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 September 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.
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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
$783,000 as of September 30, 2020. The Service Agreement expired during the
first quarter of 2020 and the parties signed a new agreement on September 15,
2020 which is discussed below.
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
On September 15, 2020, the Company and Bistromatics signed an agreement that
would transfer all worldwide marketing and Intellectual Property Rights or
claims to the Company's Phzio, Phzio TeleRehab and MSK 360 platforms to
Bistromatics in return for a 15% ownership in Bistromatics. This agreement would
eliminate all past due professional fees of approximately $783,000. The transfer
of rights would not be completed until December 31, 2020.
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IP and Licensing
We have licensed our telemedicine platform from Bistromatics Inc., a company
owned by our former CTO, for perpetuity for any telemedicine application in any
market worldwide. The below noted chart highlights what we have built to date.
[[Image Removed]]
Results of Operations of eWellness for the three and nine months ended September
30, 2020 vs. 2019
REVENUES: Total revenues for the nine months ended September 30, 2020 and 2019
were $263,429 and $0. respectively. Total revenues for the three months ended
September 30, 2020 and 2019 were $125,274 and $0, respectively.
OPERATING EXPENSES: Total operating expenses decreased to $1,911,156 for the
nine months ended September 30, 2020 from $3,508,958 for the nine months ended
September 30, 2019 reflecting a decrease of $1,597,802. 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 $251,332 for the three months ended
September 30, 2020 from $1,480,466 for the three months ended September 30, 2019
reflecting a decrease of $1,229,134. 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 $5,262,728 for the nine months ended
September 30, 2020 compared with a net loss of $4,624,131 for the nine months
ended September 30, 2019 which reflects an increase of $638,597. The increase is
from an increase in loss on derivative liability on convertible debt of
$4,683,446 offset by a decrease in interest expense of $2,185,912 and decrease
in operating expenses of $1,597,802 (as outlined above). The Company recognized
a net income of $1,226,798 for the three months ended September 30, 2020,
compared with a net loss of $1,520,350 for the three months ended September 30,
2019, which reflects a decrease in loss of $2,747,148. The decrease is from a
decrease in interest expense of $1,256,673, decrease in operating expenses of
$1,229,134 (as outlined above) and an increase of gain on derivative liability
on convertible debt of $134,480.
Liquidity and Capital Resources
As of September 30, 2020, we had negative working capital of $5,075,829 compared
to negative working capital of $6,937,847 as of December 31, 2019. The negative
working capital decrease is because of an decrease in derivative liability
offset by increases in accounts payable and accrued expenses. Cash used in
operations was $280,028 and $2,388,551 for the nine months ended September 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 $2,799,650 for the nine months ended September 30,
2020 and 2019, respectively. The decrease resulted from a decrease in the
issuance of convertible debt (net of debt issuance costs) of $3,798,000 and
reduction of payment of debt of $1,102,450. The cash balance as of September 30,
2020 was $5,694.
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We do not have sufficient cash on hand to operate. 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 nine months ended September 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 September 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
Nine Months Ended September 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 nine months ended September 30, 2020, the
Company accrued interest expense of $3,276.
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.
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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.
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EWELLNESS HEALTHCARE CORPORATION 
