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, 2020

 

[  ] 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		90-1073143
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

1126 S Federal Hwy #464, Fort Lauderdale, FL		33316
(Address of principal executive offices)		(Zip Code)

 

(855) 470-1700

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(g) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common shares		EWLL		OTC

 

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 7, 2020 was 8,732,404,469.

 

 

 

Table of Contents

 

		Page
PART I - FINANCIAL INFORMATION		3
Item 1	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4	Controls and Procedures	18
PART II - OTHER INFORMATION		19
Item 1	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 2	Exhibits	20
Signatures		21

 

 

PART I – FINANCIAL STATEMENTS

 

ITEM 1. FINANCIAL STATEMENTS

 

eWELLNESS HEALTHCARE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(unaudited)

 

		June 30, 2020				December 31, 2019
ASSETS
CURRENT ASSETS
Cash		$	4,075			$	240,722
Accounts Receivable			129,872				3,635
Prepaid expenses			21,763				157,139
Total current assets			155,710				401,496
Property & equipment, net			16,268				22,810
Intangible assets, net			8,000				9,000
TOTAL ASSETS		$	179,978			$	433,306
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	733,025			$	314,287
Accounts payable - related party			782,832				582,832
Accrued expenses - related party			121,107				138,868
Accrued compensation			357,965				532,974
Convertible debt, net of discount			1,977,769				2,240,408
Derivative liability			4,297,437				3,529,974
Total current liabilities			8,270,135				7,339,343
Total Liabilities			8,270,135				7,339,343
COMMITMENTS AND CONTINGENCIES			-				-
STOCKHOLDERS’ DEFICIT
Preferred stock, authorized 20,000,000 shares, $.001 par value, 476,667 and 250,000 shares issued and outstanding, respectively			477				250
Common stock, authorized 20,000,000,000 shares, $.001 par value, 7,851,724,496 and 12,752,084 issued and outstanding, respectively			7,851,725				12,752
Shares to be issued			76				150
Additional paid in capital			21,409,110				23,942,830
Accumulated deficit			(37,351,545	)			(30,862,019	)
Total Stockholders’ Deficit			(8,090,157	)			(6,906,037	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	179,978			$	433,306

 

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

 

 

eWELLNESS HEALTHCARE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

For the Three and Six Months ended June 30, 2020 and 2019

(unaudited)

 

		Three Months Ended								Six Months Ended
		June 30, 2020				June 30, 2019				June 30, 2020				June 30, 2019
REVENUE		$	123,780			$	-			$	138,155			$	-
OPERATING EXPENSES
Executive compensation			187,000				102,000				374,000				204,000
General and administrative			88,553				324,858				435,243				575,352
Professional fees			383,163				534,980				850,581				1,249,141
Total Operating Expenses			658,716				961,838				1,659,824				2,028,493
Loss from Operations			(534,936	)			(961,838	)			(1,521,669	)			(2,028,493	)
OTHER INCOME (EXPENSE)
Interest income			-				6				1				17
Gain (loss) on derivative liability			(2,217,052	)			(61,431	)			(4,199,959	)			617,967
Loss on disposal of asset			(3,866	)			-				(3,866	)			-
Interest expense			(205,073	)			(742,047	)			(764,033	)			(1,693,272	)
Net Loss before Income Taxes			(2,960,927	)			(1,765,310	)			(6,489,526	)			(3,103,781	)
Income tax expense			-				-				-				-
Net Loss		$	(2,960,927	)		$	(1,765,310	)		$	(6,489,526	)		$	(3,103,781	)
Basic and diluted (loss) per share		$	(0.00	)		$	(0.01	)		$	(0.00	)		$	(0.01	)
Weighted average shares outstanding			5,181,476,648				219,592,981				2,672,747,473				215,560,585

 

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

 

 

eWELLNESS HEALTHCARE CORPORATION

RECONCILIATION OF STOCKHOLDERS’ DEFICIT

(unaudited)

 

THREE MONTHS ENDED JUNE 30, 2020 AND 2019

 

																						Additional								Total
		Preferred Shares								Common Shares								Shares to				Paid in				Accumulated				Stockholders’
		Shares				Amount				Shares				Amount				be Issued				Capital				Deficit				Deficit
Balance at March 31, 2020			375,000			$	375				1,430,005,454			$	1,430,006			$	-			$	26,285,825			$	(34,390,618	)		$	(6,674,412	)
Contributed services			-				-				-				-				-				54,000				-				54,000
Shares issued to officers, directors and consultants			101,667				102				-				-				-				304,898				-				305,000
Shares issued for debt conversion			-				-				6,421,465,710				6,421,466				-				(6,047,649	)			-				373,817
Shares issued for services			-				-				253,332				253				76				(201	)			-				128
Derivative liability			-				-				-				-				-				812,237				-				812,237
Net loss			-				-				-				-				-				-				(2,960,927	)			(2,960,927	)
Balance at June 30, 2020			476,667			$	477				7,851,724,496			$	7,851,725			$	76			$	21,409,110			$	(37,351,545	)		$	(8,090,157	)
Balance at March 31, 2019			-			$	-				4,346,792			$	4,346			$	-			$	19,012,024			$	(22,739,705	)		$	(3,723,334	)
Contributed services			-				-				-				-				-				54,000				-				54,000
Shares issued for debt conversion			-				-				23,629				24				-				53,732				-				53,756
Shares issued for cash			-				-				16,000				16				-				59,084				-				59,100
Shares issued for prepaid services			-				-				10,000				10				-				52,990				-				53,000
Shares issued for services			-				-				33,009				33				-				158,051				-				158,084
Derivative liability			-				-				-				-				-				70,987				-				70,987
Net loss			-				-				-				-				-				-				(1,765,310	)			(1,765,310	)
Balance at June 30, 2019			-			$	-				4,429,430			$	4,429			$	-			$	19,460,868			$	(24,505,015	)		$	(5,039,718	)

 

SIX MONTHS ENDED JUNE 30, 2020 AND 2019

 

		Preferred Shares								Common Shares								Shares to				Additional Paid in				Accumulated				Stockholders’
		Shares				Amount				Shares				Amount				be Issued				Capital				Deficit				Deficit
Balance at January 1, 2020			250,000			$	250				12,752,084			$	12,752			$	150			$	23,942,830			$	(30,862,019	)		$	(6,906,037	)
Contributed services			-				-				-				-				-				108,000				-				108,000
Shares issued to officers, directors and consultants			226,667				227				-				-				-				679,773				-				680,000
Shares issued for debt conversion			-				-				7,838,256,204				7,838,257				-				(6,681,896	)			-				1,156,361
Shares issued for services			-				-				668,332				668				(74	)			191				-				785
Shares issued for rounding – 50:1 split			-				-				47,876				48				-				(48	)			-				-
Derivative liability			-				-				-				-				-				3,360,260				-				3,360,260
Net loss			-				-				-				-				-				-				(6,489,526	)			(6,489,526	)
Balance at June 30, 2020			476,667			$	477				7,851,724,496			$	7,851,725			$	76			$	21,409,110			$	(37,351,545	)		$	(8,090,157	)
Balance at January 1, 2019			-			$	-				4,128,139			$	4,128			$	-			$	17,416,117			$	(21,401,234	)		$	(3,980,989	)
Contributed services			-				-				-				-				-				108,000				-				108,000
Shares issued for debt conversion			-				-				125,574				125				-				401,117				-				401,242
Shares issued for cash			-				-				16,000				16				-				59,084				-				59,100
Shares issued for financing costs			—				-				20,000				20								114,980								115,000
Shares issued for prepaid services			-				-				80,217				80				-				458,670								458,750
Shares issued for services			-				-				59,500				60				-				339,573				-				339,633
Derivative liability			-				-				-				-				-				563,327				-				563,327
Net loss			-				-				-				-				-				-				(3,103,781	)			(3,103,781	)
Balance at June 30, 2019			-			$	-				4,429,430			$	4,429			$	-			$	19,460,868			$	(24,505,015	)		$	(5,039,718	)

 

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

 

 

eWELLNESS HEALTHCARE CORPORATION

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

(unaudited)

 

		For the Six Months Ended
		June 30, 2020				June 30, 2019
Cash flows from operating activities
Net loss		$	(6,489,526	)		$	(3,103,781	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			3,676				2,840
Contributed services			108,000				108,000
Shares issued for officers, directors and consultants			344,960				-
Shares issued for consulting services			785				339,633
Shares issued for financing costs			93,433				115,000
Amortization of debt discount and prepaids			725,250				1,736,987
(Gain) loss on derivative liability			4,199,959				(617,967	)
Loss on disposal of asset			3,866				-
Changes in operating assets and liabilities
Prepaid expense			(9,916	)			(37,628	)
Accounts receivable			(126,237	)			-
Accounts payable and accrued expenses			513,643				83,297
Accounts payable - related party			196,460				(9,981	)
Accrued expenses - related party			31,509				(13,560	)
Accrued compensation			122,491				(43,279	)
Net cash used in operating activities			(281,647	)			(1,440,439	)
Cash flows from investing activities
Purchase of equipment			-				(541	)
Net cash used in investing activities			-				(541	)
Cash flows from financing activities
Proceeds from issuance of common stock			-				59,100
Issuance of convertible debt			52,800				1,968,900
Payments on debt			-				(639,550	)
Debt issuance costs			(7,800	)			(248,150	)
Net cash provided by financing activities			45,000				1,140,300
Net increase (decrease) in cash			(236,647	)			(300,680	)
Cash, beginning of period			240,722				383,335
Cash, end of period		$	4,075			$	82,655
Supplemental Information:
Cash paid for:
Taxes		$	-			$	1,856
Interest Expense		$	-			$	275,814
Non cash items:
Derivative liability and debt discount issued with new notes		$	-			$	1,769,048
Shares issued for debt conversion		$	1,156,360			$	401,242
Shares issued for prepaids		$	-			$	458,750

 

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

 

 

eWellness Healthcare Corporation

Notes to Consolidated Condensed Financial Statements

June 30, 2020

(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 minimal revenues to date.

 

eWellness Healthcare Corporation is the first physical therapy telehealth company to offer real-time distance monitored assessments and treatments. Our business model is to have large-scale employers use our PHZIO platform as a fully PT monitored corporate musculoskeletal treatment (“MSK”) wellness program. The Company’s PHZIO home physical therapy assessment and exercise platform has been designed to disrupt the $30 billion physical therapy market, the $4 billion MSK market and the $8 billion corporate wellness industry. PHZIO re-defines the way MSK physical therapy can be delivered. PHZIO is the first real-time remote monitored 1-to-many MSK physical therapy platforms for home use.

 

On May 22, 2020, the Company received and accepted the resignations of Brandon Rowberry and Rochelle Pleskow as independent directors. Their letters of resignation state the reason for their resignations were to permit them to pursue other business opportunities and further stated that they have had no disagreements with the operations, policies or practices of the Company. Also, on May 22, 2020, the Company received a letter of resignation from Darwin Fogt resigning as CEO, President and director of the Company and a separate letter of resignation from Curtis Hollister, resigning as CTO and director of the Company. Messrs. Fogt and Hollister are executive officers and principals of Bistromatics Inc., organized under the laws of Canada (“Bistromatics”).

 

On November 12, 2016, the Company entered into a Services Agreement with Bistromatics (the “Bistromatics Agreement”) pursuant to which Bistromatics agreed to provide operational services to the Company for its PHZIO System including development, content editing and training, support and maintenance, billing, hosting and oversight, among other services. Reference is made to the Company’s Form 8-K filed on November 21, 2016, which Form 8-K was signed by Darwin Fogt as CEO on behalf of the Company, regarding the disclosure of the Bistromatics Agreement. The Services Agreement included a provision granting Bistromatics the right to appoint 40% of the Registrant’s Board of Directors, resulting in the appointment of Messrs. Fogt and Hollister as members of the Company’s Board. Although both Companies continue to abide by the Services Agreement the Company is in arrears in fees to Bistromatics for approximately $750,000 as of March 31, 2020. The Service Agreement expired during the 1^st quarter of 2020 and the parties continue to discuss the formation of a new Services Agreement.

 

Pursuant to communications between the Company and Darwin Fogt and Curtis Hollister regarding their resignations as executive officers and directors of the Company, which resignations were accepted by the Company’s Board on June 1, 2020, Messrs. Fogt and Hollister represented to the Company that Bistromatics and its management will continue to provide support services to the Company’s PHZIO System, In addition, both Darwin Fogt and Curtis Hollister confirmed that they have had no disagreements with the operations, policies or practices of the Company.

 

In connection with the resignation of Darwin Fogt as CEO, the Registrant’s Board of Directors has appointed Douglas MacLellan, who has served as the Company’s Chairman since May 2013, as Chief Executive Officer in addition to continuing to serve as the Chairman of the Board of Directors.

 

As noted above, the Companies PHZIO and MSK360 systems are currently operated on behalf of the Company by Bistromatics Inc. in Canada. These services are still operational and continues to treat EWLL’s corporate patients and customers.

 

We are in the process of completing a new Services Agreement with Bistromatics, that, when completed, will likely re-position EWLL as a Value Added Reseller (“VAR”) of the PHZIO & MSK360 platforms and allow EWLL to earn marketing fees and would also be granted a significant percentage ownership of Bistromatics in return for  transferring the marketing and IP rights for the PHZIO and MSK360 platforms from EWLL to Bistromatics.

 

 

eWellness Healthcare Corporation

Notes to Consolidated Condensed Financial Statements

June 30, 2020

(unaudited)

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated 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, 2019. 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, 2020 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2020. The unaudited consolidated 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, 2019.

 

The information regarding common stock shares, options and warrants throughout this document have been adjusted to reflect the 1:50 reverse split authorized by the Board of Directors on December 16, 2019 and further approved by FINRA on February 12, 2020.

 

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, 2020, the Company had revenues of $138,155. The Company has an accumulated loss of $37,351,545 and a working capital deficit of $8,114,425. In view of these matters, there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue operations is dependent upon the Company’s ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations, of which there can be no guarantee. The Company intends to finance its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Fair Value of Financial Instruments

 

As of June 30, 2020, 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		$	4,297,437			$	-			$	-			$	4,297,437
Total Liabilities measured at fair value		$	4,297,437			$	-			$	-			$	4,297,437

 

 

eWellness Healthcare Corporation

Notes to Consolidated Condensed Financial Statements

June 30, 2020

(unaudited)

 

As of December 31, 2019, the Company had the following assets and liabilities measured at fair value on a recurring basis.

 

		Total				Level 1				Level 2				Level 3
Derivative Liability		$	3,529,974			$	-			$	-			$	3,529,974
Total Liabilities measured at fair value		$	3,529,974			$	-			$	-			$	3,529,974

 

Note 3. Related Party Transactions

 

In November 2016, the Company signed an agreement with a programming company (“PC”) within which one of the Company’s former directors and Chief Technical Officer (“CTO”) is the Chief Marketing Officer. The agreement is for additional features to be programmed for the launch of the PHZIO platform. The Company is to pay a monthly base fee of $100,000 for the development and compensation for the Company’s CEO and CTO. Following payment of the initial $100,000, the Company is obligated to only pay $50,000 monthly until the PC has successfully signed and collected the first monthly service fee for 100 physical therapy clinics to use the PHZIO platform. The PC will also have the right to appoint 40% of the directors. At the periods ended June 30, 2020 and December 31, 2019, the Company had a payable of $782,832 and $582,832, respectively. The CTO resigned his officer and director position on June 1, 2020.

 

The Company signed an agreement with the former CEO for administrative physical therapy consulting. The agreement provides that the former CEO will provide non-clinical administrative services in the various states where the Phzio companies are located. The Company is to pay the former CEO the sum of $3,500 per month. Since the former CEO resigned his officer and director position on June 1, 2020, any amounts owed to him are included in accounts payable.

 

Throughout the six months ended June 30, 2020, 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, 2020 and December 31, 2019 were $0 and $1,368, respectively. There were no expenses due to the board members, but the Company has accrued directors’ fees of $121,107 and $137,500 as of June 30, 2020 and December 31, 2019, respectively. Because the Company is not yet profitable the officers have agreed to defer compensation. The Company had accrued executive compensation of $357,965 and $532,974 as of June 30, 2020 and December 31, 2019, respectively.

 

Note 4. Convertible Notes Payable

 

Six Months Ended June 30, 2020

 

In March 2020, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $52,800. The note, which is due on January 15, 2021, has an original issue discount of $4,800 and transaction costs of $3,000. After 180 days, the convertible note converts into common stock of the Company at a conversion price that shall be equal to 70% of the average of the two lowest per share trading prices for the ten (10) trading days prior to the conversion date. During the six months ended June 30, 2020, the Company accrued interest expense of $1,719.

 

 

eWellness Healthcare Corporation

Notes to Consolidated Condensed Financial Statements

June 30, 2020

(unaudited)

 

Note 5. Equity Transactions

 

Preferred Stock

 

The total number of shares of preferred stock which the Company shall have authority to issue is 20,000,000 shares with a par value of $0.001 per share. During the year ended December 31, 2019, the Company authorized the issuance of 1,000,000 shares of preferred stock to officers, directors and consultants as deferred compensation and/or expense. The shares are eligible for conversion after 24 months into 40 shares of common stock per each preferred share. The value of the issued shares was calculated on the basis of 40 shares per preferred share at the common share value on the date of issuance. The deferred compensation value of the shares will vest monthly at 1/24th of the calculated value of $3,000,000 and requisite expense or reduction of accrued compensation and/or accrued directors fees will be recorded. At the recording of the requisite vested share value, the corresponding number of preferred shares will be recorded as being issued. On May 22, 2020, two directors resigned and on June 1, 2020, three officers/directors/consultant resigned. Therefore, the vesting of their preferred shares ceased on those dates per the authorization documents. During the six months ended June 30, 2020, there were 226,667 preferred shares that vested and $297,500 was recorded to reduce accrued compensation; $37,250 was recorded to reduce accrued directors’ fees, and $345,250 was recorded as expense for a total of $680,000. As of June 30, 2020, there were 476,667 vested preferred shares for a total value of $1,430,000.

 

In April 2020, the Board of Directors issued a Certificate of Designations, Preferences and Rights of Series D Preferred Stock in which the Board authorized a new series of Preferred Stock to be designated as Series D. The Board authorized two hundred thousand (200,000) shares to be issued to persons designated by the Board. The Series D Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Holder decides to convert the shares of Series D Preferred Stock.

 

The Series D Preferred Stock will rank, with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation, (i) senior to all classes or series of the Corporation’s Common Stock, par value $0.001 per share (“Common Stock”), and to all other equity securities issued by the Corporation other than the Corporation’s newly authorized 13% Series B Cumulative Redeemable Perpetual Preferred Stock (the “Series B Preferred”); (ii) on parity with all equity securities issued by the Corporation with terms specifically providing that the Series B Preferred ranks on parity, except with respect to voting rights on which the Series B Preferred ranks junior to the Series D Preferred and except with respect to rights to the payment of dividends and the distribution of assets upon any liquidation, dissolution or winding up of the Corporation, which the Series B Preferred ranks senior to the Series D Preferred; and (iii) effectively junior to all existing and future indebtedness (including indebtedness convertible into our Common Stock or Preferred Stock) of the Corporation and to any indebtedness and other liabilities of (as well as any preferred equity interest held by others in) existing subsidiaries of the Corporation. The term “equity securities” shall not include convertible debt securities The Holders of the Series D Preferred Stock have the right, on all matters subject to the vote of the capital stock of the Corporation, to have the collective vote equal to 70% of the total of all voting capital stock of the Corporation, notwithstanding the number of shares of voting capital stock, including shares of common stock, that may be outstanding from time to time.

 

 

eWellness Healthcare Corporation

Notes to Consolidated Condensed Financial Statements

June 30, 2020

(unaudited)

 

Common Stock

 

On February 12, 2020, FINRA approved a 1:50 reverse split of the Company’s common stock. As noted throughout this document, all common shares are stated as if the 1:50 reverse split had been completed as of the beginning of the year ended December 31, 2019. Following the approval, the Company’s stock began trading under the symbol “EWLLD”. Due to rounding issues for the reverse split, the Company issued 47,876 additional shares of common stock.

 

On February 14, 2020, the Company filed a Definitive Information Statement on Schedule 14C for the purpose of authorizing the increase in the number of authorized shares of Common Stock from one billion nine hundred million (1,900,000,000) shares of Common Stock to twenty billion (20,000,000,000) shares of Common Stock. On February 19, 2019, the Company filed Articles of Amendment to the Company’s Articles of Incorporation to implement the Authorized Common Stock Share Increase with the State of Nevada.

 

Six Months Ended June 30, 2020

 

In January 2020, the Company executed a 12-month advisory services agreement. The Company is to issue 20,000 shares of common stock monthly. The Company issued 80,000 shares of common stock with a value of $126. The Company needs to issue an additional 40,000 shares of common stock with a value of $8. In addition, the Company is to also pay the advisor a monthly fee of $2,500.

 

During the six months ended June 30, 2020, the Company issued a total of 7,838,256,204 shares of common stock per debt conversion of various convertible notes. The total of the debt conversion was for $959,835 of principal, $103,093 of accrued interest and $93,433 of financing costs.

 

During the six months ended June 30, 2020, the Company issued 588,332 shares of common stock for consultant services valued at $1,597.

 

Six Months Ended June 30, 2019

 

On February 7, 2019, the Company executed an amendment to a contract executed on April 8, 2018 for twelve months for consulting services. The Company issued 5,000 shares of common stock at the signing of the contract valued at $30,500 that is being amortized over the life of the contract.

 

On March 22, 2019, the Company issued 65,217 shares of common stock to an institutional investor as part of a promissory note. These shares are returnable if the Company repays the promissory note before the maturity date. The value of these shares is $375,000 which was recorded as prepaid until the six-month maturity has passed. The Company also issued 20,000 shares of common stock to the institutional investor as a commitment fee. The value of these shares is $115,000.

 

On April 2, 2019, the Company issued 16,000 shares of common stock pursuant to a capital call notice in relation to an Equity Purchase Agreement dated June 18, 2018. The capital call totaled $59,100.

 

On May 17, 2019, the Company executed a contract for three months for consulting services. The Company issued 10,000 shares of common stock at the signing of the contract valued at $53,000 that is being amortized over the life of the contract. At the end of the three months, the Company is to issue another 10,000 shares of common stock.

 

During the six months ended June 30, 2019, the Company issued 59,500 shares of common stock to consultants for services rendered in accordance to consulting agreements. The value of these shares is $339,633.

 

During the six months ended June 30, 2019, the Company issued 125,574 shares of common stock for debt conversion totaling $401,242 which includes $380,250 principal, $18,992 accrued interest and $2,000 due diligence fee.

 

Stock Options

 

The following is a summary of the status of all Company’s stock options as of June 30, 2020 and changes during the six months ended on that date:

 

 

eWellness Healthcare Corporation

Notes to Consolidated Condensed Financial Statements

June 30, 2020

(unaudited)

 

						Weighted
		Number of Stock				Average Exercise				Remaining				Intrinsic
		Options				Price				Life (yrs)				Value
Outstanding at December 31, 2019			57,000			$	40.00				1.1			$	-
Granted			-				-
Exercised			-				-
Cancelled			-				-
Outstanding at June 30, 2020			57,000				40.00				.6			$	-
Options exercisable at June 30, 2020			57,000			$	40.00				.6			$	-

 

Warrants

 

The following is a summary of the status of the Company’s warrants as of June 30, 2020 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, 2019			42,015			$	11.94				1.9			$	-
Granted			-				-				-				-
Exercised			-				-				-				-
Cancelled			(10,000	)			17.50				-				-
Outstanding at June 30, 2020			32,015			$	10.20				1.0			$	-
Warrants exercisable at June 30, 2020			32,015			$	10.20				1.0			$	-

 

Note 6. Commitments, Contingencies

 

The Company may be subject to lawsuits, administrative proceedings, regulatory reviews or investigations associated with its business and other matters arising in the normal conduct of its business. The Company believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

 

 

eWellness Healthcare Corporation

Notes to Consolidated Condensed Financial Statements

June 30, 2020

(unaudited)

 

Note 7. Derivative Valuation

 

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

 

The debt discount is amortized over the life of the note and recognized as interest expense. For the six months ended June 30, 2020 and 2019, the Company amortized the debt discount of $594,705 and $1,401,501, respectively.

 

During the six months ended June 30, 2020, the Company had the following activity in the derivative liability account:

 

		Notes
Derivative liability at December 31, 2019		$	3,529,974
Addition of new conversion option derivatives			-
Conversion of note derivatives			(3,432,496	)
Change in fair value			4,199,959
Derivative liability at June 30, 2020		$	4,297,437

 

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		$	.0002
Exercise price of warrants		$	12.50
Conversion rate of convertible debt		$	.00007-.00014
Risk free interest rate			.10%-.27	%
Stock volatility factor			347.96-1322.92	%
Years to Maturity			.02 – .55
Expected dividend yield			None

 

Note 8. Subsequent Events

 

From July 1 until the filing of this report, the Company issued 880,679,972 shares of common stock for convertible debt conversion totaling $54,322 which includes $50,362 principal and $3,960 accrued interest

 

 

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, 2020 and 2019 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, 2019.

 

THE COMPANY

 

Overview

 

eWellness Healthcare Corporation is a provider of the state of the art PHZIO platform for the physical therapy (“PT”) and telehealth markets and believes it is the first digital telehealth physical therapy company (“dtPT Company”) to offer real-time monitored physical therapy assessments and treatments to large-scale employers. The Company’s digital telehealth assessment and treatment platform (the “dtPT Platform” or “Platform”) has been designed to serve the $30 billion physical therapy market, the $4 billion musculoskeletal (“MSK”) market and the $8 billion corporate wellness market. Our dtPT Platform redefines the way physical therapy (“PT”) can be delivered. We believe that our Platform is able to transform the access, cost and quality dynamics of PT assessments and treatments. We began generating revenue during the fourth quarter of 2019.

 

We designed our Platform to enable its usage for all PT assessments and treatments by means of computer, smart phone and/or similar digital media devices (the “Access Devices”). This new approach will lower patient treatment costs, expand patient treatment access and improve patient compliance. Our dtPT Platform allows patients to avoid the time-consuming clinical experience to an immediate in-home PT experience. We believe that approximately 80% of all PT assessments and treatments can be performed using our Platform accessible via the Access Devices in the privacy of once home.

 

We believe that our innovative approach to solving the pervasive access, cost and quality challenges facing the current access to PT clinics, will lead to highly scalable and substantial growth in our revenues. The Company has signed 7 partnership and healthcare provider agreements to date. We believe that we are well positioned to participate in the rapidly evolving PT treatment market by introducing our innovative dtPT Platform enabling remote patient monitoring, post-discharge treatment plan adherence and in-home care. Our Platform incorporates research-based methods and focuses on, not only rehabilitation but also wellness, functional fitness, performance, and prevention.

 

 

Our PHZIO and MSK 360 platforms completely disrupts the current in-clinic business model of the $30 billion PT industry, the 4 billion MSK market and the $8 billion corporate wellness industries. Innovators in other industries have solved access, cost and quality inefficiencies through the implementation of technology platforms and business models that deliver products and services on-demand and create new economies by connecting and empowering both consumers and businesses. We have taken the same approach to solving the pervasive access, cost and quality challenges facing the current access to PT and MSK clinics. eWellness’ underlying technology platform is complex, deeply integrated and purpose-built over the past five years for the evolving PT and MSK treatment marketplaces. eWellness’ PHZIO and MSK 360 platforms are highly scalable and can support substantial growth of third-party licensees. eWellness’ PHZIO and MSK 360 platforms 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.

 

On May 22, 2020, the Company received and accepted the resignations of Brandon Rowberry and Rochelle Pleskow as independent directors. Their letters of resignation dated May 22, 2020, state that the reason for their resignations were to permit them to pursue other business opportunities and further stated that they have had no disagreements with the operations, policies or practices of the Company. Also, on May 22, 2020, the Company received a letter of resignation from Darwin Fogt, resigning as CEO, President and director of the Registrant and a separate letter of resignation from Curtis Hollister, resigning as CTO and director of the Company. Messrs. Fogt and Hollister are executive officers and principals of Bistromatics Inc., organized under the laws of Canada (“Bistromatics”).

 

On November 12, 2016, the Company entered into a Services Agreement with Bistromatics (the “Bistromatics Agreement”) pursuant to which Bistromatics agreed to provide operational services to the Company for its PHZIO System including development, content editing and training, support and maintenance, billing, hosting and oversight, among other services. Reference is made to the Registrant’s Form 8-K filed on November 21, 2016, which Form 8-K was signed by Darwin Fogt as CEO on behalf of the Registrant, regarding the disclosure of the Bistromatics Agreement. The Services Agreement included a provision granting Bistromatics the right to appoint 40% of the Registrant’s Board of Directors, resulting in the appointment of Messrs. Fogt and Hollister as members of the Company’s Board. Although both Companies continue to abide by the Services Agreement the Company is in arrears in fees to Bistromatics for approximately $750,000 as of March 31, 2020. The Service Agreement expired during the first quarter of 2020 and the parties continue to discuss the formation of a new Services Agreement.

 

Pursuant to communications between the Company and Darwin Fogt and Curtis Hollister regarding their resignations as executive officers and directors of the Registrant, which resignations were accepted by the Company’s Board on June 1, 2020, Messrs. Fogt and Hollister represented to the Company that Bistromatics and its management will continue to provide support services to the Company’s PHZIO System,. In addition, both Darwin Fogt and Curtis Hollister confirmed that they have had no disagreements with the operations, policies or practices of the Company.

 

In connection with the resignation of Darwin Fogt as CEO, the Registrant’s Board of Directors has appointed Douglas MacLellan, who has served as the Company’s Chairman since May 2013, as Chief Executive Officer in addition to continuing to serve as the Chairman of the Board of Directors.

 

As noted above, the Companies PHZIO and MSK360 systems are currently operated on behalf of the Company by Bistromatics Inc. in Canada. These services are still operational and continues to treat EWLL’s corporate patients and customers.

 

Plan of Operations

 

We are in the process of completing a new Services Agreement with Bistromatics, that if completed, will likely re-position EWLL as a Value Added Reseller (“VAR”) of the PHZIO & MSK360 platforms and allow EWLL to earn marketing fees and would also be granted a significant percentage ownership of Bistromatics in return for  transferring the marketing and IP rights for the PHZIO and MSK360 platforms from EWLL to Bistromatics.

 

 

IP and Licensing

 

We have licensed our telemedicine platform from Bistromatics Inc., a company owned by our CTO, for perpetuity for any telemedicine application in any market worldwide. The below noted chart highlights what we have built to date.

 

 

Results of Operations of eWellness for the three and six months ended June 30, 2020 vs. 2019

 

REVENUES: Total revenues for the six months ended June 30, 2020 and 2019 were $138,155 and $0. respectively. Total revenues for the three months ended June 30, 2020 and 2019 were $123,780 and $0, respectively.

 

OPERATING EXPENSES: Total operating expenses decreased to $1,659,824 for the six months ended June 30, 2020 from $2,028,493 for the six months ended June 30, 2019 reflecting a decrease of $368,669. The decrease resulted from a reduction in number of shares of common stock issued to consultants offset by an increase in financing fees for conversion of convertible debt. Total operating expenses decreased to $658,716 for the three months ended June 30, 2020 from $961,838 for the three months ended June 30, 2019 reflecting a decrease of $303,122. The decrease is a result of a decrease in the number of shares of common stock issued to consultants and offset by an increase in financing fees for conversion of convertible debt.

 

NET LOSS: The Company incurred a net loss $6,489,526 for the six months ended June 30, 2020 compared with a net loss of $3,103,781 for the six months ended June 30, 2019 which reflects an increase of $3,385,745. The increase is from an increase in loss on derivative liability on convertible debt of $4,817,926 offset by a decrease in interest expense of $929,239 and decrease in operating expenses of $368,669 (as outlined above). The Company incurred a net loss of $2,960,927 for the three months ended June 30, 2020, compared with a net loss of $1,765,310 for the three months ended June 30, 2019, which reflects an increase of $1,195,617. The increase is from an increase in loss on derivative liability on convertible debt of $2,155,621 offset by a decrease in interest expense of $536,974 and decrease in operating expenses of $303,122 (as outlined above).

 

Liquidity and Capital Resources

 

As of June 30, 2020, we had negative working capital of $8,114,425 compared to negative working capital of $6,937,847 as of December 31, 2019. The negative working capital increase is because of an increase in derivative liability, accounts payable and accrued expenses. Cash used in operations was $281,647 and $1,440,439 for the six months ended June 30, 2020 and 2019, respectively. The decrease in cash used in operations is a result of an increase in derivative liability and changes in operating assets and liabilities offset by an increase in net loss. Cash flows provided by financing activities were $45,000 and $1,140,300 for the six months ended June 30, 2020 and 2019, respectively. The decrease resulted from a decrease in the issuance of convertible debt (net of debt issuance costs) of $1,675,750 and reduction of payment of debt of $639,500. The cash balance as of June 30, 2020 was $4,075.

 

 

We do not have sufficient cash on hand to operate. We anticipate that we will be able to raise additional capital on the same or better terms by the third quarter of 2020 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.

 

Capital Expenditure Plan

 

During the six months ended June 30, 2020, we raised $52,800, less $7,800 for debt issuance costs in equity and debt capital. We will 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, 2020 and December 31, 2019, respectively, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

 

Contractual Obligations and Commitments

 

Six Months Ended June 30, 2020

 

In March 2020, the Company executed a 12% Convertible Promissory Note payable to an institutional investor in the principal amount of $52,800. The note, which is due on January 15, 2021, has an original issue discount of $4,800 and transaction costs of $3,000. The convertible note converts into common stock of the Company at a conversion price that shall be equal to the 70% of the average of the two lowest per share trading prices for the ten (10) trading days prior to the conversion date. During the six months ended June 30, 2020, the Company accrued interest expense of $1,719.

 

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, 2019, 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

 

Smaller reporting companies are not required to provide this disclosure.

 

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, 2020, 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.

 

Six Months Ended June 30, 2020

 

During the six months ended June 30, 2020, the Company issued a total of 7,838,256,204 shares of common stock per debt conversion of various convertible notes. The total of the debt conversion was for $959,835 of principal, $103,093 of accrued interest and $93,433 of financing costs.

 

During the six months ended June 30, 2020, the Company issued 668,332 shares of common stock for consultant services valued at $1,723.

 

 

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
3.1(a)		Articles of Amendment to the Amended and Restated Articles of Incorporation, dated February 14, 2020 filed in the Company’s 10K for the period ended December 31, 2019.
3.2		Bylaws (Incorporated by reference to Exhibit 3(b) to the Registration Statement on Form S-1 filed on May 15, 2012)
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.

 

 

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/ Douglas MacLellan		Date August 11, 2020
	Douglas MacLellan
	Chairman of the Board

 

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/ Douglas MacLellan		Chairman of the Board and Director		August 11, 2020
Darin Fogt		(Principal Executive Officer)
/s/ David Markowski		Chief Financial Officer and Director		August 11, 2020
David Markowski		(Principal Financial and Accounting Officer)
/s/ Douglas Cole		Director		August 11, 2020
Douglas Cole