue
and while Management evaluates the best and most appropriate way to resolve same, management determined to create a reserve on
the Company’s Balance Sheet for the $90,000 that was subject to the Consent.
Capital
Expenditure Plan
During
the three months ended March 31, 2019, we raised $1,800,600, less $236,850 for debt issuance costs, in equity and debt capital
and we may require up to an additional $1.6 million in capital during the next 12 months to fully implement our business plan
and fund our operations. Our plan is to utilize the equity capital that we raise, together with anticipated cash flow from operations,
to fund a very significant investment in sales and marketing, concentration principally on advertising and incentivizing existing
customers for the introduction of new customers, among other strategies. However, there can be no assurance that: (i) we will
continue to be successful in raising equity capital in sufficient amounts and/or at terms and conditions satisfactory to the Company;
or (ii) we will generate sufficient revenues from operations, to fulfill our plan of operations. Our revenues are expected to
come from our PHZIO platform services. As a result, we will continue to incur operating losses unless and until we are able to
generate sufficient cash flow to meet our operating expenses and fund our planned sales and market efforts. There can be no assurance
that the market will adopt our portal or that we will generate sufficient cash flow to fund our enhanced sales and marketing plan.
In the event that we are not able to successfully: (i) raise equity capital and/or debt financing; or (ii) market and significantly
increase the number of portal users and revenues from such users, our financial condition and results of operations will be materially
and adversely affected and we will either have to delay or curtail our plan for funding our sales and marketing efforts.”
Off-Balance
Sheet Arrangements
As
of March 31, 2019 and December 31, 2018, respectively, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii)
of Regulation S-K promulgated under the Securities Act of 1934.
Contractual
Obligations and Commitments
Quarter
Ended March 31, 2019
On
January 29, 2019 and February 22, 2019, the Company received the third and fourth tranches of funds relating to a note executed
on July 13, 2018. The two tranches were $60,000 and $30,000 respectively.
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 and transactions costs
of $10,000. 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. During
the three months ended March 31, 2019, the Company accrued interest of $5,536.
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 and transaction costs
of $10,000. 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. During
the three months ended March 31, 2019, the Company accrued interest of $5,536.
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 three
months ended March 31, 2019, the Company accrued interest of $2,998.
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 three
months ended March 31, 2019, the Company accrued interest of $1,725.
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. The first
tranche was received on March 21, 2019.
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 three months ended March 31, 2019, the Company accrued interest of $202.
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. During the three
months ended March 31, 2019, the Company accrued interest of $10.
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
3,260,870 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 will issue 1,000,000 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 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. The first tranche was received on March 25, 2019. During the three months ended March 31, 2019,
the Company accrued interest of $2,466.
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 2,412,827 shares of common stock at a price of $.04745 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 1,630,799 shares of common stock at prices ranging from $.0583 to $.0603.
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 1,309,799 shares of common stock at prices ranging from $.0487 to $.0532.
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 2,402,436 shares of common
stock at a price of $.036.
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 1,877,796 shares of common stock at prices ranging from $.0393 to $.0437.
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 1,626,268 shares of common stock at prices ranging from $.0628 to $.1032. 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 658,722 shares of common stock at prices ranging from $.081 and $.085.
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) $0.21 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 100,000 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) $0.21 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 50,000 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) $0.06 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) $.20 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) $.20 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 180
th
calendar day after the Original Issue Date. During the year ended December 31, 2018, the
Company recognized interest expense of $1,123.
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.
Critical
Accounting Policies
Please
refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual
Report on Form 10-K for the year ended December 31, 2018, for disclosures regarding the Company’s critical accounting policies
and estimates, as well as any updates further disclosed in our interim financial statements as described in this Form 10-Q.