UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2018

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 000-55203

 

 

eWELLNESS HEALTHCARE CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada   45-1560906

(State or other jurisdiction of

incorporation or organization)

  (I.R.S. Employer
Identification No.)
     
11825 Major Street, Culver City, California   90230
(Address of principal executive offices)   (Zip Code)

 

(310) 915-9700

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Ruble 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
   
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

The number of shares of Common Stock, $0.001 per share par value, outstanding on August 13, 2018 was 174,114,818 shares.

 

 

 

     
 

 

TABLE OF CONTENTS

 

  Page
PART I - FINANCIAL INFORMATION  
Item 1 Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16
Item 3 Quantitative and Qualitative Disclosures About Market Risk 24
Item 4 Controls and Procedures 25
PART II - OTHER INFORMATION  
Item 1 Unregistered Sales of Equity Securities and Use of Proceeds 25
Item 2 Exhibits 25
Signatures 26

 

2

 

 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

eWELLNESS HEALTHCARE CORPORATION

CONDENSED BALANCE SHEETS

 

    June 30, 2018     December 31, 2017  
    (unaudited)        
             
ASSETS                
                 
CURRENT ASSETS                
Cash   $ 9,083     $ 6,882  
Prepaid Expenses     171,570       179,827  
                 
Total current assets     180,653       186,709  
                 
Property & equipment, net     8,439       5,021  
Intangible assets, net     12,477       13,954  
                 
TOTAL ASSETS   $ 201,569     $ 205,684  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
CURRENT LIABILITIES                
Accounts payable and accrued expenses   $ 316,025     $ 345,956  
Accounts payable - related party     564,752       351,511  
Accrued expenses - related party     218,000       210,828  
Accrued compensation     1,120,960       1,071,369  
Contingent liability     90,000       90,000  
Convertible debt, net of discount     669,650       444,680  
Derivative liability     376,951       1,140,578  
Short term note and liabilities     -       180,051  
                 
Total current liabilities     3,356,338       3,834,973  
                 
Total Liabilities     3,356,338       3,834,973  
                 
COMMITMENTS AND CONTINGENCIES     -       -  
                 
STOCKHOLDERS’ DEFICIT                
Preferred stock, authorized, 20,000,000 shares, $.001 par value, 0 shares issued and outstanding     -       -  
Common stock, authorized 400,000,000 shares, $.001 par value, 165,856,760 and 142,352,406 issued and outstanding     165,857       142,352  
Shares to be issued     14,800       -  
Additional paid in capital     15,221,625       13,178,131  
Accumulated deficit     (18,557,051 )     (16,949,772 )
                 
Total Stockholders’ Deficit     (3,154,769 )     (3,629,289 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 201,569     $ 205,684  

 

The accompanying notes are an integral part of these condensed financial statements

 

3

 

 

eWELLNESS HEALTHCARE CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

 

    Three Months Ended     Six Months Ended  
    June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017  
                         
OPERATING EXPENSES                                
Executive compensation     102,000       102,000       204,000       204,000  
General and administrative     290,748       234,841       487,438       418,178  
Professional fees     440,326       612,721       952,851       1,316,732  
                                 
Total Operating Expenses     833,074       949,562       1,644,289       1,938,910  
                                 
Loss from Operations     (833,074 )     (949,562 )     (1,644,289 )     (1,938,910 )
                                 
OTHER INCOME (EXPENSE)                                
Foreign exchange rate     692       24,691       8,091       37,404  
Gain (loss) on derivative liability     (116,275 )     (843,038 )     393,477       4,399,596  
Gain (loss) on extinguishment of debt     (43,131 )     -       (43,131 )     -  
Interest expense     (139,891 )     (120,567 )     (319,800 )     (223,920 )
                                 
Net Income (Loss) before Income Taxes     (1,131,679 )     (1,888,476 )     (1,605,652 )     2,274,170  
                                 
Income tax expense     (1,627 )     -       (1,627 )     (800 )
                                 
Net Income (Loss)   $ (1,133,306 )   $ (1,888,476 )   $ (1,607,279 )   $ 2,273,370  
                                 
Earnings (loss) per common share                                
Basic   $ (0.01 )   $ (0.02 )   $ (0.01 )   $ 0.03  
Diluted   $ (0.01 )   $ (0.02 )   $ (0.01 )   $ 0.03  
                                 
Weighted average shares outstanding                                
Basic     156,216,150       105,459,623       151,077,846       82,876,801  
Diluted     156,216,150       105,459,623       151,077,846       85,564,942  

 

The accompanying notes are an integral part of these condensed financial statements

 

4

 

 

eWELLNESS HEALTHCARE CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

 

    For Six Months Ended  
    June 30, 2018     June 30, 2017  
             
Cash flows from operating activies                
Net income (loss)   $ (1,607,279 )   $ 2,273,370  
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
               
Depreciation and amortization     2,996       2,512  
Contributed services     111,000       109,500  
Shares issued for consulting services     250,700       94,150  
Shares issued for contribution     70,000       -  
Options expense     217,188       217,188  
Amortization of debt discount to interest expense     239,710       176,296  
Amortization of prepaids     126,992       789,994  
Foreign currency exchange     8,091       -  
Gain on derivative liability     (393,477 )     (4,399,596 )
Loss on extinguishment of debt     43,131       -  
Changes in operating assets and liabilities                
Prepaid expense     90,265       (43,752 )
Accounts payable and accrued expenses     38,572       22,583  
Accounts payable - related party     213,241       17,169  
Accrued expenses - related party     7,172       77,441  
Accrued compensation     49,591       47,666  
                 
Net cash used in operating activities     (532,107 )     (615,479 )
                 
Cash flows from investing activities                
Purchase of equipment     (4,937 )     (2,910 )
Net cash used in investing activities     (4,937 )     (2,910 )
                 
Cash flows from financing activities                
Issuance of convertible debt     594,800       776,500  
Payment on debt     (1,005 )     -  
Debt issuance costs     (54,550 )     (110,550 )
                 
Net cash provided by financing activities     539,245       665,950  
                 
Net increase in cash     2,201       47,561  
                 
Cash, beginning of period     6,882       13,995  
                 
Cash, end of period   $ 9,083     $ 61,556  
                 
Supplemental Information:                
Cash paid for:                
Taxes   $ 1,267     $ 800  
Interest Expense   $ -     $ -  
Non cash items:                
Warrants issued with debt   $ -     $ 86,730  
Derivative liability and debt discount issued with new notes   $ 219,526     $ 155,885  
Shares issued for debt conversion   $ 569,999     $ 3,220,392  
Exercise of warrants   $ -     $ 109,978  
Shares issued for extinguishment of accounts payable   $ -     $ 309,000  
Shares issued for prepaids   $ 209,000     $ 278,500  

 

The accompanying notes are an integral part of these condensed financial statements

 

5

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

Note 1. The Company

 

The Company and Nature of Business

 

eWellness Healthcare Corporation (the “eWellness”, “Company”, “we”, “us”, “our”) was incorporated in the State of Nevada on April 7, 2011. The Company has generated no revenues to date.

 

eWellness is the first physical therapy telehealth company to offer insurance reimbursable real-time distance monitored treatments. Our business model is to license our PHZIO (“PHZIO”) platform to any physical therapy (“PT”) clinic in the U.S. and or have large-scale employers use our PHZIO platform as a fully PT monitored corporate wellness program. The Company’s PHZIO home physical therapy exercise platform has been designed to disrupt the $30 billion physical therapy and the $8 billion corporate wellness industries. PHZIO re-defines the way physical therapy can be delivered. PHZIO is the first real-time remote monitored 1-to-many physical therapy platform for home use. Due to the real-time patient monitoring feature, the PHZIO platform is insurance reimbursable by payers such as: Anthem Blue Cross and Blue Shield.

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements. Accordingly, they omit or condense notes and certain other information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles. The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in Note 2 to the Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, all adjustments necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2018 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2018. The unaudited condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from these good faith estimates and judgments.

 

Going Concern

 

For the six months ended June 30, 2018, the Company had no revenues. The Company has an accumulated loss of $18,557,051. 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.

 

6

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

Fair Value of Financial Instruments

 

As of June 30, 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   $ 376,951     $ -     $ -     $ 376,951  
Total Liabilities measured at fair value   $ 376,951     $ -     $ -     $ 376,951  

 

As of December 31, 2017, the Company had the following assets and liabilities measured at fair value on a recurring basis.

 

    Total     Level 1     Level 2     Level 3  
Derivative Liability   $ 1,140,578     $ -     $ -     $ 1,140,578  
Total Liabilities measured at fair value   $ 1,140,578     $ -     $ -     $ 1,140,578  

 

Note 3. Related Party Transactions

 

During the six months ended June 30, 2018, a company for which the Company’s former Secretary-Treasurer and CFO is also serving as CFO, invoiced the Company $10,430 for accounting services. The amount outstanding as of June 30, 2018 and December 31, 2017 was $1,920 and $700, respectively.

 

In April 2015, the Company entered into an operating agreement with a physical therapy company (“EPT”) which is owned by the Company’s President and Chief Executive Officer. Through the agreement, the Company agrees to provide operating capital advances for EPT to offer the Company’s PHIZIO platform to physical therapy patients. For accounting and tax purposes, the net profits or losses generated by EPT shall be allocated monthly. The Company will receive 75% of the net patient insurance reimbursements associated with the operation of the PHIZIO platform.

 

In November 2016, the Company signed an agreement with a programming company (“PC”) within which one of the Company’s directors and Chief Technical Officer is the Chief Marketing Officer. The agreement is for additional features to be programmed for the launch of the 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 June 30, 2018, the Company had a payable of $562,832 due to this company.

 

The Company rents its Culver City, CA office space from a company owned by our CEO. The imputed rent expense of $500 per month is recorded in the Statement of Operations and Additional Paid in Capital in the Balance Sheet.

 

Throughout the period ended June 30, 2018, the officers and directors of the Company incurred business expenses on behalf of the Company. The amounts payable to the officers as of June 30, 2018 and December 31, 2017 were $0 and $5,828, respectively. There were no expenses due to the board members, but the Company has accrued directors’ fees of $218,000 and $205,000 at June 30, 2018 and December 31, 2017, respectively. Because the Company is not yet profitable the officers have agreed to defer compensation. The Company had accrued executive compensation of $1,120,960 and $1,071,369 at June 30, 2018 and December 31, 2017 respectively.

 

7

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

Note 4. Non-Convertible Notes Payable

 

In February 2017, the Company was served by a complaint filed by the holder of a note payable. The action was removed from Louisiana state court to the United States Federal District Court in Baton Rouge, LA. The lawsuit alleges that the Company is indebted to the note holder a promissory note stemming from four loans to the Company during the 20 months prior to February 2017 amounting to $75,500 in total original principal bearing interest at 12% per annum, of which $45,202 has been repaid. Further, the note holder claims that, because of alleged defaults and extensions of the notes, the Company is now indebted in the amount of $253,877 inclusive of interest and penalties at an effective rate exceeding 70% per annum, far more than the maximum rate allowable in California or Louisiana. The Company and its counsel have determined that: (i) the note holder is not a licensed lender in the State of California, where the loan was made and the $75,500 was deposited and therefore was not permitted under California law to make loans in the State; and (ii) the interest rate the note holder is seeking to collect is usurious and therefore interest claimed in the lawsuit is neither collectible nor enforceable. In October 2017 the complainant and his counsel motioned to dismiss the unlicensed lender assertion. In January 2018 the U.S. District Court, Louisiana ruled that the unlicensed lender assertion was to proceed. The Company and counsel believe that the suit is wholly without merit and the company will prevail.

 

On June 20, 2018, a settlement agreement was signed between the Company and holder of the note payable with the following terms for the cancellation of the note payable, accrued interest and warrants:

 

  1. The Company will issue 2,709,444 shares of commons stock that is immediately tradeable under Securities and Exchange Commission Rule 144, but subject to a daily trading limit of 25,000 shares per day;
  2. The Company will issue 1,290,556 shares of common stock that shall be subject to a 180-day holding period and are also subject to a daily trading limit of 25,000 shares per day;
  3. The holder of the note payable shall bear all fees and expenses, including attorneys’ fees, associated with the transfer and trading of the Company’s shares;
  4. Beyond issuing the shares noted above, the Company shall not take any additional action that would cause the note holder to incur tax consequence from the transfer or would affect the note holder’s tax consequences in any way.

 

The Company issued the 4,000,000 shares of common stock on June 20, 3018. At June 30, 2018, the Company had no indebtedness to this holder of the note payable principal or accrued interest. During the six months ended June 30, 2018 and 2017, the Company accrued interest expense totaling $15,183 and $16,071, respectively.

 

Note 5. Convertible Notes Payable

 

In January 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $110,000. The note, which is due on October 12, 2018 has an original issue discount of $10,000. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) $0.20 or (ii) 65% of the lowest per share trading price for the fifteen (15) trading days prior to the conversion date. Conversion into shares of common stock can commend immediately following the 180 th calendar day after the Original Issue Date. During the six months ended June 30, 2018, the Company recognized interest expense of $4,099.

 

8

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

In January 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $91,300. The note, which is due on October 30, 2018, has an original issue discount of $8,300. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days prior to the conversion date. Conversion into shares of common stock can commence immediately following the 180 th calendar day after the Original Issue Date. During the six months ended June 30, 2018, the Company recognized interest expense of $5,073.

 

In February 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $63,800. The note, which is due on November 30, 2018, has an original issue discount of $5,800. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days prior to the conversion date. Conversion into shares of common stock can commence immediately following the 180 th calendar day after the Original Issue Date. During the six months ended June 30, 2018, the Company recognized interest expense of $2,853.

 

In March 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $77,000. The note, which is due on December 5, 2018, has an original issue discount of $7,000. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $0.20 or (ii) 75% of the average of the three daily VWAPs for the trading price for the twenty (20) trading days before the 181 st calendar date of the note or the ten (10) trading days if after the 181 st calendar day of the note. During the six months ended June 30, 2018, the Company recognized interest expense of $1,975. 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.

 

In March 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $72,450. The note, which is due on December 30, 2018, has an original issue discount of $9,450. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days prior to the conversion date. Conversion into shares of common stock immediately following the 180 th calendar day after the Original Issue Date. During the six months ended June 30, 2018, the Company recognized interest expense of $2,453.

 

In May 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $125,000. The note, which is due on May 10, 2019, has an original issue discount of $3,750. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock at a price 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 six months ended June 30, 2018, the Company recognized interest expense of $1,370.

 

9

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

In May 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $51,750. The note, which is due on March 1, 2019, has an original issue discount of $6,750. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days 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 six months ended June 30, 2018, the Company recognized interest expense of $612.

 

Note 6. Equity Transactions

 

Common Stock

 

In January 2018, the Board of Directors approved the extension of an Advisory Agreement dated February 15, 2015 for one year. The Company issued 800,000 shares of common stock as compensation with a value of $104,000. This value is being amortized over the life of the contract.

 

During the six months ended June 30, 2018, the Company agreed to issue a total of 200,000 shares of common stock for consulting services at a value of $14,800. At the end of June 30, 2018, these shares had not yet been issued and are recorded in Shares to be Issued.

 

During the six months ended June 30, 2018, the Company issued a total of 13,654,354 shares of common stock per debt conversion of convertible notes dated April, July, September and December 2017. The total of the debt conversion was $569,998 which includes $19,776 of accrued interest.

 

During the six months ended June 30, 2018, the Company issued 2,550,000 shares of common stock for marketing and consulting services valued at $235,900.

 

During the six months ended June 30, 2018, the Company issued 4,000,000 shares of common stock for settlement of a complaint filed in the United States Federal District Count (see Footnote 4). The debt settled totaled $236,868 which includes $56,817 of accrued interest.

 

In June 2018, the Company entered into a consulting agreement within which the Company agreed to issue 125,000 shares of common stock per month beginning in July 2018 and 1,500,000 shares of common stock upon signing of the agreement. The 1,500,000 shares of common stock were issued with a value of $105,000 which is being amortized over the life of the contract.

 

In June 2018, the Company executed an Equity Purchase Agreement with an institutional investor within which the investor agrees to purchase up to $1,500,000 of the Company’s common stock, par value $0.001. As an inducement to the investor to enter into the agreement, the Company issued 1,000,000 restricted shares of common stock to the investor valued at $70,000.

 

In January 2018, the Board of Directors agreed to form an eWellness Healthcare Corporation 2018 Equity Incentive Plan (“Plan”). The Plan shall be for 20,000,000 shares of common stock that will be placed in a 10b5-1 Sales Plan that will be registered under an S-8 Registration Statement. Under the sales plan, each recipient will open an account with Garden State Securities (“GSS”) for management of all sales of shares issued under the Plan. Quarterly limitations are placed on the number of shares that can be sold. The Company initially allocated 17,400,000 shares to officers, directors and consultants. As of June 30, 2018, no shares have been issued.

 

10

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

Stock Options

 

The following is a summary of the status of all Company’s stock options as of June 30, 2018 and changes during the six months ended on that date:

 

        Weighted              
    Number
of Stock
    Average
Exercise
    Remaining     Intrinsic  
    Options     Price     Life (yrs)     Value  
Outstanding at December 31, 2017     20,000,000     $ 0.26       1.9     $ -  
Granted     -       -                  
Exercised     -       -                  
Cancelled     -       -                  
Outstanding at June 30, 2018     20,000,000       0.26       1.8     $ -  
Options exercisable at June 30, 2018     16,398,958     $ 0.28       1.8     $ -  

 

The Company recognized stock option expense of $217,188 and $217,288 for the six months ended June 30, 2018 and 2017.

 

Warrants

 

In March 2018, the Board of Directors, at the request and with the approval of the investors, determined that it was in the best interests of the Company and the Investors, based upon market price and relatively limited liquidity of the shares of common stock that the Company revised the expiration date and exercise price for 417,429 unexercised warrants granted on April 9, 2015. The original expiration date of April 9, 2018 is extended to April 9, 2019. The original exercise price of $.35 is reduced to $.05.

 

In February 2017, the Company authorized the issuance of 68,750 warrants that were issued as part of a convertible note. At June 30, 2018 the fair value of the warrants is $5,932.

 

In April 2017, the Company authorized the issuance of 1,232,000 warrants that were issued as part of a convertible note. At June 30, 2018 the fair value of the warrants is $106,732.

 

The following is a summary of the status of the Company’s warrants as of June 30, 2018 and changes during the six months ended on that date:

 

          Weighted              
    Number of     Average
Exercise
    Remaining     Intrinsic  
    Warrants     Price     Life (yrs.)     Value  
Outstanding at December 31, 2017     8,753,179     $ 0.21       2.4     $ 0.038  
Granted     417,429     $ 0.05       1.0       -  
Exercised     -       -       -       -  
Cancelled     3,217,429     $ 0.05       1.0       -  
Outstanding at June 30, 2018     5,953,179     $ 0.31       2.4     $ 0.038  
Warrants exercisable at June 30, 2018     5,953,179     $ 0.31       2.4     $ 0.038  

 

11

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

For purpose of determining the fair market value of the warrants and options outstanding at June 30, 2018, we used the Black Scholes option valuation model. These valuations were done throughout the period at the date of issuance and not necessarily as of the reporting date. The assumptions used in the Black Scholes valuation of the date of issuance are as follows:

 

Stock price on the valuation date   $ .0673-.089  
Exercise price of warrants   $ .004 and .25  
Dividend yield     0.00 %
Years to maturity     3-4  
Risk free rate     2.33%-2.68 %
Expected volatility     245.23%-257.73 %

 

Note 7. Commitments, Contingencies

 

The Company may be subject to lawsuits, administrative proceedings, regulatory reviews or investigations associated with its business and other matters arising in the normal conduct of its business. The following is a description of an uncertainty that is considered other than ordinary, routine and incidental to the business.

 

The closing of the Initial Exchange Agreement with Private Co. was conditioned upon certain, limited customary representations and warranties, as well as, among other things, our compliance with Rule 419 (“Rule 419”) of Regulation C under the Securities Act of 1933, as amended (the “Securities Act”) and the consent of our shareholders as required under Rule 419. Accordingly, we conducted a “Blank Check” offering subject to Rule 419 (the “Rule 419 Offering”) and filed a Registration Statement on Form S-1 to register the shares of such offering; the Registration Statement was declared effective on September 14, 2012. We used 10% of the subscription proceeds as permitted under Rule 419 and the amount remaining in the escrow trust as of the date of the closing of the Share Exchange was $90,000 (the “Trust Account Balance”).

 

Rule 419 required that the Share Exchange occur on or before March 18, 2014, but due to normal negotiations regarding the transactions and the parties’ efforts to satisfy all the closing conditions, the Share Exchange did not close on such date. Accordingly, after numerous discussions with management of both parties, they entered into an Amended and Restated Share Exchange Agreement (the “Share Exchange Agreement”) to reflect a revised business combination structure, pursuant to which we would: (i) file a registration statement on Form 8-A (“Form 8A”) to register our common stock pursuant to Section 12(g) of the Exchange Act, which we did on May 1, 2014 and (ii) seek to convert the participants of the Rule 419 Offering into participants of a similarly termed private offering (the “Converted Offering”), to be conducted pursuant to Regulation D, as promulgated under the Securities Act.

 

Fifty-two persons participated in the Rule 419 Offering and each of them gave the Company his/her/its consent to use his/her/its escrowed funds to purchase shares of the Company’s restricted common stock in the Converted Offering (the “Consent”) rather than have their funds returned. To avoid further administrative work for the investors, we believe that we took reasonable steps to inform investors of the situation and provided them with an appropriate opportunity to maintain their investment in the Company, if they so choose, or have their funds physically returned. Management believed the steps it took constituted a constructive return of the funds and therefore met the requirements of Rule 419.

 

However, pursuant to Rule 419(e)(2)(iv), “funds held in the escrow or trust account shall be returned by first class mail or equally prompt means to the purchaser within five business days [if the related acquisition transaction does not occur by a date that is 18 months after the effective date of the related registration statement].” As set forth above, rather than physically return the funds, we sought consent from the investors of the Rule 419 Offering to direct their escrowed funds to the Company to instead purchase shares in the Converted Offering. The consent document (which was essentially a form of rescission) was given to the investors along with a private placement memorandum describing the Converted Offering and stated that any investor who elected not to participate in the Converted Offering would get 90% of their funds physically returned. Pursuant to Rule 419(b)(2)(vi), a blank check company is entitled to use 10% of the proceed/escrowed funds; therefore, if a return of funds is required, only 90% of the proceed/escrowed funds need be returned. The Company received $100,000 proceeds and used $10,000 as per Rule 419(b)(2)(vi); therefore, only $90,000 was subject to possible return.

 

12

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

As disclosed therein, we filed the amendments to the initial Form 8-K in response to comments from the SEC regarding the Form 8-K and many of those comments pertain to an alleged violation of Rule 419. The Company continued to provide the SEC with information and analysis as to why it believes it did not violate Rule 419 but was unable to satisfy the SEC’s concerns. Comments and communications indicate that Rule 419 requires a physical return of funds if a 419 offering cannot be completed because a business combination was not consummated within the required time frame; constructive return is not permitted.

 

Because of these communications and past comments, we are disclosing that we did not comply with the requirements of Rule 419, which required us to physically return the funds previously submitted to escrow pursuant to the Rule 419 Offering. Because of our failure to comply with Rule 419, the SEC may bring an enforcement action or commence litigation against us for failure to strictly comply with Rule 419. If any claims or actions were to be brought against us relating to our lack of compliance with Rule 419, we could be subject to penalties (including criminal penalties), required to pay fines, make damages payments or settlement payments. In addition, any claims or actions could force us to expend significant financial resources to defend ourselves, could divert the attention of our management from our core business and could harm our reputation.

 

Ultimately, the SEC determined to terminate its review of the Initial Form 8-K and related amendments, rather than provide us with additional opportunities to address their concerns and therefore, we did not clear their comments. It is not possible at this time to predict whether or when the SEC may initiate any proceedings, when this issue may be resolved or what, if any, penalties or other remedies may be imposed, and whether any such penalties or remedies would have a material adverse effect on our consolidated financial position, results of operations, or cash flows. Litigation and enforcement actions are inherently unpredictable, the outcome of any potential lawsuit or action is subject to significant uncertainties and, therefore, determining currently the likelihood of a loss, any SEC enforcement action and/or the measurement of the amount of any loss is complex. Consequently, we are unable to estimate the range of reasonably possible loss. Our assessment is based on an estimate and assumption that has been deemed reasonable by management, but the assessment process relies heavily on an estimate and assumption that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change that estimate and assumption. Considering the uncertainty of this issue and while Management evaluates the best and most appropriate way to resolve same, management determined to create a reserve on the Company’s Balance Sheet for the $90,000 that was subject to the Consent.

 

From time to time the Company may become a party to litigation matters involving claims against the Company. Except as may be outlined above, the Company believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

 

Note 8. Derivative Valuation

 

The Company evaluated the convertible debentures and associated warrants in accordance with ASC Topic 815, “Derivatives and Hedging,” and determined that the conversion feature of the convertible promissory notes was not afforded the exemption for conventional convertible instruments due to their variable conversion rates. The notes have no explicit limit on the number of shares issuable, so they did not meet the conditions set forth in current accounting standards for equity classification. In addition, the warrants have a Most Favored Nations clause resulting in the exercise price of the warrants also not being fixed. Therefore, these have been characterized as derivative instruments. We elected to recognize the notes under ASU paragraph 815-15-25-4, whereby there would be a separation into a host contract and derivative instrument. We elected to initially and subsequently measure the notes and warrants in their entirety at fair value, with changes in fair value recognized in earnings.

 

The debt discount is amortized over the life of the note and recognized as interest expense. For the six months ended June 30, 2018 and 2017, the Company amortized the debt discount of $239,710 and $82,443, respectively. The derivative liability is adjusted periodically according to stock price fluctuations and other inputs and was $376,951 and $1,140,578 at June 30, 2018 and December 31, 2017, respectively.

 

13

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

During the six months ended June 30, 2018, the Company had the following activity in the derivative liability account:

 

    Total  
Derivative liability at December 31, 2017   $ 1,140,578  
Addition of new conversion option derivatives     91,283  
Extinguishment due to note conversions     (258,823 )
Extinguishment due to note cancellations     (202,610 )
Changes in fair value     (393,477 )
Derivative liability at June 30, 2018   $ 376,951  

 

For purposes of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

 

Stock price at valuation date   $ .0725-.089  
Exercise price of warrants   $ .004 - .25  
Conversion rate of convertible debt   $ .0495 – 0.2000  
Risk free interest rate     1.93%-2.68 %
Stock volatility factor     110.9%-257.73 %
Years to Maturity     .08 – 4  
Expected dividend yield     None  

 

Note 9. Subsequent Events

 

In July 2018, the Company executed an 12% Fixed 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 into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) $0.21 or (ii) 75% of the lowest per share trading price for the thirty (30) trading days before the issued date of this note.

 

In July 2018, the Company executed an 3% Fixed 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 into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to 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.

 

In July 2018, the Company executed an 12% Fixed 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 into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) $0.21 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.

 

14

 

 

eWellness Healthcare Corporation

Notes to Condensed Financial Statements

June 30, 2018

(unaudited)

 

In July 2018, the Company entered into a consulting services agreement with a consultant for one year for a monthly fee of $5,000.

 

In July 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $56,500. The note, which is due on April 30, 2019 has an original issue discount of $6,500. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) $.20 or (ii) variable conversion price which is 75% of the average VWAP for the ten(10) trading day period ending on the latest compete trading day prior to the conversion date. The Company issued 100,000 shares of common stock valued at $8,000 upon execution of this note.

 

During the month of July to the filling of this report, the Company has issued 700,000 shares of common stock for consulting services valued at $52,775.

 

During the month of July to the filing of this report, the Company issued 7,408,058 shares of common stock for conversion of convertible debt valued at $369,843 which includes $138,983 of accrued interest and default fees.

 

15

 

 

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 six months ended June 30, 2018 and 2017 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, 2017.

 

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 completely disrupts the current in-clinic business model of the $30 billion PT industry. Innovators in other industries have solved access, cost and quality inefficiencies through the implementation of technology platforms and business models that deliver products and services on-demand and create new economies by connecting and empowering both consumers and businesses. We have taken the same approach to solving the pervasive access, cost and quality challenges facing the current access to PT clinics. eWellness’ underlying technology platform is complex, deeply integrated and purpose-built over the past four years for the evolving PT marketplace. eWellness’ PHZIO platform is highly scalable and can support substantial growth of third party licensees. eWellness’ PHZIO platform provides for broad interconnectivity between PT practitioners and their patients, uniquely positioning the Company as a focal point in the rapidly evolving PT industry to introduce innovative, technology-based solutions, such as remote patient monitoring, post-discharge treatment plan adherence and in-home care.

 

The Company’s 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.

 

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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 will also be hiring sales and marketing professionals to manage the new silos of business.

 

eWellness will initially rollout these new telehealth solutions within California, New York and Virginia, with plans to expand nationally over the next 6 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 will be able to receive physical therapy services at almost any hour of the day. A model that is not currently employed within traditional clinical settings.

 

Plan of Operations

 

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 5-Year Agreement with Endeavor Plus. In October 2017 eWellness executed a 5-year Comprehensive Physical Therapy Services Agreement with Endeavor Plus Services, Inc. (“EPS”), a fast-growing healthcare plan administrator. EPS projects having approximately 100,000 healthcare members in 2018. This level of sales will allow the Company to gain cash flow positive operations during the second half of 2018. Additionally, if EPS can continue their projected growth rate over the next 12-18 months an additional 500,000 new members would be added. Endeavor Plus, Inc. (“EPI”), the parent company of EPS, has taken the lead in a movement to assist small group employers to leave fully insured health plans and use partially self-funded ERISA qualified health insurance plans that are new and innovative and embrace a new era of Consumer-Driven Health Care Planning (CDHC). EPI’s mission is to bring about innovative changes using existing law and regulations to change the traditional health insurance models to drive down healthcare costs while offering significantly better benefits to both small and midsize group employers and their employees. This is accomplished further by having these employers and their employees to participate in the Endeavor Plus Plan, a CDHC program with technology-driven health care programs that are affordable, manageable and responsive to the demand for higher quality care with cost transparency, integrated health information and better provider access and communication and better outcomes.

 

EPS/PHZIO Marketing Plans. eWellness and EPS intend to immediately commence system, sales and marketing integration, to position eWellness to begin onboarding and treating EPS members in the second quarter of 2018. EPS is a third-party administrator (TPA), which is an organization that processes insurance claims or certain aspects of employee benefit plans for small and medium sized companies. EPS is projecting to grow rapidly in the small group health insurance market which has annual premiums of over $384 billion. Approximately 84% of this market is traditional full insurance. EPS is expected to grow rapidly by offering these small employers the ability to self- insure through excellent plan design and reinsurance. The Company is excited to be chosen as their PT gatekeeper as well as wellness program supplier. Our comprehensive PT & wellness programs and consulting services are anticipated to provide EPS with new products that will: (1) build new sales channels that increase their current health insurance business, and (2) create new revenue sources through the introduction of such products.

 

The Company Partnership with LifeWallet (“LW”) In February 2018 the Company signed a Partnership Agreement to co-market the Company’s PHZIO platform with LW (https://www.lifewallet.com) which provides employers, communities and healthcare professionals with a simple, consumer centric, integrated platform to assess the health of their population and monitor their progress towards better health. LifeWallet™ is transforming the delivery of care and revolutionizing the health care to wellness process with a consumer centric health platform and modern digital assistants that promote better outcomes. LW’s employees are dedicated to making the best products on earth. LWt™ is creating a one of a kind technology region in the south and has brought in developers from leading technology companies including Apple.

 

17

 

 

Concierge PT Medical Service. The Company will be provisioning to EPS and/or LW insureds a new and highly unique patient treatment protocol that includes “white glove” concierge in-home or in-office PT assessments and digital care treatments to enhance the medical treatment and help improve patient treatment outcomes. The Company will become the exclusive provider of “white glove” concierge in-home or in-office PT assessments, digital physical therapy and a wellness program to the individuals covered by EPS and or LW. The Company has been selected to be the gatekeeper for all EPS and or LW PT treatments. As the PT treatment gatekeeper, the Company will conduct an online consultation with each patient to assess the complexity involved with the patient presentation. From the online consultation, an in-home or in-office evaluation of the patient may be prescribed. Through this initial evaluation, a plan of care will be designed for each patient that in most cases is anticipated to include digital therapy sessions.

 

PreHabPT. Any individuals covered by EPS and/or LW, who are seeking non-emergency orthopedic surgery shall first receive a concierge online consultation, in-home or in-office PT therapy evaluation and will be prescribed a four to eight-week prehabpt.com exercise program prior to any surgery. Another in-home or in-office PT evaluation will be made following surgery and a treatment plan will be initiated. PreHabPT is up to an eight-week physician to patient pre-surgical (Prehab) digital therapeutic exercise treatment system for patients that anticipate having total join replacement (knee, hip and or shoulder) or back surgeries.

 

PurePT. PurePT is a patient and independent PT digital treatment platform for connecting new patients to PT’s that are seeking to be treated with our PHZIO treatment system. Patient program assessments can be made in the privacy of a patient’s home or office. PurePT connects new patients to PT’s, particularly in states that have direct access rules where patient’s insurance will reimburse for treatment without requiring a physician’s prescription. PurePT puts the patient first.

 

PHZIO Comprehensive Wellness Program Any EPS and/or LW insureds may, after an in-home or in-office PT assessment, enroll in a 6-month comprehensive wellness program. The top line wellness goals of our PHZIO wellness exercise program is to graduate at least 60% of inducted patients through our 6-month program. Patients should expect to experience an average of a 20% reduction in BMI, a two-inch reduction in waist size, weight loss of at least 10 pounds, significant overall improvement in balance, coordination, flexibility, strength and lumbopelvic stability. Patients also should score better on Functional Outcomes Scales (Oswestry and LEFS) which indicates improved functional activity levels due to reduced low back, knee and hip pain.

 

The Company’s PHZIO home physical therapy exercise platform has been designed to disrupt the $30 billion physical therapy and the $8 billion corporate wellness industries. PHZIO re-defines the way physical therapy can be delivered. PHZIO is the first real-time remote monitored 1-to-many physical therapy platform for home use. Due to the real-time patient monitoring feature, the PHZIO platform is insurance reimbursable by payers such as: Anthem Blue Cross, AETNA and Blue Shield.

 

The PHZIO Solution: A New Physical Therapy Delivery System

 

SaaS technology platform solution for providers bundling rehabilitation services and employer wellness programs;
   
First real-time remote monitored 1-to-many physical therapy treatment platform for home use;
   
Ability for physical therapists to observe multiple patients simultaneously in real-time;
   
Solves what has been a structural problem and limitation in post-acute care practice growth.
   
PT practices can experience 20% higher adherence & compliance rates versus industry standards; and
   
Tracking to 30% increase in net income for a PT practice.

 

18

 

 

Our initial PHZIO platform enables employees or patients to engage with live or on-demand video based physical therapy telemedicine treatments from their home or office. Following a physician’s exam and prescription for physical therapy to treat back, knee or hip pain, a patient can be examined by a physical therapist and if found appropriate inducted in the Company’s PHZIO program that includes a progressive 6-month telemedicine exercise program (including monthly in-clinic checkups). All PHZIO treatments are monitored by a licensed therapist that sees everything the patient is doing while providing their professional guidance and feedback in real-time. This ensures treatment compliance by the patient, maintains the safety and integrity of the prescribed exercises, tracks patient metrics and captures pre-and post-treatment evaluation data. PHZIO unlocks a host of potential for revolutionizing patient treatment models and directly links back to the established brick and mortar physical therapy clinic. This unique model enables any physical therapy practice to be able to execute more patient care while utilizing their same resources and creates more value than was ever before possible.

 

Our PHZIO platform, including: design, testing, exercise intervention, follow-up, and exercise demonstration, has been developed by accomplished Los Angeles based physical therapist Darwin Fogt. Mr. Fogt has extensive experience and education working with diverse populations from professional athletes to morbidly obese. He understands the most beneficial exercise prescription to achieve optimal results and has had enormous success in motivating all patient types to stay consistent in working toward their goals. Additionally, his methods have proven effective and safe as he demonstrates exercises with attention to proper form to avoid injury. Mr. Fogt has established himself as a national leader in his field and has successfully implemented progressive solutions to delivering physical therapy: he has consulted with and been published by numerous national publications including Runner’s World, Men’s Health, Men’s Journal, and various Physical Therapy specific magazines; his 13 plus years of experience include rehabilitating the general population, as well as professional athletes, Olympic gold medalists, and celebrities. He has bridged the gap between physical therapy and fitness by opening Evolution Fitness, which uses licensed physical therapists to teach high intensity circuit training fitness classes. He also founded one of the first exclusive prenatal and postnatal physical therapy clinic in the country. Mr. Fogt is a leader in advancing the profession to incorporate research-based methods and focus on, not only rehabilitation but also wellness, functional fitness, performance, and prevention. He can recognize that the national healthcare structure (federal and private insurance) is moving toward a model of prevention and that the physical therapy profession will take a larger role in providing wellness services to patients.

 

Innovators in other industries have solved access, cost and quality inefficiencies through the implementation of technology platforms and business models that deliver products and services on-demand and create new economies by connecting and empowering both consumers and businesses. We have taken the same approach to solving the pervasive access, cost and quality challenges facing the current access to physical therapy clinics.

 

Our underlying technology platform is complex, deeply integrated and purpose-built over the three years for the evolving physical therapy marketplace. Our PHZIO platform is highly scalable and can support substantial growth of third party licensees. Our PHZIO platform provides for broad interconnectivity between PT practitioners and their patients and, we believe, uniquely positions us as a focal point in the rapidly evolving PT industry to introduce innovative, technology-based solutions, such as remote patient monitoring, post-discharge treatment plan adherence and in-home care.

 

We plan to generate revenue from third-party PT and corporate wellness licensees on a contractually recurring per PHZIO session fee basis. Our PHZIO platform is anticipated to transform the access, cost and quality dynamics of physical therapy delivery for all the market participants. We further believe any patient, employer, health plan or healthcare professional interested in a better approach to physical therapy is a potential PHZIO platform user.

 

Before even launching, we have received a high indication of interest in our service. We think the demand is warranted but recognize that in the preliminary stages of our services, we may experience bottlenecks in our ability to meet the demand for same. Under this type of environment, it is critical to maintain awareness of the Company’s operational budget goals and how they are being met in our attempts to address demand. Regardless of our growth pace, it is critical to shareholder value that we are mindful of our operational spending.

 

19

 

 

Investment Agreement with Tangiers Global, LLC

 

In February 2017, the Company entered into an Investment Agreement with Tangiers. Pursuant to the terms of the Investment Agreement, Tangiers committed to purchase up to $5,000,000 of the Company’s common stock over a period of up to 36 months. From time to time during the 36-month period commencing from the effectiveness of the registration statement, we may deliver a put notice to Tangiers which states the dollar amount that we intend to sell to Tangiers on a date specified in the put notice. The maximum investment amount per notice must be no more than 200% of the average daily trading dollar volume of our Common stock for the ten (10) consecutive trading days immediately prior to date of the applicable put notice and such amount must not exceed an accumulative amount of $250,000. The minimum put amount is $5,000. The purchase price per share to be paid by Tangiers will be the 80% of the of lowest trading prices of the Common stock during the 5 trading days including and immediately following the date on which put notice is delivered to Tangiers.

 

In connection with the Investment Agreement with Tangiers, we also entered into a registration rights agreement with Tangiers.

 

Advisory Agreement with Fintech Global Consultants

 

In March 2018, the Company signed an Advisory Agreement with Fintech Global Consultants [“FGC” http://f-g-c.com ] to assist the Company in completing blockchain adaptation across the $30 billion physical therapy and $8 billion wellness markets with new advanced health tech tools. We believe that out implementation of the new blockchain technology for the Company’s PHZIO digital treatment platform and our other new health tech tools may have a beneficial impact on patient care beginning in the third quarter of 2018. The Company has hired a leading international blockchain advisory firm to further our state of the art PHZIO digital telehealth platform. We believe that by being blockchain enabled, our patients will have more convenient access to wellness services, seamless storage and access to HIPPA compliant medical records and simplified insurance reimbursement. In addition, FGC will assist the Company in its planned Initial Coin Offering of up to a $10 million non-dilutive funding that we believe will help in the implementation and acceleration of PHZIO’s expansion on a national basis during the next twelve months.

 

Results of Operations for the three and six months ended June 30, 2018 and 2017

 

REVENUE: We had no revenues from operations during the six months ended June 30, 2018 and 2017. We expect to generate revenues during the fourth quarter of 2018.

 

OPERATING EXPENSES : Total operating expenses decreased to $1,644,289 for the six months ended June 30, 2018 from $1,938,910 for the six months ended June 30, 2017. The decrease resulted from a reduction in consultant expense. Total operating expenses decreased to $833,074 for the three months ended June 20, 2018 from $949,562 for the three months ended June 30, 2017. The decrease resulted from a reduction in consultant expense.

 

NET LOSS: The Company incurred a net loss of $1,607,279 for the six months ended June 30, 2018, compared with a net income of $2,273,370 for the six months ended June 30, 2018. The significant decrease from income to loss was the result of a decrease in the revaluation of the derivative liabilities for the convertible debt and warrants totaling $4,006,119 and an increase in interest expense. For the three months ended June 30, 2018, the Company incurred a loss 1,133,306 compared with a loss of $1,888,476 for the three months ended June 30, 2017. The decrease in the loss was the result of a decrease in the revaluation of the derivative liabilities for the convertible debt and warrants totaling $726,763 offset by an increase in interest expense.

 

Liquidity and Capital Resources

 

As of June 30, 2018, we had negative working capital of $3,175,685 compared to negative working capital of $3,648,264 as of December 31, 2017. The decrease resulted from a decrease in the derivative liability and reduction of short term note payable offset by an increase in convertible debt. Cash used in operations was $532,107 and $615,479 for the six months ended June 30, 2018 and 2017, respectively. The decrease in cash used in operations was because of the relative changes in the assets and liabilities. Cash used in investing activities was $4,937 and $2,910 for the six months ended June 30, 2018 and 2017, respectively. Cash flows provided by financing activities were $539,245 and $665,950 for the six months ended June 30, 2018 and June 30, 2017, respectively. The decrease in cash flows from financing activities was a reduction in the issuance of convertible debt for cash. The cash balance as of June 30, 2018 was $9,083.

 

20

 

 

We believe that anticipated cash flows from operations will be insufficient to satisfy our ongoing capital requirements. We are seeking financing in the form of equity capital to provide the necessary working capital. Our ability to meet our obligations and continue to operate as a going concern is highly dependent on our ability to obtain additional financing. We cannot predict whether this additional financing will be in the form of equity or debt or be in another form. We may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, we may be unable to implement our current plans which circumstances would have a material adverse effect on our business, prospects, financial conditions 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.

 

21

 

 

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 June 30, 2018, we raised $414,550, less $46,550 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 June 30, 2018 and December 31, 2017, 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.

 

22

 

 

Contractual Obligations and Commitments

 

In February 2017, the Company was served by a complaint filed by a holder of a note payable. The action was removed from Louisiana state court to the United States Federal District Court in Baton Rouge, LA. The lawsuit alleges that the Company is indebted to Schoemann under a promissory note stemming from four loans to the Company during the 20 months prior to February 2017 amounting to $75,500 in total original principal bearing interest at 12% per annum, of which $45,202 has been repaid. Further the note holder claims that, because of alleged defaults and extensions of the notes, the Company is now indebted in the amount of $253,677 inclusive of interest and penalties at an effective rate exceeding 70% per annum, far in excess of the maximum rate allowable in California or Louisiana. The Company and its counsel have determined that: (i) note holder is not a licensed lender in the State of California, where the loan was made and the $75,500 was deposited and therefore was not permitted under California law to make loans in the State; (ii) the interest rate the note holder is seeking to collect is usurious and therefore interest claimed in the lawsuit is neither collectible nor enforceable. In October 2017 the complainant and his counsel motioned to dismiss the unlicensed lender assertion. In January 2018 the U.S. District Court, Louisiana ruled in favor of the Company that the unlicensed lender assertion made by the Company and counsel was to proceed in a matter brought before the court by note holder Rodney Schoeman on January 24, 2017. The Company and counsel believe that the Schoemann suit is wholly without merit and the Company will prevail.

 

On June 20, 2018, a settlement agreement was signed between the Company and holder of the note payable with the following terms for the cancellation of the note payable, accrued interest and warrants:

 

 

o

The Company will issue 2,709,444 shares of commons stock that is immediately tradeable under Securities and Exchange Commission Rule 144, but subject to a daily trading limit of 25,000 shares per day;
 

o

The Company will issue 1,290,556 shares of common stock that shall be subject to a 180-day holding period and are also subject to a daily trading limit of 25,000 shares per day;
 

o

The holder of the note payable shall bear all fees and expenses, including attorneys’ fees, associated with the transfer and trading of the Company’s shares;
 

o

Beyond issuing the shares noted above, the Company shall not take any additional action that would cause the note holder to incur tax consequence from the transfer or would affect the note holder’s tax consequences in any way.

 

The Company issued the 4,000,000 shares of common stock on June 20, 3018. At June 30, 2018, the Company had no indebtedness to this holder of the note payable principal or accrued interest.

 

In January 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $110,000. The note, which is due on October 12, 2018 has an original issue discount of $10,000. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) $0.20 or (ii) 65% of the lowest per share trading price for the fifteen (15) trading days immediately following the 180 th calendar day after the Original Issue Date. During the six months ended June 30, 2018, the Company recognized interest expense of $4,099.

 

In January 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $91,300. The note, which is due on October 30, 2018 has an original issue discount of $8,300. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180 th calendar day after the Original Issue Date. During the six months ended June 30, 2018, the Company recognized interest expense of 5,073.

 

In February 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $63,800. The note, which is due on November 30, 2018 has an original issue discount of $5,800. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180 th calendar day after the Original Issue Date. During the six months ended June 30, 2018, the Company recognized interest expense of $2,853.

 

23

 

 

In March 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $77,000. The note, which is due on December 5, 2018 has an original issue discount of $7,000. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $.0.06 or (ii) 75% of the average of the three daily VWAPs for the trading price for the twenty (20) trading days before the 181 st calendar date of the note or the ten (10) trading days if after the 181st calendar day of the note. During the six months ended June 30, 2018, the Company recognized interest expense of $1,975. 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.

 

In March 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $72,450. The note, which is due on December 30, 2018 has an original issue discount of $9,450. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days immediately following the 180 th calendar day after the Original Issue Date. During the six months ended June 30, 2018, the Company recognized interest expense of $2,453.

 

In May 2018, the Company executed an 8% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $125,000. The note, which is due on May 10, 2019, has an original issue discount of $3,750. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock at a price 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 six months ended June 30, 2018, the Company recognized interest expense of $1,370.

 

In May 2018, the Company executed an 12% Fixed Convertible Promissory Note payable to an institutional investor in the principal amount of $51,750. The note, which is due on March 1, 2019, has an original issue discount of $6,750. The convertible notes convert into common stock of the Company at conversion price into which any principal amount and interest (including any default interest) under the notes shall be convertible into shares of common stock shall be equal to the lesser of: (i) the fixed conversion price of $0.20 or (ii) 75% of the VWAP for the trading price for the ten (10) trading days 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 six months ended June 30, 2018, the Company recognized interest expense of $612.

 

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, 2017, 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.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a “smaller reporting company”, we are not required to provide the information under Item 3.

 

24

 

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of disclosure controls and procedures.

 

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2018, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and (ii) that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in the Company’s internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

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 six months ended June 30, 2018, the Company issued a total of 13,654,354 shares of common stock per debt conversion of convertible notes dated April, July, September and December 2017. The total of the debt conversion was $569,998 which includes $19,776 of accrued interest.

 

During the six months ended June 30, 2018, the Company issued 2,550,000 shares of common stock for marketing and consulting services valued at $235,900.

 

During the six months ended June 30, 2018, the Company issued 4,000,000 shares of common stock for settlement of a complaint filed in the United States Federal District Count (see Footnote 4). The debt settled totaled $236,869 which includes $56,817 of accrued interest.

 

In June 2018, the Company entered into a consulting agreement within which the Company agreed to issue 125,000 shares of common stock per month beginning in July 2018 and 1,500,000 shares of common stock upon signing of the agreement. The 1,500,000 shares of common stock were issued with a value of $105,000 which is being amortized over the life of the contract.

 

In June 2018, the Company executed an Equity Purchase Agreement with an institutional investor within which the investor agrees to purchase up to $1,500,000 of the Company’s common stock, par value $0.001. As an inducement to the investor to enter into the agreement, the Company issued 1,000,000 restricted shares of common stock to the investor valued at $70,000.

 

ITEM 2. EXHIBITS.

 

  (a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.

 

Exhibit No.   Description
     
31.1   Certification of CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2   Certification of CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2   Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

25

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

eWellness Healthcare Corporation    
(Registrant)    
       
By: /s/ Darwin Fogt   Date: August 14, 2018
  Darwin Fogt    
  President, CEO    

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Darwin Fogt   Chief Executive Officer and Director   August 14, 2018
Darin Fogt   (principal executive officer)    
         
/s/ David Markowski   Chief Financial Officer   August 14, 2018
David Markowski   (Principal Financial and Accounting Officer)    
         
/s/ Brandon Rowberry   Director   August 14, 2018
Brandon Rowberry        
         
/s/ Douglas Cole   Director   August 14, 2018
Douglas Cole        
         
/s/ Curtis Hollister   Director   August 14, 2018
Curtis Hollister        
         
/s/ Douglas MacLellan   Director   August 14, 2018
Douglas MacLellan        
         
/s/ Rochelle Pleskow   Director   August 14, 2018
Rochelle Pleskow        

 

26

 

 

 

EXHIBIT 31.1

 

Exhibit 31.1 Certification of the Chief Executive Officer of eWellness Healthcare Corporation., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Darwin Fogt, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 of eWellness Healthcare Corporation (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, considering the circumstances made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2018  
   
/s/ Darwin Fogt  
Darwin Fogt,  
Chief Executive Officer (Principal Executive Officer)  

 

     
 

 

 

EXHIBIT 31.2

 

Exhibit 31.2 Certification of the Chief Financial Officer of eWellness Healthcare Corporation, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, David Markowski, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 of eWellness Healthcare Corporation (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, considering the circumstances made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2018  
   
/s/ David Markowski  
David Markowski,  
Chief Financial Officer  
(Principal Financial and Accounting Officer)  

 

     
 

 

 

EXHIBIT 32.1

 

Exhibit 32.1 Certification of the Chief Executive Officer of eWellness Healthcare Corporation pursuant to Section 906 of the Sarbanes Oxley Act of 2002

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of eWellness Healthcare Corporation (the “Company”) for the quarterly period ended June 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), the undersigned Darwin Fogt, Chief Executive Officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  eWellness Healthcare Corporation.
     
Date: August 14, 2018 By: /s/ Darwin Fogt
    Darwin Fogt, Director and Chief Executive Officer
    (Principal Executive Officer)

 

This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

 

     
 

 

 

 

EXHIBIT 32.2

 

Exhibit 32.2 Certification of the Chief Financial Officer of eWellness Healthcare Corporation pursuant to Section 906 of the Sarbanes Oxley Act of 2002

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of eWellness Healthcare Corporation (the “Company”) for the quarterly period ended June 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), the undersigned David Markowski, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  eWellness Healthcare Corporation
   
Date: August 14, 2018 /s/ David Markowski
  David Markowski, Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.