eWellness Healthcare Corporation

11825 Major Street

Culver City, California 90230

 

August 6, 2014

 

U.S. Securities and Exchange Commission

100 F. Street, N.E.

Washington, D.C. 20549

Attn: John Reynolds

 

Re: eWellness Healthcare Corporation

Amendment No. 1 to Form 8-K

Filed June 25, 2014

File No. 000-55203

 

Dear Mr. Reynolds:

 

This letter is provided in response to your letter dated July 10, 2014 regarding the above-referenced Amendment No. 1 to Form 8-K that eWellness Healthcare Corporation (the “Company”) filed on June 25, 2014 (the “Amendment”). The Company’s responses are set forth below to the items noted by the staff in your letter. Please note that for the convenience of the reader, the words “we”, “us”, “our” and similar terms used in the responses below refer to the Company.

 

Where applicable, new language we are including in Amendment No. 2 to the Form 8-K (the “Amendment”), which we are filing on this same date, is included in the appropriate response below and written in underlined bold; any language removed from the Form 8-K is shown herein with a strikethrough.

 

Amendment No. 1 to Form 8-K

 

General

 

  1. We note your response to comment 2 from our letter dated June 2, 2014 and we reissue, in part, the comment. Please revise to address potential claims by investors who have not participated in your subsequent offering. We also note your belief that investors in your 419 offering waived their right to receive a refund of 90% of the amounts invested. Please remove any statement that investors have waived their rights or advise us of the basis for your belief. See, in this regard, Section 14 of the Securities Act of 1933.
     
    Response: We reviewed your comments and note that these first few comments under the header “General,” focus on our private financing transactions and related issues. When we conducted the April 2014 financing, we believed that the documents we submitted to the participants and their resulting consents were sufficient to alleviate any 419 issues or related concerns. Additionally, we filed the S-1 for the anticipated 419 offering, which never took place and planned to withdraw such registration statement. As we noted in our prior response letter, we recognize the potential risks associated with our strategy and to that end included the additional risk factor in the last amendment to the 8K that we filed. We believe that the steps we took to convert the 419 offering into a private financing transaction alleviates any integration and/or lingering 419 issues. The Company’s initial purpose was to locate and consummate a merger or acquisition with an entity; to that end, we filed a Registration Statement on Form S-1 (the “S-1”) to conduct a “Blank Check” offering subject to Rule 419 so that the shares ultimately issued in such a merger or acquisition would be registered. In fact, our registered shares was part of eWellness Corporation’s attraction to the Company and why the two companies entered into a letter of intent (“LOI”) and moved forward with the acquisition. The companies continued to conduct their respective due diligence and finalize the terms of the transaction and related transaction documents. However, prior to signing the definitive documents, we realized that because we did not close the acquisition by March 18, 2014 (18 months after the effective date of the related 419 registration statement), we were required under Rule 419 to return 90% of the deposited funds on a pro rata basis to all the Investors who purchased shares pursuant to the 2012 prospectus. After numerous discussions within each company’s respective management teams and between the two companies, they decided to proceed with the acquisition. The companies spent a great deal of time working towards completing an acquisition, worked well together and the investors who participated in the 419 transaction expected the Company to complete an acquisition. Accordingly, we carried out the plan disclosed in our filings, pursuant to which we: (i) filed a registration statement on Form 8-A (“Form 8A”) to register our common stock pursuant to Section 12(g) of the Exchange Act and (ii) obtained consent from 100% of the participants of the 419 Offering to instead participate in a similar private offering (the “Private Offering”).

 

 
 

 

    We think it is important to note that even prior to the S-1, the Company had a pre-existing relationship with all of the participants in the Private Offering; the Company did not create a relationship with any of the Private Offering participants through the S-1 or as a result therefrom, nor were any participants of the Private Offering solicited through the S-1. Additionally, because of our public filings, all of the information required to be provided pursuant to Rule 506(b) to non-accredited investors was available and therefore, our sale to both accredited and non-accredited investors was done in compliance with such rule. In light of the facts and circumstances explained above, we respectfully believe that we were able to convert the 419 offering into a private offering in reliance on Rule 506(b) of Regulation D.
     
    It is our intention to withdraw the S-1 and file a Notice of Exempt Offering of Securities on Form D, selecting Rule 506(b) as the Federal Exemption in Item 6. We understand that the path to Rule 506(b) may have been unconventional, but the information available, the pre-existing relationship between the investors and the Company, our desire to avoid potential litigation for failing to conduct an acquisition or business combination as set forth in our initial offering documents, including the S-1, led us to believe that the exemption was available to us and we respectfully believe we were able to utilize same to conduct the financing.
     
  2. We note your response to comment 3 of our letter dated June 2, 2014. Please provide an analysis of whether the company, which identified its investors and received funds from them in a public offering, could be deemed to have completed the transaction in a private offering. It is unclear why you believe these transactions should not be integrated. See, in this regard, 1933 Act Compliance and Disclosure Interpretation 139.25, available on our website. We may have further comment.
     
    Response: We respectfully direct your attention to response to comment #1 above.

 

 
 

 

  3. We note your response to comment 1 from our letter dated June 2, 2014, and we reissue, in part, the comment. We note that your Form S-1 for the 419 offering went effective on September 14, 2012 and included financial statement for the fiscal year ended December 31, 2011. Securities Act Section 10(a)(3) requires you to update your registration statement when the prospectus contained therein is used more than nine months after the effective date of the registration statement and the information contained therein is as of a date more than sixteen months prior to such use. With a view to greater disclosure, please tell us specifically when the sales during the previous two years were made and tell us whether the January 2014 purchase was pursuant to your 419 offering and subject to the escrow agreement. We may have further comment.
     
    Response: We respectfully direct your attention to response to comment #1 above.
     
  4. We note your response to prior comment 1 of our letter dated June 2, 2014. Please provide further detail of the dates, times and investors in the initial offering, for example a table showing the approximate dates when sales were made as well as the number of purchasers. Please also advise us of the date(s) when funds and securities were transferred from the trust to your own bank account or elsewhere. In other words, please tell us what happened to the shares issued and the funds received pursuant to the original 419 offering which were subject to the escrow agreement.
     
    Response: We respectfully direct your attention to response to comment #1 above. Additionally, we compiled the table to address your other comment:

 

eWellness Healthcare Corporation (formerly Dignyte)

Escrow Stock Sales

 

Date  No. of Shares   No. of
Investors
   Cost   Issued Date 
                 
12/12/12   260,000    3   $26,000.00    3/14/2013 
3/4/13   25,000    1   $2,500.00    3/27/2013 
3/19/13   30,000    3   $3,000.00    3/27/2013 
9/20/13   50,000    1   $5,000.00    9/24/2013 
9/23/13   100,000    1   $10,000.00    9/24/2013 
11/1/13   100,000    1   $10,000.00    12/26/2013 
12/5/13   122,000    37   $12,200.00    12/26/2013 
12/31/13   10,000    1   $1,000.00    12/31/2013 
1/7/14   190,000    2   $19,000.00    1/22/2014 
1/22/14   10,000    1   $1,000.00    1/22/2014 
4/23/14   103,000    1   $10,300.00    4/24/2014 
                     
Totals   1,000,000    52   $100,000.00      

 

 
 

 

    All Dignyte shares were retained in escrow until the merger with eWellness was completed. Following the Share Exchange, on May 19, 2014, as per each shareholder’s written instruction, the escrow agent sent the Dignyte shares to the Company’s transfer agent so that such shares could be exchanged into Company shares. The resulting eWellness shares, which are in electronic book-entry form as per the shareholder instructions, included a restrictive legend as such shares were treated as having been issued pursuant to an exemption from registration under Regulation D and Section 4(a)(2) of the Securities Act.
     
    All funds in the aggregate amount of $100,000, less 10%, remained in escrow until May 9, 2014, at which date $90,007 was transferred to the Company’s bank account. During the quarters ended June 30, 2013, December 31, 2013 and June 30, 2014, the Company utilized $3,150, $3,720 and $3,184, respectively for operating expenses, which collectively equals 10% of the funds raised, plus interest earned on the escrow account.
     
  5. Also we note your disclosure on page 38 that your proceeds from the May 1, 2014 offering were $100,000, which accounted for the funds remaining in escrow from your 419 offering as well as the $0.10 which the company had used for expenses. Please reconcile this with your response to prior comment 1 that you offered securities worth $69,700 in the 419 offering. Where appropriate, clarify the price investors paid in your May 1, 2014 offering and the source of funds.
     
    Response: We respectfully direct your attention to response to comment #1 and #4 above. Our prior response was incorrect as the amount raised by the Company was $100,000 on the dates and in the amounts set forth in the Company’s response to #4 above.
 
  6. We note your response to prior comment 3 and the statement that each of the investors in the April 2014 offering was an accredited investor. We note, however, that the Private Placement Memorandum states in several locations that the offer and sale “will be made to ‘accredited’ and ‘non-accredited’ investors.” Please provide a detailed explanation of why you believe the investors are all accredited.
     
    Response: We respectfully direct your attention to response to comment #1 above.
     
  7. We note that the Riedel Opinion Dated April 4, 2014 was not included in the Private Placement Memorandum exhibits. Please include the opinion and all exhibits with your next response.
     
    Response: Included with this letter are the following exhibits to the April 25, 2014 Private Placement Memorandum:

 

  1. Exhibit A - Form of Amended and Restated Articles of Incorporation;
     
  2. Exhibit B - Financial Statements for the fiscal years ended December 31, 2013 and 2012 (see the Company’s Form 10-K for the years ended December 31, 2013 and 2012 filed with the SEC on March 6, 2014 and April 1, 2013, respectively - which were also incorporated by reference into the Memorandum);
     
  3. Exhibit C - eWellness Fair Market Value Opinion;
     
  4. Exhibit D – Form of Subscription Agreement; and
     
  5. Exhibit E – Form of Escrow Agent Instructions

 

 
 

 

    We want to emphasize that the subject Opinion is dated April 4, 2014 and that the terms of the offering and timelines may have changed since then. The Opinion was based on the information presented at that time and the information contained in the Amendment and our other SEC filings is more up to date and reflects changes that have occurred since then, if any.
     
  8. We note your response to comment 7 in our letter dated June 2, 2014, and we reissue, in part, the comment. Please provide us with supplemental support for statements you make about the insurance industry in New York and New Jersey in your Insurance/Reimbursement section on page 13.
     
    Response: Although the information was originally included based on reliable sources, we have been unable to relocate such initial sources and therefore, revised our disclosure to make it clear that such information is based on management’s experience in the industry and their day-to-day involvement in same.

 

Item 1.01 Entry into a Material Definitive Agreement

 

  9. We note your response to comment 5 from our letter dated June 2, 2014 and the statement that “[y]our Shareholders agreed to purchase from eWellness Corporation (“Private Co.”) and Private Co. agreed to sell to us 100% of Private Co.’s common stock in exchange for 9,200,000 of our then outstanding shares of common stock.” Please advise us how you and any other parties solicited and obtained such agreements from your shareholders. We also note that this section does not clarify that the company acquired 100% of the common shares of eWellness Corporation in the exchange transaction. We also note the disclosure on page 35 that Messrs. MacLellan and Fogt received 10% of your equity securities in return for their services as promoters in the previous five years. Please advise us whether Messrs. MacLellan and Fogt were also parties to your share exchange. We may have further comment.
     
    Response: Pursuant to your comment we revised disclosure in the Amendment to clarify that the Company acquired 100% of the common shares of eWellness Corporation in the exchange transaction.
     
    Prior to the Share Exchange 95% of the Private Co. was held by founders and Private Co. management; the remaining 5% was held by an entity (J.F.S Investment, Inc. (“JFS”)) that assisted the Company with its relationship with Millenium Healthcare, Inc. Accordingly, these persons were well versed and part of the decision to enter into the Share Exchange with Dignyte. Douglas MacLellan has a prior relationship with the President of JFS and after they spoke about the share exchange transaction, JFS agreed it was in the Private Co.’s best interest to effect such transaction. Accordingly, we did not solicit our shareholders through management or any other parties.
     
    After reviewing your comment, we think our disclosure regarding Messrs. MacLellan and Fogt’s ownership and involvement may not have been clear in the referenced section and revised it accordingly. As shareholders of the Private Co., Messrs. MacLellan and Fogt were parties to the share exchange; however, they only provided services to the Private Co. prior to the share exchange. The disclosure in the 8-K may lead a reader to believe that they received shares for services provided to the combined entity, which may have triggered your comment. Prior to the Share Exchange, the Private Co. issued Messrs. MacLellan and Fogt 3,000,000 (32.61%) shares and 2,000,000 (21.74%), respectively for the services the provided to the Private Co., which included efforts aimed at the formation of the Private Co. and carrying out its business and operations. Pursuant to the terms of the Share Exchange Agreement, Messrs. MacLellan and Fogt exchanged their Private Co. shares for shares of our common stock, which resulted in them owning more than 10% of our outstanding shares.

 

 
 

 

Business

 

  10. We note your response to comment 8 in our letter dated June 2, 2014 as well as your disclosure on page 13 that in your first year, only a small portion of your revenues will be derived from telemedicine reimbursements. We reissue prior comment 8. Please revise to clarify within this section that you intend to launch primarily as an in-office operation or advise.
     
    Response: Our main focus and the service that we believe differentiates us from any other physical therapy provider is our on-line telemedicine exercise program that is both non-monitored and monitored by licensed physical therapists, the combination of which we believe increases patient engagement and program success. However, since such telemedicine services are not regularly covered by insurance agencies at this time, few patients are willing to pay for these services and therefore, our success is limited to those who will pay out of pocket or receive reimbursement for our services. Our CEO has been a physical therapist for 13 years and is keenly interested in helping the country’s obesity problem. To that end, he collaborated with the rest of our management team to come up with a system that will provide excellent health benefits for patients and financial benefits to us and our shareholders. The result of such collaboration is our Distance Monitored Physical Therapy (“DMpt”) program and the four separate patient reimbursement plans. To achieve maximum health benefits, we believe that patients need clear goals and a plan of action, but we have found that periodic monitoring and “check-ins” are what help to turn regular exercise programs into more permanent healthy lifestyle changes. We also believe that in today’s fast paced, remote based world, people need to be able to access their exercise and diet plans outside their gym and doctor’s office. Luckily for us, the combination of in-office direct-contact physical therapy evaluations, re-evaluations and physical performance testing, with a related telemedicine program, can accomplish both of our main goals: healthier lifestyles and return on investment. However, as stated above, our revenues are limited by the current health care insurance regime. Accordingly, we built a business model that can succeed and provide legitimate return to our investors based on today’s insurance reimbursement policies, but that stands to provide exponential return if insurance policies change as we believe they will. This business model requires that we maintain in-office visits, for which most insurance companies currently provide reimbursement, but does not require such visits to serve as the bulk of our operations. In fact, in each of our four programs, remote telemedicine represents at least 85% of the appointments we will be conducting with each patient; our proposed business operations never include more than 15% in-office appointments for any of the four patient programs. Although the majority of our revenues will, at least initially, come from insurance reimbursement of our in-office visits, our main focus will always be on the telemedicine program: improving that program, marketing that program, ensuring our doctors and patients are utilizing that program and working with insurance companies to increase or change their policies to provide more reimbursement for what we believe is a program geared towards healthier living, which only stands to reduce their long term costs.
     
    Pursuant to your comment and in light of the information provided above, we revised the disclosure in our Amendment accordingly, as necessary.
     
    To further clarify our plans and the 4 reimbursement programs, we added the following narrative and chart into the Amendment:

 

    “Our program is a combination of therapy for 26 weeks and is designed to guide a patient through active physical retraining. We have divided our program into 4 different basic billing models to accommodate the majority of reimbursability of our anticipated patient base. The following is a further break down of those billing groups by type of appointment and reimbursement:

  

 
 

 

Program A – Private Insured          
Total patient appointments   84    100%
Appointments insurance reimbursed under current codes   30    36%
In-office enrollments or check-ups (insurance reimbursed)   6    7%
Monitored remote physical therapy sessions (insurance reimbursed)   24    29%
Appointments not insurance reimbursed under current codes          
Non-monitored remote physical therapy sessions (not reimbursed)   54    64%
           
Program B – Partial Insurance + Self-Pay          
Total patient appointments   92    100%
Appointments insurance reimbursed under current codes          
In-office enrollments or check-ups (insurance reimbursed)   14    15%
Appointments patient pays $100 monthly flat rate          
Monitored remote physical therapy sessions   78    85%
           
Program C – Medicare/Medicaid          
Total patient appointments   92    100%
Appointments reimbursed under current insurance codes          
In-office enrollments or check-ups (insurance reimbursed)   14    15%
Appointments not reimbursed under current insurance codes          
Un-monitored remote physical therapy sessions   78    85%
           
Program D - Non-Insured/Cash Pay          
Total patient appointments   92    100%
Appointments patient pays $300 monthly flat rate (no insurance reimbursement)          
In-office enrollments or check-ups (insurance reimbursed)   14    15%
Monitored remote physical therapy sessions   78    85%

 

  11. We note your statement that you are the first to market with your innovative DMpt program. Based on your response and the disclosure on pages 6-7, it does not appear that you have made any sales of your DMpt program. Please revise your 8-K to reflect the current status of your product and your marketing efforts. See Item 101(h)(4)(i) of Regulation S-K. If you also wish to assert that you believe your product will be the first to market when launched, please balance this disclosure by noting that, if true, you have enlisted no patients to-date. Also clarify, if true, that your entry into the market depends upon your successful financing efforts.
     
    Response: Pursuant to your comment, we revised the first few paragraphs of our Business section to read as follows:

 

 
 

 

    “eWellness was incorporated in Nevada in May 2013. eWellness is an early-stage Los Angeles based privately held corporation that seeks to provide a unique telemedicine platform that offers Distance Monitored Physical Therapy (DMpt) Programs to pre-diabetic, cardiac and health challenged patients, through contracted physician practices and healthcare systems, in addition to in-office sessions. Based on today’s insurance landscape, our main revenue source shall come from in-office visits.
   
    As of the date of this Report, our initial and sole service contract covers the New York City and northern New Jersey tri-borough area (19.8 million people), the most populated region in the United States. To date, we have not identified any other program that is designed to provide Distance Monitored Physical Therapy Telemedicine Program that has been specifically designed to help prevent pre-diabetic patients from becoming diabetic. Accordingly, we believe that we are first-to-market with our specific innovative service and program. Our program combines in-office direct-contact physical therapy evaluations, re-evaluations and physical performance testing with an on-line telemedicine exercise program. This business model allows us to bill for traditional in-office patient visits and when insurance companies allow, for our telemedicine exercise program sessions too. We also offer to enroll our patients in a no-cost online healthy living nutrition and meal planning platform developed by the American Diabetes Association.
     
    Assuming we receive sufficient financing to do so, we intend to start servicing clients in September 2014, when we also anticipate rolling out our DMpt services. As an innovator of certain services, we are aware that the proposed DMpt services will be launched in an industry with deeply established and regulated billing approaches. For this reason, we designed a business model to succeed in the current billing environment by anticipating that the only reimbursement available to us for the next three years will be generated by using procedures and codes that insurance providers currently accept, even though we believe insurance companies will start providing more telemedicine reimbursement prior to such time given its benefits. Currently, depending on each patient’s insurance coverage, existing codes cover up to 14 in-office visits and/or up to 24 remotely monitored physical therapy sessions during our six month program. Today, some insurance companies do not reimburse for any physical therapy sessions, whether or not they are monitored, and none of the insurance companies within our patient base provide codes that reimburse non-monitored physical therapy sessions. Our plans and goals factor in these non-reimbursed sessions as part of the overall Cost of Goods Sold (COGS); we still believe that we can earn revenues and generate profit based solely on the services for which insurance companies currently provide reimbursement. In light of current insurance practices, we configured four separate reimbursement plans designed to maximize the needs of today’s patient base. Our DMpt system is currently configured to deliver a six month therapy program with at least three sessions per week using a combination of 78 remote monitored and/or remote non-monitored therapy sessions and 6 to 14 in-office visits (number of office visits depend on insurance coverage). This assures us that we will be able to deliver a consistent service to the patients and achieve our internal operating goals without any innovation in the insurance industry codes. While the current, somewhat archaic, reimbursement standards do not reimburse for some aspects of our six month program, based upon feedback from industry leaders, we believe that the regulatory and insurance environment is trending towards a payment structure that will be more favorable to remote monitored and non-monitored programs within the telemedicine sphere, although there can be no guarantee such trend will be realized. Part of our current plan is to compile six months of compelling patient outcomes to submit to the insurance agencies to encourage the trend towards remote-services based reimbursement and enhance our reimbursement opportunities. Regardless, our business model suggests that we will be able to generate revenues and sustain a profitable business; however, there is no guarantee that we will be able to generate any revenues or realize any profits, as we have yet to launch any of our services. If the insurance industry recognizes the advantages telemedicine can provide to patients, medical professionals and insurance companies, and then more readily provides reimbursement for same, we will stand to earn significant more revenues.”

 

 
 

 

  12. We note the revised disclosure on page 6 that currently, existing reimbursement codes cover up to 14 office visits and up to 24 remotely monitored physical therapy sessions. Given uncertainties, such as the cost of up to 54 monitored physical therapy sessions, it is unclear on what basis you state on page 6 that you will earn revenues and be profitable.
     
    Response: We updated our disclosure pursuant to your comment and respectfully direct your attention our response to comment #10 and to the changes noted in response to comment #11 above.
     
    The only other discussion of us earning a profit is in the last paragraph of page 28, which refers to “our 1st objective,” and therefore we respectfully believe we can leave as is.
     
  13. Please revise your competition disclosure on page 6 to discuss your competitive position within the industry. For example, if you are aware, you should discuss whether there are other companies that have similar business plans and also how other market entrants may have greater access to financial resources. Refer to Item 101(h)(4)(iv) of Regulation S-K.
     
    Response: We updated our disclosure pursuant to your comment and respectfully direct your attention to the changes noted in response to comment #11 above. We also added a Competition section and modified the related risk factor.

 

Online Physical Therapy Operations Assumptions

 

  14. We note your response to comment 17 in our letter dated June 2, 2014. To the extent you have a reasonable basis to do so, please revise this section to clarify the anticipated in- office monthly patient capacity for each new office. Given your planned in-office operations, please add similar disclosure to your Operational Assumptions on page 12
     
    Response: Pursuant to your comment, we revised the section at issue and added the following disclosure to the MHI Physican Collaboration Process section:
     
    “Each onsite team consisting of one certified Physical Therapist (PT) and one certified Physical Therapist Assistant (PTA) will attend to 21 patients per day between the two of them. Assuming a seven hour work day, that averages to approximately one patient every 40 minutes per certified professional. These patient visits will consist of either first time enrollments or follow-up assessments, which in the general realm of Physical Therapy tasks are considered neither time consuming or intensive.”

 

 
 

 

Insurance/Reimbursement

 

  15. To the extent you have a reasonable basis to do so, please revise to clarify the maximum number of monitored telemedicine sessions for which each of the major insurance providers described will provide reimbursement.
     
    Response: Pursuant to your comment we added the disclosure set forth below and inserted related charts based on reimbursement information we have gathered from our research and connections.
     
    Based on management’s experience and review of insurance literature, they believe that if a provider offers telemedicine reimbursement, such provider will typically reimburse the same number of telemedicine visits as the number of allowable in-office physical therapy visits. Currently, management believes that in the state of New York, Blue Cross allows for reimbursement associated with telemedicine physical therapy and other insurers including medicare, medicaid and other private insurers will not reimburse for physical therapy via telemedicine. This is why we have created multiple billing plans that may or may not include reimbursement for telemedicine physical therapy. We anticipate negotiating individual reimbursement plans with each insurance company. We also believe that the definition of telemedicine may broaden over the next 3-5 years to include physical therapy. While we believe our management team has a strong grasp of the pulse and trends of the insurance industry, there can be no assurance that management’s industry perceptions are accurate or that there will there will be any changes to insurance reimbursement policy associated with physical therapy telemedicine at any insurance company.”

 

Initial Program Patient Inclusion Criteria

 

  16. We note your response to comment 22 in our letter dated June 2, 2014 and we reissue the comment. Your disclosure on page 13 notes twice that you will provide services to patients whose insurance companies provide no reimbursement. Please reconcile these disclosures. For example, please clarify in the document whether your insurance requirement applies regardless of whether the patient’s insurance company will reimburse for physical therapy sessions or telemedicine.
     
    Response: Pursuant to your comment, we revised the second requirement on page 17 of the 8K to read as follows:
     
    Covered by private health insurance or federal or state insurance and/or pay the partial or full monthly program fee themselves.”

 

 
 

 

Risk Factors

 

We may be subject to liability for failure to comply with Rule 419

 

  17. Please revise to quantify the potential amount owed to investors as a result of your violation of Rule 419. Also, as this amount appears to be a known uncertainty, please quantify the amount in your MD&A beginning on page 28. See Item 303(a)(3)(ii) of Regulation S-K.
     
    Response: We respectfully direct your attention to our response to your comment #1 above. In light of our belief that we did not violate Rule 419, we respectfully do not believe such calculation is warranted.

 

Our success is currently dependent upon our ability to develop the relationship with MHI

 

  18. We note that your purchase and supply agreement with MHI is exclusive. If MHI will be your exclusive distributor, it appears the risk factor should explain the risk that negotiating a new agreement with a similar company may be a breach of your agreement with MHI.
     
    Response: Pursuant to your comment, we added the following risk factor:
     
    We are currently contractually committed to a 14 state exclusive supply and distribution agreement. The Company and Millennium Healthcare, Inc., (“MHI”) have entered into an exclusive supply and distribution agreement covering 14 states that include: Maine, New Hampshire, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Delaware Maryland, Virginia, North Carolina, South Carolina, Georgia and Florida, in which the company is required to pay MHI a 20% fee on DMpt patient revenue generated in those states, in return for providing marketing and program billing services to the Company. To date, this contract has not been activated as our DMpt program has not commenced operations. If at the time that our DMpt program commences operations and MHI has not used their best efforts to market and manage the billing of our program to various insurance carriers, then the Company may be in a position to cancel the contract with MHI and pursue other marketing and billing management relationships. Alternatively, if the company acts to engage other distribution companies within the covered 14 states, the Company may be required to include the 20% MHI fee into any new arrangement or worse, may be prohibited from entering into any new engagement within any such states. There can be no assurance that any distribution or billing activity outside of the agreement between the Company and MHI within the 14 states will be permitted and may cause strategic road blocks for the Company.

 

Currently our management’s participation in our business and operations is limited

 

  19. We note your response to comment 32 in our letter dated June 2, 2014 and this added risk factor. Please revise to state whether, at this point, the members of management have committed a certain amount of time, for example a percentage of their time or an approximate number of hours per week, to your business.
     
    Response: None of our officers have committed a specific portion of their time or an approximate number of hours per week in writing to the objectives of the company and no assurances can be given as to when we will be financially able to engage our officers on a full time basis and therefore, until such time, it is possible that the inability of such persons to devote their full time attention to the Company may result in delays in progress toward implementing our business plan.

 

 
 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

  20. We note your response to comment 24 in our letter dated June 2, 2014, and we reissue, in part, the comment. Please revise this section to provide a discussion of the key performance indicators that management anticipates using to assess your business once your operations have launched. For example we note your disclosure on page 28 that you intend to have a certain number of new patient inductions per month and weekly new patients.
     
    Response: As set forth below, we have developed various key performance indicators that we anticipate using to assess our business after operations are launched and included same in the Amendment:
     
    Patient Induction Rate. Our DMpt programs are 26 weeks long and start with the induction. Our patient induction rate will provide us a weekly direct understanding of how we are coordinating with the referring doctors and how efficiently we are managing the inductions; it will also give us a foundation for modeling the next six months of revenue.
     
    Patient Attrition Rate. This indicator may be the single most important indicator of long term business outlook. The long term health of our business is directly linked to the long term health of our patients. If the patient stays with the program and does well, the probability of a health changing lifestyle shift is dramatically increased. When the patient stays with the program the Company’s business is rewarded with additional revenue. Furthermore, the increased success of each patient in our program enhances the insurance provider’s cost/benefits actuarial view of our service and thus motivates a better reimbursement schedule and more patients for us in the long run.
     
    New Offices Per Month. This indicator will be useful in determining how fast or slow our distribution system will be growing. It will also provide us a predictive measure for resource requirements that will be emerging over the next six months.
     
    Selling General and Administrative Expenses (SGA). 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 early stages of our services, we may experience bottlenecks in our ability to meet the demand for same. Under this type of environment it is critical to maintain awareness of the Company’s operational budget goals and how they are being met in our attempts to address demand. Regardless of our growth pace, it is critical to shareholder value that we are mindful of our operational spending.
     
    Cashflow. Because the Company is “early stage” and launching with a minimum of capital, monitoring cashflow on a constant basis will be essential to growth.

 

 
 

 

Plan of Operations

 

  21. We note your disclosure on page 28 that you intend to close a private financing of up to $1.2 million by the end of the third quarter of 2014. Please revise to reconcile the disclosure in this section with your risk factor on page 20-21, which states that you will not be able to carry out your business if you do not complete your private financing by August 1, 2014.
     
    Response: Pursuant to your comment, we revised our disclosure to accurately state within our risk factors that we plan to close the financing by the end of the third quarter.
     
  22. We note your response to comment 25 in our letter dated June 2, 2014. With the understanding that the launch of your operations depends upon attaining adequate financing, please revise your first milestone to provide the number of offices in which you intend to launch.
     
    Response: Pursuant to your comment, we revised our plan of operations to include the following language:
     
    “Assuming we receive the full $1.2 million from our proposed financing, the Company’s plans are to pursue the targets set forth below to achieve controlled operational break-even within three months and 24 offices within 12 months after the close of such private financing and healthy profitability and growth thereafter.”
   
  23. For each of your milestones please disclose the planned expenditures that will be required to meet your milestone. For example, we note your disclosure on page 35 regarding your recorded salaries for your officers. If you intend to pay compensation for deferred salaries or otherwise in the next 12 months, please include these payments in your plan of operations. Also we note your disclosure on pages 37 and 38 regarding amounts due to related parties and the disclosures on page 39 regarding your promissory notes.
     
    Response: Pursuant to your comment, we updated the disclosure in the Amendment to accurately disclose our officers’ agreement to defer all compensation until such time as we are cash flow positive.
     
    In response to your comment, please note that we believe, with $500,000, we can achieve all of the milestones set forth in the Plan of Operations necessary to achieve positive monthly cash flow and sustainable growth by rolling out and activating two new induction offices per month at an installation cost of $7,175 and 30-day expense of $13,440 each. However, management shall continually prioritize our expenditures and payments towards maintaining sustainability, as well as company growth and shareholder value. As for outstanding liabilities that are set to become due within the next 3-6 months, we revised the Cash Flow section within the Plan of Operations section of the Amendment as follows:

 

 
 

 

    Cashflow. Because the Company is “early stage” and launching with a minimum of capital, monitoring cashflow on a constant basis will be essential to growth.
     
    The Company intends to close on a private financing of up to $1.2 million by the end of the third quarter of fiscal 2014, although there can be no guarantee we will receive any such financing. Assuming we receive the full $1.2million from our proposed financing, the Company’s plans are to pursue the targets set forth below to achieve controlled operational break-even within three months and 24 offices within 12 months after the close of such private financing and healthy profitability and growth thereafter. If we do not receive the full $1.2 million, we will scale our plans back accordingly, in accordance with the priorities set forth below. We need at least $500,000 to carry out our 1st objective, make good on some of the outstanding liabilities that are to come due within the next 3-6 months as disclosed herein and become profitable. Until we receive it, the majority of our efforts will be geared towards obtaining sufficient financing to launch and complete our 1st objective.
     
    Specifically, other than completing our 1st objective, if we do receive $500,000, we anticipate expending an aggregate of approximately $31,000 per month to compensate our executive officers to encourage them to devote more time to our Company, as we will be simultaneously launching and rolling out our operations in light of the received funds. Additionally, in light of its importance to our operations, if we receive the $500,000, we will pay the $20,000 due on our license agreement with Bistromatics Corp. (See, “Certain Relationships and Related Transactions”). Finally, if they have not otherwise been converted pursuant to their terms, we will use a portion of the $500,000 to repay the $130,000 promissory notes if they become due prior to receiving any additional funds and the holders have not otherwise agreed to extend their maturity date.

 

Liquidity and Capital Resources

 

  24. We note your responses to comments 27 and 28 in our letter dated June 2, 2014 as well as the disclosure on page 39 regarding your $130,000 promissory note financing. To the extent that debt obligations remain outstanding, please revise this section to describe the material terms of your various sources of liquidity, including interest rate and repayment terms. Please note that Item 303(a)(1) of Regulation S-K requires you to identify and separately describe your internal and external sources of liquidity for the covered periods.
     
    Response: Pursuant to your comment we added the following disclosure to the referenced section:
     
    “As of the date of this Report, we have also issued notes with an aggregate principal balance of $130,000 (the “Promissory Notes”). The Promissory Notes accrue interest at the rate of 12% per annum, which is payable on the maturity date: December 31, 2014. The Promissory Notes shall automatically convert into the securities to be issued pursuant to the private financing, upon the same terms as new investors in such financing; however, the conversion rate and securities to be issued have not yet been determined.”

  

 
 

 

Directors and Executive Officers, page 32

 

  25. With your next amendment, please provide the information required by Item 401(e) of Regulation S-K for Mr. Rowberry.
     
    Response: Pursuant to your comment, we added the information required by Item 401(e) of Regulation S-K for Mr. Rowberry into the Amendment.
     
  26. We partially reissue comment 30 from our letter dated June 2, 2014. Please provide a complete record of the principal occupations and employment for the previous five years for each of your officers and directors. For example purposes only Darwin Fogt’s positions of employment remain unclear from May 2009 through May 2013.
     
    Response: Pursuant to your comment, we updated the bios for our officers and directors in the Amendment to include the requested information.
     
  27. We also note your disclosure on page 33 that Mr. Cole has been a professional board member since 1980. Please clarify the directorships for each of your directors for the previous five years. See Item 401(e)(2) of Regulation S-K.
     
    Response: We respectfully direct your attention to our response to comment #26 above.

  

Recent Sales of Unregistered Securities

 

  28. We note your response to comment 36 from our letter dated June 2, 2014 and we reissue the comment. Given that these transactions referenced in the prior comment involved the unregistered sale of securities, please revise to include the disclosures required by Item 701 of Regulation S-K for both of these transactions.
     
    Response: Pursuant to your comment and in light of our response to comment #1 above, we added the following disclosure to the Recent Sales of Unregistered Securities:
     
    “Prior to the Share Exchange, the Private Co. received some investment interest for notes convertible into shares of the Private Co’s common stock; however, in light of the pending share exchange and corporate restructuring that would result therefrom, the Private Co sought such investor’s consent to instead receive Promissory Notes (as more fully described in “Description of Registrant’s Securities” below), in the same amount as the investor’s original interest, that would automatically convert into the same securities to be issued in the private financing described elsewhere in this Report. After receiving all of such investor’s consent, we issued Promissory Notes in the aggregate principal amount of $130,000. ”

 

 
 

 

Exhibits

 

  29. We note your response to comment 37 from our letter dated June 2, 2014, and we reissue the comment. We are unable to locate the exhibits referenced in the response. Please file your governing documents and update your Exhibit Index on page 42 or advise.
     
    Response: Unfortunately, it seems we inadvertently forgot to attach the referenced exhibits in the last amendment, but are attaching them to the Amendment.

 

Exhibit 99.3

 

Pro Forma Financial Statements

 

  30. We note your response to comment 42 in our letter dated June 2, 2014. To the extent necessary based on consideration of comments herein, please revise the pro forma balance sheet as necessary to account for the legal ramifications, if any, of replacing the redeemable shares of stock with regular shares and the removal of the restriction on 90% of the IPO proceeds. Update Note 2.E. as well.
     
    Response: We respectfully direct your attention to our response to your comment #1 above. In light of our belief that we did not violate Rule 419, we respectfully do not believe we need to revise our pro forma statements.

 

Form 10-Q for the Interim Period Ended March 31, 2014

 

Notes to Condensed Financial Statements

 

Note 8 – Subsequent Events

 

  31. Discuss in a subsequent events note that the common stock subject to possible redemption was replaced by stock sold through a private offering in April 2014 and that the replacement stock is classified as permanent equity. Discuss also the ramifications of this action, i.e., possible Section 5 violation and its effect upon the financial statements. Refer to FASB ASC 450.
     
    Response: Pursuant to your comment, we shall amend the Form 10-Q to discuss in a subsequent events note that the common stock issuable in the 419 offering was replaced by stock sold through a private offering in April 2014 and that the replacement stock is classified as permanent equity.
     
    Due to the discussion we are having regarding Rule 419, we included the related risk factor in the Amendment; we also propose to include similar language in a footnote related to the Company’s contingencies in future quarterly and annual reports. However, in light of our position stated in response to your comment #1 above, we do not believe we need to discuss any other ramifications of such action in the subject 10Q.

  

 
 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

  32. We note your response to comment 46 in our letter dated June 2, 2014, and we reissue the comment. We note the disclosures in your Form 10-Q with regard to the termination of the Rule 419 offering; however, your Form 10-Q filed on May 15, 2014 does not disclose the violation of Rule 419 and its potential impact, and we do not agree with the view that investors waived their rights under the Securities Act. Please explain to us why you believe your disclosure controls and procedures were effective in view of your violation of Rule 419. Alternatively, please amend your 10-Q to provide additional disclosure about potential weaknesses in your disclosure controls and procedures.
     
    Response: As set forth in our response to comment #1 above, we respectfully believe that the investors waived their rights under the Securities Act and do not believe that we violated Rule 419. When we realized that we could no longer proceed with a 419 transaction, management discussed the alternatives and determined to proceed the way we did because we believed it was the most appropriate way to carry out the parties intention and maintain the investment. In furtherance thereof, and to ensure that the investors were aware of the changes in structure and still wanted to invest in the Company, sent them the private placement memorandum and related documents, which essentially disclose and through an executed subscription agreement demonstrate that notwithstanding a change in the structure, a reaffirmation of their investment. We believe the steps we took when converting the 419 offering into a private placement were sufficient and within the four corners of the securities laws and therefore, did not think there was any information to disclose relating to a potential violation of Rule 419.
     
    However, we recognize that you may disagree with our assessment and in light of this discussion, we undertake to include, in our future quarterly and annual reports, disclosure about a potential weakness in our disclosure controls and procedures for not previously disclosing potential violation of Rule 419.

  

We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.

 

In responding to our comments, please provide a written statement from the company acknowledging that:

  

 the company is responsible for the adequacy and accuracy of the disclosure in the filing;
   
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
   
 the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

 

 
 

 

We understand that you may have additional comments and thank you for your attention to this matter

 

  Sincerely,
  eWellness Healthcare Corporation
   
  /s/ Darwin Fogt
  Darwin Fogt
  Chief Executive Officer

  

cc: Rachael Schmierer
  Hunter Taubman Weiss

 

 
 

  

Exhibit A

 

Form of Amended and Restated Articles of Incorporation

AMENDED AND RESTATED ARTICLES OF INCORPORATION

 

OF

 

DIGNYTE INC.

 

Pursuant to NRS 78.403 under Nevada General Corporation Law (Title 7, Chapter 78 of the Nevada Revised Statutes), DIGNYTE INC., a Nevada corporation (the “Corporation”), bearing document number 20110803203-20, hereby amends and restates its Articles of Incorporation as follows:

 

ARTICLE I - NAME

 

The name of the corporation is eWELLNESS HEALTHCARE CORPORATION (the “Corporation”).

 

ARTICLE II - PURPOSE

 

The Corporation is organized for the purpose of engaging in any business, trade or activity which may be lawfully conducted or permitted by a corporation organized under Nevada General Corporation Law, Chapter 78 of the Nevada Revised Statutes. The Corporation also shall have the authority to engage in any and all such activities as are incidental or conducive to the attainment of the purpose or purposes of this Corporation.

 

ARTICLE III - DURATION

 

The duration of the Corporation’s existence shall be perpetual.

 

ARTICLE IV - CAPITAL STOCK

 

Section 1. Authorized Capital Stock. The aggregate number of shares which the Corporation shall have the authority to issue is 110,000,000 shares, of which 100,000,000 shares shall be Common Stock, par value $.001 per share (the “Common Stock”), and 10,000,000 shares shall be Preferred Stock, par value $.001 per share (the “Preferred Stock”).

 

Section 2. Preferred Stock. The Board of Directors is authorized at any time, and from time to time, to provide the for the issuance of shares of Preferred Stock in one or more series, and to determine the designations, preferences, limitations and relative or other rights of the Preferred Stock or any series thereof. For each series, the Board of directors shall determine, by resolution or resolutions adopted prior to the issuance of any shares thereof, the designations, preferences, limitations and relative or other rights thereof, including but not limited to the following relative rights and preferences, as to which there may be variations among different series:

 

(a) The rate and manner of payment of dividends, if any;

 

(b) Whether shares may be redeemed and, if so, the redemption price and the terms and conditions of redemption;

 

(c) The amount payable upon shares in the event of liquidation, dissolution or other winding-up of the Corporation;

 

(d) Sinking fund provisions, if any, for the redemption or purchase of shares;

 

(e) The terms and conditions, if any, on which shares may be converted or exchanged;

 

(f) Voting rights, if any; and

 

 
 

 

(g) Any other rights and preferences of such shares, to the full extent now or hereafter permitted by the laws of the State of Nevada.

 

The Board of Directors shall have the authority to determine the number of shares that will comprise each series.

 

Prior to the issuance of any shares of a series, but after adoption by the Board of Directors of the resolution establishing such series, the appropriate officers of the Corporation shall file such documents with the State of Nevada as may be required by law.

 

ARTICLE V - NO PREEMPTIVE RIGHTS

 

No preemptive rights to acquire additional securities issued by the Corporation shall exist with respect to shares of stock or securities convertible into shares of stock of the Corporation, except to the extent otherwise provided by contract.

 

ARTICLE VI - NO CUMULATIVE VOTING

 

At each election for directors, every stockholder entitled to vote at such election has the right to vote in person or by proxy the number of shares held by such stockholder for as many persons as there are directors to be elected. No cumulative voting for directors, however, shall be permitted.

 

ARTICLE VII - BOARD OF DIRECTORS

 

The business and affairs of the Corporation shall be managed under the direction of a Board of Directors which shall consist of not less than one person. The manner of election and qualifications shall be provided in the Bylaws of the Corporation. The exact number of directors shall be fixed from time to time by the Board of Directors pursuant to resolution adopted by a majority of the full Board of Directors.

 

ARTICLE VIII - BYLAWS

 

The Board of Directors shall have the power to adopt, amend or repeal the Bylaws or adopt new Bylaws. Nothing herein shall deny the concurrent power of the stockholders to adopt, alter, amend or repeal the Bylaws.

 

ARTICLE IX – CONTROL SHARE ACQUISITIONS

 

The provisions of NRS 78.378 to 78.3793, inclusive, are not applicable to the Corporation.

 

ARTICLE X - LIMITATION OF DIRECTORS’ LIABILITY

 

A director shall have no liability to the Corporation or its stockholders for monetary damages for conduct as a director, except for acts or omissions that involve intentional misconduct by the director, or a knowing violation of law by the director, or for conduct violating NRS 78.138(7), or for any transaction from which the director will personally receive a benefit in money, property or services to which the director is not legally entitled. If Nevada General Corporation Law is hereafter amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director shall be eliminated or limited to the full extent permitted by Nevada General Corporation Law as so amended. Any repeal or modification of this Article shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification for or with respect to an act or omission of such director occurring prior to such repeal or modification.

 

 
 

 

ARTICLE XI - INDEMNIFICATION

 

Section 1. Right to Indemnification. Each person (including here and hereinafter, the heirs, executors, administrators or estate of such person) (1) who is or was a director or officer of the Corporation or who is or was serving at the request of the Corporation in the position of a director, officer, trustee, partner, agent or employee of another corporation, partnership, joint venture, trust or other enterprise, or (2) who is or was an agent or employee (other than an officer) of the Corporation and as to whom the Corporation has agreed to grant such indemnity, shall be indemnified by the Corporation as of right to the fullest extent permitted or authorized by current or future legislation or by current or future judicial or administrative decision (but, in the case of any future legislation or decision, only to the extent that it permits the Corporation to provide broader indemnification rights than permitted prior to the legislation or decision), against all fines, liabilities, settlements, costs and expenses, including attorneys’ fees, asserted against him or incurred by him in his capacity as such director, officer, trustee, partner, agent or employee, or arising out of his status as such director, officer, trustee, partner, agent or employee. The foregoing right of indemnification shall not be exclusive of other rights to which those seeking indemnification may be entitled. The Corporation may maintain insurance, at its expense, to protect itself and any such person against any such fine, liability, cost or expense, including attorney’s fees, whether or not the Corporation would have the legal power to directly indemnify him against such liability.

 

Section 2. Advances. Costs, charges and expenses (including attorneys’ fees) incurred by a person referred to in Section 1 of this Article XI in defending a civil or criminal suit, action or proceeding may be paid (and, in the case of directors and officers of the Corporation, shall be paid) by the Corporation from time to time in the course thereof and in advance of the final disposition thereof upon receipt of an undertaking to repay all amounts advanced if it is ultimately determined that the person is not entitled to be indemnified by the Corporation as authorized by this Article XI, and upon satisfaction of other conditions established from time to time by the Board of Directors or which may be required by current or future legislation (but, with respect to future legislation, only to the extent that it provides conditions less burdensome than those previously provided).

 

Section 3. Savings Clause. If this Article XI or any portion of it is invalidated on any ground by a court of competent jurisdiction, the Corporation shall nevertheless indemnify each director and officer of the Corporation to the fullest extent permitted by all portions of this Article VI that has not been invalidated and to the fullest extent permitted by law.

 

Effective Date. The effective date of these Amended and Restated Articles of Incorporation shall be the close of business on the date of filing with the Nevada Secretary of State.

 

Adoption of Amendment. The foregoing Amend and Restated Articles of Incorporation was approved by the Board of Directors of the Corporation by unanimous written consent in lieu of meeting on April 25, 2014.

 

The Amended and Restated Articles of Incorporation were approved by the written consent of holders of a majority of our outstanding common stock, our only voting group, on April 25, 2014. The number of votes cast for the amendment was sufficient for approval by holders of common stock, our only voting group.

 

IN WITNESS WHEREOF, the undersigned has executed these Amended and Restated Articles of Incorporation as of April 25, 2014.

 

  DIGNYTE INC.
     
  By:  
  Name:

Andreas McRobbie-Johnson

  Title: Chief Executive Officer

 

 
 

 

 
 

 

  

 
 

  

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

  

 
 

 

  

 
 

 

  

 
 

 

  

 
 

  

 

 
 

  

 

 
 

 

  

 
 

 

  

 
 

 

  

 
 

  

Exhibit D

Form of Subscription Agreement

 

Subscription Agreement

  

The undersigned “Subscriber”, on the terms and conditions herein set forth, hereby irrevocable submits this subscription agreement (the “Subscription”) to Dignyte, Inc., a Nevada corporation (the “Company”), in connection with a private placement by the Company (the “Offering”) of its common stock, $0.001 par value per common share (hereinafter, the “Shares”), as described below.

 

1. Subscription for the Purchase of Shares.

 

THE UNDERSIGNED hereby subscribes to purchase (________________) Shares of DIGNYTE, INC., a Nevada corporation, (the “Company”) at a price of $0.10 per Share for a total purchase price of $_______. The purchase price will be paid as follows: $.09 per share in cash from the Rule 419 Trust Account Balance as defined in the Memorandum and $0.01 per share which investors previously paid to the Company in connection with its Rule 419 offering discussed in the Memorandum.

 

Whereas, the undersigned in connection with its purchase warrants and represents to the Company the following:

 

The Company’s private placement of the Shares is being made to both “accredited” and “non-accredited” investors within the meaning of Rule 506 of Regulation D promulgated by the Securities Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”).

 

1.2 Offer to Purchase. Subscriber hereby irrevocably offers to purchase the Shares and tenders, herewith, the total price noted above by way of delivery of the Escrow Agent Disbursement Authorization attached hereto as Exhibit A. Subscriber recognizes and agrees that this subscription is irrevocable except as provided for in the Company’s Private Placement Memorandum dated April 25, 2014 (the “Memorandum”) and, if Subscriber is a natural person, shall survive Subscriber’s death, disability or other incapacity. This Subscription shall be deemed to be accepted by the Company only when the Company executes the Subscription Agreement.

 

1.3 Effect of Acceptance. Subscriber hereby acknowledges and agrees that on the Company’s acceptance of this Subscription, this agreement shall become a binding and fully enforceable agreement between the Company and the Subscriber. As a result, on acceptance by the Company of this Subscription, Subscriber will become the record and beneficial holder of the Shares and the Company will be entitled to the purchase price of the Shares.

 

2. Representation as to Investor Status. Subscriber hereby represents and warrants to the Company as follows:

 

(a) The Shares are being acquired for Subscriber’s own account for investment, with no intention by Subscriber to distribute or sell any portion thereof within the meaning of the Securities Act, and will not be transferred by Subscriber in violation of the Securities Act or the then applicable rules or regulations thereunder. No one other than Subscriber has any interest in or any right to acquire the Shares. Subscriber understands and acknowledges that the Company will have no obligation to recognize the ownership, beneficial or otherwise, of the Shares by anyone but Subscriber.

 

 
 

 

(b) Subscriber’s financial condition is such that Subscriber is able to bear the risk of holding the Shares that Subscriber may acquire pursuant to this Agreement, for an indefinite period of time, and the risk of loss of Subscriber’s entire investment in the Company.

 

(c) Subscriber has received, has read and understood and is familiar with this Subscription Agreement and the Memorandum and meets the Suitability Standards set forth in the Memorandum.

 

(d) The Company has made available all additional information which Subscriber has requested in connection with the Company and its representatives and Subscriber has been afforded an opportunity to make further inquiries of the Company and its representatives and the opportunity to obtain any additional information (to the extent the Company has such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of information furnished by the Company to Subscriber.

 

(e) No representations or warranties have been made to Subscriber by the Company, or any representative of the Company, or any securities broker/dealer, other than as set forth in this Subscription Agreement and the Memorandum.

 

(f) Subscriber has investigated the acquisition of the Shares to the extent Subscriber deemed necessary or desirable and the Company has provided Subscriber with any reasonable assistance Subscriber has requested in connection therewith.

 

(g) Subscriber, either personally, or together with his advisors (other than any securities broker/dealers who may receive compensation from the sale of any of the Shares), has such knowledge and experience in financial and business matters that Subscriber is capable of evaluating the merits and risks of purchasing the Shares and of making an informed investment decision with respect thereto.

 

(h) Subscriber is aware that Subscriber’s rights to transfer the Shares are restricted by the Securities Act and applicable state securities laws, and Subscriber will not offer for sale, sell or otherwise transfer the Shares without registration under the Securities Act and qualification under the securities laws of all applicable states, unless such sale would be exempt therefrom.

 

(i) Subscriber understands and agrees that the Shares acquired have not been registered under the Securities Act or any state securities act in reliance on exemptions therefrom and that the Company has no obligation to register any of the Shares offered by the Company as set forth in the Memorandum. Subscriber further acknowledges that Subscriber is purchasing the Shares after having been provided with the Memorandum.

 

(j) The Subscriber has had an opportunity to ask questions of, and receive answers from, representatives of the Company concerning the terms and conditions of this investment and all such questions have been answered to the full satisfaction of the undersigned. Subscriber understands that no person other than the Company has been authorized to make any representation and if made, such representation may not be relied on unless it is made in writing and signed by the Company. The Company has not, however, rendered any investment advice to the undersigned with respect to the suitability

 

 
 

  

(k) Upon conversion, redemption or other, any certificate representing the Common Stock will be endorsed with a restrictive legend similar to the following:

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO ANY EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER AND UNDER APPLICABLE STATE LAW, THE AVAILABILITY OF WHICH MUST BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED FROM ANY SALE OR TRANSFER PURSUANT TO THE LOCK UP TERMS SET FORTH IN SECTION 3 OF A SUBSCRIPTION AGREEMENT DATED AND EFFECTIVE AS OF APRIL 25, 2014.

 

(l) Subscriber also acknowledges and agrees to the following:

 

(i) an investment in the Shares is speculative and involves a high degree of risk of loss of the entire investment in the Company; and

 

(ii) there is no assurance that a public market for the Shares will be available and that, as a result, Subscriber may not be able to liquidate Subscriber’s investment in the Shares should a need arise to do so.

 

(m) Subscriber is not dependent for liquidity on any of the amounts Subscriber is investing in the Shares.

 

(n) Subscriber’s address set forth below is his or her correct residence address.

 

(o) Subscriber has full power and authority to make the representations referred to herein, to purchase the Shares and to execute and deliver this Subscription Agreement.

 

(p) Subscriber understands that the foregoing representations and warranties are to be relied upon by the Company as a basis for the exemptions from registration and qualification of the sale of the Shares under the federal and state securities laws and for other purposes.

 

The foregoing representations and warranties are true and accurate as of the date hereof and shall survive such date. If any of the above representations and warranties shall cease to be true and accurate prior to the acceptance of this Subscription, Subscriber shall give prompt notice of such fact to the Company by telegram, or facsimile or e-mail, specifying which representations and warranties are not true and accurate and the reasons therefor.

 

3. Lock-Up Terms.

 

(a) Subscriber irrevocably agrees with the Company that, from April 25, 2014 until April 24, 2015 (such period, the “Restriction Period”), Subscriber will not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by Subscriber or any person in privity with Subscriber), directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, 50% of the Shares acquired in the Offering (the “Securities”). Notwithstanding the foregoing, Subscriber may transfer the Securities he owns (i) as a bona fide gift or gifts, provided that the donee or donees thereof agree to be bound in writing by the restrictions set forth herein, or (ii) to any trust for the direct or indirect benefit of Subscriber or the immediate family of Subscriber, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value; or (iii) as otherwise permitted by the Company. For purposes of this Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. Beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. In order to enforce this covenant, the Company shall impose irrevocable stop-transfer instructions preventing the Transfer Agent from effecting any actions in violation of this Agreement and any certificates of the Company’s common stock covered by this Agreement shall bear an additional restrictive legend as set forth in Section 2(k) of this Agreement.

 

 
 

  

(b) Subscriber acknowledges that the execution, delivery and performance of these Lock-Up restrictions is a material inducement to the Company to sell the Common Stock as set forth in the Memorandum and the Company shall be entitled to specific performance of Subscriber’s obligations hereunder. Subscriber hereby represents that Subscriber has the power and authority to execute, deliver and perform this Agreement, that Subscriber has received adequate consideration therefor and that Subscriber will indirectly benefit from the completion of the transactions contemplated by the Memorandum.

 

4. Transferability. Subscriber agrees not to transfer or assign this Subscription Agreement, or any interest herein, and further agrees that the assignment and transferability of the Shares acquired pursuant hereto shall be made only in accordance with applicable federal and state securities laws.

 

5. Amendments. Neither this Subscription Agreement nor any term hereof may be changed, waived, discharged or terminated except in a writing signed by Subscriber and the Company.

 

6. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Nevada without regard to the principles of conflict of laws. Subscriber hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in Las Vegas Nevada and the courts of the State of Nevada located in Las Vegas, for the purposes of any suit, action or proceeding arising out of or relating to this Agreement, and hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that (i) it is not personally subject to the jurisdiction of such court, (ii) the suit, action or proceeding is brought in an inconvenient forum, or (iii) the venue of the suit, action or proceeding is improper. Subscriber hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under the Memorandum and agrees that such service shall constitute good and sufficient service of process and notice thereof. Subscriber hereby waives any right to a trial by jury. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. .

 

7. Headings. The headings in this Subscription Agreement are for convenience of reference, and shall not by themselves determine the meaning of this Subscription Agreement or of any part hereof.

 

In witness whereof, the parties hereto have executed this Agreement as of the dates set forth below.

 

SUBSCRIBER:   DIGNYTE, INC.
      a Nevada corporation
Signature(s):      
         
Name:   By:  
        Andreas A. McRobbie-Johnson
         
Residence Address:   Title:   Chief Executive Officer
       
    Date: April _____, 2014
         
Phone Number: (               )                 -      
         
Cellular Number: (               )                 -      
         
Social Security Number:      
         
Email address:                                     @      
         
Dated: April ___, 2014.      

 

 
 

 

Evolve Bank & Trust, as Escrow Agent

 

DISBURSEMENT AUTHORIZATION

 

Re: Escrow Agreement dated July 12, 2012 (the “Escrow Agreement”) between Dignyte, Inc. (the “Company”), Andreas A. McRobbie-Johnson and Evolve Bank & Trust (“Escrow Agent”)

 

Ladies and Gentlemen:

 

The undersigned is an investor in the Company’s Rule 419 offering and subscribed for the number of shares of the Company’s common stock set forth below. Although the Company did not complete the reconfirmation offering within eighteen (18) months of the September 14, 2012 effective date of its Registration Statement as provided for in the Escrow Agreement, the undersigned has elected to purchase shares of the Company’s common stock in a private placement of the Shares included in the Rule 419 offering.

 

For this reason, you are hereby instructed to disburse the undersigned’s prorata share of the Escrow Funds to the Company and deliver the undersigned’s Shares to the undersigned at the address listed below.

 

The undersigned hereby agrees to indemnify and hold harmless the Escrow Agent against any and all losses, claims, damages, liabilities, attorneys’ fees (even if Escrow Agent represents itself), and expenses, including any litigation arising from these instructions.

 

The defined terms in this letter of instruction shall have the same meaning as the defined term in the Escrow Agreement.

 

INVESTOR:       CONSENT
         
Signature(s):     The Company hereby consents to the above action.
         
Name:     DIGNYTE, INC.
      a Nevada corporation
Address:        
      By:  
        Andreas A. McRobbie-Johnson 
No. of Shares:      
      Title: Chief Executive Officer
     
      Date: April __, 2014.
Dated: April ___, 2014.